TMI Blog2017 (4) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure should not be treated as capital expenditure. Similarly, the ld.CIT(A) himself has also not tallied with items purchased by the assessee whether these electrical fittings were meant for repairing work or they are related to some new products/items. Considering this aspect, we vacate the findings of the ld.CIT(A). The expenditure cannot be disallowed to the assessee, because it was not required to deduct TDS on the purchases. In case the AO has granted deprecation, then, he will withdraw depreciation and allow the expenditure as revenue expenditure. Thus, this ground of appeal is allowed in favour of assessee TDS u/s 194C - disallowance under section 40(a)(ia) - argument raised by the assessee that payment did not exceed ₹ 50,000/- and therefore, liability for TDS deduction does not arise - Held that:- .CIT(A) has considered this aspect and observed that the assessee was required to deduct TDS under section 194C where the limit is ₹ 20,000/-. Before us, the ld.counsel for the assessee failed to controvert this finding of the CIT(A). Similar argument was raised with regard to the payment made to Hemal Shah and Associates. The ld.CIT observed that limit was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. 5. According to the ld.counsel for the assessee, the issue in dispute is squarely covered in favour of the assessee by the decision of the Hon ble High Court rendered in the case of Correctech Energy reported in 372 ITR 97. The Hon ble High Court has observed that if no tax free income was earned by the assessee, then no expenses can be construed as incurred by the assessee, because plain reading of section 14A provides that if an assessee incurred expenditure in relation to earning of tax free income then such expenditure would not be allowed. The assessee did not earn tax free income, then where is the question of allocating expenditure. The observation of the Hon ble High Court in this regard reads as under: 4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest income of ₹ 3,07,914/-. The assessee has reproduced name and address of the parties, gross payments received as per TDS certificate, TDS amount and section under which TDS was deducted etc. When the assessee was confronted, then it could not give any explanation as to why this amount of ₹ 6,13,616/-was not offered for taxation. It took an alternative plea that that in case of interest alleged to have received from Sparsh Builders P.Ltd is concerned, it has been accounted in subsequent year. Thus, it has been offered in Asstt.Year 2010-11 and therefore, a direction be issued to the AO to exclude this amount from taxation in Asstt.Year 2011-12. The ld.CIT(A) has observed that the assessee has been following mercantile system of accountancy. Interest income has been accrued in this year therefore, it ought to have been offered by the assessee for taxation in this year. The ld.CIT(A) has confirmed the addition made by the AO. 9. Before us, the ld.counsel for the assessee submitted that assessee is taxable at the same rate of tax in the Asstt.Year 2009-10 and 2010- 11. Even if this amount has suffered tax in A.Y.2009-10, then it should not be taxed in Asstt.Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee showing undue benefits is being extended by an assessee to such person for availing services or products. In that case, Hon ble Court has observed that the assessees are assessed at same rate of tax, and there cannot be any intention for avoidance of tax. Thus, facts are quite distinguishable. As far as Hon ble Calcutta High Court s decision is concerned, in that case the Tribunal has made observation that a particular item was not taxable in a particular year. It has not passed any direction that it should be allowed in the next year. The Tribunal has made observation that debit note received on 15.7.1984 could not be claimed in Asstt.Year 1985-86. According to the Hon ble High Court in completeness of the order, Tribunal has just made an observation. A perusal of the record would show that the interest income has accrued to the assessee in this year, and its taxable in this year. There is no dispute with regard to this proposition. Dispute relates to the issue whether the Tribunal can give direction for exclusion of interest income offered by the assessee in Asstt.Year 2010-11. According to the ld.DR, assessment year 2010-11 is not open before the Tribunal. It is for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not merely incidental. 8. With regard to section 153(3) and Explanations appended thereto, the Id. D.R. put forth the contention that these provisions in Chapter XIV of the Income-tax Act are intended for bringing to tax escaped income for any assessment year and could not be pressed into service for the purpose of finding or direction by the Tribunal in respect of claim of deductions for Assessment Years other than the year under appeal before the Tribunal. We feel that the argument of the Id. D.R. suffers from an inherent infirmity inasmuch as it proceeds on the footing that the powers of the Tribunal to record finding or direction in respect of other assessment year are derived from the relevant provisions of Chapter XIV of the Act. The ambit of appellate juriisdiction of the Tribunal is governed by the provisions contained under section 254( 1) and not by the provisions in Chapter XIV of the Act. As we have already indicated hereinbefore section 153(3) as well as the two Explanations appended thereunder lift the bar of time limitation for giving effect to the finding or direction contained in the order of the Tribunal regarding bringing to tax the escaped income. The sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now consider the facts of the instant case in the context of the aforementioned legal position. The basic issue which arises before us is regarding the year in which the aforementioned commission of ₹ 1,91,611 is liable to be deducted. The admitted facts are that the debit notes have been issued by the selling agent and received by the assessee during the period relevant for Assessment Year 1991-92 whereas the assessee has claimed deduction for the commission for Assessment Year 1992-93 which is the subject-matter of the present appeal on the ground that claim has been settled during this year. No evidence whatsoever at any stage has however been produced in support of the claim that there were any differences and such differences were settled in the present assessment year. In these circumstances the conclusion of the Id. CIT(A) that the amount of commission does not fall for deduction for the Assessment Year 1992-93 since the debit notes have been received in the earlier assessment year is liable to be upheld. 11. Regarding the alternative contention of the assessee that deduction may be allowed in the preceding Assessment Year 1991-92, it is relevant to note that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sstt.Year 1991-92. The Tribunal has decided the issue by observing alternative plea that claim was allowable in the Asstt.Year 1991-92 and not in the Asstt.Year 1992- 93. Considering this aspect, and on the strength of various authoritative judgments, we are of the view that interest income is taxable in the year 2009-10, and if the assessee has offered the same income for taxation for the Asstt.Year 2010-09, the appropriate action be taken by the ld.AO, in case an application is being moved by an assessee. We observe that same income should not suffer tax twice. Ld.AO shall take action in accordance with law. 14. For taking note of the grievance of the assessee in the next ground, we deem it appropriate to take note of brief facts first. The ld.AO has disallowed a sum of ₹ 7,19,385/- under section 40(a)(ia) of the Act. Out of which one amount relates to payment of ₹ 6,25,000/- to Harsha Electricals. This amount was disallowed by the AO for the reason that the assessee failed to make TDS deduction while making payment. On appeal, the ld.CIT(A) observed that since it was a payment for purchase of electrical items, the assessee was not supposed to deduct TDS. Thus in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50000 Expenditure being in the nature of advertisement did not attract TDS liability. 4 Harilal M Vyas Repairs Maintenance 50000 TDS of ₹ 1030/-has already been deducted and deposited to the credit of the government account. Copy of the challan is enclosed. The auditor has by mistake mentioned that no TDS has been made in respect of this payment. 18. On appeal, in principle, the ld.CIT(A) has concurred with the assessee that the TDS was not to be deducted on the payments made to Harsha Electricals, because it was for the purchase of electrical fittings, but ultimately, the ld.CIT(A) has considered it as capital expenditure and directed the AO to allow depreciation on it. 19. With the assistance of the ld.representatives, we have gone through the record. He disallowed claim of the assessee on account of non-deduction of TDS. Thus, the ld.CIT(A) has changed the colour of the dispute. The ld.CIT(A) thereafter did not confront the assessee as to why this expenditure should not be treated as capital expenditure. Similarly, the ld.CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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