TaxTMI 
TaxTMI 
2026 (6) TMI 924
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....e assessments framed in the case of the same assessee, namely Mumbai Port Authority (formerly known as Mumbai Port Trust), these appeals were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. The assessee is a statutory body engaged in rendering port services to port users for loading, unloading and storage of cargo passing through the port by sea. Assessment Year 2009-10. 2. The assessee filed its return of income on 29.09.2009 declaring a loss of Rs. 17,73,08,737/-. The return was accompanied by the Income and Expenditure Account, Balance Sheet and Audit Report in Form No.3CD. The return was selected for scrutiny and an assessment under section 143(3) of the Act was originally completed on 20.12.2011. Subsequently, a TDS survey was conducted at the premises of the assessee. Thereafter, the Assessing Officer issued notice under section 148 of the Act on 19.03.2014 seeking to reopen the assessment. The reasons recorded for reopening were furnished to the assessee on 20.01.2015. In response, the assessee requested that the original return filed be treated as the return in response to the notice issued under section 148....
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....mation of additions on certain other issues, both the assessee and the Revenue are in appeal before us. 8. The assessee has raised the following grounds of appeal: 1. On the facts and circumstances of the appellant's case in law the Ld. CIT(A) erred in confirming the action of Ld. AO in reopening the assessment u/s 147 by issue of notice dated 19.03.2014 u/s 148, which is merely due to change in opinion and therefore reopening is bad in law. 2. On the facts and circumstances of the appellant's case in law the Ld. CIT(A) erred in confirming the action of Ld. AO in reopening the assessment u/s 147 by issue of notice dated 19.03.2014 u/s 148, which is barred by limitation in view of first proviso to section 147 of the Act. 3. On the facts and circumstances of the appellant's case in law the Ld. CIT(A) erred in confirming the action of ld. AO in making disallowance of Rs. 80,00,00,000/- on account of contribution to leave encashment fund by invoking provisions of section 43B of the Income Tax Act, 1961. 4. The appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds of appeal on or before the hearing. 9.....
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.... Particulars Amount (Rs.) 1 Addition on account of Estate Rentals 117,76,00,000/- 2 Disallowance of depreciation 1,27,52,783/- 3 Addition on account of Amnesty Scheme income 14,00,000/- 4 Addition on account of Interest on Inter Port Loan 4,07,00,000/- 5 Disallowance of Corporate Social Responsibility expenditure 5,01,00,000/- 6 Disallowance under section 40(a)(ia) 1,53,31,905/- Total Aggregate Additions/Disallowances 129,78,84,688/- 11. Aggrieved, the assessee preferred an appeal before the learned CIT(A). During the appellate proceedings, the assessee sought admission of additional evidences under Rule 46A contending that adequate opportunity had not been granted by the Assessing Officer in respect of various issues including Estate Rentals, depreciation, Amnesty Scheme income, interest on inter-port loan and CSR expenditure. The learned CIT(A) obtained a remand report from the Assessing Officer and thereafter admitted certain additional evidences after considering the explanation offered by the assessee. 12. The learned CIT(A) thereafter adjudicated the additions made by the Assessing Officer. Being aggri....
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....the aforesaid grounds. Accordingly, Ground Nos. 1 and 2 are treated as not pressed. Since the said grounds have not been argued before us, the issue is left open. Ground No. 3 - Disallowance of Rs. 80,00,00,000/- on account of contribution to Leave Encashment Fund. 16. During the course of reassessment proceedings, the Assessing Officer noticed that the assessee had claimed deduction of Rs. 80,00,00,000/- towards contribution to Leave Encashment Fund. In response to the show-cause notice, the assessee submitted that the said amount had been actually paid to SBI Life Insurance Co. Ltd. towards leave encashment liability and, therefore, constituted an allowable deduction under section 43B of the Act. The Assessing Officer, however, did not accept the explanation of the assessee. According to him, section 43B(f) envisaged deduction only in respect of leave encashment liability actually paid and the payment made to SBI Life Insurance Co. Ltd. towards funding of leave encashment liability did not satisfy the requirement of the said provision. The Assessing Officer further observed that while the Act contains specific provisions recognising contributions to recognised provident fun....
