9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (1) TMI 1399 - AT - Income TaxMAT computation - Addition towards amortisation of subsidised cost to the book profit computed u/s 115JB - Held that - It is an admitted fact that the assessee has prepared its accounts in accordance with Parts II and III of Schedule VI of the Companies Act 1956. The accounts of the assessee has been audited by the statutory auditors and also approved by the Board. Once accounts are prepared in accordance with Parts II and III of Schedule VI of the Companies Act and such accounts have been approved by the Board of directors of the company then there is no scope for the AO to make any adjustment towards book profit computed u/s 115JB. In this case such adjustment is not in accordance with Explanation 1 to section 115JB. We further notice that the adjustments made by the AO towards amortisation of subsidised cost is not an item of positive adjustment provided under Explanation 1 to section 115JB of the Act. Therefore we are of the considered view that the AO was incorrect in making adjustments towards book profit in respect of amortisation of subsidised cost. See case of Apollo Tyres Ltd vs CIT (2002 (5) TMI 5 - SUPREME COURT) wherein it was observed that the AO is not permitted to make any adjustment towards book profit once the accounts are prepared in accordance with Parts II and III of Schedule VI of the Companies Act 1956. Addition towards share capital and share premium u/s 68 - unexplained cash credit - assessee failed to justify issue of shares at a premium and no evidence / documents have been filed to prove the identity genuineness of transactions and creditworthiness of the parties - Held that - There is no reason for the AO to doubt the genuineness of transaction only on the basis of issue of shares at a premium when the issue of shares at a premium is not at all relevant for the purpose of addition made u/s 68 of the Act. What needs to be considered for the purpose of unexplained cash credit u/s 68 is identity genuineness of transaction and creditworthiness of the parties. In this case the assessee has proved all the 3 ingredients by filing necessary evidences and hence there is no reason for the AO to make addition towards share premium when share premium cannot be considered as unexplained credit u/s 68 of the Act. The CIT(A) after considering relevant facts has rightly deleted addition made by the AO. Disallowance of expenditure for setting up of UAE branch - AO disallowed expenditure incurred for setting up of UAE branch on the ground that the assessee has not carried out any commercial activity; hence expenditure is to be considered as preliminary and preoperative expenses u/s 35D - Held that - We find merits in the arguments of the assessee for the reason that the assessee has incurred various expenditure including registration charges rent of premises travelling expenses of its personnel and other miscellaneous expenses to set up a branch office in UAE in connection with its existing business. The assessee is already in the business of sales in UAE and only for facilitation of its business has set up a branch office - expenditure incurred by the assessee is a revenue expenditure which cannot be considered as preliminary and preoperative expenses coming within the purview of section 35D of the Act. The CIT(A) after considering relevant facts has rightly deleted addition made by the AO. Disallowance of interest expenses - assessee has diverted interest bearing funds to give loans to group companies - Held that - We find merits in the arguments of the assessee for the reason that the assessee has demonstrated with evidence that loans to group companies are out of its own funds and also such loans has been given in commercial interest therefore the AO was incorrect in disallowing proportionate interest on loans given to group companies. The assessee is holding more than 33% equity stake in the company for which loans have been given and also derived commercial benefit. Therefore the AO was incorrect in holding that the assessee has diverted interest bearing funds to give loans to group companies. The CIT(A) after considering relevant submissions has rightly deleted addition made by the AO. We do not find any error in the order of CIT(A). Hence we are inclined to uphold the findings of the CIT(A) and dismiss ground raised by the revenue. Addition of outstanding sundry creditors u/s 41(1) - Held that - AO has made addition towards sundry creditors without bringing on record any evidence to prove that there is cessation of liability in the impugned financial year and also the assessee has derived benefit out of such cessation of liability. Therefore we are of the considered view that the CIT(A) was right in deleting addition made by the AO towards sundry creditors u/s 41(1) - no error in the order of the CIT(A) and therefore we are inclined to uphold the order of the CIT(A) and reject ground raised by the revenue. Short deduction of tds u/s 194C or 194J - digital print fee is incurred for the services rendered which is professional / technical service - Held that - we find merits in the arguments of the assessee for the reason that once there is compliance to TDS provisions even if there is short deduction of TDS or TDS has been deducted under different sections there is no scope for the AO to disallow expenditure u/s 40(a)(ia) of the Act as the provisions u/s 40(a)(ia) is applicable only when there is no TDS deduction. This legal proposition is supported by the decision in the case of CIT vs SK Tekriwal (2012 (12) TMI 873 - CALCUTTA HIGH COURT) wherein it was held that if there is lesser deduction of TDS due to any difference of opinion no disallowance can be made u/s 40(a)(ia) of the Act. If there is short deduction the revenue is free to proceed to pass an order u/s 201 of the Act but no disallowance can be made u/s 40(a)(ia) Addition made towards AIR mismatch - the assessee has made TDS claim of 1, 258 without considering corresponding receipts in the books of account - contention of the assessee that it has furnished reconciliation of TDS difference and explained that certain parties have deducted excess TDS - Held that - We find merits in the argument of the assessee for the reason that when the assessee has filed reconciliation statement explaining difference in TDS claim there is no reason for the AO to resort to notional addition on the basis of TDS claim. The CIT(A) after considering relevant facts has rightly deleted addition made by the AO. We do not find any error or infirmity in the order of the CIT(A); hence we are inclined to uphold the findings of the CIT(A) and reject ground raised by the revenue. - Assessee appeal allowed.
