TMI Blog2019 (4) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... O during the assessment proceedings, we note that the Revenue has not challenged this fact/issue by filing an appeal to the tribunal. Thus it appears that the Revenue is not aggrieved on account of non-furnishing of PAN to the AO during the assessment proceedings. Therefore, we are not inclined to entertain the argument of the DR as discussed above. We are not impressed with the finding of the CIT-A. Accordingly, we reverse the same and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Addition u/s 14A - HELD THAT:- There is no dispute about the fact that the own fund of the assessee exceeds the amount of investment. Therefore in our considered view presumption can be drawn that there was no investment in the shares out of the borrowed fund. Therefore there cannot be any question for any disallowance on account of interest expenses. In holding so, we find support and guidance from case of Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT]. We hold that no disallowance of interest expense claimed by the assessee can be made on account of investments as discussed above. Hence, we reverse the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)- 3, Ahmedabad[Ld.CIT(A) in short] vide appeal no.CIT(A)-3/Cir.1(1)/312/15-16, dated 21/03/2016 arising in the matter of assessment order passed under s.143 of the Income Tax Act, 1961 (here-in-after referred to as the Act ) dated 21/02/2014 relevant to Assessment Year (AY) 2011-12. 2. The assessee has raised the following grounds of appeal: 1.1 That the learned CIT(Appeal) has erred in confirming disallowance of ₹ 14,59, 857/- out of total disallowance of ₹ 49, 38, 340/- u/s 40(a) (ia) of the Act. 1.2 The appellant respectfully submits that on the fact of the case , the provision of TDS are not applicable in respect of payment of ₹ 14, 59, 857/- and therefore the same should not be disallowed u/s 40(a)(ia) of the Act. 1.3 The appellant therefore submits that the disallowance of ₹ 14, 59, 857/- made u/s 40(a)(ia) of, the Act made by Assessing Officer be deleted. 2.1 That the learned CIT( Appeal) has erred in confirming addition of ₹ 1,56,498/- u/s 14A of the Act. 2.2 The appellant respectfully submits that on the fact of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore the TDS was not deducted due to the fact that the provisions of TDS were not applicable in respect of the payments made to the transporters who have furnished PAN. 6. The assessee also claimed that the payment to the transporters does not exceed the limit of ₹ 75,000/- in the year under consideration. Therefore, the assessee was outside the purview of the TDS provisions. 7. However, the Ld. CIT (A) disagreed with the contention of the assessee by observing that it has not filed any evidence to prove that the payment was made to the transport contractors. 8. The assessee has also claimed freight expenses exceeding ₹ 75,000/- in the year. Therefore it cannot be concluded that the provisions of TDS do not apply to the assessee. 9. Being aggrieved by the order of Ld. CIT (A), the assessee is in appeal before us. 10. The Ld. AR before us submitted that the assessee had furnished the PAN of all the transport contractors during the assessment proceedings as required under section 194C(6) of the Act. 11. The Ld. AR further submitted that the disallowances cannot be made on account of non-deduction of TDS under section 194C of the Act where the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich requires assessee to submit Form No. 15-J is only procedural formality and what has been done by second proviso. Non-submission of Form No. 15-J to the Commissioner within the time prescribed in rule 29D cannot have any effect on deciding as to whether tax was deductible or not deductible from the payments made by assessee to the subcontractors. For invoking provisions of section 40(a)(ia) it is to be decided whether tax was deductible or not, if any, whether deducted/paid or not. When one looks into section 194C(3)(i) for the purposes of invoking section 40(a)(ia), it is found that only second proviso to it is sufficient to decide whether tax was deductible or not. Time factors involved for compliance of the conditions mentioned in two provisions are different. Second proviso is to be complied with at the time of making payment to the sub-contractor, whereas compliance of third proviso can be deferred till 30th June of next financial year. In other words, the contractor can wait to comply with third proviso till 30th June of next financial year after complying with second proviso. However, the decision on deductibility of tax from the payment made to the sub-contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 17. The 2nd issue raised by the assessee is that Ld. CIT (A) erred in confirming the addition made by the AO for ₹ 1,56,498/- under section 14A of the Act. 18. The assessee during the year earned dividend income of ₹ 84,256/- only which was claimed exempted under section 10(34) of the Act. The assessee against such income has not made any disallowance under the provisions of section 14A of the Act. Therefore the AO invoked the provisions of section 14A read with rule 8D of income tax rule and made the disallowance of ₹ 1,56,498/-. Thus the amount disallowed was added to the total income of the assessee. 