2011 (9) TMI 187 - AT - Income Tax

Deduction u/s 80P - co-operative society - Non deposit of TDS before filing of return - dis-allowance u/s 40(a)(ia) - Held that - the assessee placed reliance on the submissions before the CIT (Appeals) and pointed out that TDS of ₹ 73,217/- was deducted out of payment of ₹ 5,44,940/- and related to the period prior to 3 1.3.2004 and the provisions of section 40 (a)(ia) of the Act inserted w.e.f. 1.4.2005 were not applicable to such amounts. - Matter remanded back for verification of details. Dis-allowance of expenses u./s 14A - majority of the investments were made prior to 1994 and on the said investments no dividend has been received by the assessee during the year. - The CIT (Appeals) followed the observations of the Hon ble Punjab & Haryana High Court in CIT Vs. Winsome Textile Industries Ltd.(2009 -TMI - 75303 - PUNJAB AND HARYANA HIGH COURT), under which it was laid down that where there is nothing to indicate that investment in purchase of shares was made out of borrowed funds, no disallowance was warranted u/s 14A of the Income Tax Act. - Held that - The total dividend income received by the assessee was ₹ 4,00,410/- against which disallowance of ₹ 12,73,462/- by invoking the provisions of section14A of the Act is not warranted. - Decided in favor of assessee. Deduction u/s 80P - held that - if the return of income is revised and deduction u/s 80P (2) (e) is recomputed, it ultimately effects other deductions as well. - The Assessing Officer has nowhere stated that the deduction was not allowable or wrongly claimed by the appellant. Not filing a revised computation cannot lead to denial of a genuine claim where the return was duly revised and claim duly recomputed. - Decided in favor of assessee.

Issues Involved:
1. Disallowance of interest under Section 36(1)(iii) on advances to Sugarfed.
2. Addition under Section 40(a)(ia) for non-deposit of TDS.
3. Deletion of interest on amounts receivable from Punjab Government.
4. Deletion of interest on amounts receivable from FCI.
5. Deletion of addition on account of advertisement expenses.
6. Deletion of addition under Section 14A.
7. Claim of deduction under Section 80P(2)(e) and depreciation on godowns.

Issue-wise Detailed Analysis:

1. Disallowance of Interest under Section 36(1)(iii) on Advances to Sugarfed:
The Tribunal dismissed the ground raised by the assessee regarding the disallowance of interest on interest-free loans advanced to Sugarfed. The issue was previously addressed in the assessee's own case for the assessment year 2006-07, where the Tribunal upheld the disallowance due to the failure to prove the commercial expediency of the transaction. The same reasoning was applied to the current assessment year, leading to the dismissal of the assessee's appeal on this ground.

2. Addition under Section 40(a)(ia) for Non-deposit of TDS:
The Assessing Officer noted that the assessee had not deposited TDS amounting to Rs.73,217/- before the due date of filing the return, leading to an addition of Rs.73,21,700/- under Section 40(a)(ia). The CIT (Appeals) rejected the assessee's additional evidence, but the Tribunal found merit in the assessee's plea that the TDS related to payments made before 31.03.2004, thus not attracting Section 40(a)(ia). The Tribunal directed the Assessing Officer to verify the details and allowed the ground raised by the assessee.

3. Deletion of Interest on Amounts Receivable from Punjab Government:
The Assessing Officer disallowed interest on amounts receivable from the Punjab Government, citing lack of commercial expediency. However, the CIT (Appeals) allowed the claim, following the Tribunal's decision for the assessment year 2006-07, which held that such recoveries were on account of trading activities and not interest-free advances. The Tribunal upheld the CIT (Appeals) decision, dismissing the Revenue's appeal on this ground.

4. Deletion of Interest on Amounts Receivable from FCI:
Similar to the previous issue, the Assessing Officer disallowed interest on amounts receivable from FCI. The CIT (Appeals) allowed the claim, and the Tribunal upheld this decision, following the reasoning applied in the assessee's case for the assessment year 2006-07. The Tribunal dismissed the Revenue's appeal on this ground.

5. Deletion of Addition on Account of Advertisement Expenses:
The Assessing Officer disallowed advertisement expenses, viewing them as donations rather than business expenses. The CIT (Appeals) allowed the expenses, referencing the Tribunal's decision for the assessment year 2005-06, which treated such expenses as business expenditures. The Tribunal upheld the CIT (Appeals) decision, dismissing the Revenue's appeal on this ground.

6. Deletion of Addition under Section 14A:
The Assessing Officer made an addition under Section 14A for interest on loans used for investments in shares. The CIT (Appeals) allowed the assessee's claim, noting that the investments were old and not related to the current period, and there was no nexus between borrowed funds and investments. The Tribunal upheld this decision, referencing the jurisdictional High Court's rulings in similar cases, and dismissed the Revenue's appeal on this ground.

7. Claim of Deduction under Section 80P(2)(e) and Depreciation on Godowns:
The Assessing Officer added Rs.98,52,912/- to the income, disallowing the claim of deduction under Section 80P(2)(e) for depreciation on godowns. The CIT (Appeals) allowed the claim, noting that the revised return correctly reflected the deduction, and the Assessing Officer's reliance on procedural grounds was misplaced. The Tribunal upheld the CIT (Appeals) decision, dismissing the Revenue's appeal on this ground.

Conclusion:
The Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal, upholding the CIT (Appeals) decisions on most issues, except for directing verification on the TDS-related addition under Section 40(a)(ia). The judgment reflects adherence to previous Tribunal decisions and High Court rulings, ensuring consistency in the application of legal principles.

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