Issues Involved:
1. Addition towards unexplained cash credits towards share capital and share premium. 2. Disallowance of expenditure incurred on UAE branch. 3. Disallowance of interest on inter-corporate loans. 4. Addition towards cessation of liability under Section 41(1). 5. Disallowance of expenditure for failure to deduct TDS/short deduction of TDS under Section 194C. 6. Addition towards AIR mismatch. 7. Disallowance of amortization of subsidized cost. Detailed Analysis: 1. Addition towards unexplained cash credits towards share capital and share premium: The AO made an addition towards share capital and share premium under Section 68, doubting the genuineness of the transactions due to the high premium charged. The assessee justified the premium, citing strategic investment by UFO and provided necessary documents to prove the identity, genuineness, and creditworthiness of the parties. The CIT(A) deleted the addition, noting that the share premium is a capital receipt and cannot be taxed. The Tribunal upheld the CIT(A)'s decision, stating that the AO failed to provide contrary evidence and that the share premium cannot be considered unexplained cash credit under Section 68. 2. Disallowance of expenditure incurred on UAE branch: The AO disallowed the expenditure incurred for setting up a UAE branch, treating it as preliminary and preoperative expenses under Section 35D. The assessee argued that the expenses were regular business expenditures. The Tribunal found merit in the assessee's argument, noting that the expenses were incurred for an existing business and should be treated as revenue expenditure. The CIT(A)'s decision to delete the addition was upheld. 3. Disallowance of interest on inter-corporate loans: The AO disallowed interest expenses, alleging that the assessee diverted interest-bearing funds to group companies. The assessee contended that the loans were given from its own funds and in commercial interest. The Tribunal agreed with the assessee, noting that the loans were given for commercial benefit and from the assessee's own funds. The CIT(A)'s decision to delete the disallowance was upheld. 4. Addition towards cessation of liability under Section 41(1): The AO added unproved sundry creditors under Section 41(1), claiming the assessee failed to provide evidence. The assessee argued that the liabilities were paid in the subsequent year. The Tribunal found that the liabilities were indeed paid later, and there was no cessation of liability. The CIT(A)'s decision to delete the addition was upheld. 5. Disallowance of expenditure for failure to deduct TDS/short deduction of TDS under Section 194C: The AO disallowed expenditure due to short deduction of TDS, suggesting Section 194J was applicable. The assessee argued that Section 194C was correctly applied and cited a Calcutta High Court decision stating that short deduction does not warrant disallowance under Section 40(a)(ia). The Tribunal agreed, noting compliance with TDS provisions and upheld the CIT(A)'s decision to delete the disallowance. 6. Addition towards AIR mismatch: The AO added an amount due to a mismatch in TDS claims. The assessee provided a reconciliation statement, explaining the discrepancy. The Tribunal found the explanation satisfactory and upheld the CIT(A)'s decision to delete the addition. 7. Disallowance of amortization of subsidized cost: The AO recomputed book profit under Section 115JB, disallowing amortization of subsidized cost due to a change in accounting policy. The assessee argued that the financial statements were prepared according to the Companies Act and audited. The Tribunal agreed, citing Supreme Court decisions that the AO cannot adjust book profits if accounts are prepared per statutory requirements. The CIT(A)'s decision to delete the adjustment was upheld. Conclusion: The assessee's appeal was allowed, and the revenue's appeal was dismissed. The Tribunal upheld the CIT(A)'s decisions on all issues, finding no errors or contrary evidence from the revenue.
|