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....roneous premise that deduction could be allowed only when the amount was directly paid to employees. According to him, once the liability was funded through an insurance mechanism and the amount stood actually paid to the insurer, the assessee ceased to have any control over the funds and the payment assumed the character of an expenditure incurred wholly and exclusively for the purposes of business. 19. The learned AR further submitted that the contribution made by the assessee was akin to premium paid under a group leave encashment scheme and, therefore, constituted a revenue expenditure allowable under section 37(1) of the Act. Reliance was placed upon the judgment of the Hon'ble Kerala High Court in CIT v. Hindustan Latex Ltd.[2012] 22 taxmann.com 332 wherein it was held that where an assessee insures itself against leave encashment liability and pays premium towards such policy, the liability thereafter stands transferred to the insurer and the premium paid for maintaining the policy constitutes business expenditure wholly and exclusively incurred for the purposes of business. The Hon'ble High Court held that such payment is not a provision for future liability but ....
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.... place at page No. 60 of paper book) under a leave encashment scheme formulated for meeting employee benefit obligations. The payment has resulted in actual outflow of funds and the assessee has ceased to have control or dominion over the amount so contributed. 27. The Hon'ble Kerala High Court in the case of CIT v. Hindustan Latex Ltd.(supra) had occasion to consider an identical issue where premium paid to LIC under a Group Leave Encashment Scheme was sought to be disallowed by invoking section 43B(f). After considering the scheme of section 43B and the nature of the payment made to the insurer, the Hon'ble High Court held as under: "In the instant case it was not a provision for future liability which was claimed as a deduction. The assessee, a Government Company had insured itself against the liabilities that may arise on account of the claims made by the employees towards leave encashment. The assessee being covered by a valid insurance policy and premium being regularly paid, incurs no liability towards leave encashment. The liability being covered by a valid insurance policy, is solely that of the insurer."(para 6) 28. The Hon'ble High Court furthe....
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....;ble High Court specifically observed as under: "In any event what was intended by introduction of clause (f) was to deny the deduction of liabilities not actually incurred or in other words to exclude the provisions being made as against future liabilities, from being granted a deduction. In the instant case it was not a provision for future liability which was claimed as a deduction." (para 6) 33. After noticing that the assessee had insured itself against leave encashment liability and had actually paid premium to the insurer, the Hon'ble High Court further held: "Even if Section 43B(f) stands, in the case of the assessee, where the liability is borne by the insurer, there can be no situation wherein assessee could make a valid claim for deduction under Section 43B(f) since the actual liability is not incurred in any of the years. However, it cannot be doubted for a moment that the premium paid towards the renewal and continued validity of the insurance policy necessarily becomes business expenditure wholly and exclusively incurred for the business purpose and allowable as a deduction under Section 37." (para 6) 34. Thus, the Hon'ble Kerala High C....
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....38. Respectfully following the judgment of the Hon'ble Kerala High Court in CIT v. Hindustan Latex Ltd. (supra), which directly deals with contribution made to an insurer under a leave encashment scheme, we hold that the contribution of Rs. 80,00,00,000/- made by the assessee to SBI Life Insurance Co. Ltd. represents actual business expenditure incurred for meeting employee leave encashment obligations and is allowable as deduction. 39. We, therefore, set aside the order of the learned CIT(A) on this issue and direct the Assessing Officer to delete the disallowance of Rs. 80,00,00,000/-. Accordingly, Ground No. 3 raised by the assessee is allowed. A.Y. 2012-13 (ITA No. 2604/Mum/2025) Ground No. 1: Disallowance of depreciation of Rs. 8,70,625/-. 40. We shall first take up Ground No. 1 of the assessee's appeal relating to disallowance of depreciation of Rs. 8,70,625/-. The relevant facts, in brief, are that during the course of assessment proceedings, the Assessing Officer noticed that the assessee had disclosed capital receipts aggregating to Rs. 87,06,250/-. Upon being called upon to explain the nature of the said receipts, the assessee submitted that the amount....
