TMI Blog2021 (12) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... This issue is stands adjudicated in assessee s own case [ 2017 (10) TMI 1421 - ITAT DELHI] bank was making the payments to the assessee after making the deduction of the charges to it, as such, there is no occasion for the assessee to deduct the TDS and further bank was not working for the assessee but on the other hand, it was working for its customers, as such, there is no requirement of TDS on bank charges - Decided in favour of assessee. Estimation of income - bogus purchases - addition @12.5% on purchases as the income of the assessee on account of inflation of purchase price of diamonds on purchases from accommodation entry providers - CIT(A) has held that the disallowance made is not valid as the Assessing officer has accepted the value and quantitative record of purchases and sales duly recorded in the books - HELD THAT:- CIT(A) has considered the quantitative details, stock and the payment made by the assessee with regard to this purchases - As per reasoning of the ld. CIT(A) and the retraction statement of Sh. Rajendra Jain, we decline to interfere with the order of the ld. CIT(A) on this issue for the A.Y. 2013-14 and A.Y. 2014-15. Expenditure on working capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the various judgments of judicial authorities pan India wherein the fresh claim of the assessee is considered and the deduction u/s 37 of Education Cess has been allowed. The Hon ble High Court of Bombay held that the appellate authorities may confirm, reduce, enhance or annul the assessment or remand the case to the AO, because the basic purpose of a tax appeal was to ascertain the correct tax liability in accordance with the law. Thus keeping in view the provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the CBDT No. 91/58/66 ITJ(19), the orders of Co-ordinate Benches of ITAT and judicial pronouncements of the Hon ble High Court of Bombay and Hon ble High Court of Rajasthan, we hereby hold that the assessee is eligible to claim the deduction of the Education Cess as per the provisions of Section 37 of the Income Tax Act. - ITA No. 6649/Del/2017 And ITA No. 6650/Del/2017, CO No. 68/Del/2020 And CO No. 74/Del/2020 - - - Dated:- 7-12-2021 - Sh. Amit Shukla, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. S. S. Nagar, CA For the Revenue : Sh. Hemant Gupta, Sr. DR ORDER PER DR. B. R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed the assessment u/s. 143(3) on 28-03-2016 at income of ₹ 2,43,36,83,170/- as against returned income of ₹ 2,41,46,63,360/-. ITA No. 6649/Del/2017 Disallowance u/s 40(a)(ia) of ₹ 1,82,53,095/-: 5. The AO made disallowance u/s 40(a)(ia) on the grounds that no tax has been deducted on the bank guarantee commission and credit card commission paid to the banks. The ld. CIT(A) has deleted the addition holding that the provisions of Section 194H are not applicable to the transactions made by the assessee. The ld. CIT(A) relied on the order of the Hon ble Jurisdictional High Court in the case of CIT Vs JDS Apparels Pvt. Ltd. 370 ITR 454. Aggrieved the revenue filed appeal before us. 6. The facts relevant to the adjudication to this issue are that the assessee having engaged in the business of trading and manufacturing of jewellery and it is the normal trade practice in this business to accept the payment through credit cards and debit cards. For facilitating the payment through credit cards and debit cards, the bank deducts some bank charges and these charges are deducted by the respective bank automatically upon receipt of payment. Only the net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be subjected to any sort of detriment unless the obligation is clearly imposed. When the words are equally capable of more than one construction, the one not inflicting the penalty or deterrent may be preferred. In Maxwell s The Interpretation of Statutes, 12th edition (1969) it has been observed: The strict construction of penal statutes to manifest itself in four ways: in the requirement of express language for the creation of an offence; in interpreting strictly words setting out the elements of an offence; in requiring the fulfillment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction. 18. The aforesaid principles and interpretations can apply to taxing statutes. In the present case we further feel the said principle should be applied as HDFC would necessarily have acted as per law and it is not the case of the Revenue that the bank had not paid taxes on their income. It is not a case of loss of Revenue as such or a case where the recipient did not pay their taxes. 