TMI Blog2014 (1) TMI 1756X X X X Extracts X X X X X X X X Extracts X X X X ..... le disallowance can be made. We further find that during the year the assessee has made investment only to the tune of ₹ 19.40 crores in various mutual funds whereas the assessee had cash profit for ₹ 20 crores, therefore, considering the overall circumstances we are of the opinion that lump sum disallowance of ₹ 5 lakh would meet the ends of justice. Therefore, we set aside the order of the Ld. CIT(A) and direct the AO to make disallowance of ₹ 5 lakhs u/s 14A of the Act. Nature of income - agricultural income v/s income from other sources - Held that:- Though it is possible for assessee to grow some crops in the vacant land but at the same time, some details should have been filed. In the absence of details, the ld. CIT(A) has already granted reasonable relief and his order does not require any further interference. Accordingly we confirm the order of the ld. CIT(A) as noted that the assessee failed to furnished the details but at the same time the amount was very small and therefore, 50% of the agricultural income was accepted. Addition u/s 40A - Held that:- If an assessee makes payments at different times during the day and he has no idea that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) and delete the addition. Allowability of business promotion expenditure - 50% deduction was allowed u/s 80G - Held that:- First of all the assessee has not submitted any details regarding a sum of ₹ 5 lakh towards Indo-Pak Games. In any case no TDS has been deducted and therefore Section 40(a)(ia) is also applicable and these payments are not allowable. As far as payment to Mother India Foundation is concerned, same is eligible for deduction u/s 80G and 50% deduction has been allowed by the Assessing Officer then this amount cannot be allowed even as business expenditure. Therefore, we find nothing wrong with the order of the Ld. CIT(A) and confirm the same. Payment to Truck Operators Union (TOU) - Held that:- The consideration was charged by the transporter from the truck owner and or operator and hire charges were paid by the assessee directly to the truck owner and therefore, it was held that there was no contract between the assessee and local purchaser and truck owner. But in case before us, the payment has been made directly to the TOU from whom the trucks have been arranged most probably at fixed rate therefore, the contract has to be assumed between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t difference should be added to the income of the assessee. - ITA No. 797/Chd/2009, ITA No. 765/Chd/2009 - - - Dated:- 3-1-2014 - SHRI T.R. SOOD, ACCOUNTANT MEMBER AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER Assessee by Shri Rajesh Garg Department by: Smt. Jyoti Kumari O R D E R PER T.R.SOOD, A.M These cross appeals are directed against the order dated 25.5.2009 of the CIT(A), Chandigarh. The appeals were heard together and are being disposed off by this common order. ITA No. 797/Chd/2009 - Assessee s appeal 2 In this appeal the assessee has raised following grounds: 1 That the Ld. Commissioner of Income Tax (Appeals), has erred in law as well as on facts of the case in confirming the disallowance of Loss on sale of investments amounting to ₹ 68,000/- and making the addition of ₹ 87980/- as short term capital gain on sale of investments. 2. That the Ld. Commissioner of Income Tax (Appeals), has erred in confirming disallowance u/s 14A in the case of the assessee, whereas Section 14A is not applicable to the facts of the present case. 3. That the Ld. Commissioner of Income Tax (Appeals), is not justified in confirming the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed to the assessee. 3 Ground No. 1 - After hearing both the parties we find that during assessment proceedings the AO noticed that the assessee has claimed business loss amounting to ₹ 68,000/- on account of disposal of current investments. On examination of the details, it was noticed that the assessee has purchased and sold various mutual funds during Financial Years 2003-04 2004-05. The Assessing Officer also called information from various companies for ascertaining applicability of provisions of section 94(7)(b). The assessee was confronted with these informations particularly regarding net gain from mutual funds. It was mainly contended that the losses available in view of the decision of Hon'ble Supreme Court in case of Apollo Tyres Ltd Vs. CIT, 255 ITR 273 (S.C). The Assessing Officer noted that this case was distinguishable on facts and the provisions of section 94 (7) were clearly applicable because various units were purchased by the assessee within a period of 3 months prior to the record date and sold within 9 months after such date. Accordingly the losses were not allowed. 