Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (9) TMI 96 - AT - Income TaxDisallowance u/s 36(1)(iii) - amount of interest paid on bank loan for setting up new stores or stores in which business activities did not commenced in the year under reference - admission of additional evidence - HELD THAT - The disallowance of interest, admittedly has been made for the reason that the assets /stores for which the loans had been taken and to which the interest related, were not started during the year. The additional documents filed by the assessee by way of Sanction letter of Bank for term loans taken and the utilization certificate of the term loans given to the bank by the assessee, are in support of its claim that interest paid pertained to loans utilized for renovating shops and not acquiring them and in any case the interest paid pertained to period after the asset for which the loans were taken were put to use. - The additional evidences ,we find, therefore, go the root of the matter and are relevant for bringing the correct facts on record - Matter restored before the AO to decide the issue afresh. Depreciation on electrical installations and fittings - 10% OR 15% - HELD THAT - No reason to interfere in the order of the CIT(A). The factual findings of the CIT(A) made after perusing the details filed by the assessee that the additions made were in the nature of furniture and fittings, have not been controverted by the assessee by way of any explanation or detail filed before us, nor the Ld.Counsel for the assessee was able to point out any discrepancy in the findings of the CIT(A). That the applicable rate of depreciation on the said assets is 10% is not disputed. In view of the same, we find no reason to interfere in the order of the CIT(A) in restricting the depreciation to 10% on electric fittings Accrual of income - Difference in the amount of interest receivable on FDRs on accrual basis and accounted for by the appellant on receipt basis in the books of accounts - HELD THAT - Undisputedly the income had accrued in the impugned year to the assessee and TDS also deducted on the same. The same has, therefore, been rightly taxed in the impugned year. Expenditure incurred towards rent disallowed - claim pertained to preceding year and disallowance of excess purchases booked - HELD THAT - Assessee has filed additional evidences before us contradicting the findings of the Revenue. Copy of rent agreement entered into during the year has been filed to show that the impugned expenditure arose on account of the same and thus accrued during the year itself. - there was reasonable cause with the assessee for not producing them before the lower authorities, since as stated by the director of the company on oath, the documents had got misplaced in shifting of the premises of the assessee, which has not been controverted by the Revenue. We therefore admit the additional evidences .Further since the facts as contended by the assessee need to be verified, we restore this issue back to the AO Expenditure incurred on foreign travelling of the Directors - non business expenses - HELD THAT - though undoubtedly the assessee has not filed any evidence of foreign travel undertaken for the purpose of its business, at the same time, it cannot be completely ruled out that certain amount of expenses is incurred in the course of its business considering the nature of its business dealing in trading of branded clothes/apparels. We, therefore, consider 50% of the amount actually claimed by the assessee as reasonable and disallow the balance 50%. Disallowance u/s 40(a)(ia) - contention of assessee by was that out of the advertisement expenses, the amount paid to Fine Ads of ₹ 26,472/- did not qualify for tax deduction at source since the limit for TDS was ₹ 30,000/- and above and for the professional charges to Noshe Oceanic in fact TDS had been deducted on the impugned payment - HELD THAT - restore the issue back to the AO to verify both the claims of the assessee vis- -vis the advertisement payment to Fine Ads not qualifying for TDS deduction and the fact that TDS having been deducted to Noshe Oceanic.The AO is directed to adjudicate the issue in accordance with law after duly verifying the contentions of the assessee. Needless to add, the assessee be granted due opportunity of hearing. Accrual of income - difference in the amounts of receipt as per form No. 26AS and as accounted for in the books of accounts of the appellant - HELD THAT - Assessee had consistently pleaded that the difference was on account of reimbursement received from M/s V.F. Brands which was booked in the subsequent year when the fact of the reimbursement came to its knowledge by way of credit notes issued. CIT(A), we find, despite specific averments made by the assessee upheld the disallowance by giving general findings that income is to be taxed on accrual basis and that income had accrued to the assessee, without addressing the facts as stated by the assessee and pointing out how he arrived at the finding that income accrued to the assessee in this year. We, therefore, consider it fit to restore the issue back to the AO to consider the contention of the assessee
