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2018 (6) TMI 1730 - ITAT BANGALORE
Disallowance of interest payment on belated TDS payment - case of the appellant inter-alia that interest on late payment of TDS is compensatoryand not penal in nature; that TDS is not a liability in the hands of the deductor; that interest paid on account belated TDS payment is only to compensate the loss, if any; etc, and therefore, the same is allowable - HELD THAT:- As decided in Narayani Ispat Pvt. Ltd. [2017 (10) TMI 67 - ITAT KOLKATA] AO has wrongly applied the principle laid down by the Hon'ble Supreme Court in the case of Bharat Commerce Industries Ltd [1998 (3) TMI 2 - SUPREME COURT] We also find that the Hon'ble Supreme Court in the case of Lachmandas Mathura [1997 (12) TMI 16 - SUPREME COURT] has allowed the deduction on account of interest on late deposit of sales tax u/s 37(1) of the Act. In view of the above, we conclude that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s 37(1).
We find that in that case also, the issue involved was regarding allowability of interest on belated payment of service tax and TDS whereas in the present case, the issue in dispute is regarding interest payment on belated payment of TDS. Hence it is seen that the facts and dispute are similar and therefore, by respectfully following this Tribunal order, we decide the issue in favour of the assessee.
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2018 (6) TMI 1729 - ITAT PUNE
Deemed income u/s.69/69B - Income disclosed in survey action u/s.133A - taxation for discrepancies in the stock of gold and silver - HELD THAT:- There was survey action on the assessee and the same resulted in the disclosure of additional income of ₹ 1.25 crores on account of excess stock of gold and jewellery. It is also a fact that the assessee reflected the said income in the profit and loss account while filing the return of income. The requisite taxes were also paid on the said income. We find disclosure of said additional income is closely linked to the excess closing stock of assessee and consequently the business nature of the said additional income.
As decided in M/S. SUREKH JEWELLERS [2016 (8) TMI 1140 - ITAT PUNE] additional income disclosed by the assessee in the survey action u/s.133A partakes the character of business and therefore, the assessee is entitled to the benefits of excess remuneration qua the additional income as per the provisions of section 40(b).
The excess stock linked additional income partakes not only the character of business profit but the same is eligible, for quantifying the remuneration u/s.40(b) of the Act. Therefore, we are of the considered view that the order of the CIT(A) needs to be reversed. Consequently, the grounds/additional grounds raised by the assessee are allowed.
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2018 (6) TMI 1728 - CESTAT KOLKATA
Valuation - inclusion of development charges i.e. cost of dyes and moulds in the assessable - HELD THAT:- This is second round of litigation before this Tribunal on the issue regarding includibility of the development charges in respect of dies and moulds. It is on record that the mould etc. have not been manufactured by the appellant and has been provided by their client for use in their factory in the manufacture of the excisable goods for them. Therefore, the question of charging duty on the goods which has been capitvely consumed does not arise at all in view of Notification No. 67/1995.
Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1727 - MADRAS HIGH COURT
Jurisdiction - it is the submission of the Learned Counsel for the Respondents that the present Appeal filed by the Appellant is an abuse of Process and that the Appellant has no locus to even initiate a complaint under the Companies Act, 1956 - whether High Court could exercise power in respect of a proceeding pending not before it, but, at the Magistrate's Court and the issue before it was not whether the High Court can exercise powers under Section 633(1) of the Companies Act, 1956 to relieve a person on liability in a proceeding pending before it? - HELD THAT:- The object of Section 633 of the Companies Act is to grant relief against undue hardship in a given case and grant relief from liability to a person who though technically guilty of negligence, default, breach of duty, misfeasance or breach of trust, are able to satisfy the subjective conscience of the Court that they had acted honestly and reasonably and having regard to the attendant facts and circumstances of their case they ought to be fairly excused / relieved from the charge or charges levelled against them - One cannot ignore a very vital fact that Section 633(2) of the Companies Act, 1956 confers a larger / wider ambit to the Hon'ble High Court to grant an 'Apprehended' / 'Anticipatory relief' in regard to the Apprehended / Anticipatory criminal proceedings also.
