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TMI Blog2021 (10) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 40(a)(ia) of the Income Tax Act. 2 b) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO and ignoring the contention of the assessee that in view of the proviso to section 40(a)(ia), the deductee having including the income in its return of income the assessee cannot be treated as assessee in default and hence no disallowance can be made under section 40(a)(ia) of the Act. I.T.A. No. 3697/DEL/2018 (A.Y 2013-14) Revenue's appeal 1. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the addition of Rs. 6,48,20,000/- on account of accrued interest without considering the fact that the assessee was following mercantile system of accounting and the arbitration award give a right to the assessee to charge simple interest @ 5% per annum on the amount of advance given to M/s Karsan till the date of payment? 2. Whether on the facts and circumstances of the case, the Ld.CIT(A) is legally justified in deleting the disallowance of Rs. 2,59,00,000/- on account of demurrage and wharfage charges by ignoring the provision of the Railway Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystem of accounting? 9. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the disallowance of Rs. 41,47,983/- on account of 'repair & maintenance expense' without considering the facts recorded by the AO in assessment order and also by ignoring the provisions of section 37 (1) of the Act in this regard?" I.T.A. No. 3438/DEL/2018 (A.Y 2014-15) Assessee's appeal 1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts. 2 (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the disallowance of an amount of Rs. 76,00,000/- made by AO on account of CSR Expenditure incurred by the assessee (ii) That the disallowance has been confirmed ignoring the submissions along with the evidences filed by the assessee in this regard. I.T.A. No. 3696/DEL/2018 (A.Y 2014-15) Revenue's appeal 1. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the addition of Rs. 6,48,20,000/- on account of accrued interest without considering the fact that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing of Nitrogenous fertilizers and trading of Industrial Products. It filed its return of income for AY 2013-14 on 27/09/2013 declaring loss of Rs. 253,66,98,124/-. In the assessment u/s 143(3) vide the impugned order, the following additions were made:- (a) Addition on account of Interest accrued on advances given to M/s Karsan Rs. 6,48,20,000/- (b) Disallowance of Demurrage & Wharfage expenses Rs. 2,59,00,000/- (c) Disallowance on account of stores and spares written off expenses Rs. 3,91,00,000/ (d) Disallowance of Repairs and maintenance charges Rs. 41,47,983/- (e) Disallowance of depreciation on UPS and other computer peripherals Rs. 25,037/- (f) Disallowance of expense under section 14A of the Act Rs. 24,883/- (g) Disallowance of additional depreciation Rs. 6,45,673/- (h) Disallowance of bank guarantee commission Rs. 7,29,769/- (i) Addition on account of interest income Rs. 2,42,880/- (j) Other items written off Rs. 45,57,499/- (k) Income short booked Rs. 39,354/- 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the honourable Bombay High Court in case of CIT - TDS (1), Bombay versus Larsen and Toubro Ltd 101 taxmann.com 83 wherein the honourable High Court while dealing with the case for assessment year 2010 - 11 held as Under:- "3. Learned counsel for the Revenue stated that the Revenue had filed an appeal against the judgment of the Tribunal in case of Kotak Securities Ltd but that the appeal was withdrawn on the ground of low tax effect. He has, however, made available a copy of the judgment of the Tribunal in the said case which contains a detailed discussion on the issue at hand. In the said judgment, the Tribunal referred to Section 194H of the Act which requires an assessee responsible for paying any income by way of commission or brokerage to deduct tax at source. The Tribunal was of the opinion that the words "commission or brokerage" must take colour from each other. The Tribunal was of the opinion that the payment in question, though categorized as "bank guarantee commission" is not strictly speaking payment of commission since there is no principal to agent relationship between the payer and the payee. The Tribunal, therefore, held that the requirement of deducting tax at s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Notification No. 56/2012 of the CBDT the said provisions will also applied to earlier period than the date of issue of notification. Thus, the Ground No. 2(a) and 2(b) of the Assessee's appeal are allowed. Hence appeal of the assessee being ITA No. 3437/Del/2018 is allowed. 