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DCIT, Circle 11 (1) , New Delhi Versus Indian Suger Exim Corporation Ltd.

2011 (11) TMI 745 - ITAT DELHI

Disallowance of depreciation on office building, addition on account of foreign traveling expenditure, addition on account of foreign traveling expenditure, addition on account of unregistered Provident Fund Trust, disallowance u/s 14A, disallowance towards interest on late payment of TDS. - ITA No. 5943/Del/2010 - Dated:- 15-11-2011 - C.L. SETHI, JUDICIAL MEMBER AND PAHUJA, ACCOUNTANT MEMBER Appellant by : Sh. Ashwani Taneja, CA,Sh. Sumit Jain, CA & Sh. Tarun, Adv. Respondent by : Sh. Salil .....

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e building. 5. The assesse s claim of depreciation on building has been disallowed by the AO for the reason that the convenience deed in respect of property being lease hold ownership office, building and car parking at Ansal Plaza, was yet to be executed in favour of the assessee. The said disallowance has been made by the AO as so made in the A.Y. 2004-05. 6. On an appeal, ld. CIT(A) allowed the assessee s claim in the light of the finding of his predecessor on identical issue in the previous .....

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he case of hearing of this appeal, it was pointed out by the ld. Counsel for the assessee that ld. CIT(A) s order passed in A.Y. 2004-05 has been upheld by the Income Tax Appellate Tribunal, Delhi Bench C vide order dated 29.04.2011 by holding and observing as under: - 35. We have heard both the parties. There is no dispute about the fact that assessee had purchased the property in the financial year 1999-2000 and was occupied by the assessee. The assessee had been paying house tax in its own na .....

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e and also a narrow connotation. The meaning would depend on the context in which the terms are used. The decision in the case of CIT vs. Podar Cement P. Ltd. 226 ITR 625 (SC) has to be taken as a trendsetter in the concept of ownership. Assistance from the law laid down therein can be taken for finding out the meaning of the term owned is occurring in sec. 32(1) of the Income Tax Act. The term owned is occurring in sec. 32(1) of Income Tax Act, must be assigned a wider meaning. Anyone in posses .....

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is owner of the property and is entitled for depreciation. Merely because the property has not been registered in the name of the assessee, disallowance of depreciation cannot be made. The decision in the case of Tamil Nadu Civil Supplies Corporation Ltd. (supra) is not applicable to the facts of the case before us as in that case the assessee had not acquired dominion on the property. But in the present case, the assessee is in possession of property; has been paying taxes in his own name; and .....

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deleting the addition of ₹ 10,25,151/- on account of foreign traveling expenditure. 11. It has been stated by the AO that during A.Y. 2002-03, 2003-04 & 2004-05, the expenditure in respect of attending meeting of Global Alliance for Sugar Trade & Reform & Liberalization was disallowed. It was submitted by the assessee that assessee company s Committee Members/Directors were regularly attending Doha meeting of WTO and that the meeting were attended to establish assessee s busin .....

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in the A.Y. 2003-04. 13. We have heard both the parties and perused the material on record. 14. From the AO s order, it is clear that the AO has disallowed the traveling expenses to attend the conferences for the reasons given by him in A.Y. 2002-03, 2003-04 & 2004-05. The identical additions were deleted by the ld. CIT(A) in earlier years against which department did not file any appeal before the Tribunal except filing an appeal before the Tribunal in the A.Y. 2003-04. The ld. CIT(A) s ord .....

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nt of foreign traveling expenses incurred for attending meeting of Global Alliance for Sugar Trade Reform & Liberalization. Respectfully following the Tribunal s order passed in A.Y. 2003-04, the order of ld. CIT(A) in the present A.Y. on this issue is upheld. 16. The next ground no. 4 is directed against CIT(A) s order in deleting the addition of ₹ 9,08,359/- on account of unregistered Provident Fund Trust. 17. The contribution to Provident Fund amounting to ₹ 9,08,359/- has bee .....

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parties and considered the material available on record. Sec. 36(1)(iv) provides as under: - (iv) any sum paid by the assessee as an employer by way of contribution towards a recognized provident fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognizing the provident fund or approving the superannuation fund, as the case may be; and subject to such conditions as the Board may think fit to specify in cases where the contributions are not .....