19. Aggrieved assessee preferred an appeal to Ld. CIT (A). The assessee before the Ld. CIT (A) submitted that there could not be any disallowance on account of interest as its fund exceeds the amount of investment in the shares. 20. The assessee also submitted that the disallowance had been made under section 14A read with rule 8D without recording the satisfaction as required under the provisions of law. 21. However the Ld. CIT (A) disregarded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above proposition, we hold that no disallowance of interest expense claimed by the assessee can be made on account of investments as discussed above. Hence, we reverse the order of the authorities below. The AO is directed to delete the addition made by him. 25. Regarding the administrative expenses, we note that the AO has derived his satisfaction for making the disallowance under the provisions of section 14A read with rule 8D by recording the following: During the course of assessment proceedings, the assessee has furnished working of disallowance u/s. 14A of the Act by which disallowance u/s. 14A of the Act works out to ₹ 1,56,498/- . 25.1 Moreover, we also note that the assessee has not furnished any details suggesting that it has not incurred any expense in relation to such income. Thus in the absence of any working from the side of the assessee, the AO had no alternative except to resort to the provisions of section 14A read with rule 8D of Income Tax Rules. Thus we confirm the disallowance of the administrative expenses made by the authorities below. Hence the ground of appeal of the assessee is partly allowed. 26. The next issue raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be termed as capital in nature merely on the ground that it will generate enduring benefit to the assessee. Regarding this we find support and guidance from the judgment of Hon ble Calcutta High Court in the case of CIT Vs. Cominco Binani Zinc Limited reported in 204 ITR 56 wherein it was held as under: If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. 33.2 Regarding this we also find support and guidance from the judgment of Hon ble Gujarat High Court in the case of CIT Vs. Bharat Suryodaya Mills Co. Ltd. reported in 202 ITR 942 wherein it was held as under: An old wall was required to be rebuilt because of demolition. Thus, the expenditure which was incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94 being the difference representing the adjustment in the opening and closing stock on account of CENVAT/VAT. 37. Similarly the assessee has shown an amount of CENVAT credit available in its balance sheet as on 31 March 2011 for ₹ 11,62,666.00 only. The assessee has also shown the amount of CENVAT credit brought forward from the preceding AY as on 1st April 2010 at ₹ 9,80,796,00 only. As per the AO the amount of CENVAT credit shown in the balance sheet as on 31st March 2011, should have been added in the closing stock. Therefore the AO the amount of ₹ 1,81,870.00 being the difference of opening and closing amount of CENVAT credit added to the total income of the assessee. 38. Thus the AO disallowed the amount mentioned above and added the aggregate sum of ₹ 18,91,764.00 to the total income of the assessee. 39. Aggrieved assessee preferred an appeal to the Ld. CIT-A. The assessee before the learned CIT (A) submitted that it has been following exclusive system of accounting for the last several years which was accepted by the Revenue. The assessee in support of his claim submitted the following details. Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of section 145A of the Act without adducing any reason/ furnishing any document. The AO also noted that there was no adjustment shown on account of MODVAT credit received by the assessee in the statement of income. Similarly there was also not added the amount of CENVAT credit shown as opening and closing balance in the financial statement. The view taken by the AO was subsequently confirmed by the ld. CIT-A. 44.1 From the preceding discussion, we note that the assessee has been recording its transactions of purchase, sales, and valuation of inventories, net of CENVAT/VAT consistently. Thus, if the inventory of closing stock is enhanced by the amount of CENVAT credit attributable to it, then the amount of corresponding purchases should also be increased by the said amount which will result in tax neutral exercise. Therefore the CENVAT Credit availed by the assessee amounting to ₹ 2,24,06,293.00 against the purchases has no tax impact on the profitability in the instant case. 44.2 Regarding the adjustment of the CENVAT Credit attributable to opening and closing stock, we note that the assessee has made the adjustment in its stock as submitted before the CIT-A. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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