Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (7) TMI 882 - AT - Income TaxDisallowance of proportionate premium in respect of leasehold land amortized - HELD THAT:- Similar issue has been decided against the assessee by the Tribunal in the past years and in this context referred to the recent order of the Tribunal dated 03.09.2014 [2014 (9) TMI 1006 - ITAT PUNE] pertaining to assessment year 1997- 98. It was also an accepted position that the issue regarding assessee’s claim for deduction of proportionate premium of leasehold land amortized and charged to the Profit & Loss Account for the year under consideration is liable to be decided in terms of the judgement of the Hon’ble Supreme Court in the case of Govind Sugar Mills Ltd. vs. CIT, [1997 (7) TMI 16 - SC ORDER] against the assessee. Income recognition from contract activity - method of accounting - recognition income on reimbursement - HELD THAT:- We find the AS-7 which existed prior to letter dated 01st April, 2003 continues to remain the same; but for minor changes. There are minor changes in relation to the computational issues. However, there is no change so far as “cost based” percentage completion method in concerned. Therefore, the computation of “recognition income” is concerned, the order of the CIT(A) is fair and reasonable and the same does not call for any interference. Accordingly, relevant grounds stand allowed in favour of the assessee. Adjustments to the estimated cost is concerned, the CIT(A) already granted part relief to the assessee. With reference to the freight outward to be included in the estimated total cost, we find it is a case of reimbursement of the actual cost incurred by the assessee. The inclusion in the total estimated cost when the same is returned has no effect on the income aspect. Therefore, being the case of reimbursement, there is no profit element. Consequently, recognition income of such reimbursement is not appropriate. Therefore, the order of the CIT(A) on this issue requires to be reversed. Accordingly, assessee is entitled to get relief on this issue also. Thus, ground no.2 of the assessee is allowed and the ground no.1(a) and 1(b) of the Revenue is dismissed. Disallowance of ‘prior period expenses’ - HELD THAT:- This issue is perennially being adjudicated by the Tribunal [2019 (3) TMI 1608 - ITAT PUNE] and the same is decided in favour of the Revenue. Considering the commonness of the facts as well as the settled legal proposition, we are of the opinion that the issue should be decided in favour of the Revenue for the year under consideration also. Thus, ground No.3, raised in appeal by the assessee is dismissed. Addition of liquidated damages - allowable as business expenditure - HELD THAT:- Pune Bench of the Tribunal [2019 (3) TMI 1608 - ITAT PUNE] has decided this issue in favour of the assessee. Now, it is a settled law that such expenditure is allowable as business expenditure if it is incurred on the grounds of “commercial expediency”. Commercial expediency is a term of wide import and has been held to include such expenditure as a prudent businessman incurs for the purpose of business. The expenditure incurred though not under any legal obligation but still it is allowable as a business expenditure if incurred on the grounds of commercial expediency and the method of recognition is followed from year to year. Before us, no material has been placed by the Revenue that the expenditure is not a genuine expenditure or has been incurred to benefit any group concerns. Considering the totality of the facts we are of the view that the expenditure is allowable. Disallowance of “claim for depreciation @100% on Plant & Machinery” - HELD THAT:- Claim of depreciation with respect to impugned Plant & Machinery is allowable protonto. Considering the commonness of the facts as well as the settled legal proposition, we are of the opinion that the Assessing Officer needs to be directed to follow the said order of the Tribunal [2019 (3) TMI 1608 - ITAT PUNE] Short Term Incentive Plan (STIP) on account of provision for performance incentive payable to employees - HELD THAT:- Considering the totality of facts and circumstances of the case, the direction of Tribunal’s order in assessee’s own case [2019 (3) TMI 1608 - ITAT PUNE]and observation of the Ld. CIT(A) to the effect that the STIP scheme has been approved by the Company Board on 28.05.2003, we are of the considered view that the assessee is eligible for claiming deduction. Accordingly, we direct the Assessing Officer to allow the deduction as claimed by the assessee Deduction u/s.80HHC - HELD THAT:- CIT(Appeals), while dealing with this issue, has not considered the submissions of the assessee that loss of foreign representative offices should go to increase the “profits of the business” eligible for deduction u/s.80HHC instead of ignoring the same. On perusal of the records, it reveals that there needs certain clarification while exclusion of 90% of the claims and