2017 (5) TMI 1739 - HC - Income Tax

Revised working of capital gains in respect of transaction of BSE shares - Claim denied on the ground that the same was not prayed either in return or in the revised return - HELD THAT - The issue involved in the aforesaid proposed question is squarely covered against the Revenue in light of the decision of the Division Bench of this Court in the case of Commissioner of Income Tax vs. Mitesh Impex 2014 (4) TMI 484 - GUJARAT HIGH COURT as held by the Division Bench of this Court that if the revised working of capital gain is brought on record during the course of the assessment the same is permissible and the same was required to be allowable. Under the circumstances no error has been committed by the learned ITAT in allowing the revised working of capital gains in respect of transaction of BSE shares. Under the circumstances present Tax Appeal qua question No.(1) stands dismissed. Disallowance of deduction u/s 40(a)(ia) - reimbursement of expenses - HELD THAT - The said proposed question of law is also answered against the Revenue by the Division Bench of this Court in the case of Commissioner of Income tax-III vs. Gujarat Narmada Valley Fertilizers Co. Ltd. 2014 (4) TMI 235 - GUJARAT HIGH COURT wherein as held that on the amount which is reimbursed the TDS is not required to be deducted. The aforesaid is not disputed by Shri Bhatt learned Counsel appearing on behalf of the Revenue. Under the circumstances present Tax Appeal qua proposed question No.(3) stands dismissed. Appeal is ADMITTED to consider the following question of law - Whether on the facts and circumstances of the case the Appellate Tribunal was justified in deleting the disallowance of deduction u/s 40(a)(ia) of Rs. 30, 68, 705/in respect of office management and maintenance expenses?

Summary

Issues:
1. Revision of working of capital gains on BSE shares
2. Disallowance of deduction u/s 40(a)(ia) for office management and maintenance expenses
3. Disallowance of deduction u/s 40(a)(ia) for reimbursement of expenses

Analysis:

Issue 1: Revision of working of capital gains on BSE shares
The appellant challenged the ITAT's decision to allow the revised working of capital gains on BSE shares. The Assessing Officer had denied the claim as it was not included in the original or revised return. However, the High Court referred to a previous case where it was held that if revised capital gain working is presented during assessment, it should be allowed. As per the Division Bench's decision, the ITAT's decision to permit the revised working of capital gains was upheld, leading to the dismissal of the appeal on this issue.

Issue 2: Disallowance of deduction u/s 40(a)(ia) for office management and maintenance expenses
The question of whether the ITAT was correct in deleting the disallowance of deduction under section 40(a)(ia) for office management and maintenance expenses was raised. The Division Bench had previously ruled that TDS is not required on reimbursed amounts, a decision not contested by the Revenue's counsel. Consequently, the High Court dismissed the appeal on this issue as well, in line with the Division Bench's precedent.

Issue 3: Disallowance of deduction u/s 40(a)(ia) for reimbursement of expenses
The High Court admitted the appeal to consider the question of whether the ITAT was justified in deleting the disallowance of deduction under section 40(a)(ia) for reimbursement of expenses amounting to Rs. 30,68,705. This issue is to be heard alongside other related tax appeals, indicating the significance and complexity of the matter that requires further examination.

In summary, the High Court upheld the ITAT's decisions regarding the revision of capital gains on BSE shares and the disallowance of deductions for reimbursed expenses, citing relevant Division Bench judgments. The appeal on the disallowance of deduction for office management and maintenance expenses is pending further consideration.