As per Section 633(2) of the Companies Act, 1956 the power to grant relief to the Hon'ble High Court, is a discretionary power and the same should be exercised by the Court only where it is satisfied that the concerned person had acted honestly and reasonably and that considering the circumstances of a given case, he should be excused. The only issue for consideration under Section 633(1) or (2) is that whether a person had acted in good faith [honestly] and whether he had any reason to escape from the liability.
A glimpse of Section 633(1) of the Companies Act, 1956 unerringly points out that in the criminal proceedings, the Court shall have no power to give relieve from any civil liability, which may attach to an officer in respect of such negligence, default, breach of duty, misfeasance or breach of trust - Also, this Court points out that the decisions of various High Court cited on behalf of the Appellant in the present O.S.A. No. 393 of 2013 where the criminal prosecutions were initiated by Registrar of Companies/Statutory Authority after issuance of show cause notices to the concerned person(s) and thereby making them aware / bringing it to their knowledge well in advance about the anticipated / apprehended / prospective/contemplated proceedings - But in the present case on hand, the Appellant is the complainant in C.C. No. 107 of 2013 on the file of trial Court.
There is no Second Opinion of a very significant fact that the power under Section 633(2) of the Companies Act can be exercised by the High Court with great care, caution and circumspection based on the facts and circumstances of the given case, which float on the surface.
Appeal dismissed.
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2018 (6) TMI 1726 - GAUHATI HIGH COURT
Area Based Exemption - Industrial Policy for the North Eastern Region - exemption of excise duty by way of refund - stand of the authorities justifying the refusal to the exemption was that under the notification of 18-7-2009, the benefit is for a period of ten years from the date of the notification and hence, further exemption cannot be given after expiry of the period of ten years from the said notification - HELD THAT:- Under the notification of 8-7-1999, as made applicable to the appellant by the notification of 12-2-2002 upon their location being included, the appellant would be entitled to exemption for a period of ten years from 8-7-1999.
The notifications dated 8-7-1999 and 12-2-2002 have to be interpreted in a manner that once a particular industrial unit is brought within the purview of the notification of 8-7-1999 by including through an amendment made by the notification of 12-2-2002, the exemption benefit provided by the notification of 8-7-1999 would be squarely applicable in respect of such industrial unit. The notification of 8-7-1999 having specifically provided that the exemptions would be available for a period of 10 years w.e.f. the date of the said notification, i.e., 8-7-1999, any industrial unit subsequently brought within the purview of the notification by virtue of any later amendment, would also be entitled to the benefit of exemption from 8-7-1999.
The contention sought to be raised by the respondent authorities that the appellant would be entitled to the benefit of exemption from the date of the notification of 12-2-2002, inasmuch as, only after the said notification the appellant is entitled for an exemption and that such exemption would come to an end on the expiry of 10 (ten) years from the notification of 8-7-1999, would be unacceptable. The said contention would not only be contrary to the provisions of the notifications dated 8-7-1999 and 12-2-2002, but also would amount to giving a constricted interpretation to the provisions of the notifications, which would be impermissible in view of the aforesaid provisions of law.
The appellant would be entitled to the benefit of exemption from excise duties for a period of 10 (ten) years w.e.f. 8-7-1999 - Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1725 - ITAT MUMBAI
Correct head of income - fixed deposit interest income - Income from Business & Profession or Income from Other Sources - FAA had allowed the claim made by the assessee on the grounds that it was in the business of production of films that the completion of films would take time that during the intervening period the advances were deposited with bank resulting in accrual of interest income - HELD THAT:- We find that these basic finding of the FAA have not been challenged by the Department. It is also a fact that Government of India was 100% shareholder of the assessee-company and the deposit of advances with the banks was directly and inextricably linked with the business of the assessee,so the interest earned by it had to be treated as income earned from business and cannot not be treated as income from other sources - interest earned by the assessee was obviously attributable and incidental to the business carried on by it that it would not be correct to say that this interest was totally de hors the business carried on by it.
