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2021 (9) TMI 1071 - AT - Income TaxDisallowance towards prior period expenditure u/s 37 - CIT(A) upheld the action of the AO by holding that the assessee had not submitted any clarification on this issue or submitted any evidence to prove that this expenditure should have been allowed - HELD THAT - As decided in OCIMUM BIO SOLUTIONS INDIA LIMITED 2021 (6) TMI 526 - ITAT HYDERABAD detailed discussions have been fair enough in not disputing this clinching crystalisation aspect. Coupled with this, the assessee has been assessed at the same rate all along - the impugned prior period expenditure disallowance in such a case ought not to be made as it is a revenue neutral instance only. We adopt the same reasoning herein as well and direct the Assessing Officer to delete the impugned disallowance. - Decided in favour of assessee. Disallowance u/s 43B - assessee did not produce evidence for payment of statutory liabilities as per balance sheet before the due date of filing the return of income - CIT(A) confirmed the disallowance on the ground that even before him the assessee failed to produce the evidence for statutory of liabilities - HELD THAT - The law is settled on this issue if the assessee has paid the statutory liabilities before the due date of filing of return income u/s 139(1) of the Act, no disallowance is warranted. Therefore, we remit this issue to the file of the AO with a direction to examine whether the assessee has paid the aforementioned statutory liabilities within due date for filling return of income U/s 139(1) , if it is found in order , allow the claim of the assessee. The assessee is directed to substantiate its claim by way of documentary evidence that the same are paid before the due date of filing of return of income. Accordingly, grounds raised allowed for statistical purposes. Addition towards miscellaneous expenses - As assessee is following mercantile system of accounting, prior period expenditure cannot be allowed - AR submitted that it was a product development expenditure incurred earlier and allowable as per section 35D - HELD THAT - We find that nowhere from the orders of revenue authorities that the earlier year expenditure has been disallowed. Once the deduction claimed by the assessee is accepted, in subsequent year it cannot be denied. See Handy Waterbase India (P.) Ltd 2021 (4) TMI 1017 - ITAT CHENNAI - Decided in favour of assessee. Addition u/s 40(a)(ia) - assessee failed to submit the proof of deduction of TDS - as argued the expenditure was not shown payable in the books of account by the Balance sheet date, the disallowance ujs.40(a)(ia) of the Act cannot be made applicable - HELD THAT - As relying on case of Ramesh Gelli 2019 (4) TMI 2015 - ITAT HYDERABAD we hold that without treating the assessee as an assessee in default the disallowance u/s 40(a)(ia) should not be made. Therefore, we set aside the order of the CIT(A) and direct the AO to delete the additions made u/s 40(a)(ia) of the Act. Thus, the grounds raised on this issue are allowed. Addition u/s 36(i)(va) - assessee had not paid the employee contribution to PF before the due date of the relevant Act - HELD THAT - As it is a settled position of law that if the contributions are paid before the due date of filing return u/s 139(1) of the Act, no disallowance is warranted. The authorities below made the addition in the absence of proof of making payment by the assessee before the due date of filing of return - as in CIT VS. Aimil Ltd. Ors. 2009 (12) TMI 38 - DELHI HIGH COURT has held that if the employees share of contribution is paid before the due date of filing the return u/s 139(1) no disallowance can be made - we direct the assessee to furnish the proof of payment before the AO and the AO is directed to examine whether the assessee has paid before the due date of filing of return, If so, allow the assessee s claim. Addition towards investment written off debited to P L Account - assessee has not furnished any evidence to substantiate its claim that the above Income was offered in earlier years - HELD THAT - On perusal of the financial statement as per Note No. 12 under the account head non-current investments, there is a closing balance as on 31/03/2012 is ₹ 26,11,26,524/- and as on 31/03/2013 the closing balance is ₹ 20,89,21,219/-, the net difference is ₹ 5,22,05,305/-, which has been written off during the year and it is an investment in subsidiary. As relying on own case 2015 (5) TMI 897 - ITAT HYDERABAD in order to examine the issue and to give one more opportunity to assessee to substantiate the claim, matter is restored to the file of AO with a direction to examine the factual aspect of the contentions of assessee and then decide whether the amount can be allowed as revenue expenditure or not as per the provisions of Act. For this purpose, this issue is also restored to the file of AO and Grounds raised on this issue are accordingly considered allowed for statistical purposes. Addition towards capital work in progress written off - CIT(A) confirmed the addition observing that the assessee failed to substantiate its claim by way of documentary evidence - HELD THAT - In assssee s own case for AY 2009-10 2015 (5) TMI 897 - ITAT HYDERABAD whether capital work in progress can be reduced or not was not an issue before the AO and this aspect was not examined at all. Since the AO put it to CIT(A), with reference to claim And capital work in progress reduced in the computation, which the Ld. CIT(A) directed to be enhanced by an amount of ₹ 6,75,96,165/- , that too without giving opportunity to assessee as contended, we are of the opinion that this capital work in progress issue also requires re-examination. AO is directed to take the revised computation filed by the assessee and determine the exact amount claimed by assessee and why this claim was made and whether the claim can be allowed as per the provisions of the Act - Thus following the above decision, we remit the issue to the file of the AO with a direction to decide the issue. - ground raised on this issue are treated as allowed for statistical purposes.
