9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (6) TMI 1379 - AT - Income TaxAccrual of income - Taxability of maintenance advance in the hands of assessee - assessee received advances from the customers at the time of handing over of the possession of apartments, which is accounted as current liabilities in its balance sheets - HELD THAT - CIT(A) expressed categorical view that, advances do not partake the character of income and that the maintenance advances received by a sissy cannot be characterised as income unless the maintenance services are rendered. CIT(A) rightly directed the Ld.AO to compute the amount of expenditure incurred out of the search total advances received for the year under consideration which is based on percentage completion method. Direction issued by the Ld.CIT(A) to the Ld.AO is in accordance with law and cannot be found fault with. Decision relied by the Ld.AO in case of Sundaram Finance Ltd 2012 (9) TMI 373 - SUPREME COURT are rendered on different facts and are distinguishable with that of assessee in the present case. We direct the Ld.AO to compute the maintenance attributable for the years under consideration based on the expenditure incurred and the services rendered by the assessee. Unpaid service tax liability - AO made addition invoking section 43B - AR that the assessee collected amount from its customers, towards service tax liability, however the same was not remitted - HELD THAT - Section 43B does not contemplate liability to pay the service tax before actual receipt of the funds in the account of the assessee. In our opinion, when the assessee collected the amount, it should not kept it with them and same should be deposited to the Government exchequer within the specified date and time. Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. 2014 (3) TMI 386 - KARNATAKA HIGH COURT has categorically held that the assessee would be entitled to deduction of employees' contribution to PF and ESI provided the payment was made prior to the due date of filing of return of income u/s 139(1) We note that in the event the liability stood discharged by the assessee before filing of the return of income, a liberal view can be adopted in view of the decision of Coordinate Bench of this Tribunal in case of The Continental Restaurant Caf Co 2021 (10) TMI 843 - ITAT BANGALORE . We also note that Hon ble jurisdictional High Court in case of Essae Taroka (P.) Ltd 2014 (3) TMI 386 - KARNATAKA HIGH COURT and Spectrum Consultants India (P.) Ltd. 2013 (7) TMI 414 - KARNATAKA HIGH COURT has affirmed the above view. We therefore remand this issue to the Ld.AO, to verify and consider the claim in accordance with the principles laid down in case of Essae Taroka (P.) Ltd.(supra). Ground raised by the assessee stands allowed for statistical purpose. Admission of additional ground - Disallowance made in respect of the sales tax liability discharged - AO disallowed the same holding that since the demand pertains to AY 2009-10, the same could not be allowed in AY 2010-11 - HELD THAT - We note that no new documents needs to be verified for adjudicating this ground and respectfully following the decisions of National Thermal Power Co. Ltd. Vs. CIT 1996 (12) TMI 7 - SUPREME COURT and Jute Corporation of India Ltd. 1990 (9) TMI 6 - SUPREME COURT we are admitting the additional ground raised by the assessee. We note that the demand notice was received by the assessee during financial year relevant to the assessment year 2011-12, and the assessee discharged the liability during assessment year 2011-12. We therefore agree with the submissions of the Ld.AR that the disallowance is to be deleted for AY 2011-12 as per the additional ground raised by the assessee in appeal filed for AY 2011-12. Disallowance of interest u/s 201(1A) by treating it to be penal in nature - as submitted that the interest under section 201(1A) is not penal but is compensatory and does not represent tax of the assessee as it pertains to the tax liability of a third party - HELD THAT - As decided in Resolve Salvage Fire India (P.) Ltd 2022 (4) TMI 906 - ITAT MUMBAI interest was paid for delayed payment of service tax TDS. The interest for the delay in making the payment of service tax TDS is compensatory in nature. As such the interest on delayed payment is not in the nature of penalty in the instant case on hand. The issue of delay in the payment of service tax is directly covered by the judgment of Lachmandas Mathura v. CIT 1997 (12) TMI 16 - SUPREME COURT in favour of assessee. Thus we hold that the interest paid on delayed payment of TDS u/s 201(1A) is an allowable deduction - grounds raised by the assessee stands allowed. Disallowance of interest paid to the NBFC u/s 40(a)(i) - AR submitted that though the assessee did not deduct taxes at source on the interest paid to NBFCs, it is submitted that where the payee has paid the taxes directly, no disallowance under section 40(a) would be warranted - HELD THAT - We remand to the Ld.AO to verify if the payee has paid the taxes on the interest component paid by the assessee. If the submission is found to be correct, the disallowance is directed to be deleted. Disallowance of depreciation on computer software for non deduction of TDS under section 40(a)(ia) of the Act - HELD THAT - This issue is covered in favour of assessee by the decision of Hon ble Karnataka High Court in case of PCIT vs.Tally Solutions (P.) Ltd 2020 (12) TMI 1160 - KARNATAKA HIGH COURT as held that the depreciation is not an outgoing expenditure and therefore, provisions of Section 40(a)(1) and (ia) of the Act are not applicable. In the absence of any requirement of law for making deduction of tax out of expenditure, which has been capitalized and no