TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 2142
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....g in deleting the addition of Rs.2,96,16,556/- made by the Assessing Officer u/s 10AA of the IT Act. 1961, ignoring the fact that the assessee was primarily engaged in trading activities and not in any kind of manufacturing and, therefore, not eligible for any deduction u/s 10AA of the I.T. Act." 2. "On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the disallowance of sales tax dues of Rs.6,00,794/-, ignoring the fact that the assessee is not eligible to claim sales tax liability not pertaining to relevant assessment year". 3. "On the facts and circumstances of the case, the Ld. CIT(A) erred in treating the expenditure of Rs. 7 lakhs as credit rating fees as revenue expenditure instead of capital expenditure treated by the Assessing Officer, ignoring the fact that the said expenditure was incurred for loan obtained by the assessee company and the said loan amount was treated as capital in nature and hence the related expenses for obtaining loan was requires to be capitalized." 4. "On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the disallowance of rent expenses of Rs.6,20,437/-, ignoring the fact th....
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....cts of the case, submissions and contentions of the assessee as well as the order of the Id. AO. From the facts of the case, it appears that the assessee company is engaged in supply of fire fighting equipment including fire fighting systems which will include fire alarm and detecting systems, fire fighting pump sets and gas suppression systems which includes tank, valves, gases and accessories. It is gathered that most of the items or parts are imported by the assessee company from Chinese companies and thereafter various assembling, fitting, reengineering and fabrication work is done and thereafter gas is filed in cylinders before they are supplied to different clients^ The different type of customization is required dependingL-LLBQiLthe client and its nature of business. The process itself involves a lot of value addition. Therefore, it is not understandable that how did the AO reach on the conclusion that the assessee is engaged only in trading activity and not in manufacturing activity. In fact the word manufacturing has a specjaJLdfifinition as per SEZ Act, 2005 and it also includes fabrication, assembling, reengineering etc.. For clarity, the definition of manufacture is rep....
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....the other and parties have allowed that position to be sustained by not challenging the order, il would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasoning's, in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961." Similar finding has been given by the hon'ble Apex Court in case of Sumati Dayal. 8. It is gathered that assessee has got a license from SEZ Authorities for the manufacturing activities to be carried out and export of its product. The assessee's operation are als....
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....ed by revenue authorities and submissions made by both the parties, we find that as per the facts, the assessee had set up a new export oriented unit in Vishakapattanam, SEZ and the deduction u/s 10AA was claimed in respect of the profits of this unit. The AO during the assessment proceedings held that assessee was primarily engaged in the trading activity and not in any kind of manufacturing. Thus, no entitled for deduction u/s 10AA of the Act. Ld. DR while relying upon the orders passed by the AO, submitted that the documents submitted by the assessee in the shape of purchase invoices and sale invoices, it is clear that the description of items purchased by the assessee were exactly matches with the items sold by the assessee. So in this way, according to Ld. DR, the assessee cannot be said in doing the assembling activities of the goods/articles. Our attention was also drawn to page no. 81 of the paper book, wherein the approval was granted to the assessee by the office of Development Commissioner, Vishakapattanam, Special Economic Zone, for the purpose of setting up a trading unit. On the other hand, Ld. AR reiterated the same arguments as were raised by him before Ld. CI....
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....stomization depending upon the requirement of clients. Even otherwise, the claim u/s 10AA was made by the assessee for the first time in the year AY 2009-10 and the present year is the fourth such year in which such claim has been made and in earlier three years this claim has been allowed by the AO after due verification. In such circumstances, the Hon'ble Supreme Court in the case of Radhasaomi Satsang V/s CIT, 193 ITR 321 had held that in the absence of any material change, justifying the revenue to take a different view of the matter, if there was no change, the AO could not take a different view. Apart from that in the case of Sunil Kumar Ganeriwal Vrs. DCIT (ITA 4276/Mum/2008 dated 25.11.11), wherein it was held that once a particular stand has been taken by the AO in the earlier years, the same should not be changed unless and until there is material difference in the circumstances of the case. Since the Ld. CIT(A) had rightly appreciated the facts of the present case in correct perspective and even no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, we see no reasons t....
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....ed service - The expenses were incidental and arising out of the business of the assessee - The interest payment is compensatory in nature - The expenses have direct nexus with the business operation. Relying upon Commissioner of Income Tax v. Luxmi Devi Sugar Mills P. Limited [1990 (9) TMI 8 - SUPREME Court] - the amount was expended by the assessee during the course of business, wholly and exclusively for the purpose of business - If the assessee had taken proper steps and charged service tax to the service recipients and deposited with the Government, there was no question of assessee expending such sum -It is only because the assessee failed to do so, that he had to expend the said amount, though it was not his primary liability - this cannot be stated to be a penalty for infraction of law - payment of interest is compensatory in nature and would not partake the character of penalty - Decided against Revenue." 11. In view of the above facts and following Hon'ble Gujarat High Court judgement in the case of CIT V/s Kaype Mechanical India P Ltd in ITA No 186 of 2014 dated 21.04.2014, the AO is directed to allow the claim of the assessee in respect of sales tax dues of....