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....he learned AR further submitted that there was no dispute regarding the obligation of the assessee to reduce the said amount from the block of assets. He pointed out that the amount was duly adjusted against the written down value of the relevant block in the immediately succeeding assessment year upon completion of the requisite formalities. According to him, the omission to reduce the amount during the year under consideration was only a timing issue and did not result in any permanent benefit to the assessee. 43. The learned AR submitted that the disallowance has arisen merely because the reduction from the block of assets was effected in the subsequent year instead of the year under consideration. He contended that once the corresponding adjustment has been carried out in the succeeding year, the same amount cannot be subjected to adverse tax consequences by way of denial of depreciation in one year and reduction of written down value in the subsequent year. He, therefore, submitted that the disallowance sustained by the learned CIT(A) deserves to be deleted. 44. We have considered the rival submissions and perused the material available on record. The limited controversy....
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.... from Note No. XIII forming part of the financial statements that during the financial year 2011-12, Cochin Port Trust had remitted only 50% of the accrued interest on the Inter Port Loan amounting to Rs. 4.07 crore, whereas the balance 50% of the accrued interest amounting to Rs. 4.07 crore had been capitalized. Consequently, the outstanding loan balance stood increased to Rs. 54.07 crore at the end of the year. The Assessing Officer observed that the notes to accounts disclosed that the assessee had capitalised interest of Rs. 4.07 crore receivable from Cochin Port Trust and had not offered the same to tax. According to the Assessing Officer, the assessee was following the mercantile system of accounting and, therefore, was required to recognize the entire accrued interest as income. He was of the view that a person following the mercantile system of accounting could not recognize a part of the accrued income through the Profit and Loss Account while treating the balance accrued income differently. Relying upon the decision of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [(1997) 227 ITR 172 (SC)], the Assessing Officer held that the entire....
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....talization was an integral feature of the loan arrangement itself. Inviting our attention to the detailed computation of interest appearing at page 190 of the paper book, the learned AR submitted that the position emerging from the records was as under: Particulars Amount (Rs.) Principal outstanding as on 28.07.2011 50,00,00,000/- Add: Interest due up to 27.07.2011 8,14,83,562/- Less: Interest paid by Cochin Port Trust (50%) 4,07,41,781/- Balance interest capitalised and added to loan account 4,07,41,781/- Principal outstanding after capitalization 54,07,41,781/- 53. Referring to the aforesaid working, the learned AR submitted that out of the total interest due of Rs. 8,14,83,562/-, Cochin Port Trust remitted Rs. 4,07,41,781/- on 28.07.2011 and the balance amount of Rs. 4,07,41,781/- was capitalized and added to the principal outstanding in accordance with the terms and conditions governing the Inter Port Loan. Consequently, the outstanding principal increased from Rs. 50 crore to Rs. 54.07 crore. 54. The learned AR thereafter invited our attention to the journal voucher appearing at page 191 of the paper book wherein the assessee specifica....
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....apitalised portion of interest to tax. On the contrary, the accounting records demonstrate that the interest was first recognized and credited to income in accordance with the mercantile system of accounting and thereafter, in terms of the agreed arrangement between the parties, 50% thereof was converted into loan principal by capitalisation. Thus, the capitalisation represented merely a balance sheet adjustment and not suppression or omission of income. 59. The learned AR further submitted that both the Assessing Officer and the learned CIT(A) have incorrectly proceeded on the footing that the issue involves recognition of income on cash basis as against mercantile basis. According to him, the real issue is entirely different. The assessee has consistently followed the mercantile system of accounting and has recognized the interest income in its books. The dispute relates only to the subsequent capitalization of a portion of such interest in terms of the contractual arrangement governing the Inter Port Loan. 60. It was accordingly submitted that the amount of Rs. 4,07,41,781/- represented interest validly capitalised and merged with the principal outstanding in accordance wi....
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....preceding year was reversed and interest of Rs. 1,85,47,946/- for the subsequent period was recognised. Thus, the entire interest accruing on the Inter Port Loan stood recognized and credited in the books of account of the assessee. 65. The schedule titled "Finance & Miscellaneous Income as on 31.03.2012" further reveals that an amount of Rs. 390,15,22,471.40 was credited under the head "Interest on Investments". The accounting entries placed on record establish that the interest arising from the Inter Port Loan formed part of the said income. Therefore, the factual foundation adopted by the Assessing Officer that the assessee had not offered the capitalised interest to tax is contrary to the documentary evidence available on record. 66. We also find merit in the contention of the learned AR that the learned CIT(A) misdirected himself by examining whether the loan was a sticky loan or a non-performing asset. The capitalization of interest in the present case was admittedly not on account of uncertainty of recovery. It was a conscious commercial and management decision embodied in the terms governing the Inter Port Loan. Therefore, whether the loan was a sticky loan or a perfo....
