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M/s Uluberia Coke Oven Plant, C/o Salarpuria Jajodia and Co. Versus JCIT, Range-56, 3, Kolkata and DCIT, Ci rcle-56, Kolkata Versus M/s Ulberia Coke Oven

Disallowance of payment of commission on account of payment to sister concern - Held that:- The nature of the services rendered by the MFPL has not been justified by the ld. AR. The AO never raised the issue that it was made to the sister concern therefore it is disallowed. The AR has not brought the specific services rendered by the MFPL. In the similar facts & circumstances the issue has been decided in favour of Revenue by the Hon’ble High Court of Gujrat in the case of Gujarat Insecticides L .....

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e said receipt in its return of income, then the payer (the assessee herein) should not be treated as assessee in default. Accordingly no disallowance u/s. 40(a)(ia) of the Act could operate in that scenario. The said proviso though inserted by the Finance Act 2012 w.e.f 1-4-2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT]. Thus we deem it fit and app .....

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- ITA No.216 & 327/Kol /2016 - Dated:- 26-8-2016 - Shri N.V.Vasudevan, Judicial Member and Shri Waseem Ahmed, Accountant Member For The Assessee Shri S. Jhajharia and Shri Sujoy Sen, AR For The Respondent : Shri Debashis Lahari, JCIT-SR-DR ORDER PER Waseem Ahmed, Accountant Member:- The cross-appeals have been filed by assessee as well as by the Revenue against the order of Commissioner of Income Tax (Appeals)-XXXVI, Kolkata dated 13.12.2012. Assessment was framed by JCIT, Range-56, Kolkata u .....

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l/2013. 3. Grounds raised by the assessee in its appeal are as under:- 1. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in confirming the arbitrary disallowance of the payment of commission of ₹ 8,29,500/- made to the sister concern M/s Macleod Fuels Pvt. Ltd., without properly considering and appreciating the facts and the detailed explanation furnished by the appellant assessee firm. The actions of the AO & the Ld. CIT(A) .....

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. 194C(1) of the Act. The decisions taken by both the Assessing Officer & the Ld. CIT(A) without properly considering and appreciating the facts and the explanation furnished by the assessee firm were wholly unwarranted, uncalled for and bad in law. 3. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in confirming the arbitrary disallowance u/s. 40(a)(ia) of the Act of the payment of port expenses of ₹ 45,50,580/- made to M/s B .....

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wrong and unjustified in confirming the arbitrary disallowance u/s. 40(a)(ia) of the Act of the payment of legal & professional charges of ₹ 30,000/- (inclusive of the payment of out-of-pocket expense of ₹ 14,000/- un a/c of conveyance etc.) made to the tax consultant Sri Subhas Mitra during the year itself on the alleged ground that the assessee firm had failed to deduct tax at source on the entire sum u/s. 194J of the Act. The decisions taken by both the AO & the Ld. CIT(A) .....

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debited to the P&L a/c) owing to the alleged advancement of interest-free loan to the close relatives and sister concerns unrelated to the assessee s business without establishing any nexus between the loans taken and given. The decisions taken by both the AO & the Ld. CIT(A) without properly considering and appreciating the facts and the explanation furnished by the assessee firm were wholly unwarranted, uncalled for and bad in law. 4. The first issue raised by the assessee in its appea .....

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most all the Directors are the partner in the assessee firm. The assessee claimed that MFPL assisted in the job of unloading and loading of imported coal and it also provides the advance information for the arrival of the ships from Australia. However, the AO observed that the assessee has already claimed separate expenses as Port Expenses amounting to ₹ 47,08,371. There was neither any agreement to pay commission between the assessee and MFPL nor any evidence that the MFPL has rendered an .....

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nd not for the loading and unloading charges. There is a written agreement in which supervision has been paid @ 150/- after TDS deduction. No license is required to render the supervisory services. Only gate pass is issued by the Authority concern which needs to be submitted back. TDS has been paid @ 2% because it is a works contract. The AO has not made any effort to verify the transactions. However, CIT(A) has upheld the decision of AO by observing that assessee and its relatives are having ma .....

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n applied by the AO for making the aforesaid disallowances. The expenses claimed by the assessee are genuine and accordingly these should be allowed for deduction. On the other hand the ld. DR relied on the order of Authorities Below. 8. We have heard the rival parties and perused the materials available on record. At the outset we find that the nature of the services rendered by the MFPL has not been justified by the ld. AR. The AO never raised the issue that it was made to the sister concern t .....