Issues Involved:
1. Disallowance of ?3,09,306/- towards prior period expenditure u/s 37 of the Act. 2. Disallowance of ?16,16,269/- towards statutory liabilities u/s 43B of the Act. 3. Addition of ?56,55,787/- towards miscellaneous expenses. 4. Addition of ?19,07,500/-, ?10,58,300/-, and ?39,16,445/- u/s 40(a)(ia) of the Act. 5. Addition of ?36,720/- u/s 36(1)(va) of the Act. 6. Addition of ?5,22,05,305/- towards investment written off. 7. Addition of ?2,01,71,965/- towards capital work in progress written off. Detailed Analysis: 1. Disallowance of ?3,09,306/- towards prior period expenditure u/s 37 of the Act: The assessee debited ?3,09,306/- towards prior period expenses in the P&L Account. The AO disallowed this amount, citing the mercantile system of accounting. The CIT(A) upheld the AO's decision due to the lack of clarification and evidence from the assessee. The ITAT, referencing the case of Ocimum Bio Solutions India Ltd., directed the AO to delete the disallowance, noting that the expenditure was claimed in the year of crystallization and was revenue-neutral. 2. Disallowance of ?16,16,269/- towards statutory liabilities u/s 43B of the Act: The AO disallowed ?16,16,269/- for statutory liabilities (PF, Professional Tax, Service Tax, Educational Cess) as the assessee did not produce payment evidence before the due date of filing the return. The CIT(A) confirmed the disallowance. The ITAT remitted the issue to the AO to verify if the payments were made before the due date of filing the return u/s 139(1) and allowed the claim if substantiated. 3. Addition of ?56,55,787/- towards miscellaneous expenses: The AO disallowed ?56,55,787/- towards miscellaneous expenses, as the assessee failed to provide details and evidence. The CIT(A) upheld the disallowance. The ITAT noted that the expenses related to amortization of intangible assets incurred in earlier years and were allowable under Section 35D. The ITAT directed the AO to delete the addition, following the ITAT Chennai Bench's decision in Handy Waterbase India (P.) Ltd. 4. Addition of ?19,07,500/-, ?10,58,300/-, and ?39,16,445/- u/s 40(a)(ia) of the Act: The AO disallowed these amounts due to the assessee's failure to submit proof of TDS deduction. The CIT(A) confirmed the disallowance. The ITAT, referencing the Delhi High Court's decision in CIT vs. Ansal Landmark Township (P) Ltd., held that without treating the assessee as 'an assessee in default,' the disallowance u/s 40(a)(ia) should not be made. The ITAT directed the AO to delete the additions. 5. Addition of ?36,720/- u/s 36(1)(va) of the Act: The AO disallowed ?36,720/- for employee contribution to PF not paid before the due date of the relevant Act. The CIT(A) upheld the disallowance. The ITAT noted that if contributions are paid before the due date of filing the return u/s 139(1), no disallowance is warranted. The ITAT directed the assessee to furnish proof of payment and the AO to verify and allow the claim if substantiated. 6. Addition of ?5,22,05,305/- towards investment written off: The AO disallowed ?5,22,05,305/- claimed as investment written off, as the assessee failed to provide evidence that the income was offered in earlier years. The CIT(A) confirmed the disallowance. The ITAT, following its decision in the assessee's own case for AY 2009-10, remitted the issue to the AO to examine the factual aspect and decide if the amount can be allowed as revenue expenditure. 7. Addition of ?2,01,71,965/- towards capital work in progress written off: The AO disallowed ?2,01,71,965/- claimed as capital work in progress written off, due to the lack of evidence. The CIT(A) confirmed the disallowance. The ITAT, referencing its decision in the assessee's own case for AY 2009-10, remitted the issue to the AO to determine the exact amount claimed and whether it can be allowed as per the provisions of the Act. Conclusion: The ITAT allowed the appeal for statistical purposes, directing the AO to re-examine several issues and substantiate the claims based on provided evidence and applicable legal precedents.
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