refunds, balances written off now recovered, premium of forward contracts, other receipts and Export Incentives under Explanation (baa). It is also clear that the Assessing Officer as well as the Ld. CIT(Appeals) did not clarify the matter corresponding with the decisions of the Hon'ble Supreme Court of India as mentioned above as Explanation (baa). We are of the view that this issue needs certain clarification in response to the Explanation (baa) as well as the decisions of M/S AVANI EXPORTS & ANR. [2015 (4) TMI 193 - SUPREME COURT] - remit this issue back to the file of Assessing Officer for fresh adjudication Addition made on account of lease rentals - HELD THAT:- When the assets were not leased out like in the assessment year 2002-03 [2019 (3) TMI 1608 - ITAT PUNE] the lease income cannot be taxed as directed by the Tribunal the issue in favour of the assessee. Ad-hoc disallowance on account of “public relation expenses, miscellaneous expenses, Vehicle expenses, Foreign Travel expenses and Telephone expenses” - HELD THAT:- No distinguishing feature in the facts of the case under consideration and that of earlier years has been pointed out by the revenue. Before us, the submission of Ld AR that in subsequent years CIT(A) has deleted the adhoc deletions made by AO has not been controverted by Revenue. In such circumstances and following the reasoning as given while deciding the Assessee’s appeal for AY 2002-03 and for similar reasons, hold that no disallowance of expenses on adhoc basis is called for in the present case. We therefore direct its deletion. Addition of provision for Medical Expenses - HELD THAT:- We find that CIT(A) while deciding the issue in assessee’s favour had relied upon the order of his predecessor for AY 2002-03. Before us, Ld AR submitted that in AY 2002-03 CIT(A) on identical facts had decided the issue in assessee’s favour and the issue was not agitated by the Revenue. The aforesaid contention of the Ld AR has not been controverted by the Revenue. We further find that identical issue in AY 2002-03 was decided in Assessee’s favour. Deduction u/s.80HHC can be reduced by the amount of deduction allowed u/s.80IB - HELD THAT:- Assessing Officer has primarily reduced the entire amount of profits allowed as deduction u/s.80-IA from the profits eligible for deduction u/s.80HHC and computed deduction u/s.80HHC on such reduced profits and this issue is now settled by the decision ASSOCIATED CAPSULES P. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [2011 (1) TMI 787 - BOMBAY HIGH COURT] wherein it has been held that deductions u/s.80-IA and 80HHC are to be computed in the manner prescribed in those sections; only it should be ensured that in relation to the profits derived by the 80IA undertaking the two deduction taken together should not exceed the profit of the undertaking. In view of the above, we are of the view that the order of the Ld. CIT(A) is fair and reasonable and it does not call for any interference. Accordingly, ground No.9 raised in appeal by the Revenue is dismissed. Disallowance u/s.14A in respect of interest in the past - HELD THAT:- Only interest incurred was by way of post shipment credit which is always levied on credit utilized for specific purpose for which it is granted no proportion thereof can be disallowed under section 14A as attributable to exempt income. In the present year Rule 8D is not applicable. Therefore, expenses related to earning of exempt income are required to be estimated. CIT(A) while restricting the disallowance to 2.5% of the exempt income, has placed reliance on the earlier appellate order. It is a well settled law that the rule of consistency should be followed. Considering the above facts and circumstances, we are of the considered view that the order of the Ld. CIT(A) is well reasoned and it does not call for any interference. Hence, ground No.10 raised in appeal by the Revenue is dismissed. Addition on account of commission paid on sales when the same were not justifiable and also when no proof of services rendered were furnished - HELD THAT:- during assessment proceedings, as required by the Assessing Officer, parties failed to submit proof of rendering of services while they are in constant touch with the respective parties in subsequent years. Despite sufficient and reasonable opportunities, the said five parties have not been in a position to furnish requisite documentary evidences to demonstrate that the services were actually rendered by them to the assessee. It is also apparent from the order of the Ld. CIT(A) during First Appellate proceedings that the parties were not able to provide any proof of rendering of services. Therefore, it is evident from the assessment order as well as appellate order that the said five parties have not rendered any services to the assessee. Regarding rendering of services by the said five parties, the order of the CIT(A) is very silent and does not deal with the issue in proper perspective. - Decided in favour of revenue.
|