TMI Blog2021 (4) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... re satisfied the liability is not a contingent one. The liability is in present though it will be discharged at a future date. Therefore, we dismiss this ground of appeal of the Revenue. TDS u/s 194C - Disallowance u/s. 40(a)(ia) - non-deduction of TDS on 'Fees related to Management Contracts' (which is in the nature of cargo handling fees) - HELD THAT:- We note that the amount of ₹ 1.57 crores debited in the Profit and Loss Account is a mere reversal of irrecoverable fee/excess margin money. Thus we find that the Ld. CIT(A) has rightly reversed the action of the A.O. and allowed the claim of the assessee and it is a trite law that the accounting terminology used in the books of accounts cannot determine the nature of the transaction [Kedarnath Jute Manufacturing Co. Ltd. [ 1971 (8) TMI 10 - SUPREME COURT] . Thus we find no infirmity in the order of the Ld. CIT(A) and so we confirm the same. Disallowance u/s 14A r.w.r. 8D - no expenditure was incurred to earn the dividend income applied Rule 8D(iii) and disallowed 0.5% of average investment value - HELD THAT:- As relying on REI AGRO LTD, KOLKATA VERSUS DCIT CENTRAL CIRCLE-XXVII, KOL [ 2013 (9) TMI 156 - ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri A. T. Varkey , JM This appeal preferred by the Revenue and cross-objection by the assessee are against the order of Ld. CIT (Appeals)-7, Kolkata dated 25.09.2019 for Assessment year 2011-12. 2. Ground No. 1 of the Revenue and Ground No. 5 of the C.O. of the assessee is against the action of the Ld. CIT(A) in deleting the disallowance made by the A.O. amounting to ₹ 60,92,442/- on account of Royalty payable to Kolkata Port Trust (hereinafter KoPT) which has been shown in the books as 'estimated liability'. 3. Brief facts of the case as noted by the A.O. is that on a perusal of the audited balance sheet of the assessee, he observed that assessee has charged an amount of ₹ 3,26,85,306/- in the P L A/c. against royalty paid to KoPT. The A.O. asked the assessee to provide the details of the payment and the TDS deducted and paid thereof. According to the A.O., the assessee submitted that it has provided a sum of ₹ 60,92,442/- on account of royalty payable to KoPT and the said provision has been created pursuant to the independent auditor's report with which the company does not agree. According to the A.O., this statement clearly shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the appellant for the AY 2009-10 was dismissed (supra) vide ITA No. 988/Ko/2013 dated 17.03.2017. In such view of the matter, since there are judicial precedents in favour of the appellant in the matter under dispute, the AO is directed to delete the impugned disallowance of ₹ 60,92,442/-. These grounds are allowed. 5. Aggrieved, the Revenue has preferred an appeal before us and the assessee has preferred ground No. 5 of its C.O. i.e. without prejudice to the action made by the A.O., and the Ld. CIT(A) who has deleted the disallowance, however according to the assessee, even if this expenditure is disallowed, since this expenditure claimed was in respect of Berth No. 12 at Haldia which the AO has accepted to be eligible for deduction u/s. 80IA of the Act, then in any event, even if the Revenue succeeds on this ground of appeal, then the assessee should be given the consequential relief while computing the 80IA deduction. 6. We have heard both the parties and perused the records. It was brought to our notice that in assessee's own case, similar issue had cropped up in A.Y. 2009-10 wherein the A.O. in similar factual circumstances had disallowed the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harat Earth Movers in 245 ITR 428 (SC) wherein it was held if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in present though it will be discharged at a future date. Therefore, we dismiss this ground of appeal of the Revenue and consequently Ground No. 5 of the C.O. of the assessee stands dismissed being infructuous. 8. Ground Nos. 2 3 of the Revenue are against the action of the Ld. CIT(A) in deleting the disallowance made by the A.O. u/s. 40(a)(ia) of the Act amounting to ₹ 1,57,12,909/- due to non-deduction of TDS on payment to M/s. Tata Steel Ltd. 9. Brief facts of the case as noted by the A.O. is that the A.O. on perusal of the details furnished by the assessee noted that the assessee has claimed expenses amounting to ₹ 1,57,12,909/- in its P L A/c. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the amount of ₹ 1,57,12,909 debited in the profit and loss account. 