Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (10) TMI 1340 - ITAT CHENNAIAddition towards Service Commission, yet to be paid to the dealers, which is only a provision - CIT-A deleted the addition - main contention of the D.R is that the Service Commission is only a provision made in the books of accounts and it was not actually incurred - A.R submitted that the assessee has been following the same system of book keeping consistently from year to year and this Sales Commission embedded to the sales - HELD THAT:- Whenever assessee makes the sales corresponding liability attached to the assessee to maintain air conditioners in a better condition of operations for a particular period and for which the assessee is providing free maintenance warranty, which involves the cost to be borne by the assessee for which the assessee is making the provision in the books of account of assessee. Further, he submitted that when the assessee recognized the income on the sale of the air conditioners at the same time on provisional basis, provision towards services created by the assessee. According to him, the Department cannot disturb the consistent method of accounting followed by the assessee. In our opinion, if the Service Commission is directly attached to sales made by the assessee and as soon as sales are accounted corresponding service charges/commission to be incurred by the assessee to be booked in the books of account of assessee. Accordingly, we are inclined to remit the issue to the file of AO to verify the books of accounts of assessee whether the Service Commission is debited when the sales made and if the assessee charges service commission as soon as the sales is made, the claim of assessee is to be allowed, as it is related to the sales of air conditioners. With this observation, we remit the issue to the file of AO for fresh consideration. Disallowance u/s.14A - HELD THAT:- In this case the undisputed facts are that the assessee not able to show that sources of funds, which were diverted into investment in shares, which has not yielded any dividend income, even if assessee earned dividend income, it is exempted u/s.10(33) of the Act from the tax liability and the same cannot be computed under the head “income from other sources”. The expenditure incurred to earn exempted income is not liable for deduction in view of Sec.14A - the jurisdictional High Court in the case of CIT Vs. Seshasayee Paper And Boards Ltd. [1984 (4) TMI 17 - MADRAS HIGH COURT] wherein held that the borrowing has not been made exclusively and wholly for the purpose of earning interest, in which case alone it should be taken as income, which should be deducted from the interest receipts. Further, Hon’ble Karnataka High Court in the case of Pradeep Kar Vs. ACIT [2009 (6) TMI 331 - KARNATAKA HIGH COURT] wherein held that dividend income being exempt u/s.10(33) and not assessable to tax, assessee was not entitled to deduction for interest in view of Sec.14A of the Act. Accordingly, this ground of the Revenue is allowed. Disallowance of trade discount given to the sister concerns - HELD THAT:- In our opinion if the expenditure is debited to the P&L A/c and claim it as an expenditure in computing the income of assessee, provisions of the section 40A(2) of the Act is applicable. Before us, ld.A.R submitted that it is only the deduction in the sales value made to the sister concerns, and it is not claimed as expenditure in the books of account of assessee and discount was passed by the assessee while making the sale itself, and there is no separate discount was claimed by the assessee - we find that this fact has not come from the orders of the lower authorities. In our opinion, unless the entire facts are brought on record, we are not in a position to appreciate the findings of the Ld.CIT(A), so in the interest of justice we remit the issue to the file of AO whether the trade discount is given to the sister concern in the sales bills itself or separate credit has been given after the sales has been effected. If the separate sales discount is given after the sales, then the provisions of the section 40A(2) be applied. With this observation, we remit the issue to the file of AO for fresh consideration.
|