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2015 (4) TMI 101 - ITAT AHMEDABAD

2015 (4) TMI 101 - ITAT AHMEDABAD - TMI - Disallowance u/s. 14A - CIT(A) deleted the disallowance - Held that:- CIT(A) while deleting the addition has noted that assessee has received only two half yearly interest warrant bonds during the year under appeal and which were collected in routine through bank account. He has further noted that the investments were made in the year 1995 and there have been no transactions in bonds during the year under review. We further find that on identical facts, .....

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was incurred for earning exempt income - Decided in favour of assessee.

Computation of deduction u/s. 80HHC - CIT(A) directing the A.O not to exclude 'other income' being bad debts recovered, Insurance claim, Sundry Creditors, Forfeiture of advances and Exchange rate fluctuation from the business profits, for the computation of deduction u/s 80HHC - Held that:- As decided in assessee's own case in A.Y. 2004-05 [2010 (10) TMI 974 - ITAT AHMEDABAD] Commissioner of Income Ta .....

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that those amounts have been assessed as business income by the AO. Before us, Revenue has not brought any material to controvert the findings of Ld. CIT(A). - Decided in favour of assessee.

Addition u/s. 40(a)(i) - TDS short deducted on Royalty payment - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has given a finding that assessee has correctly deducted the TDS as per the rates provided in DTAA entered between the Government of India and Government of .....

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National Ltd [1986 (3) TMI 42 - GUJARAT High Court] and Berger Paints India Ltd [2004 (2) TMI 4 - SUPREME Court] has deleted the addition. Before us, Revenue has not brought any contrary binding material in its support. We further find that the assessee’s submissions of having followed the same method of accounting and claiming deduction of excise duty in earlier and subsequent years also have not been controverted by Revenue. - Decided in favour of assessee.

Disallowance on account o .....

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hus this ground of Revenue is dismissed. - Decided in favour of assessee.

Unpaid sales commission - CIT(A) deleted the addition - Held that:- CIT(A) after considering the submissions of the assessee has given a finding that the allowability towards sales commissions arose during the year and has been paid during the year and therefore the same was rightly claimed as expenditure. Before us, Revenue has not brought any contrary material on record in its support. We therefore find no rea .....

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nue has not brought any contrary binding material in its support nor could controvert the finding of Ld. CIT(A). We therefore find no reason to interfere with the order of Ld. CIT(A) and thus this ground of revenue is dismissed. - Decided in favour of assessee. - ITA No.1613/Ahd/2008 - Dated:- 26-3-2015 - Mukul Kumar Shrawat, JM And Anil Chaturvedi, AM,JJ. For the Appellant : Shri M K Patel, Sr. DR For the Respondent : Shri Nimesh Yadav, AR ORDER Per : Anil Chaturvedi, Accountant Member:- This i .....

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termined at ₹ 5,41,22,967/-. Thereafter the case was re-opened by issuing notice u/s. 148 dated 30-03-2003 and subsquently the assessment was framed u/s. 143(3) r.w.s. section 147 vide order dated 29-12-2006 and the total income was determined at ₹ 6,74,61,580/-. Aggrieved by the order of AO, Assessee carried the matter before CIT(A) who vide order dated 29-02-2008 granted partial relief to the assessee. Aggrieved by the aforesaid order of CIT(A), Revenue is now in appeal before us a .....

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8377; 1,09,181/-, from the business profits, for the computation of deduction u/s 80HHC. 3. The Ld. CIT(A) has erred in law and on the facts of the case in deleting the disallowance of royalty of ₹ 37,82,693/- u/s 40(a)(i) . 4. The Ld. CIT(A) has erred in law and on the facts of the case in deleting the disallowance of prepaid excise duty of ₹ 62,59,521/-. 5. The Ld. CIT(A) has erred in law and on the facts of the case in deleting the disallowance of ₹ 13,48,032/-, being provis .....

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. 14A. 4. AO noticed that assessee had earned dividend income of ₹ 25,898/- and tax free interest of ₹ 10,50,000/-. He also noticed that assessee had shown investment of ₹ 96,15,000/- in tax free bonds of Konkan Railway Corporation Ltd. AO has noted that assessee has not furnished details of exact source of investment in shares and mutual funds during the year under consideration and had also not stated as to whether it has maintained separate accounts of interest bearing funds .....

