2023 (4) TMI 935 - AT - Income Tax

Unabsorbed depreciation carried forward - Period beyond 8 Years - AR submitted that unabsorbed depreciation could be allowed to the assessee to be carried forward and set off even after 8 years without any limit in accordance with section 32(2) as amended by Finance Act 2001 - HELD THAT - Gujarat High Court in the case of General Motors India Pvt. Ltd. 2012 (8) TMI 714 - GUJARAT HIGH COURT as held that unabsorbed depreciation from AY 1997-98 up to 2001-02 got carried forward to AY 2002-03 and became part of it came to be governed by the provisions of section 32(2) as amended by the Finance Act 2001 and were available for carry forward and set off against income of subsequent years without any limit. Decided in favour of assessee. Disallowance of store purchase - assessee could not produce necessary bills/vouchers during the assessment proceedings before the AO - HELD THAT - Assessee has submitted most of the bills of expenditure before the ld. AO but due to fire in the office of the assessee balance bills could not be produced at the time of hearing. Besides that the books of accounts were subject to audit at various levels and its final accounts were also audited by Comptroller and Auditor General of India and no adverse comments has been made by such Govt. Authority. In such a situation disallowance made under the head of store purchases cannot be sustained. Decided in favour of assessee. CIT(A) enhanced disallowance made by AO - enhancement notice u/s 251(1) read with section 251(1)(2) to show cause that if TDS was not deducted - Non deduction of TDS u/s 194C - Disallowance under the head contractual expenses - HELD THAT - Appellant correctly objected to such notice issued by the ld. CIT(A) stating that it is barred by limitation as no fresh enquiry could be done by the ld. AO since the ld. CIT(A) powers are co-terminus with that of assessing officer and requested for dropping of such proceeding. TDS on such persons were duly deducted at the time of making such payment in the subsequent years and they have filed complete evidence in this regard to prove the fact. As relying on case of Sri Binay Kumar Singh 2020 (7) TMI 825 - ITAT KOLKATA as held that enhancement of fresh issue or new section cannot be made at appellate stage. Therefore enhancement made by the ld. CIT(A) needed to be set aside. Decided in favour of assessee. Allowability of allowance of grant to schools IICM expenses and Directors salary/remuneration mentioned u/s 40A(2)(b) - HELD THAT - We find that the assessee has added these expenses and disallowed while computing its income due to mistake whereas none of these expenditures were to be disallowed as per the Income Tax Act. In our considered view these expenses are to be allowed considering the decision of case of CIT Ranchi vs Central Coalfields Ltd. 2012 (11) TMI 1329 - JHARKHAND HIGH COURT held that expenditures under the head community development sports recreation game guest house were allowable revenue expenses which are similar to grant of school. However for verification we are restoring the issues to the file of the AO.

Summary

Issues Involved:
1. Unabsorbed Depreciation
2. Store Purchase of Rs. 6,78,69,000/-
3. Contractual Expenses Disallowance
4. Additional Claims for Grant to Schools, IICM Expenses, and Directors' Salary

Summary:

1. Unabsorbed Depreciation:
The revenue contended that the Ld. CIT(A), Dhanbad erred in applying the post-2001 amendment treatment for carry forward and set off of unabsorbed depreciation to periods prior to AY 2002-03. The revenue argued that the amendment allowing indefinite carry forward of unabsorbed depreciation was not retrospective. The Tribunal upheld the Ld. CIT(A)'s decision, referencing the Gujarat High Court's ruling in General Motors India Pvt. Ltd. vs DCIT, which clarified that unabsorbed depreciation from AY 1997-98 to 2001-02, carried forward to AY 2002-03, became governed by the amended section 32(2) and could be carried forward indefinitely. Thus, the Tribunal dismissed the revenue's appeal on this ground.

2. Store Purchase of Rs. 6,78,69,000/-:
The revenue challenged the Ld. CIT(A)'s decision to allow the store purchase expenses despite the assessee's inability to produce bills/vouchers during the assessment. The Tribunal noted that the assessee had provided most bills and that the remaining were lost in a fire. Additionally, the accounts were audited by various authorities, including the CAG, with no adverse comments. The Tribunal found no reason to disallow the expenses and upheld the Ld. CIT(A)'s decision, dismissing the revenue's appeal on this issue.

3. Contractual Expenses Disallowance:
The assessee contested the Ld. CIT(A)'s enhancement of disallowance from Rs. 7,41,75,000/- to Rs. 22,53,48,000/- for non-deduction of TDS. The Tribunal noted that the assessee had provided the necessary details during appellate proceedings and that the Ld. AO's remand report found no discrepancies. The Tribunal also referenced a coordinate bench decision stating that new issues or sections should not be introduced at the appellate stage. Consequently, the Tribunal directed the AO to delete the enhanced disallowance, allowing the assessee's appeal on this ground.

4. Additional Claims for Grant to Schools, IICM Expenses, and Directors' Salary:
The assessee argued that these expenses were mistakenly added back while computing income and should be allowed. The Ld. CIT(A) had dismissed these claims based on the Supreme Court's decision in Goetz India Ltd. vs CIT. The Tribunal, however, found merit in the assessee's claims, referencing the Jharkhand High Court's decision in CIT Ranchi vs Central Coalfields Ltd., which allowed similar expenses. The Tribunal restored these issues to the AO for verification.

Conclusion:
The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal, also allowing the cross-objection by the assessee. The order was pronounced in the open court on 31.03.2023.