TMI Blog2021 (9) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to produce the evidence for statutory of liabilities - HELD THAT:- The law is settled on this issue if the assessee has paid the statutory liabilities before the due date of filing of return income u/s 139(1) of the Act, no disallowance is warranted. Therefore, we remit this issue to the file of the AO with a direction to examine whether the assessee has paid the aforementioned statutory liabilities within due date for filling return of income U/s 139(1) , if it is found in order , allow the claim of the assessee. The assessee is directed to substantiate its claim by way of documentary evidence that the same are paid before the due date of filing of return of income. Accordingly, grounds raised allowed for statistical purposes. Addition towards miscellaneous expenses - As assessee is following mercantile system of accounting, prior period expenditure cannot be allowed - AR submitted that it was a product development expenditure incurred earlier and allowable as per section 35D - HELD THAT:- We find that nowhere from the orders of revenue authorities that the earlier year expenditure has been disallowed. Once the deduction claimed by the assessee is accepted, in subsequent y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO with a direction to examine the factual aspect of the contentions of assessee and then decide whether the amount can be allowed as revenue expenditure or not as per the provisions of Act. For this purpose, this issue is also restored to the file of AO and Grounds raised on this issue are accordingly considered allowed for statistical purposes. Addition towards capital work in progress written off - CIT(A) confirmed the addition observing that the assessee failed to substantiate its claim by way of documentary evidence - HELD THAT:- In assssee s own case for AY 2009-10 [ 2015 (5) TMI 897 - ITAT HYDERABAD] whether capital work in progress can be reduced or not was not an issue before the AO and this aspect was not examined at all. Since the AO put it to CIT(A), with reference to claim And capital work in progress reduced in the computation, which the Ld. CIT(A) directed to be enhanced by an amount of ₹ 6,75,96,165/- , that too without giving opportunity to assessee as contended, we are of the opinion that this capital work in progress issue also requires re-examination. AO is directed to take the revised computation filed by the assessee and determine the exact amount c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. AR submitted that the amounts pertain to income and expenditure or prior period arising out of compliance with statutory provisions, i.e. accounting standards and also requirement of statute are allowable u/s 37 of the Act. The ld. AR of the assessee relied on the following cases: 1. Ocimum Bio Solutions India Ltd., ITA No. 2090/Hyd/2018. 2. SA Builders, 158 Taxmann 74 (SC) 3. West Bengal State Electricity Board, ITA no. 2126/Kol/2017. 4. Mahanagar Gas Ltd., 42 Taxmann.com 40 5. Fact Securities, 61 Taxmann.com 192 6. Pharmacia Health Care Ltd., ITA no 2585/Mum/2010 7. CIT Vs. Jagatjit Industries Ltd., ITA No. 848/2010 (HC Delhi) 8. Saurashtra Cement Chemical Industries Ltd., Vs. CIT, 80 Taxmann 61 )HC Gujarat) 6.4 On the other hand, the ld. DR relied on the orders of revenue authorities and submitted that the assessee failed to substantiate its claim before the authorities below by way of documentary evidence, therefore, the revenue authorities have rightly made the disallowance. 6.5 We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total ₹ 16,16,269/- As the assessee did not produce evidence for payment of statutory liabilities as per balance sheet before the due date of filing the return of income, the AO disallowed the said amount of ₹ 16,16,269/- u/s 43B of the Act. 7.2 The CIT(A) confirmed the disallowance on the ground that even before him the assessee failed to produce the evidence for statutory of liabilities cited supra. 7.3 Before us, the ld. AR of the assessee submitted that the statutory liabilities were paid before the due date of filing of return income u/s 139(1) of the Act, hence, disallowance is not warranted. He relied on the following cases: 1. Usha Ltd. Vs. CIT, 184 Taxmann 83 (HC Delhi) 2. Vinay Cement Ltd. Vs. CIT, 213 CTR 268 (SC) 3. CIT Vs. Lakhani Rubber Udyog Ltd. 184 Taxmann 236 (HC P H). 7.4 The ld. DR, on the other hand relied on the orders of revenue authorities. 7.5 We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The law is settled on this issue if the assessee has paid the statutory liabilities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of ₹ 56,55,787/- relates to amortisation of intangible assets which were incurred in earlier years. 