9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (1) TMI 1295 - AT - Income TaxBogus expenses - According to the assessee the above said disallowance consisted of general expenses and expenses that were capitalised by the assessee - HELD THAT - Following the decision rendered by the Tribunal in AY 2009-10 2023 (2) TMI 1312 - ITAT MUMBAI we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to delete the disallowance and also disallowance of depreciation made on the capital expenditure as the assessee has rebutted the admission by furnishing evidences in support of the expenses. The very same fact that a sum of Rs.9, 86, 470/- out of the above said expenditure amount of Rs.48, 89, 052/- represents Capital expenditure (which fact has also been accepted by the AO) would show that there is merit in the submission of the assessee. For booking bogus expenses it is unlikely that anyone will account for bogus capital expenses. Accordingly we are of the view that the explanation given by the assessee on this aspect merits acceptance. Disallowance of bogus Purchases - HELD THAT - As Tribunal noted that an identical disallowance was made in AY 2009-10 2023 (2) TMI 1312 - ITAT MUMBAI and restored the matter to the file of the Assessing Officer for fresh examination. The assessee provided additional evidence to substantiate the genuineness of the purchases. Disallowance made u/s 14A - HELD THAT - As noticed that the Coordinate Bench in earlier assessment year i.e. in AY 2009-10 2023 (2) TMI 1312 - ITAT MUMBAI has taken note of the fact that there is increase in the investments and also receipt of dividends meaning thereby there was some activity in the investment portfolio of the assessee. Accordingly the Tribunal held that disallowance u/s 14A of the Act is called for. Accordingly in the facts of that year the Tribunal directed the Assessing Officer to disallow 15% of the exempt income to meet the requirements of section 14A of the Act. In the current year also we notice that facts are identical i.e. there is increase in the investments and further there was receipt of dividends. Accordingly we also hold that disallowance under section 14A for general expense is called for. Accordingly we direct the AO to restrict disallowance u/s 14A of the Act to 15% of the exempt income and the same in our view would meet the requirements of section 14A of the Act. Disallowance of depreciation on goodwill which arose on account of amalgamation of three companies - whether the good will arising on amalgamation of subsidiary company which is in the nature of fall in the value of investment would be of the same nature of the good will arising on acquisition of unrelated concern? - HELD THAT - The question is whether such kinds of goodwill would fall under the category of business or commercial rights as mentioned in section 32(1)(ii) of the Act which was interpreted in the case of Smiffs Securities Ltd 2012 (8) TMI 713 - SUPREME COURT Hence it is imperative for the assessee to show that the good will being short fall in the value of investments would also rank at par with the good will which was considered as business or commercial rights as mentioned in sec. 32(1)(ii) - the fact remains that both the tax authorities have not examined this aspect. As noticed that the CIT(A) has taken support of the sixth proviso to section 32(1) of the Act to reject the claim of depreciation on the good will. However on a careful perusal of the sixth proviso to sec. 32(1) of the Act we noticed that the same is applicable only in a situation where the amalgamation takes place in the middle of the year i.e. the said proviso states that the aggregate amount of depreciation claimed by the amalgamating companies and amalgamated company for that year should not exceed eligible amount of depreciation of that year. In the instant case the amalgamation has taken place on 1.4.2009 and not in the middle of the year. Hence the sixth proviso to section 32(1) will not apply to the facts of the present case. Accordingly we set aside the reasoning given by the learned CIT(A) for confirming the disallowance of depreciation of goodwill. Both the tax authorities have not examined the factual aspects relating to the goodwill amount and also the depreciation claimed thereon. Hence the assessee also did not get opportunity to put forth its contentions before them. Under these set of facts we are of the view that this claim of depreciation on good will requires examination at the end of the AO by duly considering all the relevant factual aspects. Accordingly we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer for examining it afresh by considering the discussions made supra. MAT - Rejection of claim of the assessee for deduction of Provision for doubtful debts from the Net profit for the purposes of computing book profit u/s 115JB - HELD THAT - As decided in own case for AY 2009-10 2023 (2) TMI 1312 - ITAT MUMBAI the Tribunal held that the amount of Provision for bad and doubtful debts if reduced from the amount of Sundry debtors balance in the assets side of Balance Sheet the same would not be hit by clause (i) of Explanation 1 to sec.115JB of the Act. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO not to add the amount of Provision for bad and doubtful debts to net profit while computing book profit u/s 115JB. Disallowance of Sales promotion expenditure invoking Explanation 1 to sec. 37(1) - CIT(A) deleted the disallowance - HELD THAT - We find merit in the submissions made by the Ld A.R. We notice that the assessing officer has disallowed sales promotion expenses of Rs.17.05 crores. According to the assessee most of these expenses may not be hit by MCI regulations. Accordingly the assessee seeks an opportunity to furnish break-up details of the above expenses. We notice that the AO also disallowed entire expenses without examining the real nature of expenses claimed under this head. Accordingly we are of the view that in the interest of natural justice this issue requires fresh examination at the end of AO. Accordingly we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining it afresh by duly considering the information and explanations that may be furnished by the assessee. Disallowance u/s 35(2AB) for R D Expenses - weighted deduction for R D expenses incurred outside the approved in-house facility - HELD THAT - Tribunal has restored the issue to the file of the Assessing Officer for examining the breakup details of the scientific research expenses incurred in each of the R D facility centre since it was not furnished to the Assessing Officer during the course of the assessment proceedings relating to AY 2009-10 2023 (2) TMI 1312 - ITAT MUMBAI - Further in that year Learned DR also had contended that the approval given to some of the research facilities were not available in the record. Hence the matter was restored to the file of the Assessing Officer for the limited purposes discussed above. AR submitted that the assessee has furnished the break up the details of expenses incurred in each of the R D facility before the AO in the current year. Accordingly he submitted that there is no requirement of remitting the issue back to the file of the Assessing Officer. However we noticed that the Assessing Officer did not examine the claim of the assessee at all with regard to this expenditure. Hence there was no occasion for the AO to examine the issue. We have already discussed about the legal position relating to the claim made u/s 35(2AB) of the Act. In our view the basic facts relating to the claim need to be verified at the end of the AO. Accordingly for verification of the basic details we restore this issue to the file of the Assessing Officer with the direction to examine this issue and decide upon the claim of the assessee in accordance with the legal position discussed supra. Disallowance of ESOP Expenses - assessee did not claim this expenditure in the return of income but claimed it before the AO during the course of assessment proceedings - HELD THAT - As relying on own case A.Y. 2009-10 2023 (2) TMI 1312 - ITAT MUMBAI we hold that the learned CIT(A) was justified in allowing the ESOP expenditure claimed by the assessee. Nature of expenses - Disallowance of Pre-commencement revenue expenses incurred at Pithampur SEZ Plant-I - assessee did not claim this expenditure in the return of income but claimed the same before the AO during the course of assessment proceedings - AO rejected the same on the reasoning that the assessee has made new claim without filing revised return of income - CIT(A) has accepted the fact that the business has been set up and hence revenue expenses incurred in that plant are allowable as deductionand also accepted the alternative contention of the assessee that the Pithampur SEZ plant is extension of existing business and accordingly directed the AO to allow the exhibit batch expenditure as revenue expenditure - HELD THAT - The uncontroverted fact is that the business of the assessee in Pithampur SEZ has been set up and further it is an extension of existing business. We notice that the Ld CIT(A) has allowed the claim following the legal principles pronounced by the Courts. Hence we do not find any infirmity in the decision rendered by Ld CIT(A) on this issue. The assessee has also filed cross objection for AY 2010-11. The ld A.R submitted that the same is in support of the order passed by Ld CIT(A) on certain issues. Accordingly the cross objection does not require adjudication. Interest levied u/s 234C - advance tax remitted by the assessee got delayed by one day beyond the due date and hence interest u/s 234C was levied - It is the case of the assessee that the delay in payment of advance tax was beyond the control of the assessee and hence the interest u/s 234C should not be levied. HELD THAT - We notice that the Ld CIT(A) has rejected the above said claim on the reasoning that he does not have power to condone the delay occurred in payment of advance tax. We also agree with the view so expressed by Ld CIT(A). We are also of the view that the condonation of delay in payment of advance tax will not fall under the scope of the powers of Tribunal also i.e. it is a matter to be taken up with CBDT. Accordingly we reject this ground of the assessee. Disallowance of mark to market loss arising on account of revaluation of forward contracts due to exchange difference on the last date of balance sheet - AO disallowed the same following the Instruction No.3/2010 issued by CBDT wherein the CBDT has expressed the view that the such kind of revaluation loss is notional one - AO also expressed the view that the provisions of sec.43(5) bars such a claim - HELD THAT - As notices in own case in AY 2009-10 2023 (2) TMI 1312 - ITAT MUMBAI notice from the break-up details of the claim extracted above the M to M loss on forward contracts was Rs.42.53 lakhs. The other two items relate to ineffective Option Contracts and Derivative asset w/off relating to option contracts . The nature of these items is not clear and we notice that no tax authority has examined these items. If these transactions have been entered in the course of carrying on of regular business activities and the underlying assets are trading items the loss arising on their revaluation at the year end is allowable as deduction. It is to be seen that the underlying assets having foreign currency exposure is also revalued as at the year end. Accordingly for the limited purpose of verifying these factual aspects we restore this issue to the file of the AO for examining this issue in the light of principles laid down by Hon ble jurisdictional Bombay High Court in the case of D Chetan Co 2016 (10) TMI 629 - BOMBAY HIGH COURT .
