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2019 (4) TMI 1723 - HC - Income TaxDisallowance of expenses on consumption and replacement of stores and spares - capital expenditure OR revenue expenditure - HELD THAT:- CIT (Appeals) on the above facts found that the expenditure claimed as revenue expenditure is in respect of components of the machinery which cannot be treated as the independent machinery in itself as they are not capable of functioning independently. It was further held that the chemical and fertilizer plant was very large plant within which again there are large machines and within the machine there are components requiring replacement due to wear and tear, that was different plants within the fertilizers and chemical plant. Reference was also made to past history of disallowance wherein the Tribunal had set aside the issue to the AO for the assessment years 1998-99 to 2002-03, who in turn accepted the explanation furnished by the appellant in de novo assessment proceedings and no additions were made. On perusal of the facts noted by the CIT (Appeals) as well as affirmed by the Tribunal, it is clear that question (a) raised by the revenue is a pure question of fact and in the absence of any perversity being pointed out in the concurrent findings of fact recorded by the Tribunal, does not give rise to any question of law. Loss on allotment of fertilizer bonds and addition on account of loss on actual sale of fertilizer bonds - capital or business loss - HELD THAT:- Tribunal, on appreciation of facts and considering the history of allotment of bonds by the Government of India in lieu of subsidy amount, held that the finding of the Assessing Officer that from the date of allotment when the market value of the bond is less then it is the notional loss, is not correct. It was also found that as a matter of fact that in assessment year 2008-09, the Assessing Officer has already allowed such loss as revenue loss. It emerges from records that on the date of allotment the bonds were received in lieu of subsidy which was the additional sale price receivable from GOI. The assessee had offered to tax the subsidy receivable as part of sale price. The realization of additional sales price by way of subsidy in the form of fertilizer bond does not make bonds an investment because the bonds were never acquired by the assessee as investment or capital but as debt and also shown as current assets. Therefore, the loss suffered on allotment of bonds and actual sale of the bonds cannot be considered as capital loss but has to be allowed as business loss under section 28 or section 37 of the Act. With regard to the loss suffered on allotment of bonds and actual loss on sale of bonds the contention of the Assessing Officer was that after allotment the assessee company continued to hold bonds and, therefore, it takes characteristic of investment. However, holding period does not decide nature of bonds as investment. In view of the background of facts of getting bonds it clearly indicates that the bonds were not acquired as investments. CIT (Appeals) as well as the Tribunal held that the bonds were received in lieu of subsidy which was additional sale price received from the Government of India and the assessee company had offered such amount to tax accordingly as part of the sale price and, therefore, the realisation to the additional sale price by way of subsidy in the form of fertilizer bonds does not make bond an investment, because such bonds were never acquired by the assessee as investment for capital but the same were received as debt and also shown as current assets. Accordingly, the loss on actual sale of the bonds cannot be considered as capital loss but the same was required to be allowed as business loss. TDS u/s 194H - disallowance u/s. 40(a)(ia) in respect of commission payment - HELD THAT:- Explanation (1) to section 194H defines “Commission or Brokerage” which includes any payment received or receivable, directly or indirectly by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying and selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities. On the facts of the present case, as per the tripartite agreement entered into between the assessee and the dealer, there is no service provided by the dealer to the assessee in the course of buying or selling goods, inasmuch as, the assessee directly sells goods to the dealer and the dealer makes the payment after collecting it from the consumers and, therefore, it is a transaction on principal to principal basis and, therefore, the payment made by the dealer is not liable for any deduction of tax by the assessee company. Therefore, in the facts of the case, the provisions of section 40(a)(ia) cannot be applied as the dealer cannot be said to be a commission agent of the assessee company. It is not possible to state that the Tribunal has committed any legal error so as to warrant interference
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