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2020 (2) TMI 557 - AT - Income TaxDisallowance u/s 14A - HELD THAT - Though the assessee has earned dividend income of 8, 800/- as against disallowance made by the AO but has not claimed the same as dividend income in the computation of income in these circumstances no disallowance can be made u/s 14A read with Rule 8D. So we find no illegality or perversity in the findings returned by the ld. CIT (A). Ground No.1 of Revenue s appeal for AY 2011-12 is determined against the Revenue. Addition made merely on the basis of fact that information u/s 133(6) has not been filed by some of the creditors - HELD THAT - It is proved that the AO as well as ld. CIT (A) proceeded to make/confirm the addition without considering the reply of the assessee and without procuring the presence of such sundry creditors to whom the notices u/s 133(6) were issued by using coercive method. In AY 2011-12 AO as well as ld. CIT (A) have made/confirmed the addition of 15, 19, 688/- out of amount of 35, 10, 494/- challenged vide ground no.3 on account of nonconfirmation from creditors which had resulted into double taxation as the similar addition was made in the preceding years. In AY 2010-11 AO has also recorded strange observation that the assessee was to provide information called for along with proof of identity on the assessee s letter-head with cop of PAN and ITR to establish the genuineness of the transaction. We are constrained to record that information called for need not be furnished on the letter-head when it is otherwise supported with requisite documents. All these facts show that the addition has been made merely on the basis of conjectures and surmise and the issue is required to be remitted back to the AO to decided afresh after providing opportunity of being heard to the assessee so as to reconcile the discrepancies arisen out of the reply of various parties given in response to notice u/s 133 (6). Disallowance u/s 36 (1)(iii) - Interest free loans - HELD THAT - In the instant case when the assessee has come up with specific defence that the advance has been made out of interest free funds and the same has been made for business expediency the applicability of the judgment relied upon by the ld. DR for the Revenue is to be seen after marshalling of the facts pleaded by the assessee only. So in the given circumstances these issues are required to be decided by passing a speaking order. Accordingly this issue is remitted back to the AO to decide afresh after providing opportunity of being heard to the assessee Wrongly computed tax demand by not allowing the complete tax credit of TCS and TDS - HELD THAT - This issue has been arisen out of some clerical error on the part of the AO who has not taken into consideration TCS and TDS credit for computing the tax liability. So we direct the AO to verify the TCS and TDS credits claimed by the assessee and computed the tax liability accordingly hence Ground No.5 of assessee s appeal for AY 2010-11 is determined in favour of the assessee for statistical purposes. Addition u/s 36(1)(va) on account of delay in filing the employees contribution to provident fund on the ground that the assessee has made payment before filing of the return of income - HELD THAT - Following the decision rendered in case of CIT vs. Bharat Hotels Ltd. 2018 (9) TMI 798 - DELHI HIGH COURT we are of the considered view that the assessee company is not entitled for deduction u/s 36(1)(va) of the Act claimed on account of depositing the employees contribution towards ESI PF as per provisions contained u/s 2(24)(x) read with section 36(1)(va) after due date which is evident from table extracted in preceding para no.5. So the case laws relied upon by the ld. AR for the assessee is not applicable to the facts and circumstances of the case. Consequently finding no illegality or perversity in the impugned order passed by the ld. CIT (A) appeal filed by the assessee is hereby dismissed. Addition u/s 40(a)(ia) on account of disallowance for nondeduction of tax on commission expenses - HELD THAT - CIT (A) after thrashing the facts and after entertaining additional evidence filed by the assessee qua which remand report was called reached the conclusion that the assessee company has given rebate and discount on sales which cannot be treated as commission. When it is undisputed case of the assessee company that the payment has been directly given to the vendee and not through any commission agent it cannot be treated as commission. During the preceding years such payment has been treated as rebate and discount and not commission and the AO has not been able to distinguish the facts of the instant case with that of the preceding years. So in the given circumstances we are of the considered view that when it is rebate and discount and not commission no TDS is required to be deducted. Consequently we are of the considered view that CIT (A) has rightly deleted the addition hence ground no.3 is determined against the Revenue.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act read with Rule 8D. 2. Addition on account of unexplained credits and non-confirmations from creditors. 3. Disallowance under Section 36(1)(iii) for interest-free loans. 4. Computation errors in tax demand and TCS/TDS credits. 5. Disallowance under Section 36(1)(va) for delayed deposit of employees' provident fund contributions. 6. Disallowance under Section 40(a)(ia) for non-deduction of tax on commission expenses. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act read with Rule 8D: The Tribunal noted that the Assessing Officer (AO) made additions under Section 14A read with Rule 8D for both Assessment Years (AY) 2010-11 and 2011-12. The AO did not record dissatisfaction with the assessee’s claim that no direct expenses were incurred to earn exempt income. The Tribunal referenced the Hon’ble Delhi High Court's ruling in Joint Investments Pvt. Ltd. vs. CIT, which held that disallowance cannot exceed the exempt income earned. Consequently, the Tribunal restricted the disallowance to the amount of exempt income earned, i.e., ?8,000 for AY 2010-11 and deleted the addition for AY 2011-12 as the assessee did not claim the dividend income in the computation. 2. Addition on account of unexplained credits and non-confirmations from creditors: For AY 2010-11 and 2011-12, the AO made additions due to discrepancies in creditor confirmations and non-compliance with notices issued under Section 133(6). The Tribunal found that the AO and CIT(A) did not adequately consider the assessee's explanations and supporting documents. The Tribunal emphasized that additions cannot be made merely based on non-receipt of confirmations if the transactions are otherwise supported by PAN and ITR details. The issue was remitted back to the AO for fresh consideration after providing the assessee an opportunity to reconcile discrepancies. 3. Disallowance under Section 36(1)(iii) for interest-free loans: The AO disallowed interest expenses under Section 36(1)(iii) for loans given to M/s. Global Industries & Services Ltd., claiming they were not for business purposes. The assessee argued that the loans were given from interest-free funds for business expediency. The Tribunal noted that the AO and CIT(A) did not address these contentions. The issue was remitted back to the AO for a fresh decision, requiring a speaking order that considers the assessee’s defense. 4. Computation errors in tax demand and TCS/TDS credits: The assessee contended that the AO incorrectly computed the tax demand by not allowing full credit for TCS and TDS. The Tribunal directed the AO to verify the TCS and TDS credits and recompute the tax liability accordingly. 5. Disallowance under Section 36(1)(va) for delayed deposit of employees' provident fund contributions: The AO disallowed deductions for delayed deposits of employees' provident fund contributions. The CIT(A) deleted this addition, but the Tribunal referenced the jurisdictional High Court’s decision in CIT vs. Bharat Hotels Ltd., which held that deductions are only allowed if deposits are made within the due date. Consequently, the Tribunal restored the AO’s addition, deciding in favor of the Revenue. 6. Disallowance under Section 40(a)(ia) for non-deduction of tax on commission expenses: The AO treated rebates and discounts as commission, requiring TDS deduction under Section 194H. The CIT(A) deleted the addition, finding that these payments were rebates and discounts, not commission. The Tribunal upheld the CIT(A)’s decision, noting that the payments were made directly to vendees and not through commission agents, thus no TDS was required. Conclusion: The Tribunal’s orders resulted in the following: - Partially allowed the assessee’s appeal for AY 2010-11 for statistical purposes. - Allowed the assessee’s appeal for AY 2011-12 for statistical purposes. - Partially allowed the Revenue’s appeal for AY 2011-12. Order pronounced in open court on this 16th day of December, 2019.
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