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ACIT Circle-5 (1) New Delhi Versus Modipon Ltd. And Vice-Versa

2015 (12) TMI 460 - ITAT DELHI

Disallowance u/s 14A - Held that:- It is uncontroverted fact that assessee did not have any exempt income during the year. Hon Delhi High court in case of Cheminvest Limited V CIT [2015 (9) TMI 238 - DELHI HIGH COURT] has held that where there is no exempt income there cannot be any disallowance u/s 14A of the Income Tax Act. Therefore respectfully following the decision of Honourable Delhi high court we reverse the order of CIT (A) confirming disallowance - Decided in favour of assessee.
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e act except in case of CIT V KJS India Private Limited (2011 (9) TMI 667 - Delhi High Court ), however provision of section 35DDA was not brought to the notice of the court. Therefore these decisions render no help to the cause of the assessee. Thus we confirm the order of CIT (A) disallowing the claim of the assessee u/s 37(1) of the act on account of payment made under voluntary retirement scheme - Decided against assessee.

Non granting adjustments of TDS - Held that:- CIT (A) is n .....

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forward of loss - Held that:- We direct that assessee should be allowed the carry forward of losses as shown by the return of income in view of press release of CBDT dated 22.12.2008 in No 402/92/2006-MC-(53 of 2008) where CBDT has accepted that returns filed electronically on 30.9.2008 where the acknowledgement date is 1.10.2008, shall be treated as having filed on 30.9.2008. Hence AO is directed to allow the claim of carry forward of losses as same is permissible according to the law. We rever .....

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has already been paid on the interest of ₹ 29,25,000/- in earlier years. Further an amount of bonus of ₹ 65092/- and gratuity of ₹ 1104478/- were already disallowed u/s 43B of the act. Thus no infirmity in the order of CIT (A) in deleting the disallowance - Decided against revenue

Disallowance on account of loss on sales of stores and spares written off - Held that:- Identical claim of the assessee was allowed by AO himself for AY 2006-07 and Ld DR did not controvert .....

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HARISHI, ACCOUNTANT MEMBER For the Petitioner : Sh. Santosh Aggarwal, Adv For the Respondent : Sh. P.Dam Kanunjna, Sr. DR ORDER Per Prashant Maharishi, A M 1. These are cross appeal by parties directed against the order of the Ld. CIT (A)-VIII, New Delhi dated 08.07.2011 for the Assessment Year 2008-09. 2. In ITA No 4155/ Del /2011 assessee has raised the following grounds:- 1. That the order of the Commissioner of Income-tax (Appeals) - VIII, New Delhi, dated 08.07.2011, is wrong on facts and b .....

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s) erred in not directing the Assessing Officer to refund/adjust the tax deducted at source of ₹ 2,92,865/-; 4.1 He erred in holding that the requisite material in this regard was not there; 5. That the Commissioner (Appeals) erred in holding that the Appellant was not entitled to carry forward the business loss/or being set off of in the subsequent years; 5.1 That the Commissioner (Appeals) erred in holding that the return was not filed within the time allowed under Section 139(1) of the .....

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nds or adds to the aforesaid Grounds of Appeal before or at the time of hearing of the above Appeal. 3. The facts in brief of the case are that the assessee company is engaged in manufacturing of Nylon and Polyester Filament yarn at Modinagar, UP. The assessee company filed return of income on 01.10.2008 at Nil income claimed Nil carry forward of loss (as per clause 14 of part-B-TI of ITR 6). Subsequently the income declared in the original return was revised by way of a revised computation, fil .....

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re no disallowance can be made u/s 14A of The Income Tax Act. He relied on the decision of Honourable Delhi High court in case of Cheminvest Limited 378 ITR 33 . Ld DR relied on the orders of AO as well as CIT (A). 6. We have carefully considered the submission. It is uncontroverted fact that assessee did not have any exempt income during the year. Hon Delhi High court in case of Cheminvest Limited V CIT 378 ITR 33 has held that where there is no exempt income there cannot be any disallowance u/ .....