Interest can be assessed under the head Income from other sources only if it cannot be brought within one or the other of the specific heads of charge.In the case before us the interest income is clearly and justifiably assessed as business income - case under consideration is not a case of depositing unutilized and surplus money by the assessee to earn interest and therefore the interest earned by the assessee cannot be assessed as Income from other sources.
Thus we hold that the order of the FAA does not suffer from any legal or factual infirmity and that it does not require any interference from our side - Decided against revenue.
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2018 (6) TMI 1724 - ITAT DELHI
TDS u/s 195 - disallowance u/s. 40(a)(i) for non-deduction of TDS - payment made by the assessee to a non- resident as agency commission - CIT(A) deleted the addition - HELD THAT:- CIT(A) has rightly deleted the addition in dispute by following the various case laws as well as following the Ld. CIT(A)-XII, New Delhi Order passed in assessment year 2009-10 in assessee’s own case wherein relying WELSPUN CORPORATION LIMITED AND VICE-VERSA [2017 (1) TMI 1084 - ITAT AHMEDABAD] held that on payments made by assessee for services rendered by non-resident agents could not be held to be fees for payment for technical services, these payments were in nature of commission earned from services rendered outside India which had no tax implications in India.
Decision of Hon’ble Madras High Court in the case of CIT vs. Kikani Exports Pvt. Ltd. [2014 (9) TMI 96 - MADRAS HIGH COURT]wherein it was held that the services rendered by the non-resident agent could at best be called as a service for completion of the export commitment and would not fall within the definition of “fees for technical services” and, therefore, section 9 was not applicable and, consequently, section 195 did not come into play. Therefore, the disallowance made by the AO towards export commission paid by the assessee to the non-resident was rightly deleted. - Decided against revenue.
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2018 (6) TMI 1723 - ITAT MUMBAI
Disallowance of excess claim of depreciation - HELD THAT:- As decided in own case [2014 (5) TMI 926 - ITAT MUMBAI] direct the AO to allow the depreciation on the machinery that had been acquired from Bilag, and also include incidental expenses incurred on acquisition of assets.
Depreciation on goodwill - HELD THAT:- As decided in own case [2014 (5) TMI 926 - ITAT MUMBAI] relying on Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - intangibles like goodwill are eligible for depreciation - non compete fee is in the nature of the payment and is now covered u/s 28(va) of the Act, it would be revenue in nature - AO is directed to allow the depreciation on goodwill as per law and consider the payment of non-compete fee, in terms of section 28(va) – Decided in favour of Assessee.
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2018 (6) TMI 1722 - NATIONAL COMPANY LAW TRIBUNAL, MUMBAI
Service of petition - petition not served - HELD THAT:- The Petitioner is directed to complete the requisite Form because the name of the IRP is not proposed. There is no evidence of Section 8 notice. Also directed to serve the copy of Petition to the other side on or before next date of hearing.
The matter is adjourned to 08.08.2018.
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2018 (6) TMI 1721 - ITAT CHENNAI
Interest receipt - Income from other sources or Capital gain - whether assessee is not entitled to set off of business expenses against the income shown under the head ‘income from other sources’ as the business of the assessee has not commenced ? - HELD THAT:- The assessee has parked the loan amount in short term deposits with Banks and other financial institution and earned interest income, which has no direct nexus and the interest income is directly attributable to the deposits made out of funds generated by way of term loans. We are of the considered opinion that the interest earned by the assessee has to be treated as income on commercial principles.
Having regard to the judgment in the case of Tuticorin Alkali Chemicals and Fertilisers Ltd v CIT [1997 (7) TMI 4 - SUPREME COURT] AND in the case of CIT v. Autokast Ltd. [2000 (11) TMI 7 - SC ORDER] the Hon’ble Supreme Court has held that the interest income is assessable to tax in the hands of the assessee.
Hon’ble Supreme Court in the above decisions that the income tax is attracted at the point when the income is earned from the fixed deposits/short term deposits and taxability of income is not dependent upon its destination or the manner of its utilization and respectfully following the above decisions, we confirm the order of the ld. CIT(A) in holding that the Assessing Officer rightly brought the interest income under the head ‘income from other sources’ and dismiss the ground raised by the assessee.
