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2015 (3) TMI 838 - AT - Income TaxAddition on account of extra ordinary item i.e. flood, cyclone fire etc - CIT(A) deleted the addition - Asstt.Year 2006-07 - Held that:- The assessee has not furnished any details and explanation about the expenditure of ₹ 3,53,90,000/- being loss due to flood, cyclone, fire. The assessee could not justify its claim on the basis of material evidences with respect to the particular assets and its extent. It also could not justify and did not make any submission as to why these expenses have been claimed under the head "extraordinary items". In view of the above, the asseessee's claim of ₹ 3,53,90,000/- under the head extra ordinary items cannot be allowed to it. Accordingly the same is disallowed and added back to its total income.Without prejudice to the above, such claim in absence of details furnished, may be for the revival of assets damaged / destroyed during the natural calamities therefore, such claim is of capital nature. Therefore also the claim is not allowable. - Decided against assessee. Disallowance of deduction for repairing of assets damaged due to floods - CIT(A) vacated the disallowance on the ground that the assessee had received financial assistance of ₹ 929 lakhs for repairing of its assets damaged due to flood and the assessee has claimed deduction of ₹ 353.90 lakhs on account of expenses incurred on repairs of flood damaged assets and the balance amount was shown as income in the year under consideration - Held that:- The fact that the assessee suffered loss has not been disputed by the AO, and therefore, the AO was not justified in disallowing the entire amount of loss claimed by the assessee, and thereby inferring that no actual loss was suffered by the assessee.However, we also find that the details of the expenditure incurred or loss suffered due to flood as well as Misc. write off of ₹ 82.93 lakhs was not filed before the CIT(A) or before us also by the assessee. The CIT(A) deleted the disallowance on the ground that the accounts of the assessee was audited by the C&AG and without verifying the details of loss and write off by the assessee. Thus, in our considered view orders of both the authorities below cannot be sustained. We, therefore, in the interest of justice remit the matter back to the file of the AO for adjudication of the issue afresh after allowing the assessee reasonable opportunity of producing the details of expenses incurred or loss suffered as well as details of amount write off and after verification of details so furnished and if the assessee fails to furnish the details, by estimating the reasonable amount of loss which was suffered by the assessee on account of flood and write off of the amount. - Decided in favour of revenue for statistical purposes. Disallowance of claim of deduction for guarantee fee - CIT(A) deleted the addition - Held that:- In the instant case, the assessee did not acquire any right to exploit a commercial technology or process, and neither was the benefit "enduring", since the payment of guarantee commission was an annual charge. The benefit derived from payment of such commission thus lasted for exactly one year only. Such short lived benefit could not be categorized as “enduring”. Hence, inclined to the view that the payment of guarantee commission was revenue expenditure. Quite apart from the other sound reasons for treating the expenditure as revenue, it would be unrealistic to say that the appellant company could derive any undue advantage or collateral benefit by making such payment to the GOG. In view of the totality of the circumstances, the AO was not justified in treating the payment of guarantee commission as capital in nature - Decided against revenue. Disallowance of restructuring of loans - CIT(A) has allowed the claim of the assessee on the ground that benefits derived from the payment of commission lasted for one year only - Held that:- It is not in dispute that the amount was paid by the assessee as guarantee commission for unsecured loans. Therefore, respectfully following the decision of the Hon’ble Gujarat High Court in the case of Mihir Textile Ltd. (2000 (8) TMI 20 - GUJARAT High Court), we confirm the order of the CIT(A) and dismiss this ground of the Revenue for both the years under consideration. - Decided against revenue. Guarantee fees and Premium on debt restructuring - CIT(A) deleted the disallowance on the ground that it does not confer any enduring benefit and merely facilitate the assessee’s business in more efficient manner - Held that:- assessee relied of the decision of the Hon’ble Gujarat High Court in the case of DCIT Vs. Gujarat Narmada Valley Fertilizers Ltd.,(2013 (8) TMI 300 - GUJARAT HIGH COURT ) wherein it was held that the expenditure incurred by the assessee on restructuring of