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m for deduction of commission payment, the Tribunal heavily relied on the factor that there was nothing to suggest that the recipient of such commission payment had rendered any services to the assessee. The Tribunal noted that the onus was on the assessee, claiming such deduction, to establish that such payments were made for services rendered. In view of the above conclusion, we do not see any scope of entertaining such question. In the absence of the specific services rendered, we find no rea .....

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e assessee. The assessee preferred an appeal to Ld.CIT(A) who upheld the decision of AO by observing that even though there is no any agreement but the payments were made for hiring of trucks. So the provision of Sec 194C is applicable. Being aggrieved, by the order of ld. CIT(A) assessee came in second appeal before us. 11. Before us Ld. AR for the assessee requested the Bench to restore the matter to the AO for verification whether the payee has included the receipt in his income tax return. O .....

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cordingly no disallowance u/s. 40(a)(ia) of the Act could operate in that scenario. The said proviso though inserted by the Finance Act 2012 w.e.f 1-4-2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) wherein the question raised before the court and the decision rendered thereon is reproduced herein below for the sake of clarity:- Question: Whether the s .....

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remained untaxed due to tax withholding lapses by the assessee. Hence, section 40(a)(ia) is not a penalty provision for tax withholding lapse but it is a provision introduced to compensate any loss to the revenue in cases where deductor hasn t deducted TDS an amount paid to deductee and, in turn, deductee also hasn t offered to tax income embedded in such amount The penalty for tax withholding lapse per se is separately provided under section 271C and, therefore, section 40(a)(i) isn t attracte .....

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ad not specifically stated that proviso is retrospective in nature. The High Court affirmed the ratio laid down by the Agra Tribunal and held that said provisos is declaratory and curative in nature and ha retrospective effect from 1st April, 2005. Respectfully following the aforesaid decision of the Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd., (supra) we deem it fit and appropriate in the interest of natural justice and fair play to set aside this issue to the .....

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payment of port expenses made by AO by disallowing a sum of RS. 45,50,580.00 paid to M/s Bhatia International Ltd on account of non deduction of TDS. 14. AO has disallowed the Port expenses paid to M/s Bhatia International due to non deduction of TDS. The assessee claimed that the payment made under the head Port Expenses including unloading of the material, stevedoring etc. are actually the part of purchase. However the AO disregarded the claim of the assessee by holding that these expenses ar .....

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icable. However the ld. CIT(A) disregarded the claim of the assessee by observing as under:- 7. Ground No. 6: In such respect, the appellant has contended that such sum is mere reimbursement of the expenses of Bhatia International Ltd., on the basis of Debit Note raised by MM/s Orissa Stevedores Ltd., In such respect, the appellant has further contended that M/s Orissa Stevedores Ltd, who are the ultimate service provider to Bhatia International Ltd., have deducted the TDs on such sum and the su .....

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s disallowable u/s. 40(a)(ia) of Income Tax Act. However, Shipping (supra), application of which is stayed by Hon ble High Court of A.P. Hence, appeal on this ground is dismissed. Being aggrieved by the order of ld. CIT(A) assessee came in second appeal before us. 16. The ld. AR before us submitted that these are the reimbursement of the expenses. So these expenses are out of the purview of TDS provisions. The ld. AR also alternatively submitted that the matter can be restored to the AO for veri .....

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ely submitted that the matter can be restored to the AO for verification whether the receipts have been included in the books of the company. We find that the AO has disallowed the same for the violation of TDS provisions. So in the interest of the justice we are inclined to restore the matter to the AO for fresh verification in terms of the order of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) (Supra). Respectfully follo .....

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owance u/s. 40(a)(ia) of the Act shall not be made in the hands of assessee. Accordingly, assessee s ground is allowed for statistical purposes. 18. Coming to next issue is that Ld. CIT(A) erred in disallowing the professional charges paid to Subash Mitra amounting to ₹ 30,000/- out of which ₹ 10,000/- were out of pocket expenses on account of non deduction of TDS. 19. At the outset, we find that Ld.CIT(A) upheld the action of AO by observing that the contention of assessee regarding .....

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e in the interest of natural justice and fair play to set aside this issue to the file of AO to decide the issue afresh in the light of the aforesaid judgment. Accordingly, we direct the AO to verify whether the payees have included the subject-mentioned receipts in their respective returns and paid taxes thereon or not. If that is so, then disallowance u/s. 40(a)(ia) of the Act shall not be made in the hands of assessee. Accordingly, assessee s ground is allowed for statistical purposes. 20. Co .....

