2014 (6) TMI 1015 - AT - Income Tax

Addition u/s 43B - deduction for deposit of electricity duty as per the directions of the Hon ble Odisha High Court - Held that - The word used u/s 43B are same as actually paid . By depositing the amount in a designated account, it cannot be said that amount has actually been paid by the Assessee to the State Government. Whenever payment is made in respect of a liability, the receiver of the amount must be the person who has received the amount. The plain meaning of the expression actually paid means that the same should have actually been paid to the coffer of the State Government. Depositing the amount with the third party, in our opinion, will not tantamount to actual payment made to the State Government. The Assessee may not have no lien on the account in which the amount has been deposited but that does not mean that the amount has actually been paid to the State Government. The amount is kept into no-lien account just to ensure the payment of the liability in the event of State Government succeeding in the pending litigation. This cannot be regarded to be the sum actually paid to the State Government for the electricity tariff. The Assessee has disputed the liability and went before the Hon ble High Court. On the direction of the Hon ble High Court the amount has been deposited by the Assessee in the designated no-lien account with the banker. This, by no stretch of imagination can be regarded to be the discharge of the liability by the Assessee. Actual payment of the amount means that the liability is actually discharged by the Assessee. - Decided against assessee. Claim of deduction in respect of foreign traveling expenditure of the Directors - allowable busniss expenditure - Held that - AO has disallowed 20% of the expenditure as the Assessee did not file before the AO the tour itinerary of the Directors, details of item-wise expenses incurred by each of the Directors on travel, stay and entertainment etc. Not only this, even though the Assessee has gone before the CIT(A) in respect of the said ground of appeal, but before the CIT(A) the Assessee did not press the said ground of appeal. Before us, even though the Assessee has taken the ground but did not place any cogent material or evidence for non-filing of which the AO had made the disallowance. The contention of the Assessee cannot be accepted that the AO has not asked for the evidences. If the Assessee had necessary evidences, he could have produced the same before the CIT(A) or before us. Under these circumstances, we dismiss the ground taken by the Assessee and confirm the order of AO. - Decided against assessee.

Summary

Issues Involved:
1. Disallowance of deduction of Rs. 6,29,11,949/- under Section 43B of the Income Tax Act.
2. Disallowance of 20% of expenditure on "Export Promotion Expenses [Foreign Travelling of Directors]".

Issue-wise Detailed Analysis:

1. Disallowance of Deduction of Rs. 6,29,11,949/- under Section 43B:
The Assessee claimed a deduction for Rs. 6,29,11,949/- representing the deposit of electricity duty in a designated non-lien bank account as per the directions of the Hon'ble Odisha High Court. The AO disallowed this deduction under Section 43B of the Income Tax Act, which was upheld by the CIT(A).

The facts reveal that the Assessee was paying electricity duty at a lower rate (6 paise/unit) while the government demanded a higher rate (20 paise/unit). The differential amount was deposited in a "no-lien" account as per the High Court's interim order. The Assessee argued that since the amount had accrued and was deposited in a no-lien account, it should be deductible under Section 37(1) of the Act.

The Tribunal analyzed the statutory provisions and judicial precedents, particularly the Supreme Court's decision in Kedarnath Jute Manufacturing Co. Ltd. vs. CIT, which established that statutory liabilities accrue when the taxable event occurs, even if disputed. However, Section 43B requires actual payment for the deduction to be allowed. The Tribunal concluded that depositing the amount in a no-lien account did not equate to actual payment to the State Government. Therefore, the deduction was not allowable under Section 43B, and the disallowance by the AO and CIT(A) was upheld.

2. Disallowance of 20% of Expenditure on "Export Promotion Expenses [Foreign Travelling of Directors]":
The Assessee claimed foreign travel expenses of Rs. 1,55,80,882/- for its Directors. The AO disallowed 20% of these expenses on the grounds that the Assessee did not provide complete details, including itineraries and item-wise expenditure. This disallowance was also upheld by the CIT(A) as the Assessee did not press this ground before the appellate authority.

Upon review, the Tribunal noted that the Assessee had only provided basic details such as the names of the Directors, places visited, and the purpose of the visits. The Assessee failed to furnish detailed evidence to substantiate the expenses, such as itineraries and item-wise costs. The Tribunal emphasized that the onus is on the Assessee to prove the genuineness and business purpose of the expenditure. Since the Assessee did not provide sufficient evidence even before the Tribunal, the disallowance of 20% of the foreign travel expenses was confirmed.

Conclusion:
The appeal filed by the Assessee was dismissed. The Tribunal upheld the disallowance of Rs. 6,29,11,949/- under Section 43B as the amount was not actually paid to the State Government. Additionally, the disallowance of 20% of the foreign travel expenses was confirmed due to the Assessee's failure to provide adequate evidence to substantiate the claim.