TMI Blog2018 (12) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO and adjudicated on merits in accordance with law. This ground of appeal number 1 filed by the assessee is allowed for statistical purposes. Penalties and fines disallowance - Held that:- The detail of said penalties are placed in paper book at page no. 106 to 118. On Perusal of these details which are placed in paper book filed with tribunal, we have observed that these expenses are toward traffic challan, interest, tax etc and in all fairness to both the parties, the matter need to be set aside and restored to file of the AO who shall analysis each and every claim of these expenses as claimed by the assessee. The onus is on the assessee to place all details before the AO and If these expenses are found to be penal in nature and hit by explanation 1 to section 37(1), the same shall be disallowed by the AO in set aside proceedings but if the same are found to be compensatory in nature the same shall be allowed by the AO. The complete details are not furnished by the assessee and the assessee is directed to provide details with respect to each of these expenses claimed by the assessee with cogent evidences to substantiate that these payments are not penal in nature. Thus, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year when the said section is applicable. With the aforesaid observations, we are restoring this issue back to the file of the AO for fresh adjudication of the issue on merits in accordance with law. Claim of deduction u/s 80HHD - reserve has been utilized for purchase of fixed assets - Held that:- The onus is on the assessee to prove that the assessee is entitled for deduction u/s 80HHD of the 1961 Act and that it had met all the requirements of provisions of Section 80HHD and its case comes strictly within the four corners and parameters of the conditions as are stipulated under Section 80HHD of the 1961 Act. The onus is on the assessee to prove that the AO while framing assessment erred in adding back reserves to the tune of ₹ 1, 27, 79, 045/- during the impugned assessment year which reserved were created by the assessee in the financial year ended 31. 03. 2000 within provisions of Section 80HHD of the 1961 Act and the said reserve amount was utilised within time period as mandated u/s 80HHD for the purposes as are stipulated u/s 80HHD. With the aforesaid observations, we are restoring this issue back to the file of the AO for fresh adjudication of the issue on meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the grounds taken by the ld. predecessor CIT(A) in A. Y. 2005-06. The appellants submits that since then the assessment for A. Y. 2005-06 has been set-aside by the Hon'ble ITAT. The appellant further submits that, in any case, the disallowance is excessive. 2. Disallowance of ₹ 1, 56, 449/- termed as penalties and fine: i) The ld. CIT(A) erred in sustaining the disallowance of ₹ 1, 56, 449/-for the expenditure incurred and termed by the appellant as penalties and fine. ii) The appellant submits that these payments were not made for any infringement of law, and are only compensatory in nature. 3. Disallowance out of vehicle expenses : ₹ 90, 000/- i) The Id. CIT(A) erred in sustaining the disallowance of ₹ 90, 000/- incurred by the appellant on vehicle expenses, and for that relying on the grounds taken by the ld. predecessor CIT(A). ii) The ld. CIT(A) erred in failing to appreciate that part of car running expenses were recovered from the Directors. iii) He further erred in failing to appreciate that if at all the entire expenditure incurred by the appellant was for business purposes and fully allowable in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 31, 74, 810/-. ii) The appellant submits that the above claims are alternate claims and made without prejudice to the outcome in the pending assessments pursuant to the orders of the ITAT for earlier years. Your appellant craves leave to add to, alter, amend or delete all or any of the grounds of appeal on or before the date of hearing. 3. The brief facts of the case are that assessee is engaged in the business of hotel and flight kitchen. The assessee did not filed return of income within due date as prescribed u/s. 139(1) of the Act, or even within the time allowed u/s. 139(4) of the 1961 Act. A notice u/s. 148 of the 1961 Act was issued to the assessee by the AO on 18. 06. 2008 after recording the reasons . The assessee did not file return of income within period of 30 days allowed by the said notice issued by the AO u/s 148 of the 1961 Act. The assessee instead filed a letter dated 14. 07. 