amount was claimed as revenue expenditure, no disallowance under section 40(a)(i) and (ia) would be made. Depreciation is a statutory deduction available to the assessee on a asset, which is wholly or partly owned by the assessee and used for business or profession. The depreciation is an allowance and not an expenditure, loss or trading liability. Disallowance of contributions made towards superannuation fund by the assessee - AO disallowed the contribution made to superannuation fund on the ground that the approval for the same had not been received, while noting that as and when the CIT accords approval, the assessee could claim the deduction - HELD THAT - We note that the assessee had applied for approval of the fund as on 27/02/2008. The Ld.AR prays for the issues to be remanded to the Ld.AO for due consideration of the approval dated 18.09.2017. The Ld.DR did not object for the submission made by the Ld.AR. We are therefore remanding this issue back to the Ld.AO with a direction to consider the approval dated 18/09/2017, in accordance with law. Disallowance u/s 14A - working disallowance u/s 14A by considering the investment which have yielded tax free income - HELD THAT - We find force in the submission of Ld.AR. As decided in case of CIT vs. Holcim India Pvt. Ltd. 2014 (9) TMI 434 - DELHI HIGH COURT , case of CIT vs. Corrtech Engineering Pvt. Ltd. 2014 (3) TMI 856 - GUJARAT HIGH COURT and decision of CIT v. Shivam Motors (P.) Ltd. 2014 (5) TMI 592 - ALLAHABAD HIGH COURT has held that Section 14A of the Act, cannot be involved when no exempt income was earned. The contention of the assessee that, it received dividend only from certain investments has not been controverted by the revenue - we are of the view that disallowance u/s 14A needs to be re-worked on the basis of the investments which have yielded tax free income. We therefore direct the Ld.AO to work out disallowance u/s.14A r.w.r 8D on the basis of investments which had yielded dividend.
Issues Involved:
1. Taxability of maintenance advance. 2. Addition of unpaid service tax liability under section 43B. 3. Disallowance of sales tax liability. 4. Disallowance of interest under section 201(1A). 5. Disallowance of interest paid to NBFC under section 40(a)(i). 6. Disallowance of depreciation on computer software under section 40(a)(ia). 7. Disallowance of contributions to superannuation fund. 8. Disallowance of interest on borrowed funds. 9. Disallowance under section 14A. Issue-wise Detailed Analysis: 1. Taxability of Maintenance Advance: The Tribunal observed that the assessee received advances from customers at the time of handing over possession of apartments, which were accounted as current liabilities. The Ld.CIT(A) directed the Ld.AO to compute the amount of expenditure incurred from the maintenance advance received and then bring it to tax. The Tribunal upheld this direction, noting that maintenance advances do not partake the character of income unless the services are rendered. The decision of the Hon'ble Supreme Court in Sundaram Finance Ltd vs. CIT was found distinguishable. 2. Addition of Unpaid Service Tax Liability under Section 43B: The Tribunal noted that the unpaid service tax liability was retained as part of current liabilities and was not debited to the P&L account, thus section 43B was not applicable. The Tribunal remanded the issue to the Ld.AO to verify if the liability was discharged before filing the return of income, in line with the decision in Essae Teraoka (P.) Ltd. 3. Disallowance of Sales Tax Liability: The Tribunal admitted the additional ground for AY 2011-12 since the sales tax demand was raised and paid during that year. The demand notice was received during the financial year relevant to AY 2011-12, and the liability was discharged in that year. Thus, the disallowance for AY 2010-11 was dismissed, and the additional ground for AY 2011-12 was allowed. 4. Disallowance of Interest under Section 201(1A): The Tribunal held that interest under section 201(1A) is compensatory and not penal in nature, and directed the Ld.AO to delete the disallowance, following the decision in Resolve Salvage & Fire India (P.) Ltd. v. DCIT. 5. Disallowance of Interest Paid to NBFC under Section 40(a)(i): The Tribunal remanded the issue to the Ld.AO to verify if the payee had paid the taxes on the interest component. If the payee had paid the taxes, the disallowance should be deleted, in line with the decision in CIT v. Sahara India Commercial Corpn. Ltd. 6. Disallowance of Depreciation on Computer Software under Section 40(a)(ia): The Tribunal noted that depreciation is an allowance and not an expenditure, thus section 40(a)(ia) is not applicable. This was supported by the decision in PCIT vs. Tally Solutions (P.) Ltd., and the ground was allowed. 7. Disallowance of Contributions to Superannuation Fund: The Tribunal remanded the issue to the Ld.AO to consider the approval dated 18.09.2017 for the superannuation fund, as the approval was applied for on 27/02/2008. The ground was allowed for statistical purposes. 8. Disallowance of Interest on Borrowed Funds: The Tribunal noted that the AO did not establish a nexus between the loans received and the payment of advance tax. The borrowed funds were fully utilized for business purposes, and thus no addition was warranted. 9. Disallowance under Section 14A: The Tribunal directed the Ld.AO to rework the disallowance under section 14A based on investments that yielded tax-free income, following decisions from various High Courts that section 14A cannot be invoked when no exempt income was earned. Conclusion: The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeals for AYs 2010-11 and 2011-12. The order was pronounced on 29th June 2022.
|
