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2021 (11) TMI 92 - AT - Income TaxAdditions as interest income - Taxability of compensation received by the assessee company from Boeing Co.- aerospace project with Boeing Co.suspended - Capital gain or income from other sources - plea of the assessee that the compensation received would be capital receipt not chargeable to tax was rejected by the ld AO on the ground that the compensation received is akin to interest loss borne by the assessee for the delay in execution of the project by the Boeing Co. and accordingly the ld AO held that the said interest would be liable to be taxed separately under the head ‘income from other sources’ - whether the assessee was justified in claiming the expenses pertaining to Boeing project as revenue expenditure when the aerospace project had been suspended at the behest of Boeing Co.? - HELD THAT:- We find that the compensation so received by the assessee company from Boeing Co. would only go to reduce the cost of project as it is effectively meant to cover up for the expenses and investments incurred by the assessee for the said project. Hence we hold that the receipt of compensation would be capital in nature and would go to reduce the cost of project. As the business of assessee was set up and had started and there was huge investment made by assessee and the project was only temporarily suspended by the Boeing Co - Here what is received by the assessee is part of overall cost of project in the form of compensation from Boeing Co. which cannot be treated as interest. Accordingly, we hold that the compensation received in the sum would go to reduce the cost of aerospace project of the assessee company. Hence the Ground raised by the assessee disposed of. Claim of revenue expenditure - We find that the ld AO had given a categorical finding which remain uncontroverted by the ld AR before us, that the business in Boeing Project started from 10/09/2012 falling in Asst Year 2013-14 onwards. Hence all the expenditure and receipts upto 09/09/2012 pertaining to the project would have to be treated as capital in nature. Accordingly, we hold that the receipt of compensation should go to reduce the cost of project i.e Capital Work in Progress of the assessee company. Similarly all expenditure incurred by the assessee which was claimed as revenue expenditure by assessee should also be capitalized to the Capital Work in Progress. This treatment, in our considered opinion, would meet the ends of justice to both assessee as well as for the revenue. Disallowance of expenses incurred on account of repairs to buildings - HELD THAT:- These expenses were incurred by Tata Motors Ltd on behalf of assessee and were later on billed to the assessee. We also find that similar disallowance made by the lower authorities in assessee’s own case for the Asst Year 2009-10 had been deleted by this Tribunal [2017 (12) TMI 1817 - ITAT MUMBAI] by placing reliance on the decision of Hon’ble Jurisdictional High Court in the case of CIT vs HEDE Consultancy Ltd. [2002 (6) TMI 19 - BOMBAY HIGH COURT] In view of the aforesaid observations and also by placing reliance on the judicial precedent relied upon hereinabove, we direct the ld AO to delete the disallowance made towards repairs to buildings. Disallowance of commission paid - HELD THAT:- We find that the assessee had given an explanation that it had entered into agreement with those parties and commission is paid only if such agent solicits business for the assessee. The assessee also pointed out that due deduction of tax at source was made in accordance with provisions of Chapter XVIIB of the Act while making payment of such commission and payment made through regular banking channels. We find that the ld AO had merely followed his finding in Asst Year 2009-10 and made the disallowance for this year also in respect of the aforesaid two parties. No examination in any manner known to law was made by him for the year under consideration. - As decided in own case [2017 (12) TMI 1817 - ITAT MUMBAI].after considering the details furnished by assessee like copies of agreements, invoice copies, relevant extract of bank statements, TDS certificates, etc, the same issue was decided in favour of the assessee and against the revenue by holding that merely non furnishing of information by the third party cannot be sole criteria for disallowance, when it is provided that expenses per se had been incurred in the normal course of business. Chargeability of interest u/s 234C - HELD THAT:- Interest u/s 234C of the Act could be levied only on the returned income and not on the assessed income - See Smt Premlata Jalani [2003 (7) TMI 62 - RAJASTHAN HIGH COURT] Decided in favour of assessee.
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