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TMI Blog2019 (4) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... account of Accrued Incentive as this amount does not represent the expenses claimed by the company but is appearing in the liability side of the Balance Sheet as at 31.03.2004; (b) That the Learned Commissioner of Income Tax (Appeals) has gone wrong in ignoring the fact that out of total amount of Rs. 2,05,69,769/- only a sum of Rs. 1,57,37,329/- pertains to current Assessment year i.e. 2004-05; (c) That the Learned Commissioner of Income Tax (Appeals) has gone wrong in stating that the assessee has not provided any documents or details on the basis of which incentive amount was justified whereas employee wise list / detailed working of calculation of incentive paid to the employees has been filed by the assessee company during the course of appellate proceedings; (d) That the Learned Commissioner of Income Tax (Appeals) has further gone wrong in ignoring the facts that exactly the similar issue has been decided in favour of the assessee by Ld CIT(A) for the Assessment Year 2008 - 09; (e) That the Learned Commissioner of Income Tax (Appeals) has also gone wrong in upholding that the incentive accrued but not due to the employees has neither been ascertained nor incurred dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is now in appeal before us. 6. The 1st disallowance contested by the assessee is with respect to the disallowance of Rs. 20569764/- on account of accrued incentive. The assessee explained that these expenses have been incurred in respect of the payments to be made to the employees for encouraging them to promote business of the assessee. Assessee also submitted that the incentive is meant for the employees which is pertaining to the financial year 2003 - 04. It is based on the performance of the employees and it has become due and payable to them based on certain criteria such a collection of sales, determination of profits after audit of annual account etc. The learned assessing officer noted that assessee has failed to discharge the onus cast upon him to prove that these expenses which have been claimed under section 37 of the Income Tax Act by furnishing relevant specific details as well as the name of employees. He also noted that assessee has failed to prove that these expenses were incurred wholly and exclusively relief for the purposes of business. The learned AO further noted that assessee also could not prove that the alleged payees have included respective amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in the subsequent year. The above provision has been made by the assessee on year-to-year basis on the basis of the performance of the employees. The excess provision is always written back to the profit and loss account in the subsequent year, if it is found to be short, further provision is made. This accounting practice is carried on by the assessee consistently. As the expenditure has been incurred for the incentive of the employees of the company raised on their performance for the same year for which the actual services have been rendered by the employees, above expenditure has been incurred by the assessee during the year only and exclusively for the purposes of the business. As the above expenditure has been made on the basis of the performance of the employees and allocated to each of the employees it is an ascertained provision. According to us it is a definite and accrued liability of the assessee for the year for which the services have been rendered by the employees. It is nothing but additional variable salaries payable to the employees. Same partakes character of salary. 11. Accordingly we reverse the finding of the lower authorities and allow the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im still some of them could not be furnished with body within the temporary registration time. Same was further extended from time to time and therefore they were not used for the purpose of the business during the previous year. He further referred to the separate chart in respect of each of the Van showing shoot out time in minute and date wise. He further referred that the shoot out time claimed to have been telecast by the assessee with the help of these vans does not appear to be correct. He further held that fact is that those vehicles remained with the bodybuilder during the period in which the temporary registration remained effective does not entitle the assessee to claim depreciation u/s 32 of the income tax act and therefore he disallowed Rs. 15 52 6521. 13. The assessee challenged the same before the learned CIT - A. The learned CIT (A) held that the assessing officer has made this disallowance on the appreciation primarily on the ground that since only temporary registration have been provided to these Vans. It implied that these Vans were not ready for use and only because of that regular registration has not been granted to these Vans. Secondly, he noted that the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be built. All these vehicles were undisputedly registered temporarily with the Road Transport Authorities. It is also an undisputed fact that these vehicles have not been registered as permanent registration up to 31/3/2004. The assessee has made an attempt to justify that these vans have been used by it by showing the shooting time which has been disputed by the learned assessing officer. The assessee has produced the copy of the invoices of body building raised by HFCL satellite communication Ltd in the name of the assessee company, which shows that these vans have been returned back to the assessee before the 31/03/2004. All the 12 invoices with respect to the bodybuilding are dated 22/3/2004 to 25/3/2004. Further the report of the utilisation has also been filed with the assessing officer, which shows that these vans have been used by the assessee on or before 31/3/2004. Merely because these vehicles are having temporary registration up to 31/3/2004, could not be registered as a permanent registration on or before that date, it does not show that these vehicles have not been actually owned by the assessee and used for the purposes of the business by the assessee. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Rs. 62,54,353/- made by the AO u/s 40(a) (ia) on account of interest payable to Prasar Bharti. The CIT(A) failed to appreciate that section 10(23)(BBH) has been inserted with effect from 01.04.2013 and is not applicable to the assessment year under consideration." 3. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in deleting the addition of Rs. 4,27,172/- made by the AO on account of software expenses by treating them as capital in nature. The C1T(A) failed to appreciate that as per new appendix-1 of the Income Tax rules, 1962, 'Computers including computer software‟ included in the block of' Machinery and Plant‟ is eligible for depreciation @ 60%. This does not make difference between the „application software‟ and the „system software‟." 4. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in deleting the addition of Rs. 3,40,59,992/- made by the AO on account of provision consumption debtors." 21. The 1st ground of appeal is with respect to the disallowance of Rs. 80861/- made by the learned assessing officer deleted by the learned CIT- A. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted tax at source. According to the AO tax is required to be deducted u/s 194A of the income tax act and therefore the disallowance was made. The learned CIT - A held that it is a corporation established by or under the Central act which is under any law for the time being in force exempt from income tax on its income. He further noted that as per the Prasar Bharti Act 1990, Prasar Bharti is not liable to pay any income tax. Therefore he held that no tax was required to be deducted thereon. Hence he deleted the disallowance. 25. The learned departmental representative vehemently supported the order of the learned assessing officer whereas the learned authorised representative submitted that that there is no requirement of tax deduction at source on interest paid to any corporation established under the act income of which is being exempt. He also supported the order of the learned CIT - A. 26. We have carefully considered the rival contention and perused the orders of the lower authorities. The learned CIT-A has deleted the disallowance since Prashar Bharti is a corporation and not liable to pay income tax on its income as provided under 196 (ii) of the income tax act. Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd stated that assessee company has given discount to its debtors based on its consumption of Airtime during the financial year. It was further stated that the working of the debtors shows that company has given discount to debtors based on the consumption of Airtime during the financial year 2007-08. The assessee also submitted the working of the consumption debtors of Rs. 34,000,000, copies of deal in respect of certain clients and copy of the rate card. The learned assessing officer considered the explanation of the assessee, however rejected stating that nature of accounting head is a provision for discount and is not asset and liability debited to the accounts of the parties. Therefore he made the disallowance of Rs. 34059992/-. The assessee challenged the same before the learned CIT - A who deleted the above disallowance. 29. The learned departmental representative relied upon the order of the learned assessing officer whereas the learned authorised representative relied upon the order of the learned CIT(A) and reiterated submission before him. 30. We have carefully considered the rival contention and found that the claim of the assessee is that company has given discount t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the order of the Learned Commissioner of Income Tax (Appeals) is bad in Law on the facts and in the circumstances of the case; 2. (a) That the Ld Commissioner of Income tax (Appeals) has gone wrong in disallowing the accrued incentive of Rs. 64,58,780/- as claimed by the assessee company during A Y 2009- 10; (b) That the Learned Commissioner of Income Tax (Appeals) has gone wrong in treating the Accrued Incentive as "Bonus"; 3. That the Learned Commissioner of Income Tax (Appeals) has gone wrong in disallowing a sum of Rs. 20,33,900/- towards interest payable to Prasar Bharti; 4. That the Learned Commissioner of Income Tax (Appeals) has gone wrong in disallowing a sum of Rs. 9,87,315/- towards claim of Software Expenses; 5. That the Learned Commissioner of Income Tax (Appeals) has gone wrong in disallowing expenses for earning dividend income to the extent of Rs. 36, 73,276/-; 6. That the Ld. Commissioner of Income Tax (Appeals) has gone wrong in disallowance a sum of Rs. 2,37,97,880/- towards leave encashment." 36. The 1st ground of appeal is against the disallowance made by the learned assessing officer confirmed by the learned CIT - A of the accrued incentive o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 36 (1) (ii) of the income tax act. Accordingly, we hold that the additional salary payable by the assessee in form of incentive to various employees for the services rendered is not hit by the provisions of section 43B of the Income Tax Act, but as deduction under section 28 of the income tax act. Accordingly, we reverse the order of the lower authorities and direct the learned assessing officer to delete the above disallowance. 39. The 2nd ground of appeal is with respect to the disallowance of interest payable to Prasar Bharti of Rs. 2033900/-. The above issue has been considered by us in in the appeal of the assessee for assessment year 2008 - 09 wherein we have held that that income of Prasar Bharti is exempt from assessment year 2013 - 14 and therefore the assessee should have deducted tax at source on payment made of interest to it. Accordingly, for this year, learned CIT(A) has also upheld the disallowance on the same reason, relying on the board‟s circular number 3/2012 dated 12/6/2012 explaining that the amendment granting specific exemption from income tax to the Prasar Bharti Broadcasting Corp of India applicable from assessment year 2013 - 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oftware expenditure are revenue expenditure or capital expenditure. He therefore submitted that the above disallowance needs to be confirmed. 