2016 (8) TMI 455 - AT - Income Tax

Loss on account of Fire - claim of quantum of loss - Held that - The undisputed fact is that the assessee was having both excisable and non-excisable goods. It is also not in dispute that both categories of goods were gutted in fire. We find that the A.O. was carried away with the quantification of loss by the Excise Department and completely ignored the loss of nonexcisable goods. Since, there was no bifurcation of goods, excisable and non-excisable. The ld. CIT(A) restricted the disallowance to 50%. In our considered opinion, the allowance of 50% of the claim on account of loss of non-excisable goods should meet the ends of justice Entitlement to deduction u/s. 80IA - Held that - An identical issue was decided by us in favour of the assessee and against the revenue in assessee s own case wherein we have held that the ratio laid down by the Hon ble Madras High Court in the case of Velayuddhaswamy Spinning Mills Pvt. Ltd (2010 (3) TMI 860 - Madras High Court) squarely apply on the facts of the case. Employees Contribution to Provident Fund, ESI - A.O. added the amount so paid/deposited after the due date - Held that - This issue has to be decided in favour of the Revenue and against the assessee in the light of the decision of the Hon ble Jurisdictional High Court given in the case of Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT - Decided in favour of revenue. Addition u/s 41 - creditors outstanding for more than 3 years - Held that - Before us, the ld. D.R. could not bring any demonstrative evidence which could show that the liabilities have ceased to exist merely because the creditors were outstanding for more than 3 years would not ipso facto justify the additions made u/s. 41(1) of the Act. Moreover, the assessee has successfully demonstrated that part of the outstanding creditors have already been taken as income. No justification in the additions made u/s. 41(1) of the Act, the ld.CIT(A) has rightly deleted the impugned addition which requires no interference. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of loss on account of fire
2. Disallowance made under section 80IA of the Act
3. Addition made on account of late payment of employees' contribution to PF/ESI
4. Addition made on account of sundry creditors under section 41(1) of the Act

Issue 1 - Disallowance of loss on account of fire:
The Revenue challenged the order of the Ld. CIT(A)-XIV regarding the disallowance of loss on account of fire. The assessee claimed a loss of material due to fire, but the A.O. found the evidence provided insufficient. The Excise department determined the loss at a certain amount, which the A.O. disallowed. The Ld. CIT(A) allowed 50% of the claim for non-excisable goods lost in the fire. The Tribunal upheld this decision, stating that both excisable and non-excisable goods were lost in the fire, and the A.O. failed to consider the loss of non-excisable goods. The Tribunal confirmed the 50% allowance for non-excisable goods.

Issue 2 - Disallowance made under section 80IA of the Act:
The A.O. disallowed the deduction claimed under section 80IA of the Act. The Ld. CIT(A) allowed the deduction based on a previous year's decision and the decision of the Hon'ble Madras High Court. The Tribunal upheld the Ld. CIT(A)'s decision, citing a previous ruling in the assessee's case and confirming the allowance of the deduction.

Issue 3 - Addition made on account of late payment of employees' contribution to PF/ESI:
The A.O. added an amount for late payment of employees' contribution to PF/ESI. The Ld. CIT(A) directed the A.O. to delete this disallowance, following the decision of the Hon'ble Supreme Court. However, the Tribunal reversed this decision, citing a different judgment by the Hon'ble Jurisdictional High Court, and confirmed the addition made by the A.O.

Issue 4 - Addition made on account of sundry creditors under section 41(1) of the Act:
The A.O. made an addition under section 41(1) of the Act for outstanding sundry creditors. The Ld. CIT(A) deleted the addition, noting the absence of a finding regarding the cessation of liability. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the outstanding creditors' age alone does not justify the additions made under section 41(1) of the Act. The Tribunal confirmed the deletion of the addition.

In conclusion, the Tribunal partly allowed the Revenue's appeal, upholding some additions while reversing others based on detailed analysis and legal precedents.