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2016 (10) TMI 489 - ITAT JAIPUR

2016 (10) TMI 489 - ITAT JAIPUR - TM - Addition u/s 41(1)(a) - unilateral remission of liability - Held that:- Where the creditor company is confirming to the Assessing officer not once but on couple of occasions through written confirmations that the amount is not payable by the assessee, there is nothing more that the Assessing officer can do to come to a conclusion that the amount is no more payable by the assessee. In our view, given that the assessee is still claiming the amount as payable .....

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case of unilateral remission of liability in the hands of the assessee. - What is relevant is to determine the year of obtaining the benefit as the benefit can be brought to tax in that year itself and not in any other year. In the instant case, M/s Tirupati Balaji Mineral Pvt. Ltd. has confirmed that there are no transactions during the previous year under consideration as well as the fact that there is no opening balance in the account of the assessee maintained in their books of accounts .....

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7; 3,16,553 under section 41(1)(a) is hereby deleted. - Regarding amount payable in respect of M/s Kay Jay Marbles Ceramics Pvt. Ltd all the facts lead the Assessing officer to treat the amount as taxable under section 41(1)(a) of the Act. There is however no evidence to support the proposition that there is a unilateral action on the part of the creditor in terms of remission of liability unlike the case of M/s Tirupati Balaji Minerals Pvt ltd. Further, the assessee continues to show the li .....

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not present in the instant case. Having said that, we donot feel the necessity to examine the contention of the assessee that since the purchases are included in the closing stock, there has been no deduction that has been claimed by the appellant. We leave this contention open. Hence, in light of above, we donot agree with the position adopted by the Revenue that it is case which falls within the four corners of section 41(1)(a) of the Act. Hence, the addition of ₹ 1,81,251 under section .....

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of the case as not allowing of depreciation @ 80% regarding all civil works of windmill is not justified as the entire civil work has been carried out regarding windmill. (ii) That the confirmation of disallowance of ₹ 4,10,188/- under section 40a(ia) is unjustified as the recipients of freight have already been paid tax on the incomes and have submitted the requisite declarations (form 15D). (iii) The confirmation of addition ns u/s 41(1)(a) - M/s Tirupati Balaji Minerals Pvt. Limited (R .....

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2016 and hence, the present appeal before us. 3. During the course of hearing, the ld. AR didn t press for ground no. 1. Hence, the ground no. 1 is dismissed as not pressed. 4. In respect of the second ground of appeal, the ld. CIT(A) has given his finding as under: I have considered the contentions of the appellant as well as assessment order. It is seen that the appellant has claimed that assessee has not deducted the tax at source against the above payments to the truck owners as Form No. 15- .....

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on concerned paying or crediting such sum, in the prescribed form and verified in the prescribed manner and within such time as may be prescribed if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year. Povided also that the person responsible for paying any sum as aforesaid to the sub-contractor referred to in the second provisio shall furnish to the prescribed income tax authority or the person authorised by it such particula .....

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has been held to be not applicable in the case of the assessee being a contractor, filing of above forms is immaterial. Further, the assessee s contention that sec. 6 has introduced to sub sec. 194C as per which furnishing of PAN No. no deduction of tax shall be made. It is relevant to note that said provision is not applicable to the A.Y. 2007-08 and has been introduced w.e.f. 01.10.2009 as has been pointed out by the AO in the remand report. In rejoinder to the remand report, the assessee has .....

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by the AO u/s 40a(ia) is confirmed. 4.1 Firstly, regarding the last contention of the assessee regarding retrospective applicability of second proviso to sec. 40(a)(ia) introduced by the Finance Act 2012, this Bench has recently held in case of Kanhaiyalal Kalyanmal, Jaipur vs. DCIT, Circle-6, Jaipur ITA No. 172/JP/16 dated _______ the same to be retrospective in nature. The relevant findings are as under: 2.5 We have heard the rival contentions and perused the material available on record. The .....

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40a(ia) to amount paid/payable during the financial year and thus doesn t support the case of the Revenue. 2.7 Regarding decision of Hon ble Kerala High Court s decision in the case of Thomas George Muthoot(supra) and Hon ble Delhi High Court in case of Ansal Land Township Pvt. Ltd. (supra), there are conflicting decisions on the issue of retrospectivity of second provisio to section 40a(ia). The question that arises for consideration is where there is no decision of a jurisdictional High Court .....

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te Raipur Bench in the case of RKP Company vs. ITO ward-1, Korba in ITA No. 106/RPR/2016 dated 24.06.2016 wherein the Coordinate Bench has held the second proviso to section 40a(ia) to be retrospective in nature noting the conflicting decisions of Hon ble Kerala High Court and Hon ble Delhi High Court and following the principles laid down in case by the Hon ble Supreme Court in the matter of CIT vs. Vegetable Products Ltd. 2.8 In view of the above discussions, we remit the matter to the file of .....

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examine the other contentions raised by the ld AR. We remit the matter to the file of the AO for limited verification of whether recipient of payment has included the same in their computation of income offered to tax and, if found to be so, delete the disallowance in question. With these directions, the matter stands restored to the file of the Assessing Officer. 5. Now coming to ground no. 3 of the appellant where the appellant has challenged the addition of ₹ 4,97,804 under section 40( .....

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the bills by the appellant company of ₹ 316553/-. Since F.Y. 2000-01, the amount of ₹ 3,16,553/-appears as outstanding due to the creditors in the appellant company s successive Balance sheets. As till date the amount has not been paid & the appellant company does not intend to not to make payment, the amount was continuously appeared in creditors list in the Balance sheet of the appellant company. Ld. AO has verified and approved the credit appearing in appellant companies fina .....

