TMI Blog2018 (8) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... ation then it was an allowable expenditure. - Decided in favor of assessee. - ITA No. 2683/Del/2016 And CO No. 51/Del/2018 - - - Dated:- 31-7-2018 - Sh. N. K. Saini, AM And Smt. Suchitra Kamble, JM For The Assessee : Sh. Kaushlendra Tiwari, Sr. DR For The Revenue : Sh. Akhilesh Kumar, Advocate ORDER Per N. K. Saini, AM: The appeal by the Department and the cross objection by the assessee are directed against the order dated 09.02.2016 of the learned CIT(A), Muzaffarnagar. In the Departmental appeal following grounds have been taken:- i. The ld. CIT(A) has erred in law as well as on fact by allowing the amount of ₹ 1,27,284/- out of disallowance of ₹ 12,36,720/- made u/s 43B ignoring the fact that it has been levied on account of Nonregistration with VAT Authorities which being mandated by law and an expenditure in infringement of law is not allowable u/s 43B. ii. The ld. CIT(A) has erred in law as well as on facts by deleting addition of ₹ 30,12,580/- made u/s 68 of the I.T. Act , 1961 as the assessee has failed to discharge his onus to prove the identity, genuineness and capacity of the creditors. iii. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal 20,00,000/- 2 Before High Court 50,00,000/- 3 Before Supreme Court 1,00,00,000/- It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case. 4. For this purpose, tax effect means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter referred to as disputed issues). Further, tax effect shall be tax including applicable surcharge and cess. However, the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed issues is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D. 7. In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Pr. Commissioner of Income-tax/ Commissioner of Income Tax shall specifically record that even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this Circular . Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits. 8. In the past, a number of instances have come to the notice of the Board, whereby an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A/ 12AA of the IT Act, 1961 etc., filing of appeal shall not be governed by the limits specified in para 3 above and decision to file appeals in such cases may be taken on merits of a particular case. 12. It is clarified that the monetary limit of ₹ 20 lakhs for filing appeals before the ITAT would apply equally to cross objections under section 253(4) of the Act. Cross objections below this monetary limit, already filed, should be pursued for dismissal as withdrawn/ not pressed. Filing of cross objections below the monetary limit may not be considered henceforth. Similarly, references to High Courts and SLPs/ appeals before Supreme Court below the monetary limit of ₹ 50 lakhs and ₹ 1 Crore respectively should be pursued for dismissal as withdrawn/ not pressed. References before High Court and SLPs/ appeals below these limits may not be considered henceforth. 13. This Circular will apply to SLPs/ appeals/ cross objections/ references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,720/- written off in details given on comparative expenses. The AO asked the assessee to give the documentary evidences of the same. In response the assessee submitted as under:- that the customers of the assessee company had deducted the work contract tax of ₹ 12,36,720/- , which is being claimed as expenses. The detai ls of WCT are being submi t ted alongwi th the specimen copy of WCT deduct ion. The detai ls are also veri f iable from the concerned part ies. It was further stated that the detai ls of the WCT were submi t ted by us in earl ier let ters dated 25.3.2013. In this connect ion, we are submi t t ing here wi th the complete charts of WCT deduct ions by the part ies in the various other States other than Ut tar Pradesh, where the assessee was not registered wi th the VAT Deppt t , and which could not be claimed by the assessee in his VAT assessments or could get the refund of the WCT decut ions. The copy of Specimen bi l ls, are also being submi t ted alongwi th the WCT charts . 9. The AO disallowed the claim of the assessee by observing that the assessee could not get the refund of the Works Contract Tax (WCT) deductions in the states other than Utt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the said expense of ₹ 12,36,720/- of WCT is an al lowable expense and may be al lowed. 11. It was further submitted that the disallowance made by the AO was also against the provisions contained in the VAT account. The assessee furnished the details of the Rajasthan VAT account to show that the provisions contained in the said Act and the similar other VAT Acts of other states. It was further submitted that the contractees in those states had deducted TDS erroneously and this deduction had become unwitting business expenses of the assessee which was allowable expenses and by considering the complexities of Works Contract Tax (WCT), an exemption method was launched in the case of contract, whose taxes were deducted under the WCT and they could opt for the scheme. It was contended that in Works Contract Taxation, the scheme of exemption fees was a mechanism provided for the collection of the Works Contract Tax from the contractor in such a way that causes minimum inconvenience to the contractor assesses and also to the department collecting the tax in computing and assessing the taxable figures. It was also contended that in the exemption fee method the following ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal value of the invoices were declared as income whereas the assessee has recevived only the remaining amount after the deduction of an amount of ₹ 12,36,720/- therefore, the said expenses were allowable expenditure related to the business of the assessee and the income against which had been declared by the assessee. 13. The learned CIT(A) after considering the submissions of the assessee observed that the assessee is based in U.P. whereas these WCT deductions had been made by the customers in various other states other than U.P. where the assessee is not registered with VAT department and therefore, could not claim the said deduction in its VAT assessments or could get the refund of those WCT deductions. He further observed that the assessee is in the business of manufacturing of steel structures for the telecom operators alongwith their installation/erection etc. and that whenever the assessee raises an invoice in the name of customer (telecom operator) against the installation/erection contract, the customer deducted WCT at the rates applicable and made the net payment to the assessee after the deduction of WCT. The customer deposited the WCT deducted with the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the assessee was engaged in the business of manufacturing of steel structures for the telecom operators and raised invoices in the name of the customers against the installation / erection contract, those customers deducted contract tax and made the net payments to the assessee. After such deduction, the amount deducted was deposited with the State Government on behalf of the assessee by the customers. In the instant case, there is no dispute that the liability crystallized during the year under consideration and the payments were made by the customers on behalf of the assessee during the year under consideration. The assessee had already credited the gross amount of invoices as turnover for sales in its profit loss account and also debited the amount which was deducted by the customers in the manufacturing / profit loss account. In our opinion, when the liability relating to the business of the assessee was crystallized and paid during the year under consideration then it was an allowable expenditure. In that view of the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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