Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (7) TMI 258 - AT - Income TaxAddition made towards retention money deducted from sales - Held that - As bringing all the retention monies received from the customers in S. No. 1 to 7 to arrive at the taxable income in the financial year 2005-06 is not correct. Accordingly, we direct the Assessing Officer to verify and include such receipts of retention money received in the particular financial year alone to arrive at the taxable income of financial year and if the assessee has not recognized as its income in the particular financial year, the same cannot be included. The above directions should be followed in all other assessment years since the Assessing Officer has simply followed earlier assessment order and made the disallowance in other assessment years. TDS u/s 194I - Disallowance under section 40(a)(ia) made on payments to clearing and forwarding charges - Held that - On perusal of reconciliation statement for the assessment year 2006-07 filed by the assessee in paper page No. 114 to 121, it is evident at page 121 that M/s. Medore Equipments received the amount of ₹.1,43,500/- towards customs duty and the assessee has not paid the amount to the agent. Further, with regard to car rent paid to two different person did not exceed ₹.1,20,000/- individually as per proviso to sub-section (b) to section 194I of the Act. Thus, we find no infirmity in the order of the ld. CIT(A) on this issue and therefore, the ground raised by the Revenue is dismissed. Disallowance under section 14A - restricted addition to 5% of the exempt income earned - Held that - When Rule 8D was not exist during the assessment year 2007-08, there is no question of its application retrospectively since Rule 8D was notified on 24.03.2008 and applicable with effect from the assessment year 2008-09 onwards only. Therefore, there is no question of applying the provisions of Rule 8D for determining the expenditure for earning dividend income. Since application of provisions of section 14A of the Act is constitutionally valid , the Assessing Officer is duty bound to determine expenditure by adopting a reasonable basis or method. But, in this case, the Assessing Officer has estimated the expenditure over and above the dividend income earned by the assessee. By following the order of the Tribunal in the case of ACIT v. Celebrity Fashions Ltd. (2012 (4) TMI 602 - ITAT CHENNAI), the ld. CIT(A) has restricted the disallowance to the extent of 5% of gross dividend income, which was not accepted by the assessee. Hence, we find no infirmity in the order of the ld. CIT(A) on this issue and accordingly, the ground raised by the Revenue is dismissed. Disallowance in respect of short payment of TDS on royalty charges paid - Held that - Assessing Officer has not disputed over the residential status of the party to whom the royalty was paid by the assessee. Therefore, at this stage, the department cannot dispute over the residential status of the party. After examining the facts, the ld. CIT(A) deleted the disallowance made on the ground that Assessing Officer has wrongly taken the rate of TDS @ 20%. In view of the above, we find no infirmity in the order of the ld. CIT(A) on this issue. Disallowance u/s 36(1)(va) - payments towards PF and ESI made before the due date of filing of return, but after a few days of grace period - Held that - As the assessee had remitted the employees contribution to PF and ESI beyond the due date for payment, but within the due date for filing the return of income. Hence, we find no reason to differ with the findings of the ld. CIT(A) in allowing the claim and thus, the ground raised by the Revenue is dismissed. Disallowance of provision for leave encashment - Held that - No details were available on record. Before the ld. CIT(A), the assessee has submitted that the entire amount of ₹.19,67,943/- does not belong to the year under consideration as ₹.9,71,066/- was the opening balance and ₹.9,96,787/- along was debited under the year. In view of the above, the Assessing Officer is directed to examine and decide the issue afresh in accordance with law. Assessee is not eligible to claim deduction of provisions for leave encashment. Accordingly, we sustain the addition to the extent it pertains to the assessment year under consideration against the disallowance of ₹.19,67,943/-, if the entire disallowance is not pertaining to the assessment year under consideration. Thus, the ground raised by the Revenue is allowed for statistical purposes.
Issues Involved:
1. Deletion of addition towards "retention money deducted from sales." 2. Disallowance under section 40(a)(ia) on payments to clearing and forwarding charges. 3. Disallowance under section 14A for exempt income. 4. Disallowance for short payment of TDS on royalty charges. 5. Disallowance under section 36(1)(va) for late payment of PF and ESI. 6. Disallowance of provision for leave encashment under section 43B(f). Issue-wise Detailed Analysis: 1. Retention Money Deducted from Sales: The primary issue was whether the "retention money deducted from sales" should be included in the taxable income. The Assessing Officer (AO) noted that the assessee received the retention money within the same financial year and thus included it in the taxable income. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, stating that the retention money was recognized as income in the subsequent financial year when received. The Tribunal directed the AO to verify and include only the retention money received within the financial year under consideration and not to include amounts received in subsequent years. 2. Disallowance under Section 40(a)(ia) on Payments to Clearing and Forwarding Charges: The AO disallowed expenses for clearing and forwarding charges, car lease charges, and freight outward for failure to deduct TDS. The CIT(A) observed that the payments were reimbursements or below the qualifying amount for TDS deduction. The Tribunal upheld the CIT(A)'s decision, confirming that the payments were not liable for TDS and thus not disallowable under section 40(a)(ia). 3. Disallowance under Section 14A for Exempt Income: The AO applied Rule 8D to disallow expenses related to earning exempt income. The CIT(A) restricted the disallowance to 5% of the exempt income, noting that Rule 8D was not applicable retrospectively for the assessment year 2007-08. The Tribunal upheld the CIT(A)'s decision, emphasizing that Rule 8D applies from the assessment year 2008-09 onwards and the AO should adopt a reasonable basis for determining the expenditure. 4. Disallowance for Short Payment of TDS on Royalty Charges: The AO disallowed 50% of the royalty charges paid to a non-resident, claiming the TDS was deducted at 10% instead of the required 20%. The CIT(A) deleted the disallowance, noting that the correct TDS rate was 10% as per the DTAA with France. The Tribunal upheld the CIT(A)'s decision, confirming the correct TDS rate was applied. 5. Disallowance under Section 36(1)(va) for Late Payment of PF and ESI: The AO disallowed late payments of PF and ESI contributions. The CIT(A) deleted the disallowance, citing precedents that allowed such deductions if payments were made before the due date for filing the return. The Tribunal upheld the CIT(A)'s decision, referencing the jurisdictional High Court's ruling that contributions paid before the return filing due date are deductible. 6. Disallowance of Provision for Leave Encashment under Section 43B(f): The AO disallowed the entire provision for leave encashment. The CIT(A) limited the disallowance to the amount debited to the profit and loss account and allowed the deduction as a contractual liability. The Tribunal directed the AO to re-examine the details and confirmed that the provision for leave encashment is not deductible following the Supreme Court's stay on the Calcutta High Court's decision in Exide Industries Ltd. Conclusion: The Tribunal provided detailed directions for each issue, ensuring that only the appropriate amounts were included in the taxable income and that the correct legal provisions were applied. The appeals were partly allowed for statistical purposes, directing further verification and adherence to applicable legal standards.
|