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....ct and finds that the impugned amount forms part of the interest income already credited and offered to tax, no separate addition shall survive on this account and the same shall be deleted. The Assessing Officer shall afford adequate opportunity of being heard to the assessee and shall decide the issue in accordance with law. Accordingly, Ground No. 2 is allowed for statistical purposes. Ground No. 3 relating to disallowance of CSR expenditure of Rs. 5,01,00,000/- 70. During the course of assessment proceedings, the Assessing Officer noticed from Note No. IX forming part of the financial statements that pursuant to the guidelines issued by the Ministry of Shipping, Government of India, regarding Corporate Social Responsibility (CSR) activities for Major Ports, the Board of Trustees of the assessee, vide Resolution No.163 dated 28.02.2012, had approved allocation of 3% of net profit, subject to a minimum of Rs. 3 crore, towards a newly created Corporate Social Responsibility Fund. The Board had also constituted a CSR Committee for monitoring and overseeing CSR activities and projects. Accordingly, the assessee created a CSR Fund, contributed an amount of Rs. 5,01,00,000/- the....
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....n nature and should not fall within the ambit of sections 30 to 36 of the Act. 75. The learned CIT(A) held that irrespective of the assessee's legal contentions regarding the prospective applicability of Explanation 2 to section 37(1) and the applicability of section 135 of the Companies Act, the primary requirement for allowability under section 37(1) remained that the expenditure should have been incurred wholly and exclusively for business purposes. According to the learned CIT(A), the assessee had failed to establish any business nexus between the contribution made to the Corporate Social Responsibility Fund and its business activities. He, therefore, concluded that the expenditure did not satisfy the conditions prescribed under section 37(1) of the Act and accordingly upheld the disallowance of Rs. 5,01,00,000/- made by the Assessing Officer. The ground of appeal was, therefore, dismissed. 76. The learned Authorised Representative reiterated the submissions advanced before the lower authorities and invited our attention to pages 194 to 196 of the paper book containing the "Guidelines on Corporate Social Responsibility (CSR) for Major Ports" issued by the Ministry of ....
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....ions. 81. The learned AR further drew our attention to the observations of the Hon'ble High Court that an expenditure incurred by an assessee in discharge of an obligation mandated by law cannot be regarded as unconnected with its business and that the Assessing Officer cannot deny deduction merely on the basis of a general assumption that CSR expenditure results in enduring benefits to society. The Hon'ble High Court further observed that deductibility under section 37(1) cannot depend upon how the recipient ultimately utilises the funds and that CSR expenditure incurred before insertion of Explanation 2 was allowable as business expenditure. 82. The learned AR also pointed out that the aforesaid judgment of the Hon'ble Delhi High Court has attained finality inasmuch as the Special Leave Petition preferred by the Revenue against the said judgment was dismissed by the Hon'ble Supreme Court in Pr. CIT v. Steel Authority of India Ltd. [(2024) 166 taxmann.com 264 (SC)]. He submitted that the Hon'ble Supreme Court declined to interfere with the judgment of the Hon'ble Delhi High Court and consequently the legal position that CSR expenditure incurred prior ....
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.... budget and CSR Fund, constitute a CSR Committee and undertake projects connected with the functioning of the Port and the communities in which the Port carries on its activities. The Board of Trustees of the assessee, acting pursuant to the aforesaid governmental directions, passed Resolution No.163 dated 28.02.2012 approving allocation of funds towards CSR activities and creation of a dedicated CSR Fund. Thus, the expenditure was incurred in the course of carrying on the statutory and administrative obligations governing the functioning of the assessee as a Major Port. 87. We further find that the authorities below have approached the issue as if the expenditure represented a mere social donation or philanthropic contribution. The guidelines themselves demonstrate that CSR activities were required to be integrated with the business plan of the Port, environmental concerns arising from Port operations, community development in the vicinity of the Port and activities having direct linkage with the functioning of the Port. Therefore, the expenditure cannot be viewed in isolation from the business and operational framework within which the assessee functions. 88. More important....