2. That an agreement subsisted between TATA Steel Ltd. (TSL) and the appellant (TMILL) to the effect that TMILL was entitled to receive 'stipulated margin money' on the basis of projected volume of tonnage' 3. That on the facts and circumstances of the case (supra), the amount of 1.57 crores debited in the Profit and Loss Account was a mere reversal of irrecoverable fee which was recognized as income from port related services. That the learned AO had failed to appreciate that TMILL had not received any such services from TSL during the year on which tax could have been deducted at source. 4. That the amount of ₹ 1.57 crores was adjusted by TSL against the subsequent invoices raised by TMILL. Hence, TMILL had not separately refunded or paid such amount to TSL 5. That the accounting terminology used in the books of accounts cannot determine the real nature of the transaction and that it has been held that the treatment in books of accounts is not the only conclusive and determinative factor to determine the treatment for tax purpose. Case laws relevant to the issue ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract of the agreement along with the working of cargo handling fees placed at page No. 165 to 168 of PB and according to him, any excess over such aggregated project volume is not recoverable from TSL. And it was brought to our notice by the Ld. AR, that for FY 2010-11 (i.e., relevant to AY 2011-12), TMILL was entitled to receive the stipulated margin/consideration of ₹ 4.2 crores for handling tonnages of TSL (i.e. aggregate projected volume of 32,12,851 metric tonnes ₹ 12.45 per metric tonne). However, according to the Ld. AR, TMILL had actually handled aggregate tonnage of 46,35,476 metric tons, resulting in the aggregate actual invoicing of ₹ 5.77 crores. The said margin of ₹ 5.77 crores was duly recognized as income in the books of accounts. Therefore, since the aggregate actual volume handled by TMILL was in excess of the aggregate projected volume, TMILL was entitled to receive only 5% of the projected aggregate margin in respect of the excess tonnage handled by it. The Ld. A.R. drew our attention to the chart wherein the factual details are provided which is reproduced for ready reference as under: Sl No. Item de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 169 of the PB to support the aforesaid averments. We find that page No. 163 of PB, the assessee had produced the written confirmation from TSL confirming that the surplus amount of ₹ 157.3 lakhs in relation to cargo handling fees was paid/adjusted to TSL in accordance with the terms and conditions of the work order. We note that the TSL has confirmed the same at page 164 of the PB as under: Further the contract was reviewed based on actual volume handled and aggregate annual margin at the end of F.Y. 2010-11. Accordingly, the surplus amount of ₹ 1.57 crores received by TM International Logistics Limited, beyond the maximum aggregate margin as stated above was paid/adjusted to Tata Steel Limited. 14. And at Page No. 169, the chart shows the project margin, maximum margin, actual margin and fees in relation to management contracts. We note that the amount of ₹ 1.57 crores debited in the Profit and Loss Account is a mere reversal of irrecoverable fee/excess margin money. Thus we find that the Ld. CIT(A) has rightly reversed the action of the A.O. and allowed the claim of the assessee in respect of ₹ 1,57,12,909/- and it is a trite law that the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(ii) is made as under: Disallowance u/r 8D(2)(iii) = 0.5% of the average of value of investment =0.5% of ₹ 40,40,57,915 = ₹ 20,20,290/- Therefore, ₹ 20,20,290/- is added back u/s. 14A read with rule 8D(2) in computing the income under normal provisions as well as in computing book profit u/s. 115JB. 18. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who gave partial relief to the assessee by holding as under: 4.1. I have considered the submission of the AR of the appellant in the backdrop of the assessment order. The brief facts of the matter are that since the appellant had earned exempt dividend income of ₹ 58,53,717/- during the relevant year, the A.O. found it fit to make a disallowance of ₹ 20,20,290/- u/s. 14A r.w. Rule 8D(2)(ii). I find that against the earning of exempt income, the appellant had not made any suo moto disallowance which I find to be not correct. The Apex Court in the case of MAXOPP INVESTMENTS LTD. has held that if expenditure is incurred on earning the dividend income that much of the expenditure which is attributable to the dividend income has to be disallowed and cannot be treated as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 8D(ii) and for the said proposition has relied on the order of the co-ordinate bench in REI Agro Ltd. Vs. DCIT 144 ITD 141 (Cal). We find force in the contention of the Ld. AR and we are inclined to accept the same and, therefore, we set aside the order of the Ld. CIT(A) and remit the matter back to the file of the AO to compute Rule 8D(ii) only in respect of the investment made by assessee in shares which resulted in dividend in the instant assessment year. With the aforesaid direction we remand the matter back to the file of the AO and the AO is directed to compute the disallowance of 0.5 percent as directed above. 