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ver AO disallowed that sum and allowed only 20 % of the total claim made by the assessee u/s 35DDA of The Income Tax Act, resultantly he disallowed ₹ 6,08,74,376/- out of the total claim of ₹ 7,60,92,970/-. Ld AO was of the view that as the claim of the assessee for allowance of VRS payments , same is covered by provisions of section 35DDA of The Income Tax Act and hence, not allowable u/s 37(1) of the Act. Assessee agitated the issue before CIT (A) who also confirmed the order of AO .....

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m 112 ( Bom) 9. Ld DR relied on the order of AO as well as CIT (A) and submitted that claim is not allowable u/s 37(1) of the Act as it is specifically allowable u/s 35DDA of the Income Tax Act. 10. We have carefully considered the rival submission of the parties and also perused the orders of lower authorities. We have also perused the decisions relied up on by the Ld AR of the assessee. In fact it is not disputed by the assessee that the claim of the assessee is not governed by the provision o .....

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R VOLUNTARY RETIREMENT SCHEME (1) Where an assessee incurs any expenditure in any previous year by way of payment of any sum to an employee in connection with retirement, in accordance with any scheme or schemes of voluntary retirement, one-fifth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance shall be deducted in equal installments for each of the four immediately succeeding previous years. (2) Where the assessee .....

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e undertaking of an Indian company entitled to the deduction under sub-section (1) is transferred, before the expiry of the period specified in that sub-section, to another company in a scheme of demerger, the provisions of this section shall, as far as may be, apply to the resulting company, as they would have applied to the demerged company, if the demerger had not taken place. (4) Where there has been reorganization of business, whereby a firm is succeeded by a company fulfilling the conditio .....

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referred to in sub-section (2), in the case of demerged company referred to in sub-section (3) and in the case of a firm or proprietary concern referred to in sub-section (4) of this section, for the previous year in which amalgamation, demerger or succession, as the case may be, takes place. (6) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other provision of this Act. According to this section the dispute has come to end that whether the VR .....

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s @ 20 % in each of the years. However assessee claims that same is fully allowable u/s 37(1) in this year .i.e. in the year in which it is incurred. 12. Provisions of section 37 (1) deals with the deductibility of expenses which are not covered u/s 30 to 36 of the Income Tax Act. Section 37 of the IT Act, 1961, enjoins that any expenditure, not being expenditure of the nature described in section 30 to section 36, laid out or expended wholly and exclusively for the purpose of the business or pr .....

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ained in section 37(1) of the Act. Where a case specifically falls under any one of the specific provisions of Section 30 to 36, although it was not specifically pleaded by the assessee, the assessing authority has a statutory duty and obligation to consider the claim of the assessee pertaining to a particular item under that section. Honourable Guj High court has held in Khimji Vishram & sons V CIT 209 ITR 993 as under :- As against this, under section 37, deduction of any expenditure could .....

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37(2B), (3) and (4) or as provided in other sections. From the aforesaid two sections, it is apparent that, under section 37, only revenue expenditure, which is expended wholly and exclusively for the purpose of business or profession, can be allowed to be deducted in computing the income while under sections 30 to 36, it could be either revenue expenditure or capital expenditure. Further, section 37 as such is a general provision which provides for deduction of expenditure while computing the .....

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or profession and they are not in the nature of capital expenditure or personal expenses of the assessee, then deduction is required to be given for the said expenses. It is quite possible that with regard to some expenses there may be overlapping between sections 30 to 36 and section 37. In that set of circumstances, if the expenses are deductible under sections 30 to 36, then section 37 is not to be resorted to. But if the said expenses are not deductible under sections 30 to 36 and the condit .....

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was whether the severance cost to the employees on suspension of one of the manufacturing activities is revenue expenditure or capital expenditure. It was held that it is revenue expenditure in nature and therefore allowable to the assessee for AY 2003-04. However provision of section 35DDA was not brought to the notice of the court. b. CIT V Bhor Industries Limited 264 ITR 180 ( Bom) the issue before Hon high court was whether the amount of expenses on voluntary retirement scheme for AY 1996-9 .....

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is allowable as deduction as expenditure on grounds of commercial expediency. d. In the decision of CIT V orient papers & Industries Limited Hon Delhi High court has followed the decision of CIT V Simpson and Co Limited 230 ITR 703 which is also on the issue of whether the VRS expenditure is capital or revenue expenditure. e. CIT V Swan Mills Limited 39 Taxmann.com 112 ( Bom) the issue before high court for AY 2000-01 was whether VRS payments are allowable on closure of business as revenue e .....

