TaxTMI 
TaxTMI 
2016 (12) TMI 450
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.... and finished leather products had filed return of income for the impugned assessment year disclosing income of Rs. 1,66,39,750/-. During the course of assessment proceedings, it was noted by the ld. Assessing Officer that assessee had imported certain machinery which were claimed by it as Revenue outgo under the head spares & maintenance. These items comprised of band knife cutting/ splitting machine costing Rs. 8,94,726/- and counter molding machine costing Rs. 3,66,909/-. Assessing Officer was of the opinion that these machinery were capital assets. He disallowed its claim as spares and maintenance expenditure. Out of the aggregate value of Rs. 12,61,635/- he allowed depreciation of Rs. 1,89,245/ and made a net disallowance of Rs. 10,72,390/-. 6. Aggrieved, the assessee moved in appeal before ld. Commissioner of Income Tax (Appeals). Argument of the assessee was that the above mentioned items were replacement of old machinery. According to him, cost of replacement of old machinery with new machinery was a Revenue outgo. Ld. Commissioner of Income Tax (Appeals) however, did not accept this contention. He confirmed the order of the ld. Assessing Officer. According to him, band kn....
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....tic testing, automatic fault alarm, and indicate fault source and position on the screen, and it is was convenient for maintenance. (vi) Adopted environmental protection water cooling type refrigerating system, and ensured quick cooling speed and 20C refrigerating temperature. (vii) After moulding, the inner, rubber, piece and vamp were closely integrated without wrinkle, deformation and budge''. Thus according to him, these machinery items were not spares but each was a complete machine by itself. He thus upheld the order of the Assessing Officer. 7. Now, before us, ld. Authorised Representative strongly assailing the orders of the lower authorities submitted that cost of replacement of old machine could only be considered as Revenue outgo. 8. Per Contra, ld. Departmental Representative strongly supported the orders of the authorities below. 9. We have considered the rival contentions and perused the orders of the authorities below. The features of the machinery imported by the assessee from Italy has been captured by ld. Assessing Officer and these features have been reproduce by us at para 6 above. Though assessee states that these were replacement of old machines, it c....
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....isallowance was made without considering the claim of the assessee that it was used in its business. Reliance was placed on a certificate issued by one Shri. E.M. Ulaganathan, Chartered Engineer in this regard. 15. Per Contra, ld. Departmental Representative strongly supported the orders of the authorities below. 16. We have considered the rival contentions and perused the orders of lower authorities. Assessee itself has stated that machine imported from M/s.Turnver was not according to its specification. As per assessee, the balance amount was withheld by it due to fault in the machine supplied. No doubt, legal ownership by itself is not a fundamental requirement for a claim of depreciation. However, the machine if not used should be atleast ready to use. Assessee's own admission is that the machine was not in accordance with the agreed specification. In our opinion, assessee was not able to show that the machine was actually used by it or kept in readiness for use. Certificate from Shri. E.M. Ulaganathan, does not say that machine were ready for use. No record showing any trial run was produced by the assessee. In such circumstances, we are of the opinion that the claim was rig....
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....n that by virtue of Explanation 4 to Sec. 9(1)(i) read along with Explanation 2 to Sec. 195(1), brought into the Act by Finance Act, 2012 with retrospective effect from 01.04.1962, any payments received by a foreign entity from an Indian entity, if there was an indirect or remote business connection would attract tax in India. Assessee having not deducted tax on the above payments to the non-resident agents, ld. Assessing Officer applied section 40(a)(i) of the Act, and disallowed the sum of Rs. 99,79,376/-. 20. In its appeal before ld. Commissioner of Income Tax (Appeals), argument of the assessee was that foreign agents were rendering marketing services outside India and they had no business connection in India. According to the assessee, it was not obliged to deduct tax on payments to the non residents agents. However, ld. Commissioner of Income Tax (Appeals) was not appreciative of this contention. According to him, assessee was not directly dealing with these foreign agents. These Foreign agents were working for local agents, and it was the local agents who were working for the assessee. According to ld. Commissioner of Income Tax (Appeals) assessee was obliged to deduct tax ....
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....assessee to the non-resident agents were not chargeable to tax in India in the hands of those non-resident agents. When no income is generated to the non-residents within India, those nonresident agents are not liable for any levy of income tax on account of the commissions they earned out of the services rendered outside India for the assessee. TDS arises only where there is a corresponding tax liability in the hands of the payee''. For assessment year 2010-2011, also commission paid by the assessee to the foreign agents were through local agents. There is no case for the Revenue that assessee had failed to deduct tax on commission paid to local agents. Fact situation being same we are of the opinion that decision of the Tribunal for the assessment year 2010- 2011 would apply here also. Commission paid by the assessee could not have been disallowed for want of deduction of tax at source. We delete the disallowance. Ground No.1(a) of the assessee stands allowed. 24. Vide ground No.1b, grievance raised by the assessee is on disallowance of interest Rs. 4,80,000 paid to close relatives of the assessee. 25. Facts apropos are that certain loans creditors appearing in its books of t....