2008 stating that the assessee is compiling information from books of accounts from various units in order to file return of income and further time of three months were sought by the assessee for preparation and filing of return of income. However, even after lapse of thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese expenses were disallowed by the AO on the grounds that spouses/family members of Directors have also travelled along with Directors and it could not be proved that the spouses/family members of Director s visit / expenses were wholly and exclusively connected with the business of the assessee. The assessee has only given bald statement that in many business trips, presence of spouse is desirable. The AO rejected the contentions of the assessee as the assessee failed to discharge its onus to prove that the expenses were incurred wholly and exclusively for the purposes of its business and only bald statements were made without any evidences being placed on record. It was observed by the AO that even in domestic travelling, the assessee has booked expenses on trips by family members of the Directors for which no cogent explanation/evidence was given by the assessee to prove that these expenses were wholly and exclusively incurred for business of the assessee, which led to an addition of an aggregate amount of ₹ 3, 19, 386/- towards travelling expenses both foreign and domestic, out of total travelling expenses of ₹ 91, 36, 776/- claimed by the assessee in the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicated afresh by AO in pursuance to the directions of the tribunal vide assessment order dated 25. 02. 2014 u/s 143(3) read with Section 254 of the 1961 Act. The assessee has however not placed the said assessment order passed by the AO in pursuance to direction of the tribunal. 4. 4. The Ld. DR raised no objection to the restoration of this issue arising in the ground of appeal back to the file of AO for fresh adjudication 4. 5 After considering rival contentions and perusing the material on record, we are of the considered view that this issue of disallowance of Foreign Travelling Expenses and Domestic Travelling Expenses, aggregating to ₹ 3, 19, 386/- is to be restored back to the file of AO for fresh adjudication on merits in accordance with law and we restore this issue back to file of AO for fresh adjudication after considering the submissions of the assessee, as while passing appellate order, the learned CIT(A) has followed the appellate order passed by his predecessor for AY 2005-06 which itself was set aside by the tribunal. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details before the AO and If these expenses are found to be penal in nature and hit by explanation 1 to section 37(1), the same shall be disallowed by the AO in set aside proceedings but if the same are found to be compensatory in nature the same shall be allowed by the AO. The complete details are not furnished by the assessee and the assessee is directed to provide details with respect to each of these expenses claimed by the assessee with cogent evidences to substantiate that these payments are not penal in nature. Thus, we are restoring this issue back to the file of AO for fresh adjudication after considering the submissions of the assessee. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The relevant explanations/evidences submitted by the assessee in its defence shall be admitted by the AO and adjudicated on merits in accordance with law. This ground of appeal number 2 filed by the assessee is allowed for statistical purposes. We order accordingly. 6. Disallowance of Vehicle Expenses of ₹ 90, 000/-. The AO observed that the assessee has i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report stated that details of personal use of vehicles was not provided to them. Before assessing officer appellant contended that in terms of the ITAT order disallowance of an amount of ₹ 6, 600/- per directors should be adequate. Assessing Officer has categorically observed that the order relied upon by the appellant pertain to year 1990 and has no significance for the A. Y. under consideration. He has particularly argued that looking to the inflation and interest and costs over a period of 16 years disallowance of ₹ 30, 000/- per year per director is justified. I have perused the facts of the case. I find that 16 years back Hon'ble Tribunal had confirmed the disallowance of ₹ 6, 600/-. If we just take into account the cost inflation index, the disallowance made by the assessing officer would be a most reasonable figure. Consequently, the disallowance made by assessing officer is upheld and the ground of appeal is rejected. The facts are identical to the facts in A. Y. 2005-06. I am of the view that the family members are also using the cars of the appellant company and the disallowance made by the A. O. is reasonable. Addition is sustained. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly. 7. The next issue concerns itself with the expenses incurred for Pali Hill Bungalow owned by the assessee which were disallowed by the AO to the tune of ₹ 5 lacs on the grounds that part of the said Bungalow was used for residence of Directors and also perquisite value in the hands of the Directors as well expenses incurred by the assessee on behalf of the Directors was not yet determined, as reported by the Auditors in their audit report vide note number 8 . The AO observed that the assessee company has not quantified the expenses in respect to Pali Hill bungalow which were incurred for personal/non business in nature and the assessee has generally stated that these expense to be allowed keeping in view mind the contractual obligations of the assessee. The AO rejected the contentions of the assessee and observed that the auditors of the assessee company has stated that the perquisite entitlement of directors are yet to be fixed. The AO observed that total expenses on Repair and Maintenance of Pali Hill bungalow amounted to ₹ 50, 37, 807/- . The AO also observed that besides other expenses like electricity expenses, rates and taxes etc. are accounted for und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant is relying on an ITAT order which is 25 years old. To my mind there is no basis on which one can conclude that this situation has not changed in the last 25 years. Appellant ought to have brought on record detailed evidence that property is being used by the assessee for its own use. Since this has not been done, the objection cannot be accepted. As far as appellant's contention that auditors have not understood the fact is concerned, it is surprising to note that appellant is objecting to auditors report, a report which was prepared in consultation with appellant and its staff and is essentially a report of the appellant submitted to the I. T. Department. It is a different matter that the report was at the instance of the I. T. Department but nevertheless it is a report which has been submitted by appellant to the I. T. Department. How can an appellant object to this report of audit when in the course of the audit the auditors are bound to discuss ever issue with the representative of appellant before forming their opinion on any issue. Moreover, in objecting to the understanding of auditors, no reason has been spelt out by the appellant. Therefore, the objection again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits in accordance with law and we restore this issue back to file of AO for fresh adjudication after considering the submissions of the assessee, as the learned CIT(A) followed the decision of his predecessor for AY 2005-06 which itself was set aside by the tribunal. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The relevant explanations/evidences submitted by the assessee in its defence shall be admitted by the AO and adjudicated on merits in accordance with law. This ground of appeal number 4 filed by the assessee is allowed for statistical purposes. We order accordingly. 8. The ground number 5 raised by the assessee concerns itself with disallowance of deduction u/s. 80IA of the 1961 Act to the tune of ₹ 75, 85, 911/- . The assessee had in its return of income claimed deduction to the tune of ₹ 75, 85, 911/- u/s. 80IA in respect of wind mills installed in Tamil Nadu . The assessee had also filed Auditor s Report in form no. 10CCB along with the return of income. The impugned assessment year is AY 2006-07 while the return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come was not filed by the due date u/s. 139(1), hence claim u/s. 80IA was rejected. Pursuant to the order dated 14. 5. 2009, of the Supreme Court audit could be completed on 11. 12. 2009 and return filed on 1. 12. 2009 followed by revised return on 24. 12. 2009. It was further submitted that section 80IA being a machinery provision, requires to be liberally interpreted in the special circumstances of the case. 1. CIT Vs Contimeters Electricals P. Ltd. (2009) 178 Taxman 422 (Del) 2. CIT Vs Ace Multitaxes Systems P. Ltd. (2009) 317 ITR 307 (Kar) 3. CIT Vs Medicaps Ltd. (2010) 323 ITR 554 (MP) 8. 3 The learned CIT(A) was pleased to reject the contentions of the assessee, vide appellate order dated 31. 10. 2012, by holding as under: 9. 2 I have gone through the issue. The provisions of Section 80AC was introduced by the Finance Act 2006 and it is effective from A. Y. 2006-07. The provision of section 80AC of the I. T. Act is loud and clear that the assessee will not be entitled for claim u/s 80IB of the I. T. Act unless they file the return within the time allowed u/s. 139(1) of the I. T. Act. No exception are provided in the section. The A. O. was not give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of hearing. It was submitted that it is only on the basis of audited accounts prepared and drawn by said firm M/s B S R Company, Chartered Accountants pursuant to the directions as are contained in the aforesaid orders of the Hon ble Supreme Court, the assessee was able to file return of income in the month of December 2009 and claim for deduction u/s. 80IA was made in the said return of income duly supported by audit report in form no. 10CCB was submitted. It is claimed that the said claim of deduction u/s 80IA was with respect to wind mills installed by the assessee at Tamil Nadu. It was submitted that for earlier years, the claim of deduction u/s 80IA was allowed. It was also submitted that Section 80AC was inserted by Finance Act, 2006 wef 01. 