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n it means a provident fund, which has been and continues to be recognized by the Chief Commissioner or Commissioner in accordance with rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees Provident Funds Act, 1952. Since as per the letter issued by CIT, Delhi-III dated 28.05.1976 the provident fund is considered as fund to which Provident Fund Act, 1925/1952 applies, it amounts to a Recognized provident fund within .....

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ribution to Provident Fund Account. 22. In ground no. 5, the revenue has disputed the CIT(A) s order in deleting the addition of ₹ 10,00,000/- on account of disallowance u/s 14A of the Act. However, on perusal of ld. CIT(A) s order, we find that the ld. CIT(A) has actually sustained the disallowance to the extent of ₹ 649336/- as against disallowance of ₹ 10,00,000/- made by the AO. 23. In this case, it was found by the AO that the assessee has earned exempted dividend income f .....

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ionate expenses in proportion to the exempted income to the total receipts. The working given by the AO is as under: 4.14 Thus, Administrative Expenses + Interest Expenses disallowed u/s 14A of the I.T. Act, 1961 on an apportionment basis = Administrative expenses + Interest expenses Total Receipts X Exempt income = 72,73,91,08 x 3,41,56,014 384,94,87,078 = ₹ 6,45,404/- As the above working comes to ₹ 6,45,404/-, and in A.Y. 2002-03 the CIT(A) has upheld the disallowance to the exten .....

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he same amount was disallowed in A.Y. 2002-03. 25. On an appeal, the ld. CIT(A) confirm the disallowance to the extent of ₹ 6,49,336/- as against ₹ 10 lakh disallowed by the AO. The working of ₹ 6,49,336/- being the amount of disallowance sustain by the ld. CIT(A) is as under: - On a perusal of the details of the above expenses and nature of functions performed by the personnel, I find that the administrative expenses would mostly relate to the carrying on of the normal & p .....

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attributed to earning of exempt income. The contention of the appellant that expenses at the Port offices cannot be proximately related to their investment decisions which are made at Head Office is reasonable and therefore, acceptable. Accordingly, only such of the administrative expenses which are made at Head Office and which can be reasonably corelated to earning of exempt income are considered for disallowance. These expenses are in the nature of Printing & stationary (Rs. 4,26,054/-), .....

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ed it is observed that the appellant admittedly has a GM and Dy. GM whose gross salary and allowance for the year are ₹ 3,91,064/- and ₹ 1,86,594/- respectively. Further salary paid to accounts department personnel at Head Office is ₹ 7,68,925/-. Apart from this the proportionate contribution on account of PF by the appellant company in case of GM, DM & accounts department is ₹ 32785/-, ₹ 15643/-, and ₹ 64464/- respectively. Likewise proportionate welfare .....

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can be made on a reasonable basis and that expenses can be apportioned for the above purpose, as per the extensive quotations from the relevant portions of the said judgment. Considering the fact that there has been an additional investment of ₹ 31.6 crores in shares and mutual funds during the year, in my opinion, it would be reasonable to disallow u/s14A of the Act 15% of salary & remuneration paid to the GM & Dy. GM of the company. The total remuneration paid to them (which inc .....

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,59,967/- an amount of 2% thereof (the appellant ahs in its submission dated 08.10.10 has allocated 1% of such expenses) is reasonably attributed to earning of exempted income. This works out to ₹ 4,43,199/- which is disallowed u/s 14A of the I.T. Act. Thus, the total disallowance u/s 14A of the I.T. Act and as discussed above would work out to ₹ 6,49,336/- (Rs. 1,09,217 + ₹ 96,920 + ₹ 4,43,199) Apart from this disallowance which is calculated and confirmed above ₹ .....

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/s 14A of the Act. We, therefore, take up this issue raised by the assessee as well as by the revenue, together. 28. We have heard both the parties and perused the material on record. On perusal of AO s order, we find that the AO has worked out the proportionate expenses incurred for earning the exempted income at ₹ 6,45,404/-. However, he disallowed the sum of ₹ 10 lakh in the light of the disallowance sustained by ld. CIT(A) in A.Y. 2002-03. However, in the present assessment year, .....

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