19. In these circumstances, we do not find any merit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition has been rightly made by the Assessing Officer. It was argued that the AO has rejected books of accounts as per the provisions of Section 145(3) of the Act. Hence, the observation of the ld. CIT(A) is wrong on facts. 12. The ld. AR relied on the order of the ld. CIT(A) and placed reliance on the following decisions which dealt with the similar issue. 13. The Co-ordinate Bench of ITAT in the case of M/s Haryana Jewellers Private Limited vs. ITO in ITA No. 2315/Del/ 2018, dated 10.09.2018 wherein it was held that the Ld. CIT(A) was not correct in sustaining the disallowance . 14. Similarly, the Co-ordinate Bench of ITAT Kolkata in the case of M/s M.B. Jewellers Sons vs. DCIT in ITA No.1/Kol./2017 dated 28-03-2018 wherein it was held that there is no case made out of the revenue for making an addition towards bogus purchases as Shri Rajendra Jain had subsequently retracted his statement by way of an affidavit, the assessee has clearly mentioned in its tax audit report that the assessee is maintaining regular books of accounts and the assessee had furnished the summary of diamonds movement indicating the quantity, and value in opening balance, purchases, sales and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Regarding genuineness of transactions of purchase from M/s Nayan Gems: (i) Copy of relevant portion of Bank Statement of the assessee company in proof of the fact that payments of purchases have been made through proper banking channel. (ii) Copy of relevant portion of Bank Statement of M/s Nayan Gems (IndusInd Bank, A/c No.200000045937) in proof of the fact that payments of purchases made by assessee company have been credited to account of M/s Nayan Gems. (iii) Confirmation of account of M/s Nayan Gems. (iv) Copy of PAN Card of M/s Nayan Gems. (v) Copy of proof of filing of Income Tax Return by M/s Nayan Gems. (vi) Copy of Registration Certificate under state VAT of M/s Nayam Gems. (vii) Confirmed copy of stock register of M/s Nayan Gems wherein quantitative details of their sale to the assessee company are accounted for. 4. Regarding transactions of purchase from M/s Kriya Impex (P) Ltd.: (i) Copy of relevant portion of Bank Statements of the assessee in proof of the fact that payments of purchases have been made through proper banking channel. (ii) Copy of relevant portion of Bank Statement of M/s Kriya Impex (P) Ltd. (Kotak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability under the provision of the income tax Act. 19. Admission of the additional grounds has been opposed in principle by the ld. DR. Keeping in view, the judgment of the Hon ble Apex Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383, the additional ground filed by the assessee is accepted. The relevant portion of the judgment is as under: 5. Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 8. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits. 20. Respectfully following the above judgment of the Hon ble Apex Court, the additional grounds taken up by the assessee are hereby admitted. Ground Nos. 1 2 Working Capital: 21. Heard the arguments of both the parties and perused the material available on record. 22. The respondent has raised ₹ 601.28 Crores by issue of share capital to the public through Initial Public Offer (IPO). In connection with the issue of share capital the company incurred capital expenditure aggregating to ₹ 38 crores. The amount has been utilized as ₹ 41.02 Crores on account of setting up of new showrooms, ₹ 475.83 Crores fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 wherein it was held that incremental Share capital was used for the purpose of working capital and the same is allowable expenditure. 28. The Co-ordinate Bench of ITAT Mumbai in the case of Navi Mumbai SEZ (P.) Limited vs. ACIT 54 Taxmann.com 259 wherein it was held that where the assessee incurred certain expenditure for increase in share capital entire share capital was used for purchase of trading stock, expenditure incurred was to be allowed as revenue expenditure. 29. The Co-ordinate Bench of ITAT Chennai in the case of Lakshmi Auto Components Limited vs. DCIT [TM [103 TTJ 315] wherein it was held that the decision of Hon ble Apex Court in the case of Brooke Bond (India) Limited could be applied only after examining the object of the capital enhancement. This decision would not be applicable if enhancement of capital was made for gearing up funds for working capital. If the expansion of capital is in order to meet the need for more working funds, in that eventuality the expenditure could partake the nature of revenue expenditure. 