2017 (9) TMI 560 - AT - Income Tax

Disallowance of claim towards the payment of Custom Duty - explain the nature of payment - Held that - AO disallowed ₹ 93,12,159/- holding that Custom duty paid was in the name of other party and the assessee failed to produce evidence that the amount was related to the assessee. The ld. CIT(A) also observed that assessee carried the matter before Settlement Commission, and the order of Settlement Commission mentions that the amount of ₹ 93,12,159/- relates to other parties and confirmed the disallowance. Even before us, the assessee had not filed any documentary evidence or given any explanation to substantiate the contention that the said amount of Custom Duty was paid by assessee. Hence, we do not find any illegality or infirmity in the order passed by AO and sustained by ld. CIT (A). Thus, the Ground of appeal raised by assessee is dismissed. Not allowing claim of interest paid on import duty - Held that - As we have already confirmed the disallowance of Import duty of ₹ 93,12,159/-, thus, the disallowance of interest expenses which is related to the same amount is also sustained, as the same pertains to the other parties. We order accordingly. Set off of carried forward loss against the income of current year - Held that - We direct the AO allow the set off of loss to the assessee in accordance with law, in case any loss is brought forward from earlier year in giving effect of this order as this ground of appeal is consequential in nature. Hence, the appeal of the assessee is partly allowed.

Summary

Issues involved:
1. Disallowance of claim towards payment of Custom Duty for AY 2006-07.
2. Disallowance of interest paid on import duty and set off of carried forward loss for AY 2008-09.

Analysis:

Issue 1: Disallowance of claim towards payment of Custom Duty for AY 2006-07
- The assessee appealed against the order of the ld. Commissioner of Income Tax-27, Mumbai regarding the disallowance of a sum on account of payment of custom duty for AY 2006-07.
- The AO disallowed the claimed amount as the custom duty paid was in the name of another party, and the assessee failed to provide evidence linking the amount to them.
- The ld. CIT(A) and ITAT upheld the disallowance, stating that the assessee did not substantiate that the custom duty was paid by them.
- The ITAT dismissed the appeal, emphasizing the lack of evidence from the assessee to prove the payment of custom duty.

Issue 2: Disallowance of interest paid on import duty and set off of carried forward loss for AY 2008-09
- The assessee contested the disallowance of interest paid on import duty and the set off of carried forward loss for AY 2008-09.
- The AO disallowed the interest expenses based on the disallowance of import duty in AY 2006-07 and the conversion of loss into income in that year.
- The ld. CIT(A) upheld the AO's actions, linking the disallowance of interest expenses to the disallowed import duty from the previous year.
- The ITAT partially allowed the appeal, directing the AO to allow the set off of loss to the assessee in accordance with the law, as the disallowance of interest expenses was related to the disallowed import duty.
- The ITAT sustained the disallowance of interest expenses but allowed the set off of carried forward loss, concluding that the appeal for AY 2008-09 was partly allowed.

This judgment highlights the importance of providing proper documentation and evidence to substantiate claims in tax assessments, as failure to do so can lead to disallowances and adverse decisions by the authorities.