Issues Involved:
1. Disallowance of alleged bogus expenses. 2. Disallowance of purchases holding them as bogus. 3. Disallowance under section 14A. 4. Disallowance of depreciation on goodwill. 5. Deduction of "Provision for doubtful debts" for computing book profit under section 115JB. 6. Disallowance of sales promotion expenditure. 7. Disallowance under section 35(2AB) for R&D expenses. 8. Disallowance of ESOP expenses. 9. Disallowance of pre-commencement revenue expenses. 10. Disallowance of mark to market loss on forward contracts. 11. Interest levied under section 234C. Summary: 1. Disallowance of Alleged Bogus Expenses: The assessee contested the disallowance of alleged bogus expenses amounting to Rs.18,15,788/- for AY 2010-11. The Tribunal found that the facts and circumstances were identical to those in AY 2009-10, where the disallowance was deleted. Accordingly, the Tribunal directed the Assessing Officer to delete the disallowance of Rs.14,96,706/- and the depreciation disallowance on the capital expenditure. Similar directions were given for AY 2011-12 and 2012-13. 2. Disallowance of Purchases Holding Them as Bogus: The Tribunal noted that an identical disallowance was made in AY 2009-10 and restored the matter to the file of the Assessing Officer for fresh examination. The assessee provided additional evidence to substantiate the genuineness of the purchases. The Tribunal directed the AO to re-examine the issue for AY 2010-11, 2011-12, and 2012-13. 3. Disallowance Under Section 14A: For AY 2010-11, the Tribunal directed the AO to delete the interest disallowance if the own funds were more than the value of investments, following the decision in HDFC Bank Ltd. The disallowance for general expenses was restricted to 15% of the exempt income. Similar directions were issued for AY 2011-12 and 2012-13. 4. Disallowance of Depreciation on Goodwill: The Tribunal found that the tax authorities had not examined the factual aspects relating to the goodwill amount of Rs.21.81 crores. The issue was restored to the AO for fresh examination for AY 2010-11, 2011-12, and 2012-13. 5. Deduction of "Provision for Doubtful Debts" for Computing Book Profit Under Section 115JB: Following the decision in AY 2009-10, the Tribunal directed the AO not to add the amount of Provision for bad and doubtful debts to net profit while computing book profit under section 115JB for AY 2010-11. 6. Disallowance of Sales Promotion Expenditure: The Tribunal restored the issue to the AO for fresh examination, considering the nature of the expenses claimed under this head for AY 2010-11, 2011-12, and 2012-13. 7. Disallowance Under Section 35(2AB) for R&D Expenses: The Tribunal upheld the decision of the CIT(A) allowing weighted deduction for R&D expenses incurred outside the approved in-house facility, following the decision in Cadila Pharmaceuticals Ltd. The issue was restored to the AO for verification of factual aspects for AY 2010-11, 2011-12, and 2012-13. 8. Disallowance of ESOP Expenses: The Tribunal upheld the CIT(A)'s decision allowing the ESOP expenses, following the decision in Biocon Ltd. for AY 2010-11, 2011-12, and 2012-13. 9. Disallowance of Pre-commencement Revenue Expenses: The Tribunal upheld the CIT(A)'s decision allowing the pre-commencement revenue expenses incurred at Pithampur SEZ Plant-I for AY 2010-11, 2011-12, and 2012-13. 10. Disallowance of Mark to Market Loss on Forward Contracts: The Tribunal restored the issue to the AO for fresh examination in light of the principles laid down by the Bombay High Court in D Chetan & Co. for AY 2012-13. 11. Interest Levied Under Section 234C: The Tribunal agreed with the CIT(A) that the delay in payment of advance tax was beyond the control of the assessee and that the issue of condonation of delay falls outside the scope of the Tribunal's powers for AY 2012-13. Conclusion: All the appeals of the assessee and revenue were treated as partly allowed, and the cross objections filed by the assessee were dismissed.
|
