Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Latest Cases

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2017 (8) TMI 1569

..... E] activity involving assembling of various components and achieving a final product of a generator amounts to manufacture or production of an article or thing with the meaning of section 80-IB of the Act. Moreover, in the case of Tata Locomotive and Engineering Company Limited [1967 (2) TMI 22 - BOMBAY HIGH COURT] has also held that assembling of various components which results into a different product which is distinct then the individual components, such an activity amounts to manufacture or production. As a consequence, we therefore do not agree with the first objection of the AO to deny assessee’s claim for deduction u/s. 80-IB (4) of the Act. Thus, on this aspect assessee succeeds Disallowance u/s.14A - HELD THAT:- Since no exempt income has been earned during the period relevant to the assessment year under appeal and since it is no ones case that any interest expenditure was incurred for making investments by the assessee, therefore, no disallowance u/s 14A is warranted. Accordingly, ground No. 2 raised in the appeal by the assessee is allowed. Amended provisions of section 40(a)(ia) - TDS u/s 194A - disallowance u/s. 40(a) (ia) - payment of interest for delayed paym .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ied, imaginary and contrary to the provisions and scheme of the Act. It further be held that no disallowance is warranted in the case of the appellant on facts prevailing in the case and as per provisions of law. The disallowance made be deleted. Just and proper relief be granted to the appellant. 3. On facts and circumstances prevailing in the case and as per provisions & scheme of the Act, it be held that disallowance/ addition of interest payment of ₹ 80,03,105/- being part of purchase price in terms of provisions of section 40(a) (ia) of the Act made by the AO and confirmed by the 1st appellate authority is unwarranted, unjustified, imaginary and contrary to the provisions and scheme of the Act. It further be held that no disallowance is warranted in the case of the appellant on facts prevailing in the case and as per provisions of law. The disallowance made be deleted. Just and proper relief be granted to the appellant. 4. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing. 3. Shri Neelesh Khandelwal appearing on behalf of the assessee submitted that assessee is engaged in the business of manuf .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... (4) as the activity carried out by the assessee in the said unit does not amount to manufacture or production and the assessee has failed to show that manufacture or production at Silvasa unit had began on or before 31.03.04. We find that disallowance of deduction u/s. 80IB(4) in the case of assessee was made by the Department in assessment yea₹ 2005-06 & 2008-09 for identical reasons. In respect of first objection that is, whether the activity carried out by the assessee at Silvasa unit amounts to manufacture or production, the Tribunal decided the issue in favour of assessee by observing as under:- 10. We have carefully considered the rival submissions with respect to the objection of the Assessing Officer that the activity undertaken by the assessee at Silvasa unit relating to the generators does not amount to manufacture or production of any article or thing. In our aforesaid opinion, the aforesaid issue is directly covered by the judgment of the Hon ble Delhi High Court in the case of Jackson Engineers Ltd. (supra). As per the Hon ble Delhi High Court, the activity involving assembling of various components and achieving a final product of a generator amounts to man .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ing the denial of the transporter, he was also asked to produce a Log Book, if any, maintained by him showing movement of the vehicle in question. In response, it was stated that though the vehicle was owned by him but no Log Book was maintained for its movement. On being asked to produce the bill book for the relevant period, the said transporter replied that it was not available and it was kept in the godown in his residential house which he had since shifted out. The transporter also confirmed that the Bill Nos. 130 and 132 purported to have been issued by him were not even ITA Nos.1368 & 1369/PN/2012 signed by him and nor were issued by him. When all these were put to the assessee, a detailed written communication was furnished, which we have already reproduced in the earlier part of this order. The claim of the assessee was that the relevant transport bills were issued by the transporter himself and were duly signed by him. The reply furnished by the assessee clarified the position that the vehicle in question belonged to the M/s Padwal Transport, who carried two consignments from Pune to Silvassa on 28.03.2004 one belonging to M/s Kavita Industries Pvt. Ltd. and the other .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... R and bills were indeed issued and signed by him. The transporter explained that the bills related to the local transportation and not for transportation outside Maharashtra and that in the bills he had mentioned the address of Silvassa merely for the purposes of billing. According to the transporter, though the LRs and bills were issued by him but they were for local transportation only and there was no transportation of goods from Chakan, Pune to Silvassa or from Silvassa to Chakan, Pune. 21. Ostensibly, there are apparent contradictions in the statements furnished by the transporter at the different points of time. In such a situation, one of the course available was for a cross-examination of the transporter by the assessee. On this aspect, we find that the Assessing Officer did allow an opportunity to the assessee of crossexamining the transporter. We find that in this context, the Assessing Officer required the assessee to cross-examine the transporter on 29.12.2010. The said opportunity was allowed by the Assessing Officer through a communication dated 28.12.2010, a copy of which has been placed on record. The assessee did not avail of this opportunity for the reason explain .