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....y of India Ltd. (supra), which stands affirmed by the Hon'ble Supreme Court, we hold that the contribution of Rs. 5,01,00,000/- made by the assessee to the CSR Fund during the year under consideration is an allowable deduction. The disallowance sustained by the learned CIT(A) is accordingly deleted and the ground raised by the assessee is allowed. 92. We shall now take up the appeals preferred by the Revenue for Assessment Years 2009-10 and 2012-13. Common Ground in Revenue's Appeals for A.Ys. 2009-10 and 2012-13 Addition on account of Estate Rentals of Rs. 104,90,00,000/- (A.Y. 2009-10) and Rs. 117,76,00,000/- (A.Y. 2012-13). 93. During the course of assessment proceedings for both the assessment years under consideration, the Assessing Officer observed from the Notes to Accounts relating to Estate Rentals that pursuant to the judgment of the Hon'ble Supreme Court dated 13.01.2004, the assessee had raised rent/compensation bills upon its lessees and tenants at the revised rates. The Assessing Officer noticed that though rent bills aggregating to Rs. 165.26 crore were raised during A.Y. 2009-10, only actual rent receipts of Rs. 60.33 crore were credited as i....
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....also took note of the principles embodied in Accounting Standard-9 relating to revenue recognition, which recognize that where substantial uncertainty exists regarding ultimate collection, recognition of revenue may legitimately be postponed until such uncertainty is resolved. 97. Referring to the continuing disputes regarding revised estate rentals, the learned CIT(A) held that the assessee's decision to recognize income only to the extent of actual realization was consistent with the principles of prudence and revenue recognition. He further relied upon the decisions of the Hon'ble Supreme Court in CIT v. ShoorjiVallabhdas& Co. (46 ITR 144) and Godhra Electricity Co. Ltd. v. CIT (225 ITR 746), wherein it was held that only real income can be subjected to tax and that hypothetical or illusory income cannot be brought to tax merely on the basis of accrual entries. 98. Accordingly, the learned CIT(A) concluded that in view of the substantial uncertainty surrounding recovery of the disputed rentals, the differential amount representing unrealized estate rentals could not be treated as accrued income of the assessee. He therefore deleted the addition of Rs. 104.90 crore ....
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....AR submitted that the learned CIT(A) had correctly appreciated the factual and legal position and rightly deleted the additions made by the Assessing Officer on account of unrecovered estate rentals. He therefore prayed that the orders of the learned CIT(A) for both the assessment years be upheld and the grounds raised by the Revenue be dismissed. 104. We have carefully considered the rival submissions and perused the material available on record. The Assessing Officer treated the entire amount of enhanced estate rentals billed by the assessee as income accrued on mercantile basis, whereas the learned CIT(A) deleted the addition by applying the doctrine of real income. The Revenue has not brought any material before us to demonstrate that the conclusions reached by the learned CIT(A) are contrary to the settled legal position. 105. The controversy before us is no longer res integra. The Hon'ble Supreme Court in CIT v. ShoorjiVallabhdas& Co. [46 ITR 144 (SC)] laid down the foundational principle governing accrual of income. The Hon'ble Supreme Court held: "Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at whi....
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....gation, no real income can be said to accrue merely because a claim has been raised. The Hon'ble Court applied the doctrine of real income and held that accrual cannot be assumed in the absence of an enforceable and undisputed right to receive the amount. Likewise, in CIT v. Pioneer Engineering Syndicate(supra), the Hon'ble Madras High Court held that amounts representing disputed claims, the entitlement to which had not been accepted by the opposite party and were pending adjudication, could not be regarded as income accrued to the assessee. Similarly, in CIT v. Sharda Sugar Industries Ltd.(supra), the Hon'ble Bombay High Court held that where the very right to receive an amount remains under dispute, no accrual of income takes place until the dispute is finally resolved and the right becomes vested and enforceable. The ratio emerging from all these decisions is that taxation under the mercantile system proceeds on real accrual and not on hypothetical or disputed claims. 112. Applying the aforesaid principles to the facts before us, we find that the estate rentals in question arose out of a long-standing dispute regarding revision of rentals payable by various lesse....
