2014 (7) TMI 803 - AT - Income Tax

Wharfage/port dues - whether in the nature of tax, duty, cess or fee u/s 43B Held that - Wharfage/port dues payable by the assessee to the MMB as royalty for cargo handling at Dighi Port as per the contract between the parties - dues were not payable by way of tax, duty, cess or fee the decision in CIT vs. McDowell & Co. Ltd. 2009 (5) TMI 28 - SUPREME COURT followed - section 43B of the Act is not attracted in the case - the disallowance made/confirmed by the lower authorities u/s 43B was not called for and the finding of the CIT(A) is set aside Decided in favour of Assessee. Non-reconciliation in TDS certificate - Held that - Assessee neither before the AO nor before the CIT(A) had been able to reconcile the amounts relating to the rent received from Ashapura Minechem Ltd. there was no force in the contention of the assessee that the excess amount received by the assessee cannot be assessed as income of the assessee especially when the Ashapura Minechem Ltd. has debited the same in its accounts on account of rent paid to the assessee and TDS deducted Decided against Assessee. Wharfage payment of claim u/s 37(1) Disallowance u/s 43B Held that - CIT(A) was right in holding that it was the assessee who as SPV was constructing, operating and managing the port and was also having income from cargo handling and thus was liable to claim corresponding expenditure relating to the said income in the shape of wharfage/port dues expenditure payable as royalty to the MMB - it was the assessee who was entitled to develop, manage and operate the Dighi Port and the assessee has also offered income from the cargo handling at Dighi Port and even the disputed dues, for which the provision was made, have been offered as income in the subsequent assessment year after the settlement of dispute - it was the assessee who was liable to pay the port dues and the expenditure was rightly claimed by the assessee in its return of income - the AO is directed to verify as to whether the assessee has offered the expenditure Decided against Revenue. Unexplained investment in plant and machinery u/s 69 Genuineness of purchase not established Held that - It was the assessee who as SPV was constructing, operating and managing the port there was no infirmity in the order of the CIT(A) holding that the plant and machinery belonged to the assessee - the disallowance was rightly deleted by the CIT(A) Decided against Revenue. General expenses Held that - The assessee during the appellate proceedings before the CIT(A), had produced all the details and supporting evidence in respect of general expenses claimed by it - it requires verification by the AO thus, the matter is remitted back to the AO for verification of details and evidences submitted by the assessee Decided in favour of Revenue.

Issues Involved:
1. Disallowance of wharfage/port dues under Section 43B.
2. Addition of Rs. 3,00,000 due to non-reconciliation in TDS certificate.
3. Deletion of addition for unexplained investment in plant and machinery under Section 69.
4. Deletion of disallowance of depreciation on plant and machinery.
5. Deletion of disallowance of general expenses.

Issue-wise Detailed Analysis:

1. Disallowance of Wharfage/Port Dues Under Section 43B:
The assessee claimed wharfage expenses/port dues of Rs. 1.23 crores, which was significantly higher than the previous year's expenditure. The AO disallowed Rs. 82,92,783 of this amount, arguing that the dues were statutory under Section 43B and had not been paid. The CIT(A) confirmed the disallowance, but the assessee argued that the dues were not statutory but contractual. The Tribunal referred to the Supreme Court's decision in "CIT vs. McDowell & Co. Ltd." and the Andhra Pradesh High Court's decision in "CIT vs. Andhra Ferro Alloys (P.) Ltd." to conclude that the dues were not statutory and thus not covered under Section 43B. The Tribunal allowed the assessee's appeal on this ground.

2. Addition of Rs. 3,00,000 Due to Non-Reconciliation in TDS Certificate:
The AO added Rs. 3,00,000 to the assessee's income due to a discrepancy between the TDS certificate and the amount credited as port rent received. The CIT(A) confirmed this addition, and the Tribunal upheld the decision, noting that the assessee failed to reconcile the amounts.

3. Deletion of Addition for Unexplained Investment in Plant and Machinery Under Section 69:
The AO treated Rs. 10,12,500 as unexplained investment, arguing that the plant and machinery belonged to BLICL. The CIT(A) deleted the addition, recognizing that the assessee had stepped into BLICL's shoes and made the payment. The Tribunal upheld the CIT(A)'s decision, confirming that the plant and machinery belonged to the assessee.

4. Deletion of Disallowance of Depreciation on Plant and Machinery:
The AO disallowed the depreciation claim on the plant and machinery, arguing that it belonged to BLICL. The CIT(A) allowed the depreciation, and the Tribunal upheld this decision, confirming that the plant and machinery were indeed the assessee's assets.

5. Deletion of Disallowance of General Expenses:
The AO disallowed 10% of general expenses, miscellaneous expenses, and traveling & conveyance expenses on an ad hoc basis due to a lack of documentary evidence. The CIT(A) directed the AO to delete this addition, noting that the disallowance was made without considering the evidence. The Tribunal remanded the issue back to the AO for verification of the details and supporting evidence submitted by the assessee.

Conclusion:
The Tribunal partly allowed the assessee's appeal, particularly on the issue of wharfage/port dues, and dismissed the Revenue's appeal, except for remanding the issue of general expenses back to the AO for verification. The Tribunal's decisions were based on detailed consideration of the facts, agreements, and relevant legal precedents.

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