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2018 (4) TMI 985 - AT - Income TaxTDS u/s 194C - Non deduction of tds on Inland Haulage for export consignment payment - Held that - Payments are in the form of reimbursement and no payments have been made directly by the assessee to shipping companies therefore assessee is not liable to deduct TDS. The assessee produced documentary evidences in support of the same contention which have not been rebutted by the authorities below. Since the amount in question were towards the reimbursement of the exact amount which have been paid to the shipping companies and others therefore assessee is not liable to deduct TDS. - Decided in favour of assessee Disallowance of freight payments to Consignment Agents without deduction of TDS - Held that - These payments are freight payments to Consignment Agents. The services of various Consignment Agents are undertaken by assessee who incurred the expenses in connection with sales which are then reimbursed to them or deducted from the gross amount of sales. The actual payment of freight charges are made by the Consignment Agents. The assessee would get the sale proceeds net of these expenses. The Ld. CIT(A) was therefore justified in holding that freight payments are made by the Consignment Agents only and even the assessee may not aware of different transporters shipping agents therefore it would impossible for assessee to deduct TDS on such payments. - Decided in favour of assessee Disallowance of certain expenditure claimed as revenue expenditure - Held that - Since the cost of the packing was not included in the cost of D.G. set and it was spent for bringing the generator set to the premises of the assessee it was incurred wholly and exclusively for the purpose of business. Therefore it was rightly held to be revenue in nature. Further out of packing no assets have been created in favour of the assessee. The other amount was incurred by assessee for upgradation of software or installation charges or better internet connectivity for business purposes. Therefore same are revenue in nature. The Ld. CIT(A) on proper appreciation of facts and material on record correctly deleted the addition - Decided in favour of assessee Disallowance of prior period expenses - Allowable expenditure - Held that - The assessee has given details of entire expenses which is reproduced in the appellate order which shows that the bills have been received in assessment year under appeal and settled. The liabilities to pay these expenses have therefore crystalized during assessment year under appeal. Same practice has been followed in earlier year on which expenses have been allowed by the Department. Therefore rule of consistency also applies against the Revenue. Further whether expenses are allowed in this year or in earlier year it is not reported as to if revenue has been deprived of any tax. Therefore it is a mere tax neutral exercise and such expenditure are allowable in assessment year under appeal. - Decided in favour of assessee Disallowance of general repair and maintenance expenses - Held that - No merit in this ground of Revenue. the Ld. CIT(A) correctly appreciated the fact that for repair and maintenance assessee has to engage labour for which details are maintained. Learned Counsel for the Assessee pointed out to various documents in the paper book to show that same are properly vouched. Since the expenditure were incurred wholly and exclusively for the purpose of business therefore the same were correctly allowed as deduction. - Decided in favour of assessee Disallowance of bad debts - Held that - the loss is incidental to the business of the assessee which were written off in the books of account as irrecoverable. Therefore it was correctly allowed as business loss by the Ld. CIT(A). - Decided in favour of assessee Addition on account of unexplained unsecured loans/trade deposits received by assessee and disallowance of interest relating thereto - A.O. made the addition because income of these parties were very less and assessee has failed to establish the genuineness of the transaction - Held that - We find that out of these six creditors two are common in the preceding assessment years in which Ld. CIT(A) deleted the addition. It is not reported if the order of the Ld. CIT(A) for earlier year have been reversed. The A.O. merely did not accept the explanation of assessee because of the income of the parties are very less. However the A.O. has forgot to note that some of the parties are trade creditors from whom security have been taken for making sales to them and in other cases the assessee has specifically pleaded that they have sufficient amount in their books of account and bank to make investment in assessee-company. Therefore the Ld. CIT(A) on proper appreciation of facts and material on record correctly deleted the addition because assessee has proved the identity of the creditors their creditworthiness and genuineness of the transaction in the matter. - Decided in favour of assessee Disallowance of expenses incurred through credit cards - Held that - The assessee explained that credit card facilities were provided to the Directors only facilitating payment of expenses to be made on behalf of the company. The details of same were filed which have not been disputed by the authorities below. The expenses are therefore incurred wholly and exclusively for the business of the assessee-company. Copy of the ledger account is also filed in the paper book to support the findings of the Ld. CIT(A). In earlier year the Ld. CIT(A) deleted the similar addition on which nothing is brought to our notice if the findings of the Ld. CIT(A) in earlier year have been reversed.