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2018 (6) TMI 1720 - ITAT MUMBAI
Disallowance of expenses relating to exempt income made u/s 14A - disallowance made for computing book profit u/s 115JB - HELD THAT:- Special Bench in the case of Vireet Investment P. Ltd., [2017 (6) TMI 1124 - ITAT DELHI] the direction of the CIT(A) to adopt the disallowance made under Section 14A for the purpose of computing book profit u/s 115JB is liable to be set aside. The assessee also took us to the working made by it for ascertaining the expenses relating to exempt income for the purpose of computation of book profit u/s 115JB.
We noticed that the assessee has allocated expenses in the ratio of taxable income and exempt income and the said method was determined by the Department in A.Y. 2000-01. It is stated that the same method is being followed for A.Y. 2000-01 onwards by the assessee.
Since a consistent method is being followed by the assessee for more than 10 years and since the allocation of expenses is on the basis of exempt income and taxable income, we are of the view that the computation made by the assessee for determining expenses relating to exempt income for the requirement of provisions of Section 115JB does not require disturbance. Accordingly we set aside the order of the learned CIT(A) on this issue and direct the AO to accept the computation made by the assessee for the purpose of sec. 115JB - Appeal filed by the assessee is treated as allowed for statistical purposes.
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2018 (6) TMI 1719 - NATIONAL COMPANY LAW TRIBUNAL, MUMBAI
Stay on invocation of Performance Bank Guarantee - HELD THAT:- The Corporate Debtor had completed the Work Order as assigned by 15.09.2016 to the satisfaction of GAIL India Limited who, in turn, had issued Completion Certificate and the "Defect Liability Period" has also MA 521 OF 2018 Rajeev Mannadiar, Resolution Professional Kohinoor Crane Services Vs. Petron Engineering Construction Limited elapsed on 15.09.2017, GAIL India Limited should not be allowed to demand State Bank of India for revocation of the Bank Guarantee.
Further, the admitted factual position is that "Moratorium" has already been commenced vide an Order (supra), therefore, alienation of any asset or recovery from any property of the Corporate Debtor is prohibited, hence action of revocation of the Bank Guarantee is against the provisions of the Insolvency Code - The State Bank is hereby estopped from revocation of Bank Guarantee or discharge in favour of any party including GAIL so that the rights of the stakeholders of the Corporate Debtor should not be prejudiced.
Application allowed.
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2018 (6) TMI 1718 - TELANGANA HIGH COURT
Validity of action of the respondents in not fixing the rate of admission for the petitioner-theater as per their application dated 20.06.2017 - HELD THAT:- The issue decided in the case of RAMAKRISHNA GLITTERATI VERSUS STATE OF TELANGANA [2016 (10) TMI 1314 - TELANGANA HIGH COURT] where it was held that all services used in relation to the business of manufacturing the final product are covered under the definition of `input service' and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal.
Petition disposed off.
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2018 (6) TMI 1717 - ITAT MUMBAI
TP Adjustment - application of most appropriate transfer pricing method and the arm‟s length price - international transactions - HELD THAT:- Functions performed, assets employed and risk undertaken by the assessee and its associated enterprises was found to be reasonable. Accordingly, we allow assessee to withdraw these grounds for the A.Y.2008-09 and 2009-10 in so far as these grounds are covered by the APA, the principle laid down in the APA for benchmarking analysis in respect of the international transactions being guidance value since there is no change in the said assessment years in the nature of international transactions.
We also direct the Department to pass an order giving effect u/s.92 CD (5) of the Act in the A.Y. 2010-11 & 2011-12. Whereas for A.Y.2008-09 and A.Y.2009-10, we observe that the principles laid down in the APA for benchmarking/comparability analysis in respect of the international transactions shall have a guidance value since there is no change in the said Assessment Years in the nature of the international transactions, functional, Asset and Risk (“FAR‟) profile of the assessee and the AEs. We direct accordingly.
