TMI Blog2015 (10) TMI 2703X X X X Extracts X X X X X X X X Extracts X X X X ..... not brush aside the reasoning or findings recorded by the primary authority. In the instant case, the Ld. CIT(A) has not provided reasons in the impugned order, we left with no other alternative but to set aside the impugned order and remand the matter to CIT(A) with a direction to decide the issue afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee. in the assessment year 2007-08, on similar set of facts, the CIT(A) has confirmed the disallowance under section 80IB amounting to ₹ 26,41,716/- in respect of Noida unit. In the assessment year 2007-08, while deciding a similar issue the CIT(A) has not made any reference to the order passed by his predecessor in assessee’s case for assessment year 2006-07. Thus remand the matter back to the CIT(A) for fresh a decision Disallowance u/s 36(l)(iii) on alleged interest free advances to various party - Held that:- This issue needs to be verified and decided at the level of the Assessing officer. The assessee is free to produce the recent decision of the Hon'ble Punjab & Haryana High Court on this issue. Considering the entire facts and circumstances of the present case, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 14-10-2015 - SHRI H.L.KARWA, HON'BLE VICE PRESIDENT MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER Appellant By : Sh. Subhash Aggarwal Respondent By : Sh. D. S. Sidhu ORDER PER H.L.KARWA, VP The appeal by the Revenue and Cross Objection by the assessee for the assessment year 2006-07 and Cross appeals by the Assessee and Revenue for assessment year 2007-08 were heard together and are being disposed of by this common order for the sake of convenience. 2. Firstly, we will take ITA No. 714/Chd/2011 for assessment year assessment year 2006-07. This appeal has been filed by the Revenue against the order of CIT-II, Ludhiana dated 27.4.2011. Ground No. 1 to 3 of the appeal read as under:- 1. That the Ld. CIT(A) has erred in law and on facts in allowing deduction u/s 80IB by holding the assessee unit to be Small Scale Industrial Unit by simply relying on the submissions of the assessee and by not giving any independent findings. 2. That the Ld, C1T(A) has erred in law and on facts in allowing deduction u/s 80IB by holding the assessee unit to be Small Scale Industrial Unit and by not giving any finding as to why some machineries have been exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit u/s 80IB of the Act. The Assessing officer categorically stated that the assessee was manufacturing an item listed in the Eleventh Schedule of the Act. Consequently, the deduction u/s 80IB of the Act claimed by the assessee on Noida unit was disallowed. 4. Aggrieved by the order of the Assessing officer, the assessee carried the matter in appeal before the CIT(A) and the Ld. CIT(A) allowed the claim of the assessee observing as under:- 5.3 I have gone through the submissions case laws cited by the appellant counsel hold that the Assessing officer was not justified in allowing deduction u/s 80IB of the Income Tax Act. The appellant succeeds on ground No.2 5. We have heard the rival submissions and have also perused the materials available on record. At the very outset, the we may observe here that the order passed by CIT(A) is cryptic and non-speaking in view of the provisions of section 250(6) of the Income-tax Act, 1961, therefore, the order is not tenable. Section 250(6) of the Act reads as under:- 250 (6) The order of the [Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings back to the Commissioner of Income-tax, Central- II, Mumbai, for hearing and consideration afresh on the merits. In the above decision, the Hon'ble Bombay High Court has categorically held that appellate authority is enjoined and it is incumbent upon it to appreciate the evidence consider the reasoning of the primary authority and assign its own reasons as to why it disagrees with the reasons and findings of the primary authority. Unless adequate reasons are given, merely because it is an appellate authority, it cannot brush aside the reasoning or findings recorded by the primary authority. In the instant case, the Ld. CIT(A) has not provided reasons in the impugned order, we left with no other alternative but to set aside the impugned order and remand the matter to CIT(A) with a direction to decide the issue afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee. 6. We may observe here that in the assessment year 2007-08, on similar set of facts, the CIT(A) has confirmed the disallowance under section 80IB amounting to ₹ 26,41,716/- in respect of Noida unit. In the assessment year 2007-08, while deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance on job charges amounting to ₹ 12,16,332/- observing as under:- I have perused the submission of the appellant and agree with the appellant and hold that the appellant is entitled to deduction u/s 80IC on income earned as job charges. The appellant therefore, succeeds on ground No.3, 4, 5. On a perusal of the impugned findings given by the CIT(A) in respect of both the issues, we held that the Ld. CIT(A) has passed a non-speaking order. In view of our findings given in respect of ground Nos. 1 to 3 of the instant appeal, we set aside the findings of CIT(A) on both these issues. The detailed findings given in respect of ground Nos. 1 to 3 (supra) shall apply with equal force also to these grounds. It is also relevant to observe here that as regards the disallowance of 10% made by the Assessing officer on deduction u/s 80IC of the Act claimed by the assessee at Thaliwal unit, the CIT(A) has confirmed the disallowance in assessment year 2007-08. However, in this year the CIT(A) has allowed the claim of the assessee. The facts are similar and there is no consistency in the findings of CIT(A). In fact, on similar issue, the appellate authority below has given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leged interest free advances to Mrs. Rajni Bector, M/s Cremica Industries P. Ltd., M/s Bector Food P. Ltd., M/s Cremica Foods Limited, M/s Dharamvir Sons, M/s E,B.I. Food Coating Ltd and M/s Cremica Foods Limited. The Assessing officer disallowed the impugned amount relying on the judgement of Hon'ble Jurisdictional High Court in the case of Abhishek Industries v CIT reported in 286 ITR 1 (P H). Te assessee claimed that it has declared an income of ₹ 1,54,70,605/- besides claim of depreciation of ₹ 2,11,45,809/- . The assessee further submitted that share capital of the company is at ₹ 1,49,85,000/- and Reserves Surplus amount to ₹ 12,32,75,800/- and the company had enough funds of its own to give the advances to the parties. Shri Subhash Aggarwal, Ld. Counsel for the assessee submitted that in view of the recent decision of Hon'ble Jurisdictional High Court in the case of Bright Enterprises Pvt. Ltd in ITA No. 224 of 2013 dated 24.7.2015, the decision rendered in the case of Abhishek Industries Ltd Vs. CIT (supra) is not applicable to the facts of the present case. In our considered view, this issue needs to be verified and decided at the level o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. It is observed that the CIT(A) has passed the order for assessment year 2006-07 on 27.4.2011 and for assessment year 2007-08, on 11.2.2013. In the impugned order, the Ld. CIT(A) has made no reference to the order of his predecessor dated 27.4.2011 passed in assessee s case. Both the decisions are contrary to each other, particularly when it is claimed that the facts are similar. Since we have remanded the matter for the assessment year 2006-07 to the CIT(A) for a fresh adjudication, and therefore, we think it appropriate to set aside the order of CIT(A) on the above issue and remand the same to the CIT(A) for a fresh decision in accordance with law after affording due and reasonable opportunity of being heard to the assessee. 19. Ground No.3 of the appeal reads as under:- 3. That the learned CIT(A)-II has erred in confirming the disallowance of prior period expenses of ₹ 1,15,595/- ignoring the fact that the liability to pay these expenses crystallized only in this year. 20. The Assessing officer observed that the assessee had debited expenses of earlier years to the profit and loss account. The details of these expenses are given in para 10 of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of maintaining accounts on the mercantile basis. In each case where the accounts are maintained on the mercantile basis it has to be found in respect of any claim, whether such liability was crystallized and quantified during the previous year so as to be required to be adjusted in the books of account of that previous year. If any liability, though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous years it cannot be disallowed as deduction merely on the basis the accounts are maintained on mercantile basis and that it related to a transaction of the previous year. The true profits and gains of a previous year are required to be computed for the purpose of determining tax liability. The basis of taxing income is accrual of income as well as actual receipt. If for want of necessary material crystallizing the expenditure is not in existence in respect of which such income or expenses relate, the mercantile system does not call for adjustment in the books of account on estimate basis. It is actually known income or expenses, the right to receive or the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing officer disallowed ₹ 4,71,880/- for the reasons stated in para 11 of the assessment order. 25. On appeal, the CIT(A) confirmed the disallowance and, hence, the assessee is in appeal before the Tribunal. 26. We have heard the rival submissions. Shri Subhash Aggrwal, Ld. Counsel for the assessee submitted that TDS on interest payment of ₹ 3,43,337/- was deposited by M/s Mrs. Bector Food Specialties Ltd. As regards other payments, Ld. Counsel for the assessee submitted that the authorities below have not correctly appreciated the facts of the case and also the submissions of the assessee in this regard. In the case of Hindustan Coca Cola Beverage P. Ltd [2007] 293 ITR 226 (SC) the Hon'ble Supreme court has held that where payee has already paid tax on the income in which there was short deduction of tax at source, recovery of short tax cannot be made once again from the tax on deductor. Shri Subhash Aggarwal, Ld. Counsel for the assessee also referred to a decision of Hon'ble Delhi Hon'ble High Court in the case of CIT-I Vs. Ansal Land Mark Township (P) Ltd in ITA 160 of 2015 and 161 of 2015 wherein the Hon'ble Delhi High Court vide its orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Goldman Sachs and M/s Golden Sachas had to make investment in M/s Mrs. Bector Food Specialties Ltd. According to Assessing officer these payments have nothing to do with transfer of business of the assessee to M/s Mrs. Bector Foods Specialties Ltd. Therefore, the Assessing officer held that the expenditure of ₹ 17,33,220/- claimed by the assessee was not wholly and exclusively incurred in connection with transfer of business of the assessee to M/s Mrs. Bector Foods Specialties Ltd. Consequently, the Assessing officer made the impugned disallowance. 30. On appeal, the CIT(A) confirmed the disallowance vide para 8.3, observing as under:- 8.3 I have carefully considered the appellant's submissions. The expenditure on account of payments made to M/s KPMG and M/s Ernest Young have been disallowed by the AO as the appellant has failed to produce any evidence in the form of bills from these concerns. Even during the course of appellate proceedings, no such bills were filed. The mere claim of the appellant that these expenses were on account of legal expenses for the purpose of business transfer does not justify the claim. The AO was fully justified in disallowing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of hearing of the appeal, the authorized representatives of both the parties agreed that this ground of appeal is consequential in nature. We hold accordingly. 34. In the result, the appeal is allowed partly for statistical purposes. ITA No. 459/Chd/2013 35. The only ground raised by the Revenue in this appeal reads as under:- That the learned CIT(A) has erred in law in deleting the addition made by the Assessing officer amounting to ₹ 34,31,320/- by disallowing the claim of the assessee u/s 80IC on the job work whereas income from job charges cannot be treated to have been derived by the undertaking from manufacturing or producing any article or thing not prohibited by 13th schedule 36. It is observed that we have decided a similar issue in Revenue s appeal in ITA No. 714/Chd/2011 (Ground No.5) for assessment year 2006-07. For the detailed reasons given therein, we have set aside the order of CIT(A) on similar issue and remanded the matter to CIT(A) for a fresh decision in accordance with law. The findings given therein shall apply to this ground of appeal also with equal force. Accordingly, this ground of appeal is allowed for statistical purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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