2017 (10) TMI 1559 - AT - Income Tax

Disallowance of service tax written of and charged to P L account - HELD THAT - The assessee has clearly explained the rationale for claiming the impugned sum which has been upheld by the different benches of the Tribunal.. As the facts of this case and the facts of the cases in which the Hon'ble ITAT, Hyderabad had relied and rendered the decision are identical with the assessee, the order of the CIT(A) is held as justified and hence the grounds of Revenue s appeal are dismissed. Disallowance u/s 14A - HELD THAT - As Revenue pleads that CIT (A) ought to have brought out materials to show that the impugned investments were made out of surplus and no borrowed funds were utilized for the investments. Since the relevant facts are not brought in the order of the CIT(A) , we deem it fit to set aside this issue to the A O for a fresh examination. The A O, after affording due opportunity to the assessee , shall pass a speaking order. Disallowance of demurrage charges u/s 40a(i) 40(a)(ia) - HELD THAT - DR presented his arguments on the lines of the assessment order and on the grounds of appeal . Per Contra, the AR invited our attention to the relevant portion of the paper book wherein a copy of sales contract with M/s Noble Resources, commercial invoice from M/s Noble Resources and invoice , Debit note issued to appellant from M/s Golden Agri International Pte Ltd, Singapore and submitted that the assessee made reimbursements only. The D R submitted since these documents are presented for the first time they require scrutiny. We heard the rival contentions. Since the relevant facts require examination, we deem it fit to set aside this issue to the A O for a fresh examination. The A O, after affording due opportunity to the assessee , shall pass a speaking order. Payments made to Chennai Port Trust without TDS - on the port Entry Pass, weighment charges, reimbursement of expenses to the port trust, the assessee pleaded before the CIT (A) that these payments do not attract TDS provisions and hence no need to deduct tax. The CIT (A) held that this is explanation is acceptable and hence the disallowances made against these amounts are directed to be deleted - HELD THAT - Since the relevant facts require examination, we deem it fit to set aside this issue to the A O for a fresh examination. The AO , after affording due opportunity to the assessee, shall pass a speaking order.

Summary

Issues Involved:
1. Disallowance of service tax write-off for AY 2007-08.
2. Disallowance of expenditures for AY 2011-12 under various sections including 14A, 40(a)(ia), and 40(a)(i).

Detailed Analysis:

1. Disallowance of Service Tax Write-Off for AY 2007-08

The Revenue filed an appeal against the CIT(A)'s order, which allowed the assessee's claim of writing off ?1,83,04,644/- in the Service Tax Set Off Account. The Revenue argued that the CIT(A) erred in allowing this write-off, as the facts of the case were distinguishable from the precedent cited (M/s NCS Distilleries P. Ltd. vs. ITO). The CIT(A) had relied on the ITAT Hyderabad decision, which allowed a similar claim for a business that had closed down, whereas the assessee in this case was still operational.

The CIT(A) found that the assessee had validly claimed the write-off due to the inability to utilize the service tax credit, following the withdrawal of excise duty on edible oil and objections from the Service Tax Department. The CIT(A) noted that the expenditures were incurred for the business and were deferred due to statutory provisions. The Tribunal upheld the CIT(A)'s decision, stating that the facts were identical to those in the ITAT Hyderabad case and other precedents supporting the assessee's claim.

2. Disallowance of Expenditures for AY 2011-12

a. Disallowance under Section 14A:

The AO disallowed ?7,49,214/- under Section 14A, arguing that the assessee incurred some expenditure for earning exempt dividend income. The CIT(A) allowed the assessee's appeal, noting that the investments were made from own funds and no specific expenditure was incurred. The Tribunal remanded the issue back to the AO for fresh examination, directing the AO to pass a speaking order after considering the relevant facts.

b. Disallowance of Demurrage Charges under Section 40(a)(i) & 40(a)(ia):

The AO disallowed ?39,44,658/- paid as demurrage charges to foreign companies without TDS. The CIT(A) held that these were reimbursements and did not attract TDS provisions. The Tribunal remanded the issue back to the AO for fresh examination, instructing the AO to scrutinize the relevant documents and pass a speaking order.

c. Disallowance of Payments to Chennai Port Trust:

The AO disallowed ?38,27,366/- paid to Chennai Port Trust without TDS. The CIT(A) deleted the disallowance for port entry pass, weighment charges, and reimbursement of expenses, accepting the assessee's explanation that these payments did not attract TDS provisions. The Tribunal remanded the issue back to the AO for fresh examination, directing the AO to pass a speaking order after considering the relevant facts.

Conclusion:
The Tribunal dismissed the Revenue’s appeal for AY 2007-08, upholding the CIT(A)'s decision on the service tax write-off. For AY 2011-12, the Tribunal remanded the issues of disallowance under Section 14A, demurrage charges, and payments to Chennai Port Trust back to the AO for fresh examination and a speaking order.