Transfer pricing adjustment in respect of transactions pertaining to taxability of reimbursement of expenses and taxability of reimbursement for purchase of fixed assets - taxability of reimbursement for purchase of fixed assets - HELD THAT:- As decided in own case [2018 (6) TMI 359 - ITAT MUMBAI] Reimbursements paid being backed by third party invoices without any element of markup, cannot be benchmarked at NIL as done by TPO. Accordingly, we delete the addition so made by the AO.
Short credit of taxes deducted at source - HELD THAT:- AO is directed to give effect for short TDS credit granted to the assessee, after due verification. We direct accordingly.
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2018 (6) TMI 1716 - ITAT AMRITSAR
Validity of reopening of assessment u/s 147 - eligibility of reasons to believe - HELD THAT:- In the present case, we find that the first sentence of the so-called reasons recorded by AO speaks that "there is information in the possession of this office".
The first part is only information and the second paragraph of the so-called reasons is mere reason and third part is directions of the superior authority. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that on the basis of the material which he had before him, income had escaped assessment.
Assessing Officer failed to make any exercise for reopening of the case independently and with corroborative material. Even the Assessing Officer has not made any exercise to gather any material evidence on record. The initiation of reassessment itself is based upon no evidence and/or un-corroborative material, therefore in any sense cannot survive, because initiation of the proceeding u/s 147 itself is a vague and based upon no substantive reasoning and/or material at all, hence in our considered opinion, the Ld. CIT(A) was absolutely unjustified in upholding the reopening of the assessment u/s 147 of the Act, without appreciating the facts of the case, explanation submitted and evidences places on record judiciously. - Decided in favour of assessee.
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2018 (6) TMI 1715 - BOMBAY HIGH COURT
Rectification Application u/s 254(2) - provisions of Section 11(1) Explanation2 of the Act would warrant its appeal being allowed was not considered and its appeal was dismissed - HELD THAT:- We find that the issue is no longer res judicata as it stands concluded by the decision of this Court in Safari Mercantile [2016 (6) TMI 1313 - BOMBAY HIGH COURT] and Gyan Constructions [2015 (1) TMI 1427 - BOMBAY HIGH COURT] that while dealing with the application for rectification, the Tribunal where it finds there is an error apparent on record, then it should recall the original order and place the Appeal for consideration of the issue on merits before the Regular Court. It is not appropriate to dispose of the controversy on merits of the submission while disposing of the Rectification Application.
The impugned order dated 16th January, 2018 is quashed and set aside. The Rectification Application filed by the petitioner is restored to the Tribunal for fresh disposal.
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2018 (6) TMI 1714 - KARNATAKA HIGH COURT
Penalty under Section 271(1)(C) - Deduction u/s 10B computation - HELD THAT:- Since the Tribunal has reiterated the findings of facts that both the additions made to the income of the Assessee having been set aside following the decision of the High Court in the case of Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] as far as issue of Section 10B is concerned and on the issue of excess stock being tax neutral, such cogent and reasonable findings of facts returned by the learned Tribunal and consequentially setting aside the penalty under Section 271[1][c] of the Act, does not give rise to any substantial question of law requiring the consideration by this Court under Section 260-A of the Act.
Appeal filed by the Revenue is thus found to be without merit and liable to be dismissed and the same is accordingly dismissed.
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2018 (6) TMI 1713 - ITAT CHENNAI
Reopening of assessment u/s 147 - unexplained investments addition u/s 69 - CIT(A) held that the Assessing Officer validly completed the assessment under section 143(3) r.w.s. 147 - Assessee submitted during the course of hearing of this appeal, the addition made in the reassessment may be deleted and justice be rendered - HELD THAT:- We direct the CIT(A) to adjudicate the issue on merits with regard to the addition made under section 69 of the Act in accordance with law by allowing an opportunity of being heard to the assessee. Appeal filed by the assessee is allowed for statistical purposes.
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2018 (6) TMI 1712 - KARNATAKA HIGH COURT
Maintainability of petition - availability of alternative remedy of appeal - section 39(1) of the Karnataka Value Added tax Act, 2003 - HELD THAT:- The writ petition is not entertained and it is dismissed as not maintainable, reserving liberty to the petitioner herein to avail alternative appellate remedy, if so advised.