43. We have carefully considered the rival contention and found that the assessee has not furnished the adequate details before the lower authorities to demonstrate that the software expenditure incurred by the assessee is whether revenue expenditure or capital expenditure. In absence of the adequate details, it cannot be held that these expenses incurred by the assessee is a revenue expenditure. Reliance on the order of the appellate authorities in earlier years does not support the case of the assessee as it is required to be demonstrated each year whether the expenditure incurred by the assessee is for capital expenditure or revenue nature. As the assessee has not submitted any details before the lower authorities, this ground of appeal is once again set aside back to the file of the learned assessing officer with a direction to the assessee to substantiate it within 30 days of this order before the assessing officer by submitting the proper evidences in the form of the bill and the nature of the software to demonstrate how they are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mandatory requirement for invoking the provisions Section 14A read with Rule 8D of the Income Tax Rules for making any disallowance. As the learned assessing officer has not recorded any satisfaction about the correctness of the claim of the assessee about the disallowance made by it in its tax audit report, the disallowance made by the learned assessing officer is not sustainable. Therefore, the addition made by the learned assessing officer of Rs. 3673276/- is not sustainable. Therefore, reversing the order orders of the lower authorities, we direct the learned assessing officer to delete the above disallowance. Accordingly, the ground number 5 of the appeal of the assessee is allowed. 48. Ground number 6 of the appeal of the assessee is towards disallowance of Rs. 2379780/- towards leave encashment expenditure. The learned assessing officer asked the assessee to reconcile the difference with the evidence for leave encashment closing balance of Rs. 44138967/- and opening balance of Rs. 20341087/-. In response to this, the assessee submitted that the assessee has claimed leave encashment on accrual basis in the return of income based on the judgement given by the Hon‟ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entive bonus made by the assessee is not in the nature of Bonus but it is an additional salary for the work performed by the staff of the assessee. In view of this, the ground number 1 of the appeal of the learned assessing officer does not survive. 54. The 2nd ground of appeal is with respect to the deleting the addition of Rs. 24545215/- made by the assessing officer on account of consumption debtors. Identical issue has been considered by us in the appeal of the assessee for assessment year 2008 - 09 in ITA number 6080/del/2012, wherein ground number 4 of the appeal of the assessee, the identical disallowance is made. We have already deleted the above disallowance. Both the parties confirmed that there is no change in the facts and circumstances of the case. Therefore, for the reasons given by us, in disposing of ground number 4 of the appeal of the learned assessing officer for assessment year 2008 - 09, we also confirm the order of the learned CIT(A) in deleting the disallowance of Rs. 24545215/-. Accordingly, ground number 2 of the appeal of the AO is dismissed. 55. Accordingly, ITA number 4097/Del/2013 filed by the learned assessing officer for assessment year 2009 - 10 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee for assessment year 2009 - 10, wherein we have deleted the above disallowance holding that the additional incentive paid by the assessee is salary in nature and cannot be held to be the bonus and therefore the provisions of section 43B are not applicable to it. For the similar reasons we also deleted the disallowance made by the learned assessing officer of Rs. 9011627/- on account of incentive payable to the staff. Accordingly, ground number 2 of the appeal of the assessee is allowed. 59. Ground number 3 of the appeal of the assessee is with respect to the disallowance interest paid to Prasar Bharti of of Rs. 2007294/- on account of non-deduction of tax at source. Both the parties confirmed that the identical issue has been decided in the case of the assessee for the earlier years. On careful consideration of the argument of the assessee, it is notice that identical issue has been decided in the appeal of the assessee for assessment year 2009 - 10, wherein it has been held that the exemption granted by the central board of direct taxes to the Prasar Bharti is effective from assessment year 2013 - 14 and not for assessment year 2010 - 11. Therefore, the disallowance under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 A of the income tax act. The learned assessing officer found that assessee has made investment in shares and mutual fund for earning exempt income. Therefore, the assessee was asked to explain why expenses should not be disallowed under section 14 A of the income tax act applying the rule 8D of the income tax rules. The assessee submitted that it has disallowed a sum of Rs. 101140/- which is disclosed in form number 3 CD of the income tax act rules. However the learned assessing officer proceeded to disallow the expenditure applying rule 8D of the income tax rules 1962. It disallowed a sum of Rs. 1386140/- being 0.5% of the average value of the investment. As assessee has disallowed a sum of Rs. 1 01140 in its computation of the total income as well as in form number 3 CD the learned assessing officer made the net disallowance of Rs. 1285000/-. The learned CIT - A, confirmed the above disallowance and therefore the assessee is in appeal before us. 63. The arguments of the authorised representative as well as the learned departmental representative remains the same as it was therein assessment year 2009 - 10. 64. We have carefully considered the rival contention and found that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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