8. As regards Ground No. 1 of the Revenue's appeal, the Ld. DR submitted that the CIT(A) erred in deleting the addition of Rs. 6,48,20,000/- on account of accrued interest without considering the fact that the assessee was following mercantile system of accounting and the arbitration award give a right to the assessee to charge simple interest @ 5% per annum on the amount of advance given to M/s Karsan till the date of payment. The Ld. DR relied upon the assessment order. 9. The Ld. AR submitted that the issue is squarely covered by the judgment of Hon'ble Jurisdictional High Court in assessee's own case for A.Y. 2006-07, 2007-08, 2008-09 and 2009-10 in ITA Nos. 551, 782, 784 and 817 of 2016 dated 24.04.2017. 10. We have heard both the parties and perused the material available on record. It is pertinent to note that the Hon'ble High Court in assessee's case for AYs. 2006-07 to 2009-10 held as under: "1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat regard and any prospect of the money being recovered has all but vanished. Since no part of the principal amount could actually be recovered by the Assessee, there was no 'real income' and the question of adding any notional accrued interest to its income on such amount does not arise. In the entire facts and circumstances of the case, the Court agrees with the concurrent findings of the CIT(A) and ITAT . No substantial question of law arises as regard this issue as well." Since, the issue contested in the present ground is identical to that of earlier assessment years and no distinguishing facts were pointed out by the Ld. DR. Ground No. 1 of the Revenue's appeal is dismissed. 11. As regards Ground No. 2 of the Revenue's appeal, the Ld. DR submitted that the CIT(A) erred in deleting the addition of Rs. 2,59,00,000/- made on account of disallowance of demurrage and wharfage charges by ignoring the provision of the Railway Act, 1989 and Explanation 1 to Section 37(1) of the Income Tax Act, 1961. The Ld. DR relied upon the assessment order. 12. The Ld. AR submitted that the issue is squarely covered by the judgment of Hon'ble Jurisdictional High Court in assessee's own case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Hon'ble High Court in assessee's case for AYs. 2006-07 to 2009-10 held as under: "5. This Court is of the opinion that the Revenue's contentions are unmerited. The assessee was all along reflecting the full value of the stock; for the year i.e. AY 2004-05 the CAG had made an observation that Slow-Moving Stock had to be realistically valued. This resulted in a fresh valuation by an engineering expert. Based upon this exercise the valuation was reduced to Rs. 47.76 crores. 6. Having regard to these circumstances, the Revenue's contention that the acceptance of 5% as the basis for valuing the Slow Moving Stock being unscientific, is baseless in our opinion. Once the engineering expert examined all the heads of stock and valued them, to the best of his judgment, and in the absence of any finding that the 5% was not relatable to such valuation without an alternative valuation or that it is a flawed method of valuation, the AO could not have rejected what was offered as the reduced value of the Slow-Moving Stock. In other words, there is nothing on the record to doubt the bonafides of the valuation. In the event of likelihood of the stocks realizing higher amount than the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 1267/2010), dated 31st August, 2010, the Hon'ble High Court has upheld the order of the Tribunal in allowing the depreciation @ 60% on computer peripherals and accessories such as printers, scanners and server etc. In that case, the Tribunal had followed the decision of coordinate Bench of the Tribunal in the case of ITO vs. Samiran Majumdar (2006) 98 ITD 119 (Kol.) and in the case of Expeditors International (India) (P) Ltd. (supra). 