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2018 (6) TMI 1711 - ITAT MUMBAI
Disallowance of club membership of fee - AO disallowed partial amount of total club membership expenses on the ground that the assessee failed to furnish evidences - HELD THAT:- It is the contention of the assessee that it has filed details for balance amount of ₹ 2,30,623/- before the Ld. CIT(A) vide its submission dated 22.01.13. Such details have been furnished before us in the form of paper book. Therefore, we are of the considered view that the issue needs to be reexamined by the AO, in the light of evidences filed by the assessee. Hence, we set aside the issue to the file of AO and direct him to consider the issue afresh after affording a reasonable opportunity of hearing to the assessee.
Disallowance of expenses incurred in relation to exempt income under section 14A r.w.r. 8D - HELD THAT:- Once the assessee has proved the availability of own funds in excess of value of investments, then the question of disallowance of interest expenses under rule 8D(2)(ii) does not arise. In this case, the assessee has filed necessary details to prove availability of own funds. Hence, we are of the considered view that the AO was incorrect in disallowing interest expenses under rule 8D(2)(ii) of Income Tax Rules, 1962 and accordingly direct him to delete disallowance of interest expenses worked out under rule 8D(2)(ii).
Disallowance of direct expenses under rule 8D(2)(i) - suo moto disallowance by assessee - AO has not recorded his satisfaction before disallowing further expenses - HELD THAT:- We find no merits in the arguments of the assessee for the reason that the AO has arrived at a satisfaction by rejecting computation worked out by the assessee towards suo-moto disallowances which means that the AO has considered the nature of expenses incurred by the assessee and also disallowances quantified in the light of exempt income earned for the year and hence we are of the considered view that the AO was right in invoking rule 8D(2)(iii) to quantify disallowance in respect of expenses incurred in relation to exempt income. Hence, we are of the considered view that there is no error in the computation worked out by the AO under rule 8D(2)(iii).
Disallowance of gift expenses - assessee has failed to file any evidences to prove necessity of gifts given to employees, associates and government officials in relation to its business activity - HELD THAT:- Basically the expenses in the nature of gifts and rewards are in the nature of personal expenses and hence cannot be allowed as deductable under section 37(1). Mere payment of fringe benefit tax on such expenses would not discharge the assessee’s obligation to prove such expenses to say that these are incurred wholly and exclusively for the purpose of business. The Ld. CIT(A) after considering the relevant submissions has rightly confirmed additions made by the AO. We do not find any error or infirmity in the order of the Ld. CIT(A). Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground raised by the assessee.
Disallowance of compensation payment u/s 40(a)(ia) - non deduction of tds - HELD THAT:- Although the assessee claims that payment made to Mr. SS Mohla is in the nature of compensation for which the provisions of TDS has no application, on perusal of facts available on record, we find that such payment is in the nature of commission for securing orders, therefore, we are of the considered view that mere change in nomenclature of the expenses does not absolve the assessee from the responsibility of complying with applicable TDS provisions. In this case, the assessee itself has admitted that it has paid commission for securing orders. Once the payment is in the nature of commission obviously the assessee ought to have deducted TDS under section 194H - Since the assessee has failed to deduce TDS, the AO has rightly disallowed such expenditure under section 40(a)(ia) - CIT(A) after considering the relevant submissions has rightly confirmed additions made by the AO. In so far as case laws relied upon by the assessee, we find that all the case laws are rendered on different set of facts and has no application to the facts of the assessee’s case. Hence, we are inclined to uphold the finding of the Ld. CIT(A) and reject the ground raised by the assessee.
Disallowance of write off of doubtful deposits - assessee had claimed deduction of write off of deposits which were long outstanding and had become irrecoverable - HELD THAT:- Deposits written off by the assessee are balance sheet items and not part of trading receipts. If the assessee has given deposits out of its tax suffered income, then obviously such deposits are coming within the ambit of bad debts written off under section 36(1)(vii) of the Act. If the assessee has given such deposit out of its borrowings then obviously it does not fulfill the conditions prescribed under section 36(2) of the Act. Hence, the Ld. CIT(A) has rightly set aside the issue to the file of AO to verify whether such advances are trade advances or not. Therefore, we are of the considered view that the Ld. CIT(A) was right in setting aside the issue to the file of the AO to verify the nature of advances. There is no grievance is caused to the assessee. The assessee can file necessary evidences before the AO to prove whether such advances are in the nature of trade advances or not. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground raised by the assessee.