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reditors M/s Tirupathi Balaji Minerals Pvt. Ltd. that it is not willing to make payment. In the ongoing disputes, the creditor company has never agreed nor even hinted to the appellant company about the waiver of the outstanding Amount. Even at the time of change of management in M/s Tirupathi Balaji Minerals Pvt. Ltd., the appellant company had confirmed the outstanding dues for the suppliers. In such circumstances the undisputed facts that emerge are appellant company purchased goods in F.Y. 2 .....

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vious year (clearly not in F.Y. 2006-07). 5.2 The ld AR further submitted that from the various explanations by the creditor company (M/s Tirupathi Balaji Marble Pvt. Ltd.), one can clearly derive as under: Letter dated 15.10.2009 - Extract reproduced: With reference to the above, this is to submit that during A.Y. 2007-08 no dealings with M/s Shree Padmavati Marbles Pvt. Ltd. Madanganj Kishangarh and no opening as well as closing balance exist with us . Derivation: - The creditor has no dealing .....

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0.2009 - Extract reproduced: On verification of Fax copy of account statement of Shree Padmavati Marbles Pvt. Ltd. in this matter this is to submit that no such amount is pending/outstanding with this concern. In our letter dated 15.10.2009 sent by Tirupathi Balaji Marbles Pvt. Ltd. we clearly submit that no opening as well as closing balance is lying with Shree Padmavati Marbles Pvt. Ltd. Further this is to submit that there is no transaction with this concern since 5-7 years. Derivation: - The .....

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ny since long back and no transaction since last 9 years. (b) During the F.Y. 2006-07 no account is appearing in the creditor company s Books as there is no transaction with the company since 7 years implying that there is no write off has been made by the creditor company in F.Y. 2006-07. Thus no amount is chargeable under section 41(1). As the appellant company had purchased goods on credit in F.Y. 2000-01 and has not paid the outstanding till date, it can be reasonably inferred that the credi .....

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rchased blades & segment from the creditor company vide bill No. 01 dated 31.05.2003 on credit. The creditor company was new in the line, probably we were their first customers. The goods were purchased on guaranteed production results with a stipulation that payment shall be made only on satisfactory performance. The seller had also guaranteed for rectification of the defect for no additional cost. Blades and Segments are consumables in marble cutting operations. The blades & segments w .....

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nd the rejected goods are still lying in our stores. The entire value (Rs. 1,81,251) continues to be part of our closing stock and is being reflected in Final Accounts since then. It be kindly noted that the purchases from creditor company appeared debited in our Trading and Profit and Loss account for the year ended 31.03.2004 and corresponding amount was included in Closing stock as on 3.03.2004. Thus the net effect of the debit and credit in P&L is NIL. It is not a case wherein it can be .....

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in the assessment for any year. We are enclosing herewith the Trading & Profit and Loss Account alongwith details of closing stock for the year ending 31.03.2004 which will leave no doubts as to fact of non deduction of amount of ₹ 1,81,251/-. In various judicial pronouncements, it has been repeatedly held that unless it is proved that an allowance or deduction has been made in the assessment in any previous year, it is not open to the Revenue to invoke section 41(1). Reliance is place .....

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that assessee has shown the following creditors in his account: (i) M/s Tirupati Balaji Mineral Pvt. Ltd. Rs.3,16,553/- (ii) M/s Kay Jay Marbles Ceramics Pvt. Ltd. ₹ 1,81,251/- As regarding M/s Tirupati Balaji Pvt. Ltd., assessee s claim is that the said amount is outstanding against the purchases made from M/s Tirupati Balaji Mineral Pvt. Ltd in 2000-01 due to dispute regarding quality of marble blocks supplied by the said party. Further M/s Kay Jay Marbles Granites Pvt. Ltd. has been sh .....

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ses, the assessee s claim that there was dispute regarding the quality is not supported by any evidence to this effect inspite of matter being very old. In view of above facts, it is clear that the above liability has ceased in the case of the assessee in terms of sec. 41(1)(a) of the IT Act. The AO has brought out all the facts of the case in details in the assessment order and has confronted the same to the assessee also. These facts have not been controverted by the assessee by way of any evi .....

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payable and the same has not been written off in its books of accounts. Where the creditor company is confirming to the Assessing officer not once but on couple of occasions through written confirmations that the amount is not payable by the assessee, there is nothing more that the Assessing officer can do to come to a conclusion that the amount is no more payable by the assessee. In our view, given that the assessee is still claiming the amount as payable in its books of accounts, it is a matte .....

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ty in the hands of the assessee. 5.6 The next question that arises for consideration is whether such unilateral remission of liability can be brought to tax in the hands of the assessee for the year under consideration under the provisions of section 41(1)(a) as invoked by the Assesing officer and confirmed by the ld. CIT(A). It would be relevant to examine the provisions of Section 41(1)(a) which states as under: Sec. 41 Profits chargeable to tax: (1) Where an allowance or deduction has been ma .....

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benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not. 5.7 Undisputedly, the expenditure has been claimed in the earlier year and hence, the first condition of invoking section 41(1)(a) is satisfied. The second condition talks about the year of taxabili .....

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se, M/s Tirupati Balaji Mineral Pvt. Ltd. has confirmed that there are no transactions during the previous year under consideration as well as the fact that there is no opening balance in the account of the assessee maintained in their books of accounts for the year under consideration. It is therefore clear that the unilateral action on the part of M/s Tirupati Balaji Mineral Pvt. Ltd. in remitting the subject amount has not happened in the previous year under consideration. In light of the sam .....

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