9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (7) TMI 604 - AT - Income TaxAddition of prior period expenses - assessee is following a mercantile system of accounting - expenses relate to current year - Held that - The receipt of bills in a particular year cannot alone lead to the crystallization of liability in that year. What is imperative for crystallization of a liability is incurring of the same and quantification of the same with reasonable certainty. Assessees maintaining mercantile system of accounting can treat the liability to incur the expenses having crystallized in the year in which it becomes definite, certain or ascertainable. For answering the question whether prior period expenses can be claimed as business expenses for the relevant assessment year, the point to be considered is whether the claims were ascertained and crystallized only during the year. In the absence of any finding given on the above lines for holding the liability pertaining to prior period expenses to have crystallized in this year, we consider it fit to restore the issue back to the file of the Ld. CIT (Appeals) to consider the expenditure and evidences filed by the assessee afresh and thereafter pass a reasoned order, in accordance with law. Expenses incurred on account of modernization and renovation of the project - capital v/s revenue expenditure - Held that - CIT (Appeals) has deleted the impugned disallowance by simply accepting the assessee s submissions, giving no reason for doing so, nor referring to any documents, which supports the assessee s argument. Clearly, the CIT (Appeals) has not passed a well-reasoned order supporting his findings. The Ld. CIT (Appeals) has merely reiterated the assessee s submissions that a part of interest had been capitalized by it, while the balance pertained to loans transferred by HSEB against completed scheme and hence is revenue in nature. There is no mention of how the CIT (Appeals) was satisfied on both the aspects of the matter or what documents produced before him lead him to concur/agree with the assessee s submissions. Thus in view of the non-speaking order passed by the Ld. CIT (Appeals), we consider it fit to restore the matter back to the file of the CIT (Appeals) to consider the issue afresh Disallowance made on account of depreciation relatable to capital-grant-in-aid received - Held that - Acquiring of an asset out of the grant received is a sine qua non for applying Explanation-10 to section 43(1) and logically also since the purpose of the Explanation is to reflect the actual cost of the asset to the purchaser only, reducing the cost contributed by any other person therefrom. We, therefore, hold that Explanation-10 to section 43(1) is not attracted on the portion of the grants in-aid not utilized for acquiring capital asset and the same will not go to reduce the cost of assets acquired by the assessee. Explanation-10 to section 43(1) is not automatically attracted the moment grants-in-aid are received. It is only when they are utilized for acquiring assets that the Explanation gets attracted in. In view of the same, we hold, that to the extent of grant-in-aid is not utilized for acquiring capital assets, the same will not be adjusted against cost of assets of the assessee and the denial of depreciation to this extent also is deleted. Thus we delete the disallowance of depreciation on the grants-in-aid received TDS u/s 194C - Addition u/s 40(a)(ia) - non-deduction of TDS on payment of transportation charges by the assessee - Held that - There was no work contract between the assessee and the supplier of coal and hence the Ld. CIT (Appeals) has rightly held that the liability of the assessee to deduct tax under the provisions of section 194C of the Act did not arise in the present case. The Ld. CIT (Appeals), therefore, has correctly deleted the disallowance made under section 40(a)(ia) of the Act on account of non-deduction of TDS on transportation charges Addition of guarantee commission expenses and commitment charges holding the same to be capital in nature - Held that - Undisputedly, identical disallowances were made in assessment year 2004-05 and 2006-07, which, in assessment year 2006 07,were upheld by the CIT (Appeals) and not further challenged by the assessee before the I.T.A.T. while in assessment year 2004-05,the addition was not challenged before the CIT(A), thus implying that the assessee has accepted that the nature of the guarantee commission and commitment charges paid was capital. Further, before us, no distinguishing facts have been brought to show how the facts in the present case are different from that in the preceding years, nor any evidence adduced to show that the impugned expenses were incurred for availing working capital funds and hence were revenue in nature. We, therefore, find no reason to differ from the order of the Ld. CIT (Appeals) and uphold the disallowances
Issues Involved:
1. Deletion of disallowance on account of prior period expenses. 2. Deletion of disallowance of expenses incurred on modernization and renovation of the project. 3. Disallowance of depreciation related to capital grant-in-aid received. 4. Deletion of addition under section 40(a)(ia) on account of transport charges. 5. Disallowance of guarantee commission and commitment charges. Issue-wise Detailed Analysis: 1. Deletion of Disallowance on Account of Prior Period Expenses: The Revenue challenged the deletion of disallowance of ?4,66,12,183/- made by the Assessing Officer (AO) on account of prior period expenses, arguing that the assessee follows a mercantile system of accounting, and thus, only current year expenses should be allowed. The CIT (Appeals) had deleted the disallowance, accepting the assessee's argument that the expenses crystallized in the impugned year as the bills were received during this period. The Tribunal found the CIT (Appeals)'s order to be non-speaking and cryptic, lacking detailed reasoning. Consequently, the issue was restored to the CIT (Appeals) for a fresh examination and reasoned order. 2. Deletion of Disallowance of Expenses Incurred on Modernization and Renovation of the Project: The AO disallowed ?2,01,88,372/- claimed by the assessee as interest on renovation and modernization, treating it as capital expenditure. The CIT (Appeals) deleted the disallowance, accepting the assessee's submission that a part of the interest was capitalized, while the remaining pertained to completed projects. The Tribunal found that the CIT (Appeals) had not provided adequate reasoning or evidence for the deletion and restored the issue to the CIT (Appeals) for reconsideration with a reasoned order. 3. Disallowance of Depreciation Related to Capital Grant-in-Aid Received: The AO reduced the depreciation claimed by ?1,57,47,347/- by adjusting the capital grant-in-aid received from the cost of assets, following Explanation 10 to section 43(1). The CIT (Appeals) upheld the disallowance. The Tribunal, however, found that the assessee had not utilized the entire grant for acquiring assets and had not claimed depreciation on the utilized portion. The Tribunal held that Explanation 10 to section 43(1) applies only to the portion of the grant used for acquiring assets and deleted the disallowance. 4. Deletion of Addition under Section 40(a)(ia) on Account of Transport Charges: The AO added ?13.92 crores under section 40(a)(ia) for non-deduction of TDS on transport charges included in the purchase bills of coal. The CIT (Appeals) deleted the addition, holding that the contract was for the sale of goods, not for transportation, and thus, TDS was not applicable. The Tribunal upheld the CIT (Appeals)'s decision, referencing the Punjab & Haryana High Court's ruling in a similar case, which stated that transportation costs included in the sale bill are part of the cost of goods sold, not a separate payment for transportation services. 5. Disallowance of Guarantee Commission and Commitment Charges: The AO disallowed ?27,05,917/- of guarantee commission and ?6,94,164/- of commitment charges, treating them as capital expenditure. The CIT (Appeals) upheld the disallowance, noting that the assessee had not provided evidence that these expenses were for working capital. The Tribunal found no merit in the assessee's contentions, noting that similar disallowances in previous years were accepted by the assessee, and upheld the CIT (Appeals)'s decision. Separate Judgments Delivered by Judges: Not applicable as the judgment does not indicate separate judgments delivered by different judges. Conclusion: The appeals resulted in mixed outcomes, with some issues being restored to the CIT (Appeals) for fresh consideration, some disallowances being upheld, and others being deleted based on the Tribunal's detailed analysis of the facts and applicable legal provisions.
|