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....hat this amount of Rs 7,00,000/- has been paid to the credit rating agency, Crisil Ltd which evaluates the affairs of the assessee and grants it investments related ratings. It is further gathered that the assessee has raised loans of Rs 300 crores in nature of working capital loan and such loan has been sanctioned by the Financial Institution based upon credit rating given by the agency. It is noticed that the working capital has been enhanced by the IDBI Bank on 25.10.2014. It is further argued by the assessee that this amount of Rs 7,00,000/- is paid by it annually to Crisil and therefore it is in nature of revenue expenditure and should be allowed. I have examined the facts of the case and it appears that out of Rs 7,00,000/- paid to Crisil, Rs 5,00,000/- is relating to initial rating fees and Rs 2,00,000/- is annual surveillance fees. However, as the credit rating expenditure is relating to only working capital loan and not to the loan taken for investment in fixed assets, etc., therefore this is clearly a revenue expenditure. Since the part of the expenditure is in nature of annual surveillance fee has to be incurred annually by the assessee on the basis of the agreement with....
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....AY 2011-12, however, due to late receipt of debit note from the said company, this rent of 21/2 months for the AY 2011-12 has been claimed by the assessee during the current year i.e. AY 2012-13. It is on this ground that the AO has disallowed this rental expenditure of Rs 6,20,437/- and added back in the hands of the assessee. During the course of appellate proceedings, the Ld AR argued that the rent of Rs 6,20,437/- was actually paid in subsequent year on the basis of the debit note received from the above company and therefore this expenditure should be allowed in AY 2012-13 even though technically it was *relating to AY 2011-12. It is gathered that during AY 2011-12 the assessee has not claimed this expenditure and it is only in AY 2012-13 that this amount has been claimed on the basis of payment. This error has taken place because of certain mistake at the end of the Accounts Department of the company and the assessee has argued that the expenditure being fgenume may please be allowed. It is noticed that an identical issue has been decided by the Hon'ble Delhi High Court in the case of CIT V/s Herbalife International Ltd 384 ITR 276 vide order dated 13.05.2016 where in the....
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....03.2011, though accrued in AY 2011-12, however, due to late receipt of debit note from the said company, this rent of 21/2 months for the AY 2011-12 had been claimed by the assessee during the current year i.e. AY 2012-13. Whereas this rent of Rs. 6,20,437/- was actually paid in subsequent year on the basis of the debit note. Therefore in such circumstances, Ld. CIT(A)allowed the expenses in the year under consideration while relying upon the judgment of Hon'ble Delhi High Court in the case of CIT V/s Herbalife International Ltd 384 ITR 276 vide order dated 13.05.2016 wherein the Hon'ble court directed to allow the expenditure by observing as under:- "Allowance of prior expenses - Held that- The Court concurs with the view expressed by the ITAT in the present case, that the expenses for the period 1st January 2000 to 31st March 2000 accrued as a liability to the Assessee only during the previous year and that the said expenditure was rightly allowed as deduction during the AY in question Decided in favour of the Assessee." Since, in the present year, there was no doubts on the genuiness of the expenditure, therefore the same was rightly allowed in view of the above ....
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....taking into consideration, the total investments of Rs. 73,63,52,619/- in the shares of various companies had accordingly upheld the working of disallowance made by AO u/s 14A r.w.r 8D of the Act at Rs. 33,97,774/-. After considering the entire facts of the present case, we find that Hon'ble Delhi High Court in the case of Joint Investment Pvt. Ltd. vrs. CIT (2015) 372 ITR 694 (Del) had held that section 14A or rule 8D of the I.T. Rules 1962, cannot be interpreted so as to mean that the entire exempt income is to be disallowed. The window for disallowance was indicated in section 14A and was only to the extent of disallowing expenditure 'incurred by the assessee in relation to the tax exempt income'. This proposition or portion of the exempt income surely cannot swallow the entire amount. Thus it was held that the disallowance can only be to the extent of expenditure income incurred by the assessee in relation to tax exempt income. In the decision rendered by the Coordinate Bench of ITAT in the case of K. Ratanchand and Co. vrs. ITO (2017) 83 taxmann.com 242 (Ahd-Trib), wherein it was held that addition u/s 14A cannot be more than exempt income. Thus, such disallo....
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..... 1,62,17,312/- under the head conveyance and travelling. However, the assessee could not produce supporting details, bills and vouchers and therefore 10% of the expenditure was disallowed. Ld. AR argued before us that assessee had already furnished all the required documents to prove the expenditure was incurred for business purposes and majority of the expenditure was incurred through banking channel. We noticed that Ld. CIT(A) restricted the disallowance to 5% of the expenditure without mentioning any reason thereto. In our view, the assessee's books of accounts were not rejected and the AO had accepted the assessee's accounts which have been duly audited, therefore no disallowance is permissible for non-production of evidence of expenditure claimed by the assessee. The additions on the basis of estimation is not permissible on the flimsy ground particulary when all these documents have been duly audited and audited books of accounts and balance sheet have not been rejected by the AO. In this respect, we respectfully follow the judgment rendered by the Hon'ble Supreme Court in the case of PCIT Vrs. R. G. Buildwell Engineers Ltd (2018) 259 taxmann 370/99 taxmann.com 284(....