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t the disallowance of administrative expenses of ₹ 1,44,038/- u/s. 14A. Aggrieved by the order of AO, Assessee carried the matter before CIT(A) who deleted the addition by holding as under:- "4.1 Before me, the learned counsel for the appellant contended that the AO failed to appreciate that the appellant had bought 10,000 10.50% tax-free bonds of ₹ 1,000 each of Konkan Railway Corporation limited, a Government of India undertaking, in the year 1995 and maturity term of the said .....

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erest income of ₹ 10.50 lacs and no disallowance on account of prorata administration expenses is, therefore, warranted or justified even on facts of the case. It was submitted that the administration expenses, sought to be co-related, do not have any nexus with or have been incurred in relation to tax-free interest income so as to be hit by section 14A. Without prejudice to above, it was submitted that the question of disallowance under section 14A has been considered by the predecessor A .....

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at similar disallowance made in A.Y. 2004-05 was allowed by the CIT(A)-VIII. He also relied on the decision of Hon'ble ITAT Delhi Bench in the case of ACIT v, Eicher Limited 101 TTJ 369 wherein it was decided that it was the duty of the AO to pin point such expenditure on the basis of material on record with an acceptable degree of accuracy and not on a notional basis. In this case, it is quite apparent that no specific expenditure is attributable for depositing just 2 interest warrants and .....

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ntical facts in assessee s own case for A.Y. 2004-05, the issue has been decided by the Hon ble Tribunal in its favour. He placed on record the copy of the aforesaid decision in ITA No. 4231/Ahd/2007 order dated 29-10-2010. He also pointed to the relevant portion of the order. He therefore submitted the since the facts of the case in the year under appeal are identical to that of earlier years, the issue has rightly been decided in favour of the assessee by Ld. CIT(A). He thus supported the orde .....

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review. We further find that on identical facts, the Co-ordinate Bench of Tribunal while deciding the assessee s appeal for A.Y. 2005-06 and after relying on the decision in the case of CIT vs. Hero Cycle Ltd (2010) 323 ITR 518 decided the issue in favour of the assessee by holding as under:- "11 In the instant case, we find that it is not in dispute that in respect of exempt income warrants the assessee had only received two interest warrants and four dividend warrants. No material was bro .....

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In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. Ground No. 2 is with respect to computation of deduction u/s. 80HHC. 8. During the course of assessment proceedings, AO noticed that assessee had claimed deduction of ₹ 59,86,965/- u/s. 80HHC of the Act. He also noticed that assessee had shown other income comprising of training fees (Rs. 1,80,000/-), insurance claim (Rs. 5,73,325/-), sundry creditors (Rs. .....

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from export business. The receipts which formed part of other income were not derived from export business and therefore it has to be reduced from the profit of the business for the purpose of calculation of deduction u/s. 80HHC. With respect to interest income, AO after relying on the decisions cited in his order, was of the view that the interest income was "income from other sources" and therefore it has also to be excluded from the profit of the business. He accordingly re-worked t .....

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he A.O. has rightly excluded the same from business profile. As regards training fees collected of ₹ 1 ,08,000/-, the same is not income derived from export business as decided against the appellant by CIT(A)-VIII in A.Y. 2001-02 and 2000-01. So the finding of the Assessing Officer is confirmed on the issue of reduction of training fees collected. The A.O is directed to verify and ensure that the disallowance is not made again as similar addition was made in the original assessment and sus .....

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." 10. Aggrieved by the order of Ld. CIT(A), Revenue is now in appeal before us. 11. Before us, Ld. DR supported the order of AO. He further pointed that the issue of forfeiture of advance and exchange fluctuation was not before the Co-ordinate Bench of Tribunal in A.Y. 2004-05. Ld AR on the other hand, reiterated the submission made before Ld. CIT(A) and further submitted that identical issue arose in the case of assessee for A.Y. 2004- 05 and the matter has been decided by the Tribunal in .....