8.5 We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The issue is covered U/s 35D under the head miscellaneous expenditure which is allowable in ten equal instalments . On observation of the financial statements Note No. 13 under the account head OTHER NON CURRENT ASSETS there is a balance as on 31.03.12 is 28,278,933/- and balance as on 31.03.2013 is 22,623,146/-, it shows that it relates to the earlier years. The AR submitted that it was a product development expenditure incurred earlier and allowable as per section 35D of the Income Tax Act. 1961 is accepted. We find that nowhere from the orders of revenue authorities that the earlier year expenditure has been disallowed. Once the deduction claimed by the assessee is accepted, in subsequent year it cannot be denied. This view is supported by the decision of ITAT CHENNAI BENCH 'B' in the case of Handy Waterbase India (P.) Ltd. Vs. Deputy Commissioner of Income-tax, Company Circle II(2), Chennai , [2021] 127 taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he orders of revenue authorities and submitted that in the absence of proof of deducting TDS before filing of the return of income, the AO made the additions accordingly u/s 40(a)(ia) of the Act. 9.4 We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. In the case of Ramesh Gelli Vs. ACIT in ITA No. 1637/Hyd/2018 for AY 2009-10 vice order dated 03/04/2019, on which reliance placed by the ld. AR of the assessee, on similar set of facts, the coordinate bench of this Tribunal has held as under: 6. Having regard to the rival contentions and the material available on record, I find that undisputedly, the assessee has not made TDS from the payment made towards legal and professional fee. The Hon ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township (P.) Ltd [2015] 61 taxmann.com 45 (Delhi), has considered the applicability of second proviso to section 40(a)(ia) of the Act and held that the second proviso to section 40(a)(ia) is declaratory and curative and it has retrospective effect from 01/04/2005. Relevant portion of the Hon ble High Court order is reproduced hereunder for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40(a)(ia) and Section 201(1) of the Act is that as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. 13. Turning to the decision of the Agra Bench of ITAT in Rajiv Kumar Agarwals case (supra ), the Court finds that it has undertaken a thorough analysis of the second proviso to Section 40(a)(ia) of the Act and also sought to explain the rationale behind its insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under: On a conceptual note, primary justification for such a disallowance is that such a denial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an intended consequence to punish the assessees for non-deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. 14. The Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a)(ia) of the Act and its conclusion that the said prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. The grounds raised on this issue are treated as allowed for statistical purposes. 11. Ground Nos. 43 to 47 are relating to the addition of ₹ 5,22,05,305/- towards investment written off debited to P L Account. 11.1 During the assessment proceedings, the Assessing Officer noticed that the assessee had debited an amount of ₹ 5,22,05,305/- to the P L account towards Investment written off . The Assessing Officer asked the assessee to submit details. In response, the assessee submitted that though the nomenclature was used as investment written off, fact remains that the amount represents bad debts written off as it was offered as income in the earlier years and is allowable u/s. 36(i)(vii) of the Act. The assessee has not furnished any evidence to substantiate its claim that the above Income was offered in earlier years. In absence of details, the Assessing Officer, disallowed 5,22,05,305/- and added to the total income. 11.2 The CIT(A) confirmed the action of the AO observing that in the absence of proper explanation and documentary evidence, the addition made by the AO is upheld. 11.3 Before us, the ld. AR submitted that the amount of ₹ 5,22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the FEMA provisions, and then by virtue of RBI circular written-off the amount. Since the amount was originally offered as income, subsequent write-off is allowable as revenue expenditure, it was contended. 5.1. Without going into the merits of the claim, we are of the opinion that this claim also requires re-examination. Assessee's claim that amounts are originally offered as income, subsequently converted to equity of the subsidiary and written-off on the basis of the circulars of RBI requires examination by AO, as none of the figures are comparable on the basis of the annual reports filed before us. In order to examine the issue and to give one more opportunity to assessee to substantiate the claim, matter is restored to the file of AO with a direction to examine the factual aspect of the contentions of assessee and then decide whether the amount can be allowed as revenue expenditure or not as per the provisions of Act. For this purpose, this issue is also restored to the file of AO and Ground No.4 is accordingly considered allowed for statistical purposes. 11.6 Respectfully following the above decision, in order to examine the issue and to give one ..... X X X X Extracts X X X X X X X X Extracts X X X X
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