- Decided in favour of assessee Disallowance of interest on bank held same to be capital in nature - Held that - The proviso to Section 36(1)(iii) is applicable only to interest paid in respect of capital borrowed for acquisition of asset for extension of existing business. The generator by nature itself is always ready for functioning. Therefore Learned Counsel for the Assessee rightly contended that generator was for running the existing business more efficiently. Thus generator cannot be for the extension of the business. Therefore disallowance was wholly unjustified. The assessee thus paid interest on Bank loan for capital borrowed for business purpose. Therefore the same was an allowable deduction. We therefore set aside the orders of the authorities below and direct the A.O. to allow deduction of the interest under section 36(1)(iii) - Decided in favour of assessee Disallowance of expenditure booked on account of writing-off of security deposit paid to Haryana State Electricity Board ( HSEB ) - Held that - When the amount is adjusted against the electricity bill it was clearly revenue in nature. Since the Electricity Board intimated to assessee of the adjustment in this assessment year under appeal therefore the expenditure is crystalized in assessment year under appeal. Therefore it was correctly treated as revenue expenditure by making relevant book entries in the books of account. The Ld. CIT(A) therefore correctly deleted the addition. - Decided in favour of assessee Disallowance of excess depreciation - Held that - No merit in this ground of appeal of the Revenue. The assessee pointed out to the Ld. CIT(A) that there is a mistake in calculation of disallowance which was accepted by the Ld. CIT(A) after verifying the facts. No material is produced before us to show any infirmity in the finding of the Ld. CIT(A) to that extent. As regards the depreciation claimed on SS Pipe Plant assessee pleaded that it was installed on 29.02.2008 and was put to use and same facts could be verified from Excise record. No material is produced before us to rebut the finding of fact recorded by Ld. CIT(A). - Decided in favour of assessee Addition on account of sales tax incentive receivable - Held that - The assessee received letter from Sales Tax authorities on 10.11.2008 intimating the assessee that he was entitled for refund. The assessee thereafter made a claim of refund on 21.09.2009 and according to the explanation of assessee the amount of refund depends upon various calculations like rebate/interest etc. which may change the quantum of refund. Therefore assessee would be knowing of the exact amount of refund due to assessee only on actual calculation made in this behalf. Therefore the refund would depend upon the claim made by the assessee which was made in subsequent A.Y. 2010-2011. The receipt of the amount in question is finally crystalized in A.Y. 2010-2011 which have been correctly offered for tax in A.Y. 2010-2011 which have been assessed by the A.O. also in the order under section 143(3) of the I.T. Act. Therefore no double addition should be made against the assessee.- Decided in favour of assessee Addition of discount allowed to foreign buyer - Held that - Both the parties conducted the transaction through their respective Bankers and the genuineness of the transaction have not been doubted. The assessee produced confirmation from the party as well as other material on record to support the transaction that because of the discount offered the assessee was able to sell the goods and to receive the payment. Therefore there were nothing unusual in the transaction. No evidence of any collusive transaction have been brought on record. Merely because no formal agreement or MOU to offer discount has been filed would not disentitle the assessee to claim the discount.- Decided in favour of assessee Disallowance of labour and staff welfare expenses - assessee has made payment to Hindustan Refrigeration for purchase of water cooler which were debited to labour and staff welfare expenses - Held that - The purchase of water cooler is office equipment and was correctly treated as capital in nature. The assessee has not explained as to how the purchase of water cooler would be considered as business expenditure. The assessee failed to explain that it was a business expenditure incurred wholly and exclusively for the purpose of business. Therefore Ground of the cross objection of the assessee is dismissed.
Issues Involved:
1. Deletion of addition on account of disallowance of Inland Haulage for export consignment without TDS deduction. 2. Deletion of addition on account of disallowance of freight payments to Consignment Agents without TDS deduction. 3. Deletion of addition on account of disallowance of certain expenditures claimed as revenue expenditure by the assessee. 4. Deletion of addition on account of disallowance of prior period expenses. 5. Deletion of addition on account of disallowance of general repair and maintenance expenses. 6. Deletion of addition on account of disallowance of bad debts. 7. Deletion of addition on account of unexplained, unsecured loans/trade deposits and related interest. 8. Deletion of addition on account of disallowance of expenses incurred through credit cards. 9. Disallowance of interest on bank loans held as capital in nature. 10. Deletion of addition on account of disallowance of expenditure booked on account of writing-off of security deposit to HSEB. 11. Deletion of addition on account of disallowance of excess depreciation. 12. Deletion of addition on account of disallowance of foreign travel expenses. 13. Deletion of addition on account of sales tax incentive receivable. 14. Deletion of addition on account of disallowance/discount allowed to foreign buyer. 