4 Before the ld. CIT(A) it was mainly contended that the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , even then there would be a particular time for declaration of dividend. That means, before that time, the particular unit would be cum-dividend and after that time it would ex-dividend. Similar would be the position in regard to weekly dividend, etc. There is no dispute that the assessee purchased the units within 3 months of the record date and also sold within 9 months of the record date. Therefore, provisions of section 94(7) are applicable. Since neither the Assessing Officer nor the ld. CIT(A) has examined the details of various schemes, whether any record date was involved or not and have decided the issue on assuming that there is a record date in these schemes. In our opinion, the details of the schemes need to be examined to find out whether any record date was involved or not and therefore, in the interest of justice, we set aside the order of the Ld. CIT(A) and remit the same back to the file of Assessing Officer with a direction to first find out whether any record date is involved and then decided the issue as per law. 8 Grounds No. 2 3 - These two grounds relate to disallowance made u/s 14A of Income Tax Act, 1961. 9 After hearing both the parties we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur. The assessee earned income from sale of mustard seeds and ripe crop of amla. The Assessing Officer was of the opinion that full details were not available, therefore, this income was treated as income from other sources. 15 On appeal, the submissions made before the Assessing Officer were reiterated and it was further submitted that the assessee is having about 120 acres of land at the plant site. The ld. CIT(A) noted that the assessee failed to furnished the details but at the same time the amount was very small and therefore, 50% of the agricultural income was accepted. 16 Before us, the ld. counsel of the assessee reiterated the submissions made before the lower authorities. 17 On the other hand, the ld. DR for the revenue strongly supported the order of ld. CIT(A) and submitted that in the absence of any details, the ld. CIT(A) has already granted reasonable relief. 18 After considering the rival submissions we are of the opinion that though it is possible for assessee to grow some crops in the vacant land but at the same time, some details should have been filed. In the absence of details, the ld. CIT(A) has already granted reasonable relief and his order does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dependent cash transaction, therefore, section 40A(3) of the Act could not be applied because in no transaction one individual payment has exceeded ₹ 20,000/- Reliance is placed on the judgment of the Punjab Haryana High Court in the case of CIT Vs. Bal Krishna Jagdish Chand 164 Taxman 459 (copy enclosed) where it is held by the Hon ble High Court that various cash payment made to one party on one day were not required to be clubbed and treated as one cash payment and for that reason, total cash payment exceeding ₹ 20,000/- in a day to that party were not to be violative of section 40A(3). The assessee has made the payment of freight outwards to ₹ 83.46 lacs and payment of Freight forwarding clearing expenses amounting to ₹ 393.58 lacs, total freight aggregating to ₹ 477.04 lacs during the year, out of which payment of approximately ₹ 2 lacs have been made in cash in more than one installment in a single day that too for the amount not exceeding ₹ 20,000/- in single transaction. There was no mala fide intention on the part of the assessee to avoid taxes in such manner. Out of the total payment made by cheques amounting to ₹ 477 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sa), the Tribunal held that when part payments are made the same cannot be aggregated for disallowance of Section 40A(3). We further find that Hon'ble Orissa High Court in case of CIT Vs. Aloo Supply Co. (supra) has held as under: The word sum has no statutory definition and must have the common parlance meaning. While legislating, Parliament tries to convey its intention through express words. It is one of the well settled rules of interpretation that where a word used in a statute carries more than one meaning, that meaning which makes the provision workable and is nearest to the legislative intention, has to be adopted. The word sum in s.40A(3), second proviso, of the I.T. Act, 1961, is used only to indicate an amount of money and does not refer to the totality of the expenditure. Therefore, if an assessee makes payments at different times during the day and he has no idea that he has to pay to the same person on more than one occasion, he cannot be subjected to the statutory provision contained in s.40A(3) of the Act, unless any one payment is above ₹ 2,500. The statutory limit of ₹ 2,500 under s. 40A(3) of the Act applies to payment made to a party a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Development Corporation Ltd. Vs. CIT(Supra) as well as in case of Brooke Bond India Ltd Vs. CIT, 225 ITR 798 (S.C). The head note of the decision reads as under: When an expenditure is made not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. But this is not a strait-jacket formula and the question will have to be determined in the backdrop of the facts of each case. The test laid down can at best be a guide for determining whether a particular expenditure forms part of revenue expenditure or capital expenditure. The fees paid to the Registrar of Companies for expansion of the capital base of a company is directly related to the capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit-making, it still retains the character of capital expenditure since the expenditure is directly related to the expansion of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered as development expenses. 37 On the other hand, the ld. DR for the revenue strongly supported the order of the ld. CIT(A). 