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materials available on record. In the instant case, the Learned Commissioner of Income Tax (Appeals) directed to delete 90% of bad debts recovered, discount earned from suppliers of goods, insurance claim received, sundry credit balances in the suppliers account written back, Miscellaneous charges recovered from the customers, scrap sold and Kasar income from "profits and gains of business or profession" to compute eligible profits of business for the purpose of section 80HHC of the A .....

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or arriving at eligible profits of business. No specific error in the order of the Learned Commissioner of Income Tax (Appeals) could be pointed out by the Learned Departmental Representative. We therefore, confirm the order of the Learned Commissioner of Income Tax (Appeals) and dismiss the ground of appeal of the Revenue." 13. We thus find that on identical facts for A.Y. 2004-05, the issue has been decided by the Co-ordinate Bench of Tribunal in Assessee s favour. Before us, Revenue has .....

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T(A). We therefore find no reason to interfere with the order of Ld. CIT(A) and thus this ground of Revenue is dismissed. Third ground is with respect to deleting the addition u/s. 40(a)(i) of the Act. 14. During the course of assessment proceedings, AO noticed that assessee had claimed royalty expenses of ₹ 62,92,000/- on the ground that the same was disallowed in earlier years on account of non-deduction of TDS. During the year assessee had stated to have deducted TDS of ₹ 7,52,792 .....

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25,09,306/- and the balance amount of royalty of ₹ 37,82,693/- was disallowed u/s. 40(a)(i) of the Act. Aggrieved by the order of AO, Assessee carried the matter before Ld. CIT(A) who decided the issue in favour of the assessee by holding as under:- "6.1 Before me, the learned counsel for the appellant contended that the royalty payment is arising out of the transactions "between residents of India and residents of USA and charge of royalty under consideration is thus governed by .....

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payer to make TDS from the payments made abroad at the rates in force. The section 2(37A) defines the rates in force. Clause (iii) to said section 2(37A) provides as under: "(iii) for the purposes of deduction of tax under section 195, the rate or rates of income tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income tax specified in an agreement entered into by the Central Government under section 90, whichever applicable by virtue of the provi .....

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A (Article 12) at 15% of the royalty payable is more beneficial to the assessee and hence the general rate in First Schedule to the Finance Act does not come into operation. The appellant has deducted TDS from the royalty payments in accordance with the rate prescribed under Article 12 of the DTAA. The prescribed declarations under section 195 have been filed with the AO/the TDS officer, the Reserve Bank of India and the authorised dealer. The appellant has thus claimed the deduction in respect .....

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TDS. Ld. AR on the other hand reiterated the submissions made before Ld. CIT(A) and further submitted that as per Article 12 of Indo-USA Treaty the applicable rate of TDS on royalty is 15% and therefore the TDS has been correctly deducted by the assessee. He also pointed to copy of the Article 13 placed at page 168 of the paper book. He thus supported the order of Ld. CIT(A). 17. We have heard the rival submissions and perused the material available on record. We find that Ld. CIT(A) while dele .....

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e disallowance of pre-paid excise duty. 18. AO noticed that assessee had debited pre-paid excise duty of ₹ 62,59,521/- and the same was claimed as deduction u/s. 43B of the Act. AO was of he view that deduction u/s. 43B is available if the expense is incurred during the year and paid on or before the due date of filing of return. He was therefore of the view that assessee has not incurred excise duty liability during the year and accordingly disallowed the claim of assessee. Aggrieved by t .....

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no disallowance thereof is justified in any case in the reassessment proceedings. The Hon. Gujarat High Court in Lakhanpal National Limited 162 ITR 240 (Guj) has held as under:- "Section 43B of the income tax Act, 1961 opens with a nonobstante clause which means that irrespective of other provisions, section 43B will have overriding effect. The intention of the Legislature is to allow deduction in respect of any tax or duty in computing under section 28 the income of that previous year in .....

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lowable under section 43B of the Income lax Act, 1961, as deduction in respect of that year, irrespective of the amount of excise duty/customs duty included in the valuation of the assessee's closing stock at the end of the accounting year as relating thereto." 7. 2 I have considered the submissions of the A,R. carefully. As the excise duty has been paid during the year, the same is directed to be allowed u/s.43B of the IT. Act." 19. Aggrieved by the order of Ld. CIT(A), Revenue is .....