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O has disallowed the interest expenses claimed by the assessee amounting to ₹ 20,56,654/- on proportionate basis. 22. Aggrieved, assessee preferred an appeal to ld. CIT(A) who has partly allowed the relief to the assessee by observing as under:- 5.1 In such respect, I find that the appellant had borrowed substantial amount of loan and had paid interest but the appellant had advanced interest free loan and no interest was charged, hence, the AO in its order after taking all the details all .....

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g also filed detailed working of the interest worked out and the AO has pointed out that on basis of such working that interest in such respect works out only to ₹ 2,36,663/- and hence the disallowance cannot be beyond the said sum of ₹ 2,36,663/-. Apart from the same it has contended the nexus of interest-bearing funds has not been established by the AO that the interest free fund so given and hence the disallowance in such respect was not justified following number of judgments inc .....

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appellant s contention that such sum has given interest free to related concerns have been given interest free fund of the appellant on a perusal of the Audited Accounts as on 31.3.2009, it was observed that the appellant had current liability to an extent of ₹ 8,70,80,084/- out of which advances from parties were only ₹ 1,15,03,656/- and the balances were sundry creditors. Further, it was observed that the appellant had inventory of ₹ 6,15,39,717/- and debtors of ₹ 1,22 .....

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s restricted to ₹ 2,63,663/- . Being aggrieved by the order of ld. CIT(A) assessee came in second appeal before us. 23. Before us ld. AR filed the breakup of interest amount which is placed on page 49 of the paper book. The ld. AR submitted that the disallowance interest can be considered only on the amount of interest paid to the bank for an amount of ₹ 9,19,547/- only. On the other hand, ld. DR vehemently supported the order of the lower authorities. 24. We have heard the rival par .....

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instant case the AO has disallowed the expenses of interest on the ground that the loan bearing fund has been diverted and interest on the same has been claimed by the assessee. From the above amount of interest the interest can be considered for the disallowance only for ₹ 16,93,807.00 (9,19,547.00 plus 7,74,260.00) as the question of diversion of fund on the interest paid on car loan, sales tax, LC credit does not arise. The ld. AR before us submitted to consider the interest amount of .....

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itional evidence at the time of appellate proceedings in contravention of Rule 46A n restricting the addition of ₹ 20,56,564 to ₹ 2,36,663 on account of disallowance of interest u/s 36(1)(iii) wherein documents relating to Chiva Investment Pvt. Ltd. and Swati Mining P t. Ltd. were accepted. 2. That on the facts and in the circumstances of the case the L d CIT(A)- XXXVI, Kolkata s order is perverse insofar as the restriction of addition of ₹ 20,56,564 to ₹ 2,36,663/- on ac .....

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the merits of the assessment order vis-à-vis facts of the case and the case laws referred therein. 4. That the Appellant craves leave to add, alter/or amend any of the grounds of appeal during the course of hearing. 26. First issue raised by Revenue in ground no. 1 & 2 is that Ld. CIT(A) erred in admitting the additional evidence at the time of appellate proceedings in contravention of Rule 46A of the IT Rules u/s 36(1)(iii) We have already discussed and allowed in part the aforesaid .....

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ock of raw materials and finished goods at ₹ 6,15,39,717/-. The AO during assessment proceedings observed that the closing stock reported to the bank was of ₹ 6,71,55,000/-. Therefore, there was a mismatch in the quantity and the value of closing stock furnished to the bank for ₹ 56,15,283/- which was added by AO to the total income of assessee. 29. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO by observing as under:- 8. Ground No .....

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rrent value of stock and hence the difference in value as shown in the Audited Accounts and in the stock statement filed with the bank. I find strength in the argument of the appellant and it was also observed the valuation of the stock is on cost basis and such method has not been changed since earlier years. Hence the addition in such respect cannot be sustained. Hence, addition on account of undervaluation of stock of ₹ 56,15,283/- is deleted. Being aggrieved by this order of Ld. CIT(A) .....

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ddhi Steel And Tubes (P) Ltd. (2014) 22 taxmann. 148 (Guj), wherein the head-note reproduced below:- Income from undisclosed sources u/s 69B-Amount of stock not fully disclosed in books-Addition-Assessee engaged in business of manufacturing filed return and case was selected for scrutiny-AO noticed that closing stock in books was less than stock shown in bank for securing cash credit-Assessee submitted that stock statement of bank was on estimated and inflated figures for securing higher credit .....

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