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... red back to the file of the Assessing Officer who shall certainly confronted the assessee with the material with him but also ensure that an appropriate and adequate opportunity of cross-examination is allowed to the assessee. It is also relevant to say that in response to the denials by the transporter, initially the assessee had made a detailed submission attempting to demolish the version of the transporter. The initial burden on the assessee stood discharged in view of its submissions dated 21.12.2010 and therefore it was in fitness of things that crossexamination was carried out so as to enable the Assessing Officer to come to an appropriate and credible findings thereof. Thus, we setaside the order of the CIT(A) and restore the matter back to the file of the Assessing Officer who shall make an order afresh after allowing the necessary opportunity to the assessee of being heard and keeping in mind out above directions. Thus, for assessment year 2005-06, assessee partly succeeds for statistical purposes. Thus, in view of above observation of the Co-ordinate Bench and to maintain consistency, we are of considered view that it would be just and proper to restore the issue back to .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... 09-10 decided on 18-01-2016, under similar circumstances by following the decision rendered in the case of Commissioner of Income Tax Vs. Oriental Structural Engineers Pvt. Ltd. (supra) deleted the disallowance made u/s. 14A r.w. Rule 8D in respect of investments made in the subsidiary companies which were created as SPV to obtain and execute Government contracts. The relevant extract of the findings of Tribunal are as under : 17. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO on the basis of his finding that interest bearing funds have been diverted to holding company for acquisition of their shares made disallowance of ₹ 1,08,81,177/- u/s.14A of the I.T. Act r.w. Rule 8D of the I.T. Rules. While doing so, he rejected the contention of the assessee that the investment made in the shares of holding companies are due to commercial expediency and therefore no disallowance of interest should be made u/s.36(1)(iii) or u/s.14A. We find the Ld.CIT(A) rejecting the various submissions made before him .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... e assessment year 2008-09. This aspect has been considered by the Tribunal in detail and it has observed as under: - 6.3 We have carefully considered the submissions and perused the records. We find that Ld. Commissioner of Income Tax (Appeals) has given a finding that only interest of ₹ 2,96,731/- was paid on funds utilized for making investments on which exempted income was receivable. Further, Ld. Commissioner of Income Tax (Appeals) has observed that in respect of investment of ₹ 6,07,775,000/- made in subsidiary companies as per documents produced before him, they are attributable to commercial expediency, because as per submission made by the assessee, it had to form Special Purpose Vehicles (SPV) in order to obtain contracts from the NHAI and the SPVs so formed engaged the assessee company as contract to execute the works awarded to them (i.e. SPVs) by the NHAI. In its profit and loss account for the year, the assessee has shown the turnover from execution of these contracts and therefore no expense and interest attributable to the investments made by the appellant in the PSVs can be disallowed u/s. 14A r.w. Rule 80 because it cannot be termed as expense/ interes .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... of the Income-tax Act, 1961 ( the Act ), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act. At times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. Doubts have been raised as to whether such higher profits would also result in claim for a higher profit-linked deduction under Chapter VI-A 2. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows : (i) If an expenditure incurred by assessee for the purpose of developing a housing project was not allowable on account of non-deduction of TDS under law, such disallowance would ultimately increase assessee's profits from busi .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... , therefore, no disallowance u/s 14A is warranted. Accordingly, ground No. 2 raised in the appeal by the assessee is allowed. 11. The third ground raised in the appeal by the assessee relates to disallowance of ₹ 80,03,105/- u/s. 40(a) (ia) of the Act. The ld. AR submitted that disallowance u/s.40(a) (ia) has been made for nondeduction of TDS u/s. 194A of the Act on payment of interest for delayed payments to creditors. The ld. AR submitted that interest paid was in the nature of trade payments, therefore, such payments do not fall within the ambit of section 194A of the Act. To support his submission, the ld. AR placed reliance on the following decisions :- 1) ITO Vs. Parag Mahasukhlal Shah, 143 TTJ (Ahd) 606. 2) Sri Venkatesh Paper Agencies (Hyd.)(P)(Ltd.) Vs. DCIT, 24 taxmann.com 52 (Hyd.) 3) Ghaziabad Development Authority Vs. Dr. N.K Gupta 258 ITR 337. The ld. AR made alternate submission that as per proviso to section 201(1) of the Act, in case the payee has considered the said income in the return of income filed, then no disallowance shall be made u/s. 40(a) (ia) of the Act. The ld. AR in support of his alternate contention placed reliance on the decision of Co-ordina .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||