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....icity Co. Ltd. v. CIT (supra) while applying the doctrine of real income also took note of the uncertainty surrounding realization of the enhanced charges and held that the probability or improbability of realization has to be considered in a realistic manner while determining whether income has truly accrued. The ratio of the said decision, therefore, accords with the principles underlying AS-9 that revenue cannot be said to accrue merely because a claim is raised when its ultimate realization remains uncertain. 116. The learned CIT(A), while deleting the addition, has applied the settled principles governing real income and accrual of income. We find ourselves in agreement with the conclusion reached by the learned CIT(A). The Revenue has not pointed out any distinguishing feature either on facts or in law warranting interference with the impugned order. 117. Accordingly, we uphold the order of the learned CIT(A) deleting the addition made on account of unrecovered estate rentals. The common grounds raised by the Revenue for the relevant assessment years are dismissed. Common Ground No. 2 in Revenue's Appeals for A.Ys. 2009-10 and 2012-13 - Depreciation on Docks, Sea....
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....ck/locomotives. However, the learned CIT(A) upheld the disallowance of Rs. 8,70,625/- pertaining to demolished assets. Consequently, relief aggregating to Rs. 1,18,82,158/- (Rs.70,75,538/- + Rs. 48,06,620/-) was granted by the learned CIT(A). 122. The learned DR strongly relied upon the assessment orders for both the assessment years. He submitted that the Assessing Officer had correctly held that docks, sea walls, piers and railways & rolling stock/locomotives were more appropriately classifiable under the block of buildings and, therefore, depreciation was admissible only at the rate prescribed for buildings. According to the learned DR, the learned CIT(A) was not justified in directing allowance of depreciation at the higher rate claimed by the assessee. 123. The learned AR strongly relied upon the orders of the learned CIT(A) for both the assessment years and submitted that the issue is squarely covered in favour of the assessee by binding judicial precedents. He submitted that the Assessing Officer erred in treating docks, sea walls, piers, wharves, railway sidings and rolling stock as mere buildings, ignoring their functional role in carrying on the business of a port. ....
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....ely covered in favour of the assessee by judicial precedents. 128. Insofar as the classification of port infrastructure is concerned, we find that the issue directly came up for consideration before the Rajkot Bench in Kandla Port Trust v. ACIT. The Tribunal, after examining the nature and functions of port assets such as wharves, pavements, docks, drains, jetties, railway sidings and rolling stock, observed in para 20 as under: "In view of the above discussions, we are of the considered view that if assets used in the business are tools or apparatus of assessee by means of which it carries on his business then it can be classified as plant. wharves, pavements, docks, including dry docks, drains, jetties, railway wagons and slidings rolling stock and various platforms are principal apparatus of port with which it carries on its business and they are so equip to take care of heavy machinery and that is the reason all the above assets are classified under Block VI as Plant and Machinery and depreciation applicable to plant and machinery is to be allowed." 129. Thereafter, in para 21, the Bench concluded as under: "Thus, applying the functional tests to each an....
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....judicial precedents while granting relief to the assessee. The Revenue has not brought to our notice any contrary decision of any higher judicial forum taking a different view in respect of similar port infrastructure. 136. Having regard to the totality of facts and circumstances and respectfully following the decisions in Kandla Port Trust v. ACIT (supra) and CIT v. Mazgaon Dock Ltd. (supra), we uphold the orders of the learned CIT(A) deleting the disallowance of depreciation. Accordingly, Ground No.2 raised by the Revenue for A.Y. 2009-10 and Ground No.2 raised by the Revenue for A.Y. 2012-13 are dismissed. Common Ground No. 4 in Revenue's Appeal for A.Y. 2009-10 and Ground No. 3 in Revenue's Appeal for A.Y. 2012-13 137. The next issue arising for our consideration relates to the disallowance made under section 40(a)(ia) of the Act on account of alleged short deduction of tax at source. 138. During the course of assessment proceedings for A.Y. 2009-10, the Assessing Officer received information from the DCIT (TDS)-2(1) that a survey action had been conducted in the case of the assessee and proceedings under sections 201(1) and 201(1A) of the Act had been initi....