04. 2006 and this is the first year when this condition of filing of return of income within due date prescribed u/s 139(1) has come into effect for claiming deduction u/s 80IA of the 1961 Act. It was submitted that this Section 80AC is directory in nature and not mandatory. Our attention was also drawn to the appellate order of the Ld. CIT(A) for AY 2003-04 dated 01. 12. 2006 wherein Penalty levied u/s 271F of the 1961 Act f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration based on newly inserted provision in the 1961 Act wherein Section 80AC was inserted by Finance Act, 2006 wef 01. 04. 2006. The said Section clearly mandates that in order to grant deduction u/s 80IA, the return of income has to be filed within the due date as stipulated u/s 139(1) which undisputedly the assessee did not comply with. The Section 80AC as was applicable for the impugned assessment year is reproduced hereunder: Deduction not to be allowed unless return furnished. 80AC. Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139. ] The return of income for the impugned assessment year is not clearly filed within the time prescribed u/s. 139(1) nor was it filed within time prescribed u/s 139(4) of the 1961 Act. The return of income was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution Bench of Hon ble Supreme Court in the case of Commissioner of Customs(Imports), Mumbai v. Dilip Kumar and Company others in civil appeal no. 3327 of 2007 vide orders dated 30th July 2018 that exemption provisions are to be strictly construed. The conclusion arrived at by Hon ble Supreme Court in the aforesaid decision are as under: 52. To sum up, we answer the reference holding as under (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands overruled. The assessee is directed to produce complete details of litigation/dispute between the assessee and/or between promoters/directors along with relevant orders of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. 9. The ground number 6 concerns itself with disallowance under section 14A of the 1961 Act r. w. r. 8D of the Income Tax Rules, 1962. The disallowance was made by the AO of ₹ 16, 102/- u/s 14A of the 1961 Act. The assessee has received dividend income of ₹ 26, 134/- which was claimed as an exempt income u/s 10(34) of the 1961 Act. The learned CIT(A) restricted the disallowance u/s 14A to 10% of the dividend income received by the assessee. The assessee has now filed an appeal with the tribunal against the appellate order of learned CIT(A). The Ld. Counsel for the assessee at the outset submitted that this ground of appeal bearing number 6 is not pressed and the same may be dismissed as not being pressed. The learned DR raised no objection to dismissal of this ground of appeal as not been pressed. After hearing both the parties and perusing material on record, we dismiss this ground no. 6 raised by the assessee in memo of appeal filed with the tribunal as not been pressed. We order accordingly. 10. The assessee has also raised ground no. 7 wherein the assessee has stated that there was non- consideration of expenses disallowed in earlier year and claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, 472 25, 045 24, 075 10, 997, 220 31/03/2002 2, 627, 627 308, 103 63, 812 9, 146, 758 1, 394, 507 107, 646 - 13, 648, 453 31/03/2003 14, 426, 263 1, 820, 833 3, 298, 537 9, 434, 737 26, 124, 308 781, 651 - 55, 886, 329 31/03/2004 6, 132, 350 922, 998 577, 716 17, 843, 901 51, 039, 079 6, 696, 812 - 83, 212, 856 31/03/2005 2, 750, 909 1, 687, 542 417, 798 30, 151, 860 12, 099, 046 537, 523 3, 200 47, 647, 878 31/03/2006 2, 325, 569 1, 069, 150 1, 999, 541 16, 649, 655 5, 717, 782 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y utilised the said reserves created in financial year ended 31.03.2000 as required u/s. 80HHD for which details were filed vide additional paper book (Page number 24), as under:- Details Of additions to Fixed Assets (Amount in Rs. ) Financial Year ended AMBO AMMA AMAU DFK BFK Croissants Windmill Total 31/03/2001 2, 654, 991 1, 440, 662 86, 276 6, 565, 699 200, 472 25, 045 24, 075 10, 997, 220 31/03/2002 2, 627, 627 308, 103 63, 812 9, 146, 758 1, 394, 507 107, 646 - 13, 648, 453 31/03/2003 14, 426, 263 1, 820, 833 3, 298, 537 9, 434, 737 26, 124, 308 781, 651 - 55, 886, 329 31/03/2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to question of law. Moreover, the mandate of the Act is to the levy tax