loan was revenue expenditure. No contrary decision was cited by the learned DR. Therefore, respectfully following the decision we confirm the order of the CIT(A) and dismiss the ground of appeal of the assessee. - Decided against revenue. Addition on account of Employee’s PF contribution - employees contribution to PF paid beyond the due date - CIT(A) deleted addition - Held that:- AR of the assessee submitted that the AO has disallowed the deduction simply because the payments were not made to the credit of PF authorities within the due date prescribed under the PF Act. He submitted that under the PF Act, the payments can be made within 15 days from the deduction of PF contribution from the employees’ salary plus 5 grace days. The AO has not verified the payments made to the PF authorities according to this provision of the PF Act. He, therefore, submitted that the matter should be remitted back to the file of the AO for verification, and thereafter making the disallowance of payments, which are made beyond 15 days from the payment of salary to the employees plus 5 days’ grace period allowed under the PF Act.Thus set aside the orders of the lower authorities and remand the matter back to the file of the AO for adjudication of the issue afresh in the light of the discussion made hereinabove after providing reasonable opportunity to the assessee - Decided in favour of revenue for statistical purposes. Treatment of the provision for gratuity as unascertained liability and in enhancing the book profit by this amount - Held that:- DR could cite any contrary decision. He could not controvert the findings of the CIT(A) that the provision for gratuity in the instant case was made by the assessee on actuarial valuation. Therefore, following the decision o the Hon’ble Gujarat High Court in the case of DCIT Vs. Inox Leisure [2013 (2) TMI 353 - GUJARAT HIGH COURT] wherein it was held that the provision of gratuity on the basis of acturial calculation was not to be added back under clause (c) to Explanation-1 below section 115JB of the I.T.Act, 1961. - Decided against revenue. Exclude the amount withdrawn from reserve in the computation of book profit u/s.115B -CIT(A) allowed the appeal of the assessee by observing that the profit carried to the balance sheet in the reserve account were those profit, which were arrived at after deducting tax and that under the proviso it was not necessary that the amount withdrawn from the reserve should be credited to the profit & loss account of the same year - Held that:- as per Explanation-1 below section 115JB(2) clause (i) the profit as shown in the profit & loss account for the relevant previous year has to be reduced by the amount withdrawn from any reserve or provision, if any amount is credited to the profit & loss account. We find that a reading of the assessment order shows that the AO disallowed deduction claimed for amount withdrawn from reserves on the ground that the same was not credited in the profit & loss account of the year under consideration, and therefore, not included in the net profit as per the profit & loss account of the year. The CIT(A) deleted the addition without recording any finding whether the amount was included in the net profit of the year or not. Before us, copy of the audited profit and loss account was not filed by either of the party. In the absence of the same, we are not in a position to adjudicate the issue completely. We, therefore, in the interest of justice restore this issue back to the file of AO for adjudicating the same afresh - Decided in favour of revenue for statistical purposes. Re computation of the book profit for MAT by not reducing the claim for depreciation - Held that:- is not in dispute that the assessee has claimed only that depreciation which was debited in its audited profit & loss account which was laid before the AGM. In our considered view, following the decision of the Hon’ble Supreme Court in the case of Apollo Tyres Ltd. ( 2002 (5) TMI 5 - SUPREME Court) only those adjustments from net profit disclosed by such audited accounts can be made which are specified in Explanation to section 115JB. The depreciation not being a specified item in Explanation to section 115JB at the relevant time, we do not find any error in the order of the CIT(A) in directing the AO to recomputed the book profit for MAT by not reducing the claim for depreciation of ₹ 1.75 crores. - Decided against revenue. Disallowance under Section 14A read with rule 8D - Held that:- It was mandatory for the AO to apply Rule 8D while computing the disallowance under section 14A of the Act. Therefore, CIT(A) correctly restored the matter to the file of the AO to verify the correct figure of interest and recalculate the disallowance, if necessary. - Decided against assessee.
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