20. In the light of the aforesaid decision of the Tribunal on the same issue, we find no infirmity in the order of the Ld. CIT(A). Therefore we dismiss this ground of C.O. of the assessee. 21. Ground No. 2 of C.O. reads as under: 2. That on the facts and circumstances of the case, and in law, the learned A.O. be directed to allow the deduction of education cess on the income tax paid given the fact that the same is not hit by the provisions of section 40(a)(ii) of the Act, and hence is an allowable deduction. 22. The Ld. AR of the assessee contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned AO be directed to allow the deduction of education cess on the DDT paid in respect of non-resident shareholders, given the fact that the same was not hit by the provisions of section 40(a)(ii) of the Act and hence is an allowable deduction. 24. The Ground No. 2 in C.O. raised by the assessee is in respect of deduction of education cess on income-tax paid by the assessee which it claims as an allowable expenditure. We note that this issue relating to education cess as to whether it is an allowable expenditure or not is no longer res-integra and has come up before this Tribunal in the case of Reckitt Benckiser (I) Pvt. Ltd. vs. DCIT in ITA No. 404/Kol/2015 ITA No. 625/Kol/2016 decided on 17/06/2020 wherein this Tribunal has dealt with this issue as under: 55. The second additional ground raised by the assessee reads as follows: 2. Deduction of education cess on income tax paid by the assessee is allowable expenditure. This ground relates to A.Y. 2011-12. 56. We note that issue raised by the assessee in this additional ground is no longer res-integra. Ld. Counsel of the assessee submitted that education cess is not tax and hence not disallowable u/s. 40(a)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expense. The relevant judgments are given below: (i) M/s. ITC Limited vs. ACIT (ITA No. 685/Kol/2014)- The assessee's additional last/substantive ground avers that it is entitled for the educations secondary higher education cess as overhead deduction amounting to ₹ 423618317 u/s. 37 of the Act. We note that hon'ble Rajasthan high court's decision in DB Income Tax Appeal No. 52/Kol/2018 M/s. Chambal Fertilizers Ltd. vs. DCIT decided on 31.07.2018 takes into account CBDT circular dated 18.05.1967 for holding such cess(es) to be allowable as deduction. Their lordships hold that section 40a(ii) applies only on taxes such than earn cess(es). We therefore reject the Revenue's contentions supporting the impugned disallowance. The assessee's instant substantive ground is accepted. The Assessing Officer is direction to verify all the relevant facts and allow the impugned cess (es) as deduction u/s. 37 of the Act. The assessee's appeal I.T.A. No. 685/Ko/2014 is partly accepted in above terms. (ii) Peerless General Finance Investment Co. Ltd. vs. DCIT (ITA No. 937/Kol/2018)- 37. Additional ground raised by the assessee in ITA No. 937/Kol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59. The Ld. Departmental Representative relied on the earlier decision of ITAT dated 27-02-2019, wherein this Tribunal had disallowed the claim on the basis of two contentions: (i) Education cess is an additional surcharge and hence forms of income tax and (ii) Decision of Kalimati Investment Company Ltd. vs. ITO (ITA No. 2706, 4508/M/2010, 2552, 2553/M/2011) and Sesa Goa Ltd. vs. JCIT (ITA No. 72/PNJ/2012) squarely applicable against the assessee. 60. We accept the submissions of the assessee concurring with the decisions of Rajasthan High Court and binding favourable decisions of Jurisdictional Tribunal and thus we allow the claim of the education cess. The AO is directed to allow the claim of education cess in computing total income of the assessee company. This additional ground raised by the assessee is allowed. 25. Respectfully following the decision of this Tribunal in the case of Reckitt Benckiser (I) Pvt. Ltd. vs. DCIT (supra), we direct the A.O. to allow the claim in respect of the education cess while computing the total income of the assessee. Ground No. 2 of the C.O. of the assessee is allowed. 26. Ground No. 3 (of additional ground) is for refund for div ..... X X X X Extracts X X X X X X X X Extracts X X X X
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