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le Gujarat High Court in the case of Lakhanpal National Ltd 162 ITR 240 and Berger Paints India Ltd 266 ITR 99 (SC) has deleted the addition. Before us, Revenue has not brought any contrary binding material in its support. We further find that the assessee s submissions of having followed the same method of accounting and claiming deduction of excise duty in earlier and subsequent years also have not been controverted by Revenue. In view of the aforesaid facts, we find no reason to interfere wit .....

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s gratuity payment since assessee had not payment of ₹ 13,48,032/- to approved gratuity funds, the same was not allowable u/s. 40A(7) of the Act. He accordingly disallowed the same. Aggrieved by the order of AO, Asssessee carried the matter before Ld. CIT(A) who after considering the submissions of the assessee deleted the addition made by AO by holding as under:- "8.1 Before me, the learned counsel for the appellant contended that the gratuity provision [not funded under section 40A( .....

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section 40A(7) has been disallowed during the previous year. The appellant has paid ₹ 5,96,837 as LIC group gratuity policy premium and so claimed and accepted in the original assessment. The appellant also invites attention to note no. 2 in computation of total income for the previous year and gratuity provision made of ₹ 7,62,641, in respect of three employees, who retired on 31st March, 2001, have been claimed under section 40A(7)(b), since the said gratuity of ₹ 7,62,641 h .....

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nd 2001-02 and not claimed, there has been no error on facts of the case on part of the predecessor AO. Thus it was submitted that non-deductible provision for gratuity has been rightly disallowed by the appellant and accepted in the original assessment and no further adjustment is warranted even on facts of the ease. This is the case of double disallowance. 8.2 I have considered the submissions of the A.R. carefully. As non-deductible provision for gratuity of ₹ 5,59,8787/- has been alrea .....

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unascertained liability and further no details of payments were submitted by the Assessee before AO. He further submitted that Ld. CIT(A) decided the issue without calling for any remand report from AO. He therefore supported the order of AO. Ld. AR on the other hand reiterated the submissions made before Ld. CIT(A) and further submitted that the provision for gratuity was also examined in proceedings u/s. 263 of the Act and thus there was no new evidence before Ld. CIT(A). He thus supported th .....

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o reason to interfere the order of Ld. CIT(A) and thus this ground of Revenue is dismissed. Next ground is with respect to deletion of unpaid sales commission. 26. During the course of assessment proceedings, AO noticed that assessee had provided for sales commission of ₹ 2,00,000/-. He also noticed that there was unpaid sales commission of ₹ 15,15,000/- as on 01-04-2001. AO noticed that in the absence of details of provision of ₹ 2,00,000/- the expenditure cannot be allowed an .....

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r any outstanding expenses. The appellant adds that the opening balance in sales commission provision is in respect of liabilities accrued during earlier years and the same has not been charged to Profit and Loss account of the previous year. The sales commission of ₹ 2 lacs accrued, due and was paid by cheque during the previous year." 27. Aggrieved by the order of Ld. CIT(A), Revenue is now in appeal before us. 28. Before us, Ld. DR submitted the no details of sales commission was p .....

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CIT(A) after considering the submissions of the assessee has given a finding that the allowability towards sales commissions arose during the year and has been paid during the year and therefore the same was rightly claimed as expenditure. Before us, Revenue has not brought any contrary material on record in its support. We therefore find no reason to interfere with the order of Ld. CIT(A). In the result, this ground of revenue is dismissed. Next ground is with respect to deletion of bad debts. .....

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Aggrieved by the order of AO, Asssessee carried the matter before Ld. CIT(A) who after considering the submissions of the assessee deleted the addition by holding as under:- "11.2 I have considered the facts of this case and also perused the assessment order. I find that the A.O. has made disallowance of bad debts at 25% of total bad debts claimed, there can not be a percentage disallowance in case of bad debt . Further the claim of bad debt had been discussed in the original assessment and .....

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