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2014 (10) TMI 987 - AT - Income TaxTDS u/s 194I - disallowance of Compensation expenses paid on the ground of non deduction of TDS u/s. 40(a)(ia) - assessee has filed additional evidence in the fact that recipient of the amount Shri Sureshchandra J. Shah has shown the amount received in his return of income and paid tax thereon - Held that - In view of Second Proviso to 40(a)(ia) of the Act inserted by the Finance (No.2) Act, 2004, w.e.f. 01.04.2004, which has been held to be retrospective in effect by the Agra Bench of the tribunal in the case of Rajeev Kumar Agarwal vs. ACIT 2014 (6) TMI 79 - ITAT AGRA , no disallowance can be made in the hands of the assessee of the expenditure claimed by the assessee. Therefore, we accept the additional evidence filed by the assessee and restore the matter back to the file of Assessing Officer for readjudication of the issue afresh after taking into consideration the additional evidences filed by the assessee as per law. As a result, this ground of appeal as well as additional ground is allowed for statistical purpose. Amount received on sale of sales tax entitlements excluded from the profit derived from eligible unit being wind mill - Held that - As decided in assessee 2014 (9) TMI 131 - ITAT AHMEDABAD as held that the main purpose of the resolution was to modernize industries, which ordinarily would come at a considerable cost, particularly when such industries were located in under-developed areas - The industries will find it difficult without Government s incentive to undertake large-scale modernization with the use of modern technology.the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to-day functioning of the business, or for making the industry more profitable - The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry the matter is remitted back for fresh adjudication Decided in favour of assessee. Disallowance of deduction claimed u/s. 80IA for profits derived from electricity generation from wind mill at Bhogat, Gujarat - Held that - As decided in assessee 2014 (9) TMI 131 - ITAT AHMEDABAD tribunal has not erred in holding that there was no rectification possible u/s 80-I for reasons somewhat different from those which prevailed with the Tribunal - There was no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year re-computation of income for the purpose of computing permissible deduction u/s 80-I for the new industrial undertaking was not required in the present case - the assessee has not suffered any loss in the year - no brought forward loss or depreciation could be reduced for determining the amount in which the deduction is to be allowed u/s. 80IA of the Act Decided in favour of assessee. Treatment of the amount received on sales tax entitlement as capital receipt - Held that - Set aside the order of lower authorities on the issue and remit this issue to the file of A.O. for re-adjudicating the issue as per direction of Tribunal given 2014 (9) TMI 131 - ITAT AHMEDABAD Disallowance of excessive expenditure claimed u/s.40A(2)(b) - Held that - Similar issue arose in A.Y. 06-07 2010 (3) TMI 1236 - ITAT AHEMDABAD as held that it is nobody s case that the transactions of purchase from the sister concerns were not bona fide transactions nor is it the case of the Revenue that these were sham transactions or that the price paid in respect of each of these transactions by the assessee was other than the one set out in the books of account of the assessee. Under these circumstances it appears to us that the taxing authorities had no right to substitute the average price in place of the price or value agreed to between the parties to the transaction, since the transaction has not been shown to be a sham one nor has it been shown that the value was not the value in the books of account.In view of the foregoing, we are not inclined to agree with the reasons of the ld. CIT(A) and therefore, delete the disallowance made by the AO - Decided against revenue
Issues Involved:
1. Disallowance of compensation expenses due to non-deduction of TDS. 2. Exclusion of sales tax entitlements from profits derived from the windmill. 3. Disallowance of deduction claimed under section 80IA for profits from electricity generation from windmills. 4. Treatment of sales tax entitlement as capital receipt. 5. Disallowance of excessive expenditure claimed under section 40A(2)(b). Issue-wise Detailed Analysis: 1. Disallowance of Compensation Expenses Due to Non-Deduction of TDS: The assessee challenged the disallowance of Rs. 6,35,824/- paid as compensation for non-deduction of TDS under section 40(a)(ia). The Assessing Officer (A.O.) considered this payment as rent, requiring TDS under section 194I. The Tribunal, referencing a similar case (ITA No. 3014/Ahd/2010), accepted additional evidence showing that the recipient had paid tax on the amount received, thus invoking the second proviso to section 40(a)(ia), which is retrospective. The Tribunal set aside the matter to the A.O. for reconsideration with this evidence. 2. Exclusion of Sales Tax Entitlements from Profits Derived from the Windmill: The A.O. excluded Rs. 24,20,833/- received from sales tax entitlements from the profits of the windmill unit at Satara, Maharashtra. The CIT(A) upheld this exclusion, but the Tribunal, following its decision in the assessee's case for A.Y. 2009-10, ruled in favor of the assessee. The Tribunal noted that the sales tax entitlements should be included in the profits derived from the windmill, thus setting aside the lower authorities' orders. 3. Disallowance of Deduction Claimed under Section 80IA for Profits from Electricity Generation from Windmills: The A.O. disallowed deductions under section 80IA for profits from electricity generation from windmills at Bhogat, Gujarat (Rs. 5,40,148/-) and Satara, Maharashtra (Rs. 35,91,513/-). The CIT(A) confirmed these disallowances. However, the Tribunal, referencing its earlier decision in the assessee's case for A.Y. 2009-10, ruled in favor of the assessee. The Tribunal noted that the initial assessment year chosen by the assessee should be respected, and losses prior to this year should not be brought forward. Thus, the Tribunal allowed the deductions under section 80IA. 4. Treatment of Sales Tax Entitlement as Capital Receipt: The assessee argued that sales tax entitlements should be treated as capital receipts, not liable to tax. The Tribunal, referencing a similar issue in ITA No. 3014/Ahd/2010 for A.Y. 2007-08, remanded the matter back to the A.O. for reconsideration. The A.O. was directed to reassess the issue after considering the scheme under which the entitlements were received and the relevant judicial precedents. 5. Disallowance of Excessive Expenditure Claimed under Section 40A(2)(b): The A.O. disallowed Rs. 2,62,32,096/- for A.Y. 2008-09 and Rs. 2,38,06,502/- for A.Y. 2009-10, considering the payments to the assessee's sister concern as excessive. The CIT(A) deleted these additions. The Tribunal upheld the CIT(A)'s decision, noting that the A.O. failed to provide a fair market comparison and did not consider transportation costs and other relevant factors. The Tribunal emphasized that the transactions were bona fide and there was no tax evasion. Conclusion: The Tribunal's judgment addressed multiple issues, often favoring the assessee by setting aside disallowances and remanding matters for reconsideration with additional evidence or proper legal interpretation. The decisions were heavily influenced by prior judgments and the specifics of the assessee's case history.
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