2011 (5) TMI 504 - AT - Income Tax

Disallowance - The decision regarding this has to be arrived at from the material which is available on record or from such document as asked for. Ld. Commissioner of Income Tax (Appeals) further noted that before him the assessee has produced only the evidence which is zerox copy certified issued by the CA. The assessee was asked to establish the facts from the records and from the bank accounts, but the same was never produced - Here assessee has simply stated that the evidence called for in this regard is 10 years old - Hence, the same was not available - Do not find any infirmity or illegality in the order of the Ld. Commissioner of Income Tax (Appeals) and accordingly,uphold the same - Hence, the appeal filed by the assessee is dismissed. Disallowed - Deduction u/s 43B - Excise Duty - Business had already changed hands and when the business changes hand the assets as well as liabilities are transferred - Therefore, outstanding payment of excise duty was liability of the company known as TPIL, and, therefore, it should form a part of the capital loss/gain of the company to which it has been transferred - Accordingly,allow the deduction - Hence, decide the issue in favour of the Revenue.

Summary

Issues:
1. Disallowance of claimed amount under section 43B of the IT Act.
2. Deduction of Excise Duty paid and its nature as revenue or capital expenditure.

Issue 1: Disallowance under Section 43B:
The case involved an appeal against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the disallowance of Rs. 18,49,950 claimed by the assessee under section 43B of the IT Act for the assessment year 1998-99. The Assessing Officer had made a total addition of Rs. 1,18,49,950, out of which the Ld. Commissioner of Income Tax (Appeals) upheld Rs. 1,00,000,000 but was silent on the balance amount. The ITAT, in its order, directed the matter related to the balance amount of Rs. 18,49,950 back to the Ld. Commissioner of Income Tax (Appeals) for consideration. The Ld. Commissioner of Income Tax (Appeals) noted that the assessee failed to provide sufficient evidence to establish the claim, relying only on a certificate from a CA. Despite the assessee's arguments, the ITAT upheld the disallowance, stating that the evidence provided was insufficient to support the claim under section 43B.

Issue 2: Deduction of Excise Duty and its Nature:
In another appeal, the tribunal recalled its earlier order to consider the deduction of Rs. 1 crore paid as Excise Duty. The Assessing Officer had disallowed this amount, considering it a liability on capital account due to the transfer of assets. The Ld. Commissioner of Income Tax (Appeals) upheld the disallowance, stating that the payment was of capital nature as it related to a capital asset that had been transferred. The tribunal, after reviewing the submissions and relevant notes on accounts, affirmed that the liability of Rs. 1 crore was on account of a capital asset transfer and hence not allowable as a business expenditure. The tribunal concluded that the payment was rightly held to be in the nature of capital expenditure and not deductible while computing taxable income, as it was a liability of the previous company and not the assessee. Therefore, the tribunal upheld the decision of the Ld. Commissioner of Income Tax (Appeals) and ruled in favor of the Revenue.

In both appeals, the tribunal dismissed the assessee's claims, upholding the decisions of the lower authorities regarding the disallowance under section 43B and the nature of the Excise Duty payment as capital expenditure. The judgments emphasized the importance of providing sufficient evidence to support claims and the distinction between revenue and capital expenditures in tax assessments.