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2015 (8) TMI 1033 - AT - Income TaxPenalty u/s. 271(1)(c) - Disallowance made u/s. 40(a)(ia) - CIT(A) deleted penalty - Held that - The Hon ble Supreme Court of India in the case of GE India Technology Centre P. Ltd. Vs. CIT (2010 (9) TMI 7 - SUPREME COURT OF INDIA) has held that if the remittances are not assessable to tax under the provisions of Act, there is no question of deducting tax at source. The services were admittedly rendered outside India by the foreign entities. The said foreign entities were having no PE in India. Therefore, payment of sales commission were not assessable to tax in India. The issue in present appeal is squarely covered by the judgment of Faizan Shoes P. Ltd. (2014 (8) TMI 170 - MADRAS HIGH COURT) wherein similar circumstances has held, that disallowance on payment of sales commission without TDS to foreign parties for procuring export orders, u/s. 40(a)(i) is not sustainable. Hence, no penalty can be levied on such unsustainable disallowance. Deduction u/s. 80HHC - Held that - The Hon ble Supreme Court of India in the case of CIT Vs. Reliance Petro Products P. Ltd. (2010 (3) TMI 80 - SUPREME COURT) has held that a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing of inaccurate particulars. In the present case, the assessee is rather on a better footing. The assessee is eligible to claim deduction u/s. 80HHC on exports. The only shortcoming is that the assessee has not recovered the export proceeds on which the deduction has been claimed. The impugned order of the CIT (Appeals) in deleting the penalty levied u/s. 271(1)(c) on both the grounds is well reasoned and warrants no interference. Addition on account of Management Incentive Bonus (MIPB) and Leave Travel Assistance (LTA) - CIT(A) deleted the addition - Held that - It is an admitted position that the assessee is following mercantile system of accounting and has been making provision for the aforesaid incentives. It has come on record that the incentives are paid to the assessee in the subsequent year, if they are not claimed by the employees in the year in which provision is made. The assessee has been consistently following this method of creating provision and making payments in respect of aforesaid incentives. The assessee has brought on record ledger extracts to show that the liability has been paid in the subsequent year, where not claimed in the year of creating provision. The Hon ble Supreme Court of India in the case of Bharat Earth Movers Vs. CIT reported as 2000 (8) TMI 4 - SUPREME Court has held that, if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date - Decided against revenue. Addition on account of Employees share of Contribution towards Provident Fund (PF) and ESIC on account of delay - CIT(A) deleted the addition - Held that - This issue has already been settled by the Hon ble Supreme Court of India in the case of Alom Extrusions Ltd. 2009 (11) TMI 27 - SUPREME COURT . The Hon ble jurisdictional High Court in the case of Hindustan Organics Chemicals Ltd. (2014 (7) TMI 477 - BOMBAY HIGH COURT) and in the case of CIT Vs. Ghatge Patil Transport Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT following the law laid down by the Hon ble Supreme Court of India has held that the assessee would be entitled to deduction on contribution to the employee welfare funds, if the amount has been credited on or before the due date of filing of the return. We do not find any infirmity in the impugned order in deleting the addition on this count - Decided against revenue. Disallowance of depreciation - AO disallowed the claim of depreciation to the tune of ₹ 16,99,760/- on the fixed asset for which the bills were not produced - CIT(A) deleted the addition - Held that - CIT(Appeals) has admitted the contentions of assessee without verification of the bills/invoices in respect of newly acquired assets. The Assessing Officer has categorically observed in his order that the assessee has failed to produce bills in respect of assets amounting to ₹ 94,51,713/-. Whereas, the Commissioner of Income Tax (Appeals) in his order has reduced this amount to ₹ 15,95,990/- without recording the reasons. It is not clear from the order of the appellate authority, whether some more bills/invoices were furnished by the assessee before him. CIT (Appeals) has further erred in observing that the Assessing Officer has not brought on record that the assessee has inflated the purchase or has claimed excessive depreciation.We find that there is disparity between the bills produced by the assessee before the Assessing Officer and as recorded by the CIT (Appeals). In such circumstances, we deem it appropriate to remit this issue back to the Assessing Officer for reconsideration of the bills/invoices. - Decided in favour of assessee for statistical purpose.
