9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (6) TMI 1511 - AT - Income TaxDisallowance u/s 40(a)(i) on account of non-deduction of TDS - consultancy and legal service charges - depreciation disallowed to the assessee with the help of section 40(a-) Held that - In the case of Sonic Biochem Extractions P.Ltd 2013 (9) TMI 193 - ITAT MUMBAI Tribunal did not approve this line of reasoning adopted by the AO and held that depreciation cannot be disallowed to the assessee with the help of section 40(a) because section 40(a) is applicable if the assessee has claimed deduction of expenditure mentioned in the section. Other decisions referred by the ld.counsel for the assessee are also to this effect. CIT(A) has rightly deleted the disallowance Assessment of interest income - whether without filing revised return, the assessee can raise new plea before the ld.CIT(A) in order to exonerate itself from tax liability? - Held that - A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income Tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income. This is primarily on the premise that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the assessing officer. Quantification of interest income available with the assessee for set off against pre-operative expenditure in power project implementation - Held that - We find that the ld.CIT(A) has not independently examined any issue in this order, rather followed order of his predecessor in the assessment year 2008-09. The ITAT did not approve the order of the ld.CIT(A) in the assessment year 2008-09 and respectfully following the order of the ITAT in the assessment year 2008-09, we are of the view that interest income is available with the assessee for set off against pre-operative expenditure which is titled as project development expenditure .
Issues Involved:
1. Deletion of disallowance under Section 40(a)(i) of the Income Tax Act for non-deduction of TDS. 2. Taxability and treatment of interest income as capital receipt or revenue receipt. 3. Validity of raising new claims before appellate authorities without filing a revised return. 4. Maintainability of cross-objection filed by the assessee. Issue-wise Detailed Analysis: 1. Deletion of Disallowance under Section 40(a)(i) for Non-Deduction of TDS: The Revenue argued that the CIT(A) erred in deleting the disallowance of ?1.97 crores made by the AO under Section 40(a)(i) due to non-deduction of TDS on consultancy and legal service charges. The AO treated the payment as fees for technical services under Section 9(1)(vii) and disallowed it due to failure to deduct TDS. The assessee contended that the expenditure was capitalized as the business was in the pre-commencement stage, and no amount was debited in the profit & loss account. The CIT(A) accepted this contention and deleted the disallowance. The Tribunal upheld the CIT(A)’s decision, noting that Section 40(a)(i) applies only if the assessee claims the expenditure as a deduction, which was not the case here. The Tribunal referenced similar cases, including Sonic Biochem Extractions P. Ltd. and Sumilon Industries Ltd., where depreciation or disallowance under Section 40(a) was not applicable when the expenditure was capitalized. 2. Taxability and Treatment of Interest Income: The controversy involved whether the interest income amounting to ?8.17 crores was a capital receipt to be set off against pre-operative expenses or a revenue receipt. The AO treated the interest income as taxable, referencing the Supreme Court’s decision in Tuticorin Alkali Chemicals & Fertilisers Ltd. The CIT(A) bifurcated the interest income, treating some as capital receipts and others as revenue receipts. The Tribunal, following its decision in the previous assessment year, held that the entire interest income was a capital receipt, inextricably linked to the setting up of the power project. The Tribunal relied on decisions like Bokaro Steel Ltd., Karnal Co-operative Sugar Mills Ltd., and Indian Oil Panipat Power Consortium Ltd., which established that interest earned on funds directly linked to project implementation should be treated as capital receipts. 3. Validity of Raising New Claims Before Appellate Authorities Without Filing a Revised Return: The AO argued that the assessee could not raise new claims without filing a revised return, citing the Supreme Court’s decision in Goetze (India) Ltd. The Tribunal, however, noted that appellate authorities have the jurisdiction to entertain new claims, referencing the Gujarat High Court’s decision in CIT vs. Mitex Impex and other cases. The Tribunal clarified that the restriction in Goetze (India) Ltd. applies to assessing officers, not appellate authorities, which can entertain new grounds or legal contentions affecting tax liability. 4. Maintainability of Cross-Objection Filed by the Assessee: The assessee filed a cross-objection in support of the CIT(A)’s order on the issue contested by the Revenue. The Tribunal noted that a cross-objection should demonstrate grievances against any part of the CIT(A)’s order. Since the assessee’s cross-objection did not demonstrate such grievances, it was deemed not maintainable and was rejected. Conclusion: The Revenue’s appeal was dismissed, the assessee’s appeal was allowed, and the assessee’s cross-objection was dismissed. The Tribunal upheld the CIT(A)’s deletion of disallowance under Section 40(a)(i) and treated the interest income as a capital receipt, reinforcing the principles established in prior judicial decisions.
|