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....that he was not pressing this ground. Hence ground No.1c is dismissed as not pressed. 32. Vide Ground No.1d, grievance of the assessee is on disallowance of depreciation on machinery purchased from M/s. Turner. 33. This issue is similar to ground Nos. 3 to 5 by the assessee in its appeal for the assessment year 2009-2010 in ITA No.1688/Mds/2016. At para 16 above, we have held that the disallowance was rightly made by the ld. Assessing Officer. Fact situation remaining the same, we do not find any reason to interfere with the orders of the lower authorities. Ground No.1d of the assessee stands dismissed. 34. Vide ground No.1e, grievance of the assessee is that foreign travel expenditure of Rs. 1,25,000/- was disallowed 35. Ld. Counsel for the assessee submitted that he was not pressing this ground. Hence ground No.1e is dismissed as not pressed. 36. Vide ground No.1f, grievance of the assessee is on a disallowance of interest of Rs. 1,20,000/- u/s.36(1)(iii) of the Act. 37. Facts apropos are that assessee had paid a sum of Rs. 10,00,000/- to M/s. MBS Arabic College on 25.06.2010. which was received back on 01.12.2010. However, assessee had not charged any interest for the amou....
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....owed. 41. Vide ground No.1g, grievance of the assessee is on disallowance of travel expenditure of Rs. 3,58,275/-, for non deduction of tax at source. 42. Facts apropos are that assessee had paid van charges of Rs. 3,58,275/- to one Shri. E. Shammel Ahmed, for transporting its workers from Arcot to its factory at Periamet. Explanation of the assessee was that the van owned by Shri. E. Shammel Ahmed, was used for transporting its workers and Sec. 194C of the Act would not be attracted to the payments. However, Assessing Officer was of the opinion that payments were covered by Sec. 194C of the Act. Assessee having not deducted TDS, Assessing Officer applied Sec 40(a) (ia) of the Act and made a disallowance of Rs. 3,58,275/-. This disallowance was confirmed by the ld. Commissioner of Income Tax (Appeals) 43. Now before us, ld. Authorised Representative, strongly assailing the orders of the lower authorities submitted that payments were effected on behalf of the employees. Assessee was only a conduit for paying amount, which otherwise was payable by the employees who used the van. According to him, Sec.194C of the Act could not be applied for such payments. 44. Per Contra, ld. Depa....
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....ders of the authorities below. 50. We have considered the rival contentions and perused the orders of the authorities. Claim of the assessee is that property on which property tax was paid was owned by a partner of the assessee firm and was used by assessee firm. However, ld. Assessing Officer has given a clear finding that there were no branches or establishment for the assessee in Bangalore, after verifying its Audit report in form 3CD. We, are therefore of the opinion that assessee could not show its use of the property on which property tax was paid. In our opinion , the disallowance was correctly made. Ground No.1h of the assessee stands dismissed. 51. Vide ground No.1i, grievance of the assessee is on disallowance of Rs. 29,68,236/-. 52. Ld. Assessing Officer noted during the course of assessment proceedings, that assessee had claimed the following expenses as Revenue outgo. Particulars Amount claimed Rs. Sony Cameras 75,000 Borewell 36,681 Effluent Treatment plant 4,02,000 Road expenses 3,89,820 Conference Hall expenses 5,59,243 Machinery repairs 18,85,281 Total 33,48,025/- Assessing Officer put the assessee on notice as to how the above expenditu....
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.... considered it as a capital outgo. 55. Per Contra, ld. Departmental Representative strongly supported the orders of the authorities below. 56. We have considered the rival contentions and perused the orders of the authorities. In so far as expenditure incurred for Sony camera and one digital recorder are concerned, employees of the assessee had acknowledged receipts of the items from assessee. Claim of the assessee is that this was a gesture of staff welfare and incurred to keep the employees motivated. In our opinion this expenditure cannot be treated as a non business outgo. Sony cameras and digital recorder having been given to its employees, could never form part of the assets of the assessee. Hence disallowance of the cost of Sony camera and digital recorded were not warranted. 57. Coming to the borewell expenditure, claim of the ld. Authorised Representative is that there was no water in the borewell, hence, it is a loss. What we find is that ld. Assessing Officer has placed specific reliance on a bill issued by M/s. Andal Motors for fixing a motor and pump to the borewell. If there is no water in the borewell, then there is no question of fixing a motor. Thus, claim of th....
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.... to Mikro Zone Technologies 15.07.2010 Bill No.86-12V/135 AH Battery 17,437 15.07.2010 Bill No.87 5KVA online UPS & 1 No.12v /17AH Battery 2 Nos. 48,464 5 Payment made to S.S. Associates- 23.09.2010 Bill No.279 Refrigerated Air Dirs 3 Nos. 1,03,646 6 Ratha Fan House B No.98528 Racold water heater 14,280 7 02.04.2010 Machinery Repair Expenses Bill No.002, Tumbe Drier Thermetic Flued Line Material 61,740 8 15.04.2010 G.K. Systems Vellore B. No.23691015 - 600 VA Kevin Home UPS 1 No. & 100 AH 12 V Exide battery 1 No. (TMAJ) personal in nature (machinery repairs expenditure) 14,000 9 11.05.2010 Gopi Engineering works - Bill no. 05 Reversible settings 61,739 10 12.07.2010 New Tech Machines Bill No.34, Air com spray gungs 1,04,000 11 18.07.2010 S.V. Industries Bangalore Bill No.76, Hydraulic Hand pallet Truck 2 No 26,520 12 27.08.2010 Kelcom Power Systems B No.13191027 100 AH Exide battery 2 13,000 13 30.09.2010 Industrial Blowers Bill No.465, M/s. Fabricated blower 41,600 14 31.10.2010 Rathna Fan House Purchase of fans 21,440 15 25.11.2010 Vinar Systems Pvt. Ltd Bill No.258, Conveyor over heads- Drive unit ....