Issues Involved:
1. Deletion of penalty levied under section 271(1)(c) for assessment year 2004-05. 2. Deletion of additions made on account of Management Incentive Bonus (MIPB) and Leave Travel Assistance (LTA) for assessment year 2008-09. 3. Deletion of additions made due to delay in deposit of Employees' share of contribution towards Provident Fund (PF) and ESIC for assessment year 2008-09. 4. Deletion of additions made on account of depreciation claimed on unproved assets for assessment year 2008-09. Issue-wise Detailed Analysis: 1. Deletion of Penalty under Section 271(1)(c) (A.Y. 2004-05): The Revenue challenged the deletion of penalty levied under section 271(1)(c) of the Income Tax Act. The penalty was initially imposed due to disallowance under section 40(a)(ia) for non-deduction of tax on sales commission paid to overseas entities and a wrong claim of deduction under section 80HHC. The Commissioner of Income Tax (Appeals) found that the sales commission was paid for services rendered outside India and was not subject to TDS as per section 9(1)(vii). Additionally, the excess deduction under section 80HHC was attributed to a bonafide error without any deliberate intention to conceal income. The Tribunal upheld the Commissioner's decision, referencing the Supreme Court ruling in CIT Vs. Reliance Petro Products P. Ltd., which stated that a mere unsustainable claim does not amount to furnishing inaccurate particulars. 2. Deletion of Addition on Account of MIPB and LTA (A.Y. 2008-09): The Revenue contested the deletion of the addition of Rs. 2,86,964 on account of Management Incentive Bonus and Leave Travel Assistance. The assessee had created provisions for these staff welfare expenses, which were paid in the subsequent year. The Tribunal referenced the Supreme Court case of Bharat Earth Movers Vs. CIT, which held that a business liability that has definitely arisen in the accounting year should be allowed as a deduction, even if it is to be discharged in the future. The Tribunal found the assessee's method of creating provisions consistent and upheld the Commissioner's deletion of the addition. 3. Deletion of Addition Due to Delay in Deposit of PF and ESIC (A.Y. 2008-09): The Revenue challenged the deletion of the addition of Rs. 98,061 due to the delayed deposit of employees' contributions towards PF and ESIC. The Tribunal noted that the contributions were deposited before the due date of filing the return under section 139. The Tribunal cited the Supreme Court decision in Alom Extrusions Ltd. and the Bombay High Court rulings in Hindustan Organics Chemicals Ltd. and CIT Vs. Ghatge Patil Transport Ltd., which supported the allowance of such deductions if the contributions were deposited before the due date of filing the return. The Tribunal upheld the Commissioner's deletion of the addition. 4. Deletion of Addition on Account of Depreciation on Unproved Assets (A.Y. 2008-09): The Revenue disputed the deletion of the addition of Rs. 16,99,760 on account of depreciation on assets for which the assessee failed to produce bills. The Commissioner of Income Tax (Appeals) had reduced the disallowed amount, stating that the missing bills were only a small percentage of the total assets. However, the Tribunal found discrepancies in the Commissioner's findings and remitted the issue back to the Assessing Officer for verification of the bills/invoices. The Tribunal instructed the Assessing Officer to reconsider the issue after verifying the documents and to provide the assessee an opportunity for a hearing. Conclusion: The Tribunal dismissed the Revenue's appeal for assessment year 2004-05 and partly accepted the appeal for assessment year 2008-09 for statistical purposes, remitting the issue of depreciation back to the Assessing Officer for further verification. The Tribunal upheld the Commissioner's decisions on the deletion of additions related to MIPB, LTA, and delayed PF and ESIC contributions.
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