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2017 (4) TMI 823 - ITAT AHMEDABAD

2017 (4) TMI 823 - ITAT AHMEDABAD - TMI - Disallowance u/s 14A - Held that:- 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 [2014 (3) TMI 856 - GUJARAT HIGH COURT] as 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 .....

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f 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) 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 .....

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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 of ₹ 20,000/- which has been exceeded by the assessee. In view of this finding of CIT(A), we do not see any reason to interfere in it. - Decided against as .....

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40,543/- which was added by the AO with the aid of section 14A of the Income Tax Act, 1961. 3. Brief facts of the case are that the assessee-company has filed its return of income on 25.1.2010 declaring total income at ₹ 2,63,31,960/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has made investment to the tune of ₹ 6.50 crores .....

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e was that it has not earned any income which is exempt in nature, therefore, no disallowance under section 14A can be made. This plea has been specifically raised before the ld.CIT(A), and it is discernible from written submissions of the assessee reproduced by the ld.CIT(A) on page no.6 of the impugned order. Submission made in sub-para 1 to this aspect reads as under: 1. The perusal of the P&L account would also reveal that the appellant company has not earned any income which is exempt i .....

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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 .....

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pter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not ijnake any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision o .....

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for diverting the same to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no application." 5. We do not find any question of law arising, Tax Appeal is herefore dismissed. 6. Respectfully following the judgment of the Hon ble High Court, we are of the view that the CIT(A) is not justified in confir .....

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ed in subsequent year be excluded from the taxability. 8. Brief facts of the case are that the AO received an information from annual information wing (AIR) exhibiting the fact that the assessee has earned interest income of ₹ 9,15,925/-. The assessee has shown interest 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 confr .....

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ing 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 2010-11. In support of his contenti .....

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pon the order of the ITAT in case of Perfect Equipments Vs. DCIT, 85 ITD 50 (Ahd). On strength of these decisions, he contended that interest income should not be suffered tax twice i.e. 2009-10 and again in 2010-11. 10. On the other hand, the ld.DR relied upon the order of the AO. He pointed out that before the AO, the assessee did not raise this alternative contention. It was raised for the first time before the ld.CIT(A). He also contended that at this stage from the record, it is not discern .....

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r where income was not generated. Payment of taxes in a particular year is not by choice of the assessee, rather it is by operation of law. Neither the rate of payment of tax nor offering of any income in a particular year can absolve assessee from payment of tax by operation of law. Otherwise, it will be discretion of an assessee to offer an income in a particular year. For example, an assessee might have huge losses in a particular year, and he would like to shift the taxable income to that ye .....

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urt 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 cla .....

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t year 2010-11 is not open before the Tribunal. It is for the assessee to challenge any inclusion of the interest income in that year. That proceedings will be an independent proceedings. On the other hand, the contention of the assessee is that Tribunal has vast power. It can give direction to the AO for taking up the issue in next assessment year and exclude it from the taxable income. For buttressing this contention, order of the ITAT in the case of Perfect Equipments Vs. DCIT (supra) has bee .....

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roposition that the Tribunal by virtue of the powers vested upon it under the provisions of section 254(1) for disposal of an appeal may pass such orders thereon as it thinks fit. The Tribunal would obviously pass the orders which have a bearing on the subject-matter of appeal and cannot possibly record finding or direction on incidental issues which are not connected with the subject-matter of appeal. The various provisions enacted by the Legislature in Chapter XIV of the Income-tax Act, 1961 v .....

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ther than the assessment year under appeal, there was obviously no occasion for the Legislature to include various sections in Chapter XIV for lifting the bar of time limitation to initiate proceedings for assessment in consequence of such directions or findings. The only limitation on the powers of the Tribunal to give directions or finding in relation to another assessment year would be that these are necessary for the disposal of appeal and are not merely incidental. 8. With regard to section .....

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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 limi .....

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understand as to why a similar finding or direction in respect of deduction of any expenditure relating to other assessment year cannot be given by the Tribunal. It is an admitted position that such finding or direction, with respect to income or expenditure would be inextricably linked with the subject-matter of appeal and would be necessary for the disposal of the appeal. It may further be noted that insofar as finding or direction in respect of deduction of claim for any other assessment year .....

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d decision has been rendered in the context of the second proviso to section 34(3) of the Indian Income-tax Act, 1922. While construing the expressions "finding" and "direction" in the second proviso to section 34(3), the Supreme Court held that a finding could only be that which was necessary for the disposal of an appeal in respect of an Assessment Year of a particular year. Even though the relevant provisions for lifting the bar of time limitation for giving effect to the .....

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the Id. D.R. to which reference has been made above. 10. We may 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 cla .....

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3 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 such an alternative contention has been made even at the assessment stage by the assessee as evident from the assessee's letter dated 21-12-1994 placed in the paper book at page 45. The revenue authorities have however disallowed the claim o .....

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debit notes have been received in Assessment Year 1991-92. For resolving the entire issue it is apparently necessary to record a finding as to which assessment year the commission relates. Since we hold the view that debit notes have been received in Assessment Year 1991-92 and there is no evidence that any dispute or controversy has been raised by the assessee, the commission in questions has fallen due in Assessment Year 1991-92 and no such commission is deductible for Assessment Year 1992-93. .....

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.year 1992-93 and ultimately it revealed that it was to be claimed Asstt.Year 1991-92. The assessee has raised alternative plea before the AO and contended that in case it is not admissible in Asstt.Year 1992-93, then it would be allowed in the Asstt.Year 1991-92. The Tribunal has considered position of law on this aspect and held that finding can be recorded for permitting the assessee to claim an expenditure which was related to some other year, than the year in which it was claimed and disput .....

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ffered 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 whic .....

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nditure, because it relates to electrical fittings and allow depreciation on this amount. 16. The ld.counsel for the assessee contended that without giving any notice to the assessee, the ld.CIT(A) has changed the character of the addition made by the AO who failed to record any findings as to why it to be considered as capital assets. The ld.DR on the other hand, relied upon the order of the ld.CIT(A). 17. We have duly considered rival contentions and gone through the record carefully. The AO h .....

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the above, the assessee was asked to show cause why the above amount should not be disallowed. .In response, the assessee vide submission dtd. 10/10/2011 submitted as under: "4) The auditor in his report in form no. 3CD Annexure H has observed that no tax has been deducted at source. Following statement gives the details of payments made without deduction of tax at source: Sr No. Name of Party Nature of work Amount (Rs.) Reasons for non deduction of Tax at source 1 Dalkin Air conditioning .....

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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) h .....

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