on the correct income which is chargeable to tax as provided under the provisions of the 1961 Act, which is in consonance with Article 265 of the Constitution of India that no tax can be levied or collected save by the authority of law. The facts are available on facts but they need verification. The contention of the assessee that it has complied with provisions of Section 80HHD so far as utilisation of the reserve created for the financial year ended 31.03.2000 u/s 80HHD strictly in compliance with requirements of Section 80HHD requires verification of facts and claim of the assessee is to be determined after verification of facts as presented by the assessee before us. In all fairness to both the rival parties this issue need to be restored to the file of the AO for fresh adjudication in accordance with law on merits. Thus, in order to compute correct income in the hands of the assessee to advance substantial justice, we are admitting this additional ground of appeal and directing the AO to make necessary verifications of the claim and contention of the assessee to verify whether the assessee has fulfilled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal ground with respect to claim of deduction u/s 80HHD, our decision in AY 2006-07 shall apply mutatis mutandis to the issues involved in AY 2007-08. We order accordingly. 14. In the result appeal of the assessee in ITA no. 370/Mum/2013 for AY 2007-08 is partly allowed for statistical purposes. AY 2008-09-ITA no. 721/Mum/2013 15. The assessee has also raised an ground no. 4 in memo of appeal filed with tribunal which is concerning short deduction of TDS to the tune of ₹ 18, 449/- and non applicability of provisions of Section 40(a)(ia) of the 1961 Act. The Ld. Counsel for the assessee at the outset submitted that this ground of appeal is not pressed and it is prayed that this ground may be dismissed as not being pressed. The Ld. DR did not raise any objection to the dismissal of this ground of appeal . After hearing both the parties and considering the material on record, we dismiss this ground of appeal number 4 concerning short deduction of TDS and applicability of provisions of Section 40(a)(ia) as not been pressed. Since other issues in appeal for AY 2008-09 involves common issues as were present in AY 2006-07, our decision in AY 2006-07 on other issues rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en further claimed as allowable deduction. Vide order sheet noting dated 17.12.2010, the assessee was required to explain and furnish the proof of payment of property tax during the F. Y. 2007-08 relevant to current A. Y. or till the due date of filing of return for the current assessment year. The assessee has produced copy of payment of property tax to the tune of ₹ 32,10,870/- which is paid in the F. Y. 2008-09 (payment date 10/12/2008). The assessee has claimed that this quantum of property tax pertain to enhanced value of property tax by Municipal Authorities after survey action and hence the same is claimed as deductible expenses in the year of provision made. The assessee has also contended that this expenditure does not fall in the nature of items covered in section 43B of the I. T. Act. This claim of the assessee is not acceptable as the property tax fall under section 43B (a) of the Act which starts with 'any sum payable by assessee by way of tax, duty, cess or fee by whatever name called under any law for the time being enforced' and these wordings certainly takes care of the property tax. As the property tax payment is made on 10/12/2008, the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod or before the due date for filing the return. In view of this, I hold that ₹ 32,10,870/- is correctly disallowed by the AO u/s 43B of the Income-tax Act. Addition is upheld. 17. 2. Now, the assessee has raised this ground of appeal as an additional ground of appeal before tribunal for AY 2009-10 . We have gone though assessment order for AY 2008-09 as well appellate order passed by Ld. CIT(A) order for AY 2008-09 and we have also considered statement of fact filed by the assessee for AY 2009-10 along with additional ground of appeal as an Annexure, which reads as under:- Statement of facts: The appellant owns and runs interalia 3 hotels, one of which is located at Chennai (Ambassador Pallava). The appellant had claimed a deduction for ₹ 32,10,870/- in A. Y. 2008-09 for the additional property tax which was claimed by Municipal authority during the year ended 31.3.2008, and in preparing the annual accounts of the company for Y. E. 31.3.2008 the appellant made a provision for the said additional claim of ₹ 32,10,870/- under the Companies Act, and as advised made a claim before the Assessing Officer in the A. Y. 2008-09. The appellant in support ..... X X X X Extracts X X X X X X X X Extracts X X X X
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