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....tion 40(a)(ia) of the Act, resulting in additions of Rs. 21,01,15,610/- for A.Y. 2009-10 and Rs. 1,53,31,905/- for A.Y. 2012-13 respectively. 141. For both the assessment years, the learned CIT(A) deleted the impugned additions on the ground that the orders passed under sections 201(1)/201(1A), which constituted the sole basis for invoking section 40(a)(ia), had already been set aside in appellate proceedings and, therefore, the consequential disallowances could not survive. 142. During the course of hearing, the learned DR relied upon the assessment orders. 143. The learned AR relied upon the orders of the learned CIT(A) and further submitted that the very basis of the impugned disallowances under section 40(a)(ia), namely the orders passed under sections 201(1)/201(1A), had already been set aside in appellate proceedings. He further placed reliance upon the decision of the Co-ordinate Benchin the assessee's own case in ITA Nos. 3166 to 3168/Mum/2014, ITA No. 463/Mum/2015 and ITA No. 3930/Mum/2015 dated 11.10.2017, wherein, while adjudicating the appeals arising from the proceedings under sections 201(1) and 201(1A), the Bench upheld the finding that the payments in q....
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....cifications. The nature of human intervention was reflected in the terms and conditions of the agreement itself. ... Section 194J of the Income-tax Act, 1961 is not a residuary clause. In other words, it is not that if a contract does not fall within the ambit of section 194C, it must be deemed to fall within the ambit of section 194J. Sections 194C and 194J are independent provisions." 146. Thereafter, in paragraph 5.2, the Bench further held as under: "In our opinion, all the contracts were work contracts and there was no live link between the payment and use of technical services. So, in our opinion order of FAA does not suffer from any legal infirmity." 147. The Bench also examined the applicability of section 194-I and, in paragraph 5.3, held: "Similarly, we find that assessee had not hired any vehicles. The services of contractors were hired for ferrying the members of staff. In our opinion, the FAA had rightly held that provisions of section 194-I were not applicable for the payments made by the assessee to various parties, as discussed in the earlier part of the order." 148. Thus, the very TDS demands which formed the basis of the impugned disallo....
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.... exclusively for business purposes. According to the Assessing Officer, the expenditure comprised payments made towards Bipartite Wage Negotiation Committee Meetings, TODA of Labour Federations, Indian Port Association, Maharashtra Labour Welfare Fund, MbPT Reynolds Institute, Mumbai Port Sports Council, Mumbai Port Trust Sports Club and Port Officers Recreation Club, which had been grouped under the head "Donations and Contributions". The Assessing Officer, therefore, maintained that the disallowance was justified. 153. Before the learned CIT(A), the assessee submitted that the nomenclature adopted in the ledger was not determinative of the true nature of the expenditure. It was contended that the impugned payments represented expenditure incurred towards employee welfare activities, labour welfare measures, sports and recreational facilities for employees and participation in professional and industry bodies such as the Indian Port Association. The assessee further submitted that the ledger accounts and party-wise details clearly established the nature and purpose of the expenditure and demonstrated that the same had been incurred wholly and exclusively for the purposes of its....
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....ion 37(1) of the Act. The learned AR particularly relied upon the observations of the Hon'ble High Court that voluntary payments made by an employer for the welfare and benefit of employees on grounds of commercial expediency have a direct nexus with the conduct of business and are deductible as revenue expenditure. The learned AR submitted that the learned CIT(A) had correctly appreciated the real nature of the expenditure and rightly held that the impugned payments were in the nature of staff welfare and business expenditure and not donations. He, therefore, prayed that the order of the learned CIT(A) deleting the addition of Rs. 2,84,00,000/- be upheld and the ground raised by the Revenue be dismissed. 158. We have heard the rival submissions and perused the material available on record. The solitary issue arising in the present ground relates to the deletion by the learned CIT(A) of the disallowance of Rs. 2,84,00,000/- made by the Assessing Officer under the head "Donations and Contributions". 159. The Assessing Officer disallowed the expenditure primarily on the premise that the amount debited under the head "donations and contributions" did not appear to be related....