2016 (5) TMI 1546 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - HELD THAT - Considering assessee's own case 2015 (6) TMI 412 - ITAT MUMBAI and assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that considering the totality of circumstances and the facts, the expenses equal to 4% of the exempt income, earned by the assessee, was held to be reasonable disallowance, therefore, following the aforesaid decision of the Tribunal, the ld. Assessing Officer is directed to follow the aforesaid order, therefore, this ground is partly allowed. Addition of value of closing stock u/s 145A on account of cenvat credit in respect of goods other than capital goods - HELD THAT - Considering assessee's own case 2015 (6) TMI 412 - ITAT MUMBAI since the assessee has followed the guidance note issued by the ICAI, it would be in a position to demonstrate the above said fact before the AO, i.e., the assessee could establish that there was no change in the income under both the methods by furnishing necessary workings. Accordingly, we are of the view that the assessee should be given one more opportunity to demonstrate this fact. If the assessee fails to furnish the workings discussed above, in our view, the AO should consider the alternative contention of the assessee, viz., to adjust the opening stock with the correct amount that was actually adjusted in the closing stock of immediately preceding year. We have already noticed that the there was contradiction in the stand of DRP. If the service tax is considered to the tax incurred in bringing the goods to the present location and condition, then the same is required to be adjusted both in the opening stock and closing stock. Otherwise, the same should not be adjusted in both the items. Addition u/s 40(a)(ia) - short deduction of TDS - HELD THAT - We find that this issue has been examined by the Mumbai Bench of the Tribunal 2011 (7) TMI 956 - ITAT MUMBAI , wherein, it was held that the provisions of section 40(a)(ia) can be invoked only in the event of non-deduction of tax at source but not lessor deduction of tax at source. Identical view was taken by Hon ble Kolkata High Court in the case of S.K. Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT In the absence of any contrary decision brought to our notice, we allow this ground of the assessee. Granting credit for tax deducted at source as against claimed in the revised return and thereby short credit and charging interest u/s 234 - counsel contended that there is calculation mistake, therefore, the Assessing Officer may be directed to verify the claim of the assessee - HELD THAT - DR had no objection to the request of the assessee. Thus, considering the totality of facts and the assertions from both sides, we direct the ld. Assessing Officer to examine the claim of the assessee and after providing due opportunity of being heard decide in accordance with law, consequently, both these grounds are allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance under section 14A of the Income Tax Act.
2. Addition to closing stock under section 145A of the Act on account of CENVAT credit.
3. Addition under section 40(a)(ia) of the Act.
4. Addition under section 40(a)(ia) of the Act for short deduction of TDS.
5. Disallowance under section 43B in respect of motivator and leave encashment provision.
6. Granting credit for tax deducted at source.
7. Charging of interest under section 234B.

Issue-wise Detailed Analysis:

1. Disallowance under section 14A of the Income Tax Act:
The assessee contested the disallowance of ?33,52,540/- under section 14A. The Tribunal referred to its previous decision (Assessment Year 2006-07) where it was held that Rule 8D of the Income Tax Rules is not applicable retrospectively and can only be applied if the assessee's method is unsatisfactory. The Tribunal concluded that expenses equal to 4% of the exempt income earned by the assessee would constitute a reasonable disallowance. Consequently, the Assessing Officer was directed to follow this order, partially allowing the ground of appeal.

2. Addition to closing stock under section 145A of the Act on account of CENVAT credit:
The assessee disputed the addition of ?2,10,08,937/- to the closing stock. The Tribunal cited its earlier decision, which stated that the valuation of purchase, sale of goods, and inventory should include the amount of any tax, duty, cess, or fee incurred. The Tribunal noted contradictions in the DRP's approach and directed the Assessing Officer to re-examine the matter, allowing the assessee to demonstrate that there was no tax implication under both inclusive and exclusive methods. This ground was allowed for statistical purposes.

3. Addition under section 40(a)(ia) of the Act:
The assessee failed to substantiate its claim regarding the addition of ?4,52,19,313/-. Therefore, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and decided this ground against the assessee.

4. Addition under section 40(a)(ia) of the Act for short deduction of TDS:
The assessee argued that no disallowance should be made for short deduction of TDS, citing decisions from the Hon'ble Kolkata High Court and the Tribunal. The Tribunal agreed, referencing previous judgments that section 40(a)(ia) applies only to non-deduction of tax, not lesser deduction. This ground was allowed in favor of the assessee.

5. Disallowance under section 43B in respect of motivator and leave encashment provision:
The assessee claimed a factual error in the disallowance of ?28,76,961/-. The Tribunal directed the Assessing Officer to re-examine the claim and decide after providing an opportunity for the assessee to be heard. This ground was allowed for statistical purposes.

6. Granting credit for tax deducted at source:
The assessee contended there was a calculation mistake in granting credit for TDS. The Tribunal directed the Assessing Officer to verify the claim and decide accordingly. This ground was allowed for statistical purposes.

7. Charging of interest under section 234B:
The issue of charging interest of ?1,51,95,613/- under section 234B was deemed consequential. The Tribunal directed the Assessing Officer to re-examine the claim afresh.

Conclusion:
The appeal of the assessee was partly allowed for statistical purposes, with directions for the Assessing Officer to re-examine several claims and provide opportunities for the assessee to be heard. The order was pronounced in the presence of representatives from both sides on 18/05/2016.