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2012 (10) TMI 88 - AT - Income TaxLoss due to cancellation of forward contract - dis-allowance on ground of it being speculative transaction - Held that - Loss due to cancellation of forward contract is revenue expenditure and thus allowable expenditure - Decided against Revenue Addition on account of late payment of employees contribution to PF - Held that - PF contribution of employer and employee was deposited within grace period, though and well before filing of due date of income tax return. No ground for disallowing the same -Decided against Revenue Addition on account of excise duty not included in the valuation of closing stock of finished goods - Held that - Closing stock has to be valued, at the option of the assessee, at cost or market price, whichever is lower. Duty of Central excise is levied on the goods manufactured, i.e. excisable goods manufactured by an assessee. It is not a part of manufacturing cost. It can be termed a post-manufacturing cost. Therefore, unless and until it is entered on one side, as an item of cost, it cannot be taken as a component of the value of the closing stock on the other side. Hence, excise duty is to be excluded at the time of valuation of closing stock of finished goods at the end of account period - Decided against Revenue Addition of expenditure incurred on repairs and maintenance treated as capital expenditure - Held that - CIT(A) has given a finding of fact that the expenditure were incurred on account of maintenance of the existing plant and machinery. Revenue has not placed anything contrary on record suggesting that such expenditure was made for bringing into existence of a new asset on for the enduring benefit to the existing asset. Hence allowable as revenue expenditure - Decided against Revenue Addition U/s 40(a)(ia) on account of commission paid to foreign agents in foreign currency without deduction of tax at source - assessee did not deducted tax at source in compliance with Board Circular No.786 - Held that - It is not disputed that in respect of AY 2005-06 the claim of the assessee was accepted by the Revenue and there is no change in the circumstance except the contention that the Circular No.786 dated 7.2.2000 has been withdrawn vide Circular No.7 of 2009. Since the claim of the assessee was based upon the circular existing at the time of assessment year, no infirmity found in order of CIT(A) deleting the addition - Decided against Revenue Dis-allowance of excess payment of interest u/s 40A(2)(b) - rate of interest work out to be 21% whereas assessee claims to have paid 12% - Held that - Matter restored back to the file of AO to verify the claim of the assessee that the liability to pay interest crystallized in the A.Y. 2005-06 and also working out of rate of interest. Additional depreciation - Revenue submitted that the claim of additional depreciation was made in revised return and the revised return submitted when the limitation of filing of such return was expired whereas assessee submitted that CIT(A) has allowed additional depreciation having called for remand report of the AO - Held that - It is evident from the finding of CIT(A) that for the additional depreciation has been allowed after receiving remand report. No infirmity found in order passed by CIT(A) Dis-allowance of various administrative expenditures - Held that - It is found that order of CIT(A) is cryptic and no reasoning is given as to why the disallowances are confirmed. Therefore all the issues are restored back to the file of CIT(A) to decide these issues afresh. Expenses incurred on purchase of gift articles and contribution to one Samiti - dis-allowance - Held that - Expenditure incurred on the occasion of diwali towards purchase of gift vouchers is allowable since the same is incurred to encourage of working ability to its workers. Further, contribution was paid to said Samiti on humanitarian ground hence allowable - Decided against Revenue Dis-allowance of advance written off claimed u/s. 37(1) - business expediency for giving the advance - Held that - Nothing is brought on record to establish business expendiency or giving the advance in question. Thus, it is not a business advance. Hence, the same is neither allowable u/s. 37 nor u/s. 28/29 as business loss - Decided against assessee.
Issues Involved:
1. Disallowance of loss due to cancellation of forward contract. 2. Addition on account of late payment of employees' contribution to PF. 3. Addition on account of excise duty not included in the valuation of closing stock of finished goods. 4. Addition on account of repairs and maintenance expenses treated as capital expenditure. 5. Addition on account of late payment of employees' contribution to PF and ESI. 6. Disallowance under Section 40(a)(ia) for commission paid to foreign agents without deduction of tax at source. 7. Disallowance of excess payment of interest under Section 40A(2)(b). 8. Allowance of additional depreciation. 9. Disallowance of various expenses. Detailed Analysis: 1. Disallowance of Loss Due to Cancellation of Forward Contract: The Revenue appealed against the CIT(A)'s decision to delete the disallowance of Rs. 34,88,834/- for the loss due to cancellation of a forward contract. The Tribunal upheld the CIT(A)'s decision, referencing the Gujarat High Court judgment in CIT v. Friends And Friends Shipping Pvt. Ltd., which ruled that such losses are not speculative and are allowable as business losses. 2. Addition on Account of Late Payment of Employees' Contribution to PF: The Revenue challenged the deletion of Rs. 10,17,696/- for late payment of employees' PF contribution. The Tribunal dismissed the Revenue's appeal, citing the ITAT Ahmedabad's decision in the assessee's own case for A.Y. 1998-99, which allowed such deductions if payments were made before the due date of filing the return. 3. Addition on Account of Excise Duty Not Included in Valuation of Closing Stock: The Revenue appealed against the deletion of Rs. 3,09,42,594/- for excise duty not included in the closing stock valuation. The Tribunal upheld the CIT(A)'s decision, following the Gujarat High Court's ruling in ACIT v. Namada Chematur Petrochemicals Ltd., which stated that excise duty is a post-manufacturing cost and should not be included in the closing stock valuation. 4. Addition on Account of Repairs and Maintenance Expenses Treated as Capital Expenditure: The Revenue contested the deletion of Rs. 22,95,488/- for repairs and maintenance expenses treated as capital expenditure. The Tribunal dismissed the appeal, agreeing with the CIT(A) that the expenses were for maintaining existing assets and did not result in new assets or enduring benefits, referencing the Supreme Court's judgment in CIT v. Saravana Spinning Mills P. Ltd. 5. Addition on Account of Late Payment of Employees' Contribution to PF and ESI: The Tribunal consistently dismissed Revenue's appeals regarding late payments of employees' contributions to PF and ESI across multiple assessment years, reiterating that such contributions made before the due date of filing the return are allowable. 6. Disallowance Under Section 40(a)(ia) for Commission Paid to Foreign Agents Without Deduction of Tax at Source: The Revenue appealed against the deletion of disallowances for commission payments to foreign agents without TDS. The Tribunal upheld the CIT(A)'s decision, noting that the payments were not taxable in India based on existing CBDT circulars at the time of assessment, and the subsequent withdrawal of these circulars did not apply retrospectively. 7. Disallowance of Excess Payment of Interest Under Section 40A(2)(b): The Tribunal restored the issue of disallowance of excess interest payment of Rs. 35,27,425/- to the AO for verification, as the CIT(A) had not provided the AO an opportunity to verify the assessee's claim regarding the crystallization of liability. 8. Allowance of Additional Depreciation: The Tribunal upheld the CIT(A)'s decision to allow additional depreciation, noting that the CIT(A) had based the decision on a remand report confirming the assets were put to use in the relevant assessment year. 9. Disallowance of Various Expenses: The Tribunal restored the issues of disallowances of various expenses back to the CIT(A) for fresh consideration, as the CIT(A)'s order lacked detailed reasoning. Conclusion: The Tribunal dismissed most of the Revenue's appeals, upholding the CIT(A)'s decisions on various grounds, including the treatment of forward contract losses, late payment of PF and ESI contributions, excise duty valuation, and repairs and maintenance expenses. The Tribunal also addressed the issue of TDS on foreign commissions, emphasizing the non-retrospective application of withdrawn CBDT circulars. The issue of excess interest payment was remanded to the AO for further verification. The assessee's cross-objections were either allowed or remanded for reconsideration.
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