TMI Blog2021 (10) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... than the date of issue of notification. Appeal of the assessee allowed. Addition on account of accrued interest - real income theory - taxation of hypothetical income - 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 - HELD THAT:- As decided in own case [ 2017 (5) TMI 485 - DELHI HIGH COURT] the notional interest awarded by the International Court of Arbitration, which has now attained finality is a hypothetical income which cannot be subjected to tax. Merely because the said amount has been awarded by way of an order, does not mean that the assessee has received such income. The assessee followed mercantile system of accounting where there cannot be a situation of hypothetical income being taxed - 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. - Decided against revenue. Disallowance of demurrage and wharfage charges - Scope of provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not an article or thing is an artificially restrictive meaning of the provision. Thus, the benefit of additional depreciation under Section 32(1)(iia) has to be granted to the assessee and w.e.f 01.04.2013, the provision has been amended by the Finance Act, 2012 wherein the assessees engaged in the generation of power have expressly been included in the ambit. Thus, the CIT(A) rightly deleted the disallowance. Addition on account of repair and maintenance expenses - CIT-A deleted the addition - HELD THAT:- 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. Expenditure actually incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 2,59,00,000/- on account 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 (hereinafter referred to as the Act )? 3. Whether on the facts and circumstances of the case, the Ld. CIT (A) is legally justified in deleting the disallowance of ₹ 3,91,00,000/- on account of write-off value of slow moving stores and spares by ignoring the provision of section 145 of the Act and without appreciating the fact that the assessee is not allowed to adopt any Accounting Standard of itschoice as and when it deemed to be beneficial to it? 4. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the learned CIT(A) has erred, both on facts and in law in confirming the disallowance of an amount of ₹ 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 ₹ 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 ₹ 2,56,00,000/- on account 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 (hereinafter referred to as the Act )? 3. Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / (d) Disallowance of Repairs and maintenance charges ₹ 41,47,983/- (e) Disallowance of depreciation on UPS and other computer peripherals ₹ 25,037/- (f) Disallowance of expense under section 14A of the Act ₹ 24,883/- (g) Disallowance of additional depreciation ₹ 6,45,673/- (h) Disallowance of bank guarantee commission ₹ 7,29,769/- (i) Addition on account of interest income ₹ 2,42,880/- (j) Other items written off ₹ 45,57,499/- (k) Income short booked ₹ 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 this appeal is filed by the assessee against the order passed by the CIT(A) confirming the disallowance of ₹ 7,29,769/- made by the Assessing Officer on account of bank guarantee commission invoking Section 40(a)(ia) of the Income Tax Act. The Ld. AR submitted that the Assessing Officer has made the disallowance holding that the notification no. 56/2012 dated 31.12.2012 which provides relief from TDS on specified payments made to Scheduled Banks is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 source emanating from Section 194H of the Act in the present case does not arise. 4. We are broadly in agreement with the view of the Tribunal. The socalled bank guarantee commission is not in the nature of commission paid to an agent but it is in the nature of bank charges for providing one of the banking service. The requirement of Section 194H of the Act, therefore, would not arise. No question of law arises. The Income Tax Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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: 10. The third ground urged by the Revenue is regarding the failure by ITAT to disclose as part of its income, the interest accrued on the advance made by it to M/s. Karsan. Learned counsel for the Revenue pointed out that by a judgment dated 4th December 2006 of this Court, the arbitral award in favour of the Assessee under the Arbitration Act, 1940 was made rule of the Court. He submitted that although up to that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ₹ 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 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. 13. 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: 3. These four appeals seek to raise a common question whether the ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s resulted in a fresh valuation by an engineering expert. Based upon this exercise the valuation was reduced to ₹ 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 value shown, the same would be reflected in the subsequent year in the income or profit of the assessee, the Revenue s contention is without any merit. 7. Nor do we find any reason to subscribe and uphold the AO s adverse observations that the change in method of valuation was without basis. In fact the observations of the CAG in this case led ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ₹ 24,883/- u/s14A of the Act without considering the legislative intent of introducing Section 14A of the Act, 2001 as clarified by the CBDT s Circular No. 5/2014 dated 10.02.2014. The Ld. DR submitted that allowability or disallowability of expenditure under the Act is not conditional upon the earning of the income as upheld by the Hon ble Supreme Court in the case of CIT vs. Rajendra Prasad Moody (1978) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 6,45,673/- on account of additional depreciation claimed u/s 32(1)(iia) of the Act without considering the fact that the relevant provisions are applicable w.e.f. 01.04.2013. The Ld. DR relied upon the assessment order. 24. The Ld. AR submitted that the Assessing Officer was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 41,47,983/- on account of repair and maintenance expenses without considering the facts recorded by the Assessing Officer in the Assessment order as well as ignored the provisions of Section 37(1) of the Act. The DR relied upon the assessment order. 30. The Ld. AR submitted that during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal) 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 finding of the CIT(A). Hence, Ground No. 9 of the Revenue s appeal is dismissed. 32. Hence, the appeal of the Revenue being ITA No. 3697/Del/2018 is dismissed. I.T.A. No. 3438/DEL/2018 (A.Y 2014-15) Assessee s appeal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 2019. The above case is subsequently followed in THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA-3 VERSUS M/S GU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord. 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 ₹ 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 disallowance of ₹ 3,07,00,000/- made on account of write-off value of slow movin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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