15. Disallowance of labour and staff welfare expenses held as capital in nature. Issue-wise Detailed Analysis: Issue No. 1: Deletion of Addition on Account of Disallowance of Inland Haulage for Export Consignment Without TDS Deduction The Revenue challenged the deletion of ?29,03,991/- made by the AO due to non-deduction of TDS on Inland Haulage charges. The assessee argued these were reimbursements to Clearing and Forwarding Agents, not direct payments, thus not liable for TDS. The CIT(A) restricted the addition to 10%, but the Tribunal found the entire addition liable to be deleted, citing precedents where reimbursements were not subject to TDS. Issue No. 2: Deletion of Addition on Account of Disallowance of Freight Payments to Consignment Agents Without TDS Deduction The AO added ?21,05,632/- for freight payments to Consignment Agents without TDS deduction. The CIT(A) deleted the addition, noting the payments were made by the agents, not the assessee. The Tribunal upheld this, emphasizing the assessee had no control over these payments and thus was not liable for TDS. Issue No. 3: Deletion of Addition on Account of Disallowance of Certain Expenditures Claimed as Revenue Expenditure by the Assessee The AO treated ?8,54,521/- as capital expenditure. The CIT(A) allowed these as revenue expenses, including packing expenses, ERP maintenance, and computer repairs. The Tribunal agreed, noting these were necessary for business operations and citing relevant case law supporting the treatment of such expenses as revenue in nature. Issue No. 4: Deletion of Addition on Account of Disallowance of Prior Period Expenses The AO disallowed ?7,63,248/- as prior period expenses. The CIT(A) accepted the assessee's explanation that these expenses were recorded when liabilities crystallized. The Tribunal upheld this, noting the consistency in the assessee's accounting method and the tax-neutral nature of the timing of these expenses. Issue No. 5: Deletion of Addition on Account of Disallowance of General Repair and Maintenance Expenses The AO disallowed ?14,64,445/- for lack of supporting documents. The CIT(A) accepted the assessee's explanation and documents for labour payments for repairs. The Tribunal upheld the deletion, noting the expenses were necessary for the business and properly documented. Issue No. 6: Deletion of Addition on Account of Disallowance of Bad Debts The AO disallowed ?1 lakh as bad debts. The CIT(A) allowed it as business loss under Section 37. The Tribunal upheld this, noting the loss was incidental to the business and supported by relevant Supreme Court decisions. Issue No. 7: Deletion of Addition on Account of Unexplained, Unsecured Loans/Trade Deposits and Related Interest The AO added ?21,50,000/- as unexplained loans and disallowed ?7,78,344/- interest. The CIT(A) deleted the addition, noting the assessee provided sufficient evidence of the creditors' identity, creditworthiness, and transaction genuineness. The Tribunal upheld this, emphasizing the AO's failure to further investigate provided evidence. Issue No. 8: Deletion of Addition on Account of Disallowance of Expenses Incurred Through Credit Cards The AO disallowed ?17,99,822/- for expenses incurred by Directors' credit cards. The CIT(A) deleted the addition, noting these were business expenses. The Tribunal upheld this, citing the consistent treatment in earlier years and proper documentation. Issue No. 9: Disallowance of Interest on Bank Loans Held as Capital in Nature The AO disallowed ?2,29,669/- interest on bank loans as capital expenditure. The CIT(A) upheld this but allowed depreciation. The Tribunal reversed this, noting the interest was for business purposes and not for extending the business, thus allowable under Section 36(1)(iii). Issue No. 10: Deletion of Addition on Account of Disallowance of Expenditure Booked on Account of Writing-off of Security Deposit to HSEB The AO disallowed ?8,25,000/- as non-refundable security deposit. The CIT(A) deleted the addition, noting it was adjusted against electricity bills and thus a revenue expenditure. The Tribunal upheld this, emphasizing the adjustment was informed during the assessment year. Issue No. 11: Deletion of Addition on Account of Disallowance of Excess Depreciation The AO disallowed ?12,70,000/- as excess depreciation. The CIT(A) corrected the calculation error and allowed the depreciation, noting the asset was installed and used. The Tribunal upheld this, finding no material to rebut the CIT(A)'s findings. Issue No. 12: Deletion of Addition on Account of Disallowance of Foreign Travel Expenses The AO disallowed ?3,88,785/- for foreign travel. The CIT(A) deleted the addition, following earlier years' consistent treatment. The Tribunal upheld this, noting no reversal of earlier findings. Issue No. 13: Deletion of Addition on Account of Sales Tax Incentive Receivable The AO added ?1,17,32,766/- for sales tax incentive. The CIT(A) deleted the addition, noting the income was correctly offered in the subsequent year when it crystallized. The Tribunal upheld this, emphasizing the tax-neutral nature and proper timing of the income recognition. Issue No. 14: Deletion of Addition on Account of Disallowance/Discount Allowed to Foreign Buyer The AO disallowed ?1,20,71,504/- for discount to a foreign buyer. The CIT(A) deleted the addition, finding the transaction genuine and necessary for business. The Tribunal upheld this, noting the compelling reasons and proper documentation. Issue No. 15: Disallowance of Labour and Staff Welfare Expenses Held as Capital in Nature The AO disallowed ?33,784/- for a water cooler as capital expenditure. The CIT(A) upheld this, allowing depreciation. The Tribunal agreed, finding the purchase of a water cooler as office equipment and not a business expense. Conclusion: The Tribunal dismissed the Departmental Appeals and partly allowed the Cross Objections of the assessee, providing detailed reasons for each issue based on the facts, evidence, and relevant case law.
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