2019 (12) TMI 1205 - AT - Income Tax

Disallowance of dividend distribution by the AO - HELD THAT - As decided in own case 2018 (7) TMI 1876 - ITAT AMRITSAR we find no basis for the said addition. Even assuming, for the sake of argument, that the dividend distribution tax was indeed payable by the assessee-company, the Revenue can only proceed under law to exact the same. It does not in any manner lead to the inference of any income having accrued to the assessee as a result. Rather, the said tax, where paid, would stand to be debited to its operating statement (P L A/c) for the year. We decide accordingly. Addition on account of standard loan disallowed by the AO - HELD THAT - Issue to be decided against revenue as relying on assessee own case 2018 (7) TMI 1876 - ITAT AMRITSAR Addition on account of losses of fraud committed at main branch, Hoshiarpur and on account of contra entry of interest not decided by the CIT(Appeal) - HELD THAT - We find that while disallowing the total amount of ₹ 6,00,75,946/-. The AO has also included the amount of ₹ 2.17 crores being provisions made against main branch office of fraud and ₹ 2.58 crores being interest paid to main branch Hoshiarpur without confronting the assessee on this issue. Therefore, we are of the considered opinion that this issue is set aside to the file of the AO for examination and reconsideration of the same after affording a reasonable opportunity of being heard to the assessee. In view of this ground of appeal is set aside to the file of the AO in entirety for reconsideration of the disallowances made. Disallowance of fuel and hire charges debited to the P L account - HELD THAT - In the instant case, we find neither of these two conditions being satisfied; the former being in fact incidental in-as-much as a voluntary expenditure, shown to be for the purpose of the assessee s business, would qualify for deduction. In our considered view, therefore, the impugned expenditure does not meet the test of section 37(1), and stands rightly disallowed by the Revenue. We decide accordingly, and the Revenue succeeds

Summary

Issues Involved:
1. Deletion of addition on account of disallowance of dividend distribution tax.
2. Deletion of addition on account of provision for standard loans.
3. Confirmation of addition on account of losses due to fraud and interest not decided by the CIT(A).
4. Disallowance of fuel and hire charges.
5. Deletion of addition on account of provision for bad and doubtful debts.
6. Disallowance of self-assessment tax and other expenses.

Detailed Analysis:

1. Deletion of Addition on Account of Disallowance of Dividend Distribution Tax:
The issue relates to the deletion of an addition amounting to ?41,00,640/- made by the AO on account of disallowance of dividend distribution tax. The Tribunal found that this issue was already covered by its own decision in the assessee's case for AY 2007-08, where it was held that the dividend distribution tax, even if payable, does not lead to any income accruing to the assessee. The Tribunal upheld the CIT(A)'s decision to delete the addition, dismissing the Revenue's appeal on this ground.

2. Deletion of Addition on Account of Provision for Standard Loans:
The AO had disallowed ?6,00,75,946/- on account of provision for standard loans, treating it as a contingent liability. The Tribunal referred to its earlier decision, which held that such provisions, if within the statutory limits under section 36(1)(viia), are allowable. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal on this ground as well.

3. Confirmation of Addition on Account of Losses Due to Fraud and Interest Not Decided by the CIT(A):
The assessee contested the addition of ?2,17,18,237/- for losses due to fraud and ?2,58,57,709/- for interest paid to the head office. The Tribunal noted that the AO had included these amounts without confronting the assessee. It set aside this issue to the AO for re-examination, directing a reconsideration of the entire disallowance of ?6,00,75,946/- after affording the assessee a reasonable opportunity of being heard.

4. Disallowance of Fuel and Hire Charges:
The AO disallowed ?8,39,825/- for fuel and hire charges, which were claimed by the assessee for vehicles used by the Department of Cooperative Societies, Punjab. The Tribunal upheld the disallowance, stating that the expenditure did not serve any business purpose of the assessee and was not incurred wholly and exclusively for the business, thus failing the test under section 37(1).

5. Deletion of Addition on Account of Provision for Bad and Doubtful Debts:
The AO had disallowed ?2.25 crores for provision for bad and doubtful debts, treating it as a contingent liability. The Tribunal referred to its earlier decision, which allowed such provisions under section 36(1)(viia) if within statutory limits. It upheld the CIT(A)'s order to delete the addition, dismissing the Revenue's appeal on this ground.

6. Disallowance of Self-Assessment Tax and Other Expenses:
The AO disallowed ?6,06,090/- for self-assessment tax and ?25,17,221/- for other expenses, which the assessee claimed to have already added back in the return. The Tribunal set aside these issues to the AO for verification. If the amounts were indeed already added back, no further addition is required; otherwise, the disallowances would be sustained.

Conclusion:
- The appeal of the Revenue for AY 2009-10 was dismissed.
- The appeal of the assessee for AY 2009-10 was partly allowed and partly set aside.
- The appeal of the Revenue for AY 2011-12 was dismissed.
- The appeal of the assessee for AY 2013-14 was partly allowed and partly set aside.