19. Respectfully following the aforesaid decision of the Hon'ble Delhi High Court confirming the Tribunal's order, we uphold the order of the learned CIT(A) in accepting the assessee's claim of depreciation @ 60% on UPS and LAN/WAN. Thus, this ground No. 2 raised by the revenue is also rejected." Since, the issue contested in the present ground is identical to that of earlier assessment years and no distinguishing facts were pointed out by the Ld. DR. Ground No. 4 of the Revenue's appeal is dismissed. 20. As regards Ground No. 5 & 6 of the Revenue's appeal, the Ld. DR submitted that the CIT(A) erred in deleting the disallowance of Rs. 24,883/- u/s14A of the Act without considering the legislative intent of introducing Section 14A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion "does not form part of the total income‟ in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year." The Ld. AR also relied upon the decision of the Hon'ble Supreme Court in case of PCIT vs. Oil Industries Development Board (supra) wherein the Apex Court has confirmed the view of the Hon'ble Delhi High Court that in the absence of any exempt income, disallowance under Section 14-A of the Act of any amount was not permissible. The decision in Cheminvest Limited (supra) was followed, in the decision of the Hon'ble High Court. In the present assessee's case also, no exempt income was earned during the year, thus, disallowance u/s 14A of the Act will not be applicable. Hence, Ground No. 5 and 6 of the Revenue's appeal are dismissed. 23. As regards Ground No. 7 of the Revenue's appeal, the Ld. DR submitted that the CIT(A) erred in deleting the disallowance of Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order. 27. The Ld. AR submitted that this addition is also made on account of notional interest on advances to Karsan on which the litigation is still pending. The addition was made on the ground that the addition of. Rs. 6,48,20,000/- was also made as per Ground No. 1. The CIT(A) also deleted the addition on the line of Ground No. 1 that the Hon'ble courts has already held that the advances given by the assessee to Karsan are pending recovery and cannot be assessed as income of the assessee in this year. Thus, the issue is identical to ground no. 1 as the Assessing Officer himself admitted the same and addition made by the Assessing Officer is uncalled for and rightly deleted by CIT(A). 28. We have heard both the parties and perused the material available on record. Since, the Ground No. 1 of the Revenue's appeal and the present Ground No. 8 is related and on the same principle, the findings given hereinabove will be applicable in this ground as well. Hence, Ground No. 8 of the Revenue's appeal is dismissed. 29. As regards Ground No. 9 of the Revenue's appeal, the Ld. DR submitted that the CIT(A) erred in deleting disallowance of Rs. 41,47,983/- on account of repa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Del/2016 And ITA No. 863/Del/2016] dated 30.07.2018 DCIT versus Grintex India Limited ITA No, 1262/Del/2016 And ITA No. 863/Del/2016] ITAT (Del.) dated 30.07.2018 DCIT Vs Grintex India Limited ITA No, 4622/Del/2016 (Del. Tribunal) Dhir & Dhir Associates v. ACIT in ITA NO. 2169/Del/2014 dated 16.06.2017 (Del. Tribunal) ACIT v. Precision Pipes & Profiles Co. Ltd. in ITA No. 4257/Del/2012 dated 12/10/2012. 