30. The Co-ordinate Bench of ITAT Bangalore in the case of ACIT vs. Khoday India Limited 32 SOT 373 where it has been held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the IPO expenditure amounting to ₹ 38 Crores. 35. The AO is directed to consider the Explanation 1 to Section 115JB and also considered the book profits taking into the treatment given to the receipt of the share capital in finalization of the accounts. Appeal of the assessee on this ground is allowed for statistical purpose. Education Cess: 36. The assessee has taken up additional grounds pertaining to deduction of Education Cess amounting to ₹ 2.37 Crores before the ld. CIT (A). The ld. CIT (A) did not allow the grounds holding that it doesn t emanate from the assessment order. 37. Reading the provisions of Section 40(a)(ii), the assessee argued that education cess paid on Income Tax doesn t come under the purview of the definition as it is levied on the amount of Income Tax but not on profits of business. The ld. AR relied on the Circular No. 91/58/66-ITJ(19) by CBDT dated 18.05.1967, which states the effect of the omission of the words cess from Section 40(a)(ii) is that only taxes paid are to be disallowed in the assessment for the assessment years 1962- 63 onwards. 38. The ld. AR also relied on the judgment of Hon ble Rajasthan High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The similar issue of allowability of cess u/s 37 has been examined by the Co-ordinate Bench of ITAT in ITA No. 685/Cal./2014 wherein the amount of the cess paid has been held to be an allowable deduction. 45. Further, we find that the Hon ble High Court of Judicature for Rajasthan at Jaipur in ITA No. 52/2018 in the case of Chambal Fertilizers and Chemicals Ltd. held that in view of the Circular of CBDT where the word cess is deleted, the claim of the assessee for deduction is acceptable. In that case, the Hon ble High Court held that there is difference between the cess and tax and cess cannot be equated with the cess. 46. We have also gone through the provisions of Sec. 115 of the Income Tax act 1961 which are as under: Explanation 2 to section 115JB (2) of the Act defines the term 'Income-tax' in an inclusive manner, which includes cess. Provision of the explanation 2 to section 115JB is as given below:- For the purposes of clause (a) of Explanation 1, the amount of income-tax shall include- (i)any tax on distributed profits under section 115O or on distributed income under section 115R; (ii) any interest charged under this Act; (iii) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by public authority for public purposes enforceable by law, and is not payment for services rendered . In bringing out the essential features of a tax this definition also assists in distinguishing a tax from a Fee. It is true that between a tax and a fee there is no generic difference. Both are compulsory exactions of money by public authorities; but whereas a tax is imposed for public purposes and is not, and need not, be supported by any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it. If specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. Tax recovered by public authority invariably goes into the consolidated fund which ultimately is utilised for all public purposes, whereas a cess levied by way of Fee is not inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 54. We have also gone through the various judgments of judicial authorities pan India wherein the fresh claim of the assessee is considered and the deduction u/s 37 of Education Cess has been allowed. The Hon ble High Court of Bombay held that the appellate authorities may confirm, reduce, enhance or annul the assessment or remand the case to the AO, because the basic purpose of a tax appeal was to ascertain the correct tax liability in accordance with the law. To mention a few, DCIT Vs M/s. Agrawal Coal Corporation Pvt. Ltd ITA Nos. 801 to 803/Indore/2018. Atlas Copco India Ltd. Vs ACIT in ITA No. 736/Pune/2011 Tata Autocomp Hendrickson Vs DCIT in ITA No. 2486/Pune/2017 Symantec Software India Pvt. Ltd. Vs DCIT in ITA No. 1824/Pune/2018 Sicpa India Pvt. Ltd. Vs ACIT in ITA No. 704/Kol/2015 Philips India Ltd. Vs ACIT in ITA No. 2612/Kol/2019 ITC Limited Vs ACIT in ITA No. 685/Kol/2014 DCIT Vs The Peerless General Finance Investment Co. Ltd. in ITA No. 1469/Kol/2019. ACIT Vs ITC Infotech in ITA No. 220/Kol/2017 Reckitt Benckiser India Pvt. Ltd. Vs DCIT (2020) 117 taxmann.com 519 (Kol.) Crystal Crop. Protection Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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