Disallowance of irrecoverable advances - debit balance outstanding in DEPB provision account and amount receivable for duty drawback for recovery from Vietnam exports as the same were irrecoverable - AO disallowed written off of irrecoverable advances on the ground that such advances were not bad debts of customers and hence could not be allowed under section 36(1)(vii) - HELD THAT:- When export incentive is offered to tax in the earlier period by showing the amount as receivable, then write off of such advance as irrecoverable is in the nature of bad debt which can be claimed as deduction under section 36(1)(vii) - there is a contradiction in the claim made by the assessee in its books of accounts and the submissions made before the authorities. The assessee has claimed an amount of ₹ 51,45,651/- as irrecoverable advances, however, as per the submissions the amount written off was at ₹ 39,39,160/-. Therefore, we are of the view that the issue needs to be reexamined by the AO in the light of submissions of the assessee. Hence, we set aside the issue to the file of AO and direct him to examine the claim with necessary evidences before allowing the claim. If the assessee is able to file evidences to the extent of ₹ 51,45,651/-, then the AO is directed to allow write off irrecoverable advances.
Adhoc disallowance of 50% of payment made to subsidiary company for supply of support services and supply of manpower - AO has disallowed amount paid to associate concern on the ground that the payments were excessive and unreasonable - HELD THAT:- We find force in the arguments of the assessee for the reason that the assessee has furnished necessary details of payment made to its subsidiary company for rendering services. The AO has made adhoc disallowance of 50% without any reference to comparable cases to come to the conclusion that payments made by the assessee are excessive and unreasonable. Hence, we direct the AO to delete additions made towards disallowance of payments made under section 40(2)(b) .
Disallowance of unrealized foreign exchange loss - AO disallowed such loss on the ground that it pertains to capital assets which ought to have been added to the concerned asset - HELD THAT:- CIT(A) has already set aside the issue to the AO to consider it afresh in the light of decision in the case of CIT V/s. Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT]. Therefore, we are of the considered view that there is no grievance caused to the assessee. The assessee can file necessary details before the AO to prove the loss whether it pertains to revenue or capital in nature. We further observe that the assessee itself has admitted while giving effect to the order of the Ld. CIT(A) the AO has allowed unrealized foreign exchange loss. Therefore, we are of the considered view that there is no merits in the ground taken by the assessee and accordingly we reject ground taken by the assessee.
Non adjudication of additional ground by Ld. CIT(A) - ground filed by the assessee relating to the allowance of claim which was wrongly disallowed by the assessee while filing the return of income u/s 40(a) - HELD THAT:- we find that the assessee is within its right to raise the additional ground qua the deduction not claimed before the AO during the year. The assessee has raised the issue before the first appellate authority who has not adjudicated the same. In our opinion, the issue needs to be restored to the file of the Ld. CIT(A) so that the same could be decided on merits. The case of the assessee is squarely covered by the ratio laid down in the case of CIT vs. “CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd.” [2012 (7) TMI 158 - BOMBAY HIGH COURT]as held that the assessee can raise before the appellate authorities any additional ground qua the deduction which was not claimed in the return of income.
Disallowance of product trial expenses - HELD THAT:- Assessee is eligible for deduction towards product trial expenses under section 37
In so far as assessee’s claim of weighted deductions under section 35, we find that the assessee has failed to file any kind of evidences to prove that such R&D expenditure has been approved by the competent authority to be eligible for weighted deduction, therefore we are of the considered view that there is no merit in the arguments of the assessee that the assessee is eligible for weighted deduction under section 35 of the Income Tax Act, 1961. The Ld. CIT(A) after considering the relevant submissions has rightly allowed the claim. We do not find any infirmity in the order of the Ld. CIT(A). - Decided against revenue.
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