31. We have heard both the parties and perused the material available on record. It is pertinent to note that disallowance made by the Assessing Officer is an ad-hoc disallowance. The submission of the Ld. AR that there is no estimate that the annual repair and maintenance should be in consonance with the percentage of sales, is accepted as the Assessing Officer has not given any particular reason on why the said expenses has to be disallowed on ad-hoc basis. The contention of the Ld. DR that Section 37 (1) was not properly followed is also not correct to say as the details of the expenses were before the Assessing Officer which was totally ignored by the Assessing Officer. Thus, the CIT(A) rightly deleted this disallowance. There is no need to interfere with the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it has been held that the Explanation 2 to Section 37(1) of the Income Tax Act will apply prospectively i.e. w.e.f. AY 2015-16. The Ld. AR relied upon the following judgments: DCIT vs. Great Eastern Energy Corporation ltd. and (vice-versa) ITA No.3310/Del/2015, ITA No. 3360/Del/2015 & 5728/De!/2016 - Dated 20.11.2019- ITAT Delhi. Wapcos Ltd. vs. ADDL. CIT ITA No. 3736/Del/2018-Dated 20.12.2018- ITAT Delhi. CENTRAL WAREHOUSING CORPORATION VERSUS ACIT, CIRCLE-3 (1) , C.R. BUILDING, NEW DELHI AND DCIT, CIRCLE-3 (1) , C.R.BUILDING, NEW DELHI VERSUS CENTRAL WAREHOUSING CORPORATION AND (VICEVERSA)- 2021 (6) TMI 68 - ITAT DELHI- Dated: - 31 May 2021. 22 ITA Nos. 3437 & ors/Del/2018 NTPC ELECTRIC SUPPLY COMPANY LTD. VERSUS DCIT, CIRCLE 18 (2) , NEW DELHI. (VICE-VERSA)- 2019 (12) TMI 982 - ITAT DELHI Dated. November 15,2019. ADDL. CIT vs. M/s. Rites Limited and (Vice-Versa) ITA No.6447/Del./2017, ITA No.6448/Del./2017, CO No.78/Del.2019 (in ITA No.6447/Del./2017)- ITAT Delhi -Dated. 12.01.2021 THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA VERSUS M/S GUJARAT NARMADA VALLEY FERTILIZER AND CHEMICALS LTD- 2019 (8) TMI 1288 - GUJARAT HIGH COURT- Dated: -16 July 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 dated 24.04.2017. 39. We have heard both the parties and perused the material available on record. This issue is identical to that of Ground No. 1 of revenue's appeal for A.Y. 2013-14 and no distinguishing facts are pointed out by the Ld. DR, hence, Ground No. 1 of the Revenue's appeal is dismissed. 40. As regards Ground No.2 of the Revenue's appeal relating to addition of Rs. 2,56,00,000/- on account of disallowance of demurrage and wharfage charges, the Ld. DR submitted that same is identical to that of Ground No. 2 of Revenue's appeal for A.Y. 2013-14. The Ld. DR relied upon the assessment order. 41. The Ld. AR submitted that the issue is squarely covered by the judgment of Hon'ble Jurisdictional High Court in assessee's own case for A.Y. 2006-07, 2007-08, 2008-09 and 2009-10 in ITA Nos. 551, 782, 784 and 817 of 2016 dated 24.04.2017. 42. We have heard both the parties and perused the material available on record. This issue is identical to that of Ground No. 2 of revenue's appeal for A.Y. 2013-14 and no distinguishing facts are pointed out by the Ld. DR, hence, Ground No. 2 of the Revenue's appeal is dismissed. 43. As regards Ground No.3 of Revenue's appeal relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the addition of Rs. 6,48,20,000/- was also made as per Ground No. 1. The CIT(A) also deleted the addition on the line of Ground No. 1 that the Hon'ble Courts has already held that the advances given by the assessee to Karsan pending recovery cannot be assessed as income of the assessee. Thus, the issue is identical to Ground no. 1 as the Assessing Officer himself admitted the same and addition made by the Assessing Officer is uncalled for and rightly deleted by CIT(A). The issue is also identical to Ground No. 8 of the Revenue's appeal for A.Y. 2013-14.
51. We have heard both the parties and perused the material available on record. This issue is identical to that of Ground No. 8 of revenue's appeal for A.Y. 2013-14 and no distinguishing facts are pointed out by the Ld. DR, hence, Ground No. 6 of the Revenue's appeal is dismissed.
52. Thus, appeal of the Revenue being ITA No. 3696/Del/2018 is dismissed.
53. In result, both the appeal of the assessee being ITA Nos. 3437/Del/2018 and 3438/Del/2018 are allowed. Both the appeal of the Revenue being ITA Nos. 3696/Del/2018 and 3697/Del/2018 are dismissed.
Order pronounced in the Open Court on this Day of September, 2021. X X X X Extracts X X X X X X X X Extracts X X X X
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