2016 (3) TMI 244 - AT - Income Tax

Allowance of puja expense and temple expenses - whether such expenses are non-business expenditure? - Held that - We find that the puja expense incurred on occasion of Diwali and Mahurat are customary expenses and going by the turnover of the assessee-company and the nature of the business of the assessee, we feel that these are incurred for the harmony of the assessee-company s employees and these are for the purpose of business. Similar are the reasons for incurring temple expense. Hence expenditure allowed - Decided in favour of assessee Addition made on account of cess on green leaf - Held that - This issue is covered by the decision of AFT Industries Ltd. V. CIT (2004 (7) TMI 81 - CALCUTTA High Court) wherein it has been decided by Hon ble jurisdictional High Court that cess on green leaf is a normal business expenditure and once the Hon ble jurisdictional High Court decides the issue in favour of assessee, same is covered.- Decided in favour of assessee Non-deduction of TDS on expenses of commission payment u/s. 195(1) - Held that - The commission paid to foreign agents, who are not having permanent establishment business place in India and they are providing services outside India and even the payment is directly made outside India in foreign exchange. According to assessee, assessee s income does not accrue or arise in India and once income does not accrue or arise in India, the assessee is not liable to deduct TDS on foreign payments. This issue is covered by the decision of Hon ble Supreme Court in the case of GE India Technology Centre P. Ltd. v. CIT (2010 (9) TMI 7 - SUPREME COURT OF INDIA ) in favour of assessee Disallowance of Nursery Expenses - revenue v/s capital expenses - Held that - We find that the assessee has incurred expenditure for replantation in the existing area and plants grown in the nursery were used for replacement of dead plants within the plantation area. This fact has not been denied by revenue before CIT(A) or before us now. The AO also noted that this is re-plantation in the existing area and replacement of dead plants but by going through the volume of expenditure he made disallowance and Hon ble jurisdictional High Court in the case of Tasati Tea Ltd., (2003 (2) TMI 42 - CALCUTTA High Court ) has considered the issue and allowed the claim of replacement of plants in existing area against dead plants. The expenditure claimed by appellant is to be allowed as revenue expenditure - Decided in favour of assessee MAT computation - deduction of wealth tax while computing book profit u/s. 115JB - Held that - No infirmity in the order of CIT(A) as he allowed the claim of assessee by relying on the decision of ITAT Kolkata in the case of Usha Martin Industries Ltd., (2000 (3) TMI 170 - ITAT CALCUTTA-E ). CIT(A) didn t erred in law in directing the AO to deduct Wealth Tax from the net profit to ascertain book profit u/s. 115JB. - Decided in favour of assessee

Summary

Issues involved:
1. Allowance of Puja and temple expenses as business expenses.
2. Deletion of addition on account of cess on green leaf.
3. Deletion of disallowance on non-deduction of TDS on commission payment.
4. Treatment of nursery expenses as revenue expenditure.
5. Deduction of wealth tax while computing book profit under section 115JB.
6. Rejection of addition made towards donation.

Issue 1: Allowance of Puja and temple expenses as business expenses:
The Revenue appealed against the CIT(A)'s decision to allow Puja and temple expenses as business expenses. The Tribunal confirmed the CIT(A)'s decision based on a similar case precedent, stating that the expenses were incurred for the harmony of the company's employees and the purpose of the business. The Tribunal dismissed the Revenue's appeal on this issue.

Issue 2: Deletion of addition on account of cess on green leaf:
The Revenue contested the deletion of the addition made on account of cess on green leaf. The Tribunal upheld the CIT(A)'s decision based on a jurisdictional High Court ruling that deemed cess on green leaf as a normal business expenditure. The Tribunal dismissed the Revenue's appeal on this issue.

Issue 3: Deletion of disallowance on non-deduction of TDS on commission payment:
The Revenue challenged the CIT(A)'s deletion of the disallowance on account of non-deduction of TDS on commission payment. The Tribunal upheld the CIT(A)'s decision, citing a Supreme Court judgment that clarified the obligation to deduct TDS only when the income is chargeable under the Act. As the income did not arise in India, TDS was not applicable. The Tribunal dismissed the Revenue's appeal on this issue.

Issue 4: Treatment of nursery expenses as revenue expenditure:
The Revenue disputed the CIT(A)'s decision to delete the disallowance of nursery expenses, arguing that they should be considered capital in nature. The Tribunal upheld the CIT(A)'s decision, stating that the expenses were for replantation within the existing area and were essential for growing and manufacturing tea. Relying on a High Court ruling, the Tribunal confirmed the allowance of the expenses as revenue expenditure and dismissed the Revenue's appeal on this issue.

Issue 5: Deduction of wealth tax while computing book profit under section 115JB:
The Revenue raised an issue regarding the deduction of wealth tax while computing book profit under section 115JB. The Tribunal upheld the CIT(A)'s decision, relying on a precedent from the ITAT Kolkata, and dismissed the Revenue's appeal on this issue.

Issue 6: Rejection of addition made towards donation:
The Revenue contested the rejection of the addition made towards donation by the CIT(A). However, the Tribunal noted that this ground was neither raised nor adjudicated by the CIT(A), leading to its dismissal as infructuous.

In conclusion, the Tribunal dismissed the Revenue's appeal on all issues presented, affirming the decisions made by the CIT(A) in each case.