Issues Involved:
1. Disallowance of interest expenses under section 36(1)(iii) of the Income Tax Act. 2. Depreciation rate on electrical installations and fittings. 3. Addition of interest receivable on FDRs on accrual basis. 4. Disallowance of rent expenditure. 5. Disallowance of excess purchase value of goods. 6. Disallowance of foreign travel expenses of directors. 7. Disallowance under section 40(a)(ia) for non-deduction of TDS. 8. Addition due to mismatch in income as per Form 26AS and books of accounts. Issue-wise Detailed Analysis: 1. Disallowance of Interest Expenses under Section 36(1)(iii): The assessee contested the disallowance of ?2,11,095/- as interest expenses on bank loans for setting up new stores. The AO disallowed the interest, stating it related to the period before the commencement of business activities in the stores. The CIT(A) upheld this disallowance. The assessee provided additional evidence, including a bank sanction letter and a utilization certificate, to support its claim that the interest pertained to loans for renovating stores and should be allowable. The Tribunal admitted the additional evidence and remanded the matter to the AO for fresh adjudication. 2. Depreciation Rate on Electrical Installations and Fittings: The assessee claimed depreciation at 15% on electrical installations, which included items like PVC wires and GI pipes. The AO restricted the depreciation to 10%, considering these items as part of furniture and fittings. The CIT(A) upheld this decision. The Tribunal found no reason to interfere with the CIT(A)'s order, as the assessee could not provide any contrary evidence. Thus, the depreciation was restricted to 10%. 3. Addition of Interest Receivable on FDRs on Accrual Basis: The AO added ?1,01,632/- to the income of the assessee, representing the difference in interest receivable on FDRs as per Form 26AS and the amount accounted for on a receipt basis. The CIT(A) upheld this addition, stating that income should be taxed in the year it accrues. The Tribunal agreed with the CIT(A), noting that the income had indeed accrued in the impugned year. 4. Disallowance of Rent Expenditure: The AO disallowed ?5,72,741/- claimed as rent for March 2010, arguing it pertained to the previous year. The CIT(A) upheld this disallowance. The assessee provided additional evidence, including a lease deed and correspondence, showing that the liability for rent arose in the current year. The Tribunal admitted the additional evidence and remanded the issue to the AO for verification and fresh adjudication. 5. Disallowance of Excess Purchase Value of Goods: The AO disallowed ?2,42,868/- for excess purchase value claimed by the assessee, which was corrected in the subsequent year. The CIT(A) upheld this disallowance. The assessee submitted additional evidence showing that the excess purchase was offset by a corresponding discount entry. The Tribunal admitted the additional evidence and remanded the matter to the AO for verification and fresh adjudication. 6. Disallowance of Foreign Travel Expenses of Directors: The AO disallowed ?3,79,021/- incurred on foreign travel of directors and their family members, treating it as non-business expenditure. The CIT(A) upheld this disallowance. The Tribunal, considering the nature of the assessee's business, allowed 50% of the travel expenses as business expenditure and disallowed the remaining 50%. 7. Disallowance under Section 40(a)(ia) for Non-deduction of TDS: The AO disallowed ?3,79,914/- under section 40(a)(ia) for non-deduction of TDS on certain expenses. The CIT(A) upheld this disallowance. The assessee contended that TDS was not required for one of the payments and had been deducted for another. The Tribunal remanded the issue to the AO for verification of the assessee's claims and fresh adjudication. 8. Addition Due to Mismatch in Income as per Form 26AS and Books of Accounts: The AO added ?7,96,537/- due to a mismatch between income as per Form 26AS and the books of accounts. The CIT(A) upheld this addition. The assessee argued that the mismatch was due to reimbursement of advertisement expenses accounted for in the subsequent year. The Tribunal remanded the issue to the AO for verification of the assessee's contention and fresh adjudication. Conclusion: The Tribunal partly allowed the appeals for statistical purposes, remanding several issues to the AO for fresh adjudication after verifying additional evidence and the assessee's contentions. The decisions emphasized the need for accurate documentation and timely submission of relevant evidence to support claims.
|