38 We have heard the rival submissions carefully. First of all the assessee has not submitted any details regarding a sum of ₹ 5 lakh towards Indo-Pak Games. In any case no TDS has been deducted and therefore Section 40(a)(ia) is also applicable and these payments are not allowable. As far as payment to Mother India Foundation is concerned, same is eligible for deduction u/s 80G and 50% deduction has been allowed by the Assessing Officer then this amount cannot be allowed even as business expenditure. Therefore, we find nothing wrong with the order of the Ld. CIT(A) and confirm the same. 39 Grounds No. 9 10 - After hearing both the parties we find that during assessment proceedings the AO noticed that the assessee has made payment to Truck Operators Union (TOU) amounting to ₹ 67,57,763/-. The assessee was asked to furnish the details of payment and TDS. In response it was stated vide letter dated 12.12.2007 as under: The payment has been made to the truck operators union against the different goods receipts of various truck ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Punjab Haryana High Court in case of CIT Vs. United Rice Land Ltd. (supra). 44 On the other hand, the ld. DR for the revenue strongly supported the order of ld. CIT(A) and also relied on the decision of Hon'ble Supreme Court in case of Associated Cement Co. Ltd. Vs. CIT, (supra). 45 We have heard the rival submissions carefully and do not find force in the submissions of the ld. counsel of the assessee. The decision of Hon'ble Punjab Haryana High Court in case of CIT Vs. United Rice Land Ltd. (supra) is totally distinguishable. In that case the assessee was engaged in the business of manufacturing and export of rice and for sending the goods to the Ports the assessee used to engage trucks through transporters. The consideration was charged by the transporter from the truck owner and or operator and hire charges were paid by the assessee directly to the truck owner and therefore, it was held that there was no contract between the assessee and local purchaser and truck owner. But in case before us, the payment has been made directly to the TOU from whom the trucks have been arranged most probably at fixed rate therefore, the contract has to be assumed between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cals Ltd. Vs. ACIT in ITA No. 19,142,347/Chd/97, the deduction of notional sales tax liability is being claimed by the assessee. The assessee was asked to justify this deduction and in response it was stated vide letter dated 16.8.2007 as under: Sales Tax Incentive ₹ 686.64 lacs Regarding the claim of sales tax exemption of ₹ 686.64 lacs by the assessee during the year. It is submitted as under:- To build a conductive industrial climate to attract fresh investment and also facilitate the growth and expansion of industry in the state and off setting the locational disadvantages of the state, creating more jobs opportunities for the youth, the Punjab State Government has announced a number of incentive packages under Industrial Policy and Incentive Code 1996, one of which is the Sales Tax Subsidy Scheme. Under the said scheme, the company has been granted sales tax exemption for a period of 10 years from 19.01.1999 to 18.01.2009. The sales tax exemption has been granted under the Industrial Incentive Scheme 1996 of Govt. of Punjab with a view to promote growth of industry in the state. This sales tax exemption is based upon the fixed capital investment. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as capital receipt and not a revenue receipt or to show that the kind of subsidy under consideration was given to the assessee for creation of capital assets as an aid to setting up of the unit. Rather, it was evident that the subsidy was an operational subsidy provided by the State after the industry had been set up and commenced commercial production. In the absence of material to show that the subsidy was to enable it to carry out capital investment it could not be presumed that such a subsidy was a capital subsid. Following the above, we decide this issue against the assessee. 51 In the result, appeal of the assessee in ITA No. 797/Chd/2009 is partly allowed. ITA No. 765/Chd/2009 - Revenue s appeal 52 In this appeal the revenue has raised the following grounds: 1 On the facts and in the circumstances of the case and law, the ld. CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2 On the facts and in the circumstances of the case and law, the ld. CIT(A) has erred in deleting an additions of ₹ 6,99,08,597/- u/s 145A as the assessee was not routing various duties /taxes through profits and loss ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Explanation.-For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment. (b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received. 57. The plain reading of the above provision would show that it is of mandatory nature and mandates that any tax, duty etc. has to be included in the value of the closing stock. However, at the same time the Hon'ble Delhi High Court in the case of CIT Vs. Mahavir Aluminum Ltd (supra) held as under;- Held, dismissing the appeal, that paragraph 23.13 of the guidance note on tax audit under section 44AB issued by the Institute of Chartered Accountants of India made it clear that whenever any adjustment is made in the valuation of inventory, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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