TMI Blog2021 (5) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... % under the block of assets plant and machinery , as against 10% made by the AO. This ground of appeal raised in both the appeals under consideration is allowed. Disallowance of expenditure by way of penalty or fine for violation of any law for the time being in force - allowable revenue expenditure u/s 37(1) or not? - Since the assessee failed to substantiate the said expenditure with documentary evidence, the AO made the addition, which was confirmed by the CIT(A) - HELD THAT:- The submissions of the assessee is that these are the payments made to various state government departments for delay in submission of form or document or compliance with the procedures, in which case, the payment is not for violation of law but compensation for not complying with law and allowable expenditure as normal business expenditure u/s 37(1) of the Act. We are in agreement with the submissions of the assessee and, therefore, we direct the AO to delete the addition made on this count. Accordingly, this ground of appeal is allowed. - ITA No. 2188 & 2189/Hyd/2017 - - - Dated:- 27-5-2021 - SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest payments under Land A cquisition Act are covered by section 194A 1. According to section 194A of the Income-tax Act, 1961, any person, not being an individual or HUF, who is responsible for paying to a resident any income by way of interest other than income by way of Interest on securities shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. The provisions contained therein are however subject to the exceptions provided in the said section. According to the provisions of section 200 of the Income-tax Act, any person deducting any sum in accordance with the provisions of section194A shall pay, within the prescribed time, the sum so deducted to the credit of Central Government. If he fails to deduct tax at source or after deducting fails to pay the tax to the credit of Central Government, he shall be liable to action in accordance with the provisions of section 201. In this connection attention is also invited to the provisions of section 276B of the Income-tax Act, as substituted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session of the land till the date of such order and such interest cannot be assessed to income-tax in one lump sum in the year in which the order is made. The above decision of the Supreme Court in Rama Bai s case ( supra) has set at rest the conflict of decisions among some High Courts on the above issue. The effect of the decision of the Supreme Court referred to above is that on the enhanced compensation, for land compulsorily acquired under the Land Acquisition Act, awarded by the Court on a reference under section 18 of the Land Acquisition Act, interest is payable to the claimants. If so, section 194A of the Act empowers the person who is responsible for making the payment to deduct income-tax. But the direction given in the D.O. letter dated 1-3-1987, of the Commissioner of Income-tax stating that while paying interest, income-tax was deductible at the rates in force during that financial year (Emphasis supplied) with effect from 1-4-1975, if the amount exceeded.₹ 1,000 was not and could not be valid. Such a direction did not get support from section 194A under which Department sought deduction of income-tax at source. The proviso to section 194A of the Act empowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eking higher compensation (with interest) and the Court allows their claims the concerned authority which had acquired their land, shall, while paying the compensation, deduct tax at source from the amount of interest forming part of the compensation ,and deposit the remaining amount with the Court of Law, for disbursement to the successful litigants. The same authority shall also issue the TDS certificates to the concerned parties in the prescribed Form 16A. Order : F.No. 275/109/92-IT(B), dated 21-9-1994. ANNEX - MINISTRY OF LAW, JUSTICE C.A. (DEPARTMENT OF LEGAL AFFAIRS) ADVICE (B) SECTION The question for consideration is as to who is the person responsible for deduction of tax at source for the purpose of section 204 of the Income-tax Act, 1961 in the case of payment of compensation under the Land Acquisition Act. A prima facie view was expressed by us in the matter on the assumption that Collector, Land Acquisition is the person making payment and as such he is responsible for making deduction at source in terms of section 204( iii) of the Income-tax Act. However, we had requested the Department to confirm the factual position from the Ministry of Rural Devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard, we also refer to section 145A(b) is as under: Interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be in the income of the year in which it is received. 9.8 Now coming to the case on hand, it is clear that the assessee has deposited the amount with the Court, but, it has not actually paid to the actual recipients directly i.e., pattadars. On analysis of the above cited section and Circulars, it is clear that the assessee is not responsible for deducting tax deduction at source and assessee is also not sure that when the amount shall be paid to the actual recipients/pattadars. In our considered opinion, the addition made in this regard is not sustainable in the eyes of law and, therefore, the addition is deleted. Accordingly, grounds raised on this issue are allowed in favour of the assessee. 5.1 Respectfully following the conclusions drawn as above in assessee s own case (supra), we delete disallowance made by the AO u/s 40(a)(ia) in both the years under consideration and the grounds raised on this issue in both the AYs are allowed. 6. As regards ground No. 5 in AY 2013-14 and ground No. 8 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the various courts have defiled the plant and machinery as per the conditions existed in given cases. Further on perusal of the submission of the AR of the assessee it has been observed that in assessee s own case while granting investment allowance U/s 32A of the IT Act, similar expenditures incurred by the assessee under the head plant and machinery were decided in favour of the assessee and held that it was plant and machinery by the Hon ble jurisdictional AP High Court as relied upon by the assessee. Further the assessee has relied on the decision of the Hon ble SC in case of Karnataka Power Ltd. as quoted supra is squarely applicable to the facts of the present case. The Ld. CIT (A) has not accepted this judgement of Hon ble SC holding that it relates to Investment Allowance U/s 32A of the Income Tax Act, 1961. Once similar expenditures have been accepted by the Hon ble SC as quoted supra , we are of the view that the expenditures incurred by the assessee were necessary for excavation of coal from mines and shafts . In view of the above observations, we allow this ground of appeal of the assessee by holding that the assessee is entitled to charge depreciation @ 15% under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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