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urt. Therefore these decisions render no help to the cause of the assessee. 16. In view of above facts we confirm the order of CIT (A) disallowing the claim of the assessee of ₹ 6,08,74,376/- u/s 37(1) of the act on account of payment made under voluntary retirement scheme. Therefore ground no 3 of the appeal is dismissed. 17. Ground No 4 of the appeal is against not granting adjustments of TDS of ₹ 292865/-. Assessee has dully filed the TDS certificates along with the return of inco .....

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s filed TDS certificates along with the return of income filed by the assessee and if the claim is according to the law , assessee should be granted the credit for such TDS certificate. In view of this we direct AO to grant credit of TDS certificates of ₹ 292865/- on merit after proper verification if the credit complies with the provision of section 199 of the Income Tax Act. Therefore the ground no. 4 of the appeal is allowed. 19. Ground no 5 of the appeal is against not allowing the car .....

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9.2008 as per verification shown in ITR V , however due to some technical error in the portal of Income tax department it showed the date of filing of return of income as 1.10.2008. For this assessee submitted the copy of the press release letter dated 22.12.2008 issued by CBDT that such returns where the returns were filed electronically on 30.9.2008 but the acknowledgement date shows stamp of 1.10.2008 , they shall be treated to be having filed the return of income on 30.9.2008. 21. We have ca .....

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We reverse the finding of CIT (A) on this count. Accordingly ground no 5 of the appeal is allowed. 22. In the result appeal of the assessee is partly allowed. ITA No 4178/Del/2011 ( Revenue) 23. Ground no 1 of the revenue s appeal is general in nature and therefore dismissed. 24. Ground no 2 of the appeal is against the deletion of disallowance of ₹ 2247126/- made on account of prior period expenses. During assessment proceedings AO noticed that the appellant company had claimed prior peri .....

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method of accounting from beginning and accepted by the department. However, the reply furnished by the appellant company was not found satisfactory by the Id.AO and he disallowed the same. On appeal CIT (A) allowed the claim of the assessee. Therefore revenue has raised this ground. 25. Before us LD DR submitted that prior period expenses are not allowable and supported the order of AO. 26. Ld AR submitted that the expenses of ₹ 22,47,126/- have actually not been claimed by the appellant .....

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allowing the same, It is therefore, submitted that the disallowance may be deleted and order of CIT (A) may be confirmed. 27. We have carefully considered the rival submissions. In fact there is no expenses debited by the company but there is a reversal of income by the assessee of interest income of ₹ 10,77,555/- out of interest income shown of ₹ 29,25,000/- in AY 2007-08 which was received only of ₹ 18,47,445/- and therefore the reversal of ₹ 10,77,555/- was made debiti .....

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r the appellant company none of the aforesaid items was to be considered for disallowance for the AY under consideration on account of the following reasons:- a. Reversal of interest income - it is submitted by the appellant company that during the FY 2006-07, the appellant company had received certain funds against the sale of equity shares of M/s Ambuja Cement Eastern Lid. and the same were deposited with IFCI Ltd. and interest income of ₹ 2925000/- was credited for the FY 2006-07 on est .....

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may be seen that the amount of ₹ 1077555/- actually represents the reversal of interest income which was shown on estimate basis for the AY 2007-08. In my view, the amount in question does not represent the prepaid expenses for the reasons discussed herein before and accordingly, the AO is directed to delete the disalowar.ee of ₹ 1077555/-. b. Bonus - It is submitted by the Id. counsel for the appellant that the amount in question represented a provision created for FY 2006-07 and fo .....

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paid bonus of ₹ 1888724/- including the bonus of ₹ 65092/- pertaining to FY 2006-07 has been disallowed by the appellant itself, no further disallowance was called for in the assessment. The AO is therefore, directed to delete the disallowance of ₹ 65092/-. Gratuity - It is pointed out by the Id. counsels that during the year under consideration, the appellant company had credited the gratuity payable account by sum of ₹ 18797891/- and thereafter deducted a sum of ₹ .....

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