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2022 (3) TMI 1331 - AT - Income TaxDeduction on account of interest payment based on the judgment of decree passed against the appellant by the Hon'ble Delhi High Court - grievance of the department is that though the same has been claimed in the computation of income, but the same has not been charged as an expense in the audited accounts/books - HELD THAT - Since, the issue has travelled a series of judgments of the Tribunal, Special bench and the Hon'ble High Court and the matter has been settled with regard to the payment of interest, we decline to interfere with the order of the ld. CIT(A). Disallowance of Expenses u/s. 40(a)(ia) - HELD THAT - The amount paid by the assessee is the cost of purchase and not in the nature of commission. The procuring organization i.e. the Village, District State Level Co-operative Societies had to incur expenses on maintaining offices and administrative staff to carry out the work of procurement. They also had to earn some net profit from all their effort/work. Accordingly, the appellant allowed the Village, District . State Level Co-operative Societies to raise their sales invoices on the appellant on a similar basis which the Govt. of India (GOI) has prescribed for the appellant i.e. cost plus a fixed gross margin. In fact even the market/mandi charges and other taxes etc. are also charged as a percentage. The State Level Cooperatives raise their sale bills on NAFED giving various components of the direct costs like basic price, purchase tax, marketing fees, packing charges etc. as well as their margin of profit for meeting their own administrative costs etc. Pricing mechanism fixed by the Government of India, it is clear that the assessee has merely paid the purchase price as agreed. However, only to monitor the pricing, the cost components are separately shown so as to reimburse the assessee for any loss incurred by it in execution of PSS/MIS - Since the amount paid by the assessee to the Dist/State Level Cooperatives is only the purchase price and not in the nature of commission, no disallowance under section 40(a)(ia)is called for. Disallowance of Expenses u/s. 40(a)(ia) - HELD THAT - Disallowance u/s. 40(a)(ia) was made by the AO for late deposit of TDS deducted u/s. 194C during December 2008 and February 2009 for payments made. TDS was deposited in the government treasury on 25.05.2009 which was before the due date of filing of return u/s. 139(1) of the Income Tax Act, 1961. No disallowance is called for u/s. 40(a)(ia) owing to the decision of the Income Tax Appellate Tribunal, Delhi 'H' Bench, in the case of Taru Leading Edge (P) Ltd., New 2012 (6) TMI 296 - ITAT DELHI for Assessment year 2008-09. 50% of depreciation on the warehouse holding that it has been put to use for less than 180 days - HELD THAT - Warehouse bills on sample basis were furnished vide letter dated 08.11.2011 to prove that the warehouse is in operation. The bills were issued by NAFED to FCI for giving warehouse storage facility by NAFED to FCI. These bills are therefore evidence to establish that the warehouse was in operation in the year under assessment. The invoices submitted on sample basis before the AO were not the purchase invoices for acquisition of the asset rather these invoices were in evidence to use of such assets. The document pertaining to handing over note of warehouse dated 31.03.2008 before the ld. CIT(A) which was remanded back to the office of AO. AO vide remand report dated 19.11.2013 rejected the claim of assessee without pointing out any reason as to why the aforesaid document does not prove the date of put to use. This contention of AO was not accepted by the ld. CIT(A) and relief was provided to assessee. Hence, we decline to interfere with the order of the ld. CIT(A) Disallowance u/s. 14A - HELD THAT - During the year, the assessee received dividend income of ₹ 1,01,33,000/- from IFFCO and Cooperative Bank of India. The similar issue has been adjudicated by the Co-ordinate Bench of ITAT in the case of the assessee 2012 (4) TMI 803 - ITAT DELHI wherein the disallowance made by the AO has been deleted. Since, the matter stands adjudicated, in the absence of any material change and the legal proposition, we decline to interfere with the order of the ld. CIT(A). Disallowance on account of Claims Rejected - HELD THAT - Assessee claimed from railways and Government of India and an amount of ₹ 20,75,889/- for loss suffered in stock transfer from one branch to another and on account of purchase sale of agriculture products on behalf of the Government of India. This is the rejection of expenses incurred by the assessee and not reimbursed by the GOI/Railways on account of Price Support Scheme and Market Intervention Scheme. These expenses are not penal in nature and hence claimed u/s. 37 - Since, the expenses are incurred in connection with the business of the assessee, no disallowance is called for. Disallowance u/s. 37 - assessee has claimed in the P L Account an amount towards Reimbursement of Deficit/Surplus from/to business associates on account of reimbursement as per the terms of Memorandum of Understanding dated 11th April 2008 between the said entity and the assessee - HELD THAT - Recorded sales and purchases/costs (though made/incurred by the business associate) in the books of the assessee, as the result an amount of ₹ 10,03,22,868/- is shown as the difference between the sale and the purchase in the books of the assessee which was payable to the business associate after deducting the service charges of ₹ 53,33,813/- being income of the assessee. Thus, the balance amount of ₹ 9,49,89,055/- payable to the business associate namely M/s. R. Piyarelal Global Impex Ltd. was recorded as an expense in the books and the account of the business associates was credited. Export sales made by the business associates, the sales have been credited by the assessee in its books of accounts as normal sales, being pursuant to the tie-up business model adopted for recording of sales and purchase transactions, to that extent the revenue is recognized in the books of the assessee. Correspondingly the purchase cost/expenses incurred by the business associates were also debited by the assessee in its books of accounts and to that extent the cost is recorded.Thus, the difference is sitting in the books of the assessee after reducing the service charges being the true income of the assessee, was nullified by debiting the profit Loss account under the head Reimbursement of Deficit/Surplus from/to business associates . Disallowance of prior period adjustments - AO made the aforesaid disallowance by holding that the liability of these expenses were crystallized in previous years - HELD THAT - Since, the expenses were found to have been crytalized during the year, no disallowance is called for. Disallowance of interest u/s. 36/37 - HELD THAT - Mere non-accrual of any income does not ipso facto make the tie-up advances as not for business purposes and very importantly when the same were given as held driven out of commercial expediency and the income has been earned in the past and duly included in the taxable income and assessed under section 143(3) of the Income Tax Act for those years and for subsequent assessment years. NAFED is persistently pursuing the recoveries against these tie-up advances. A Year Wise breakup of recoveries made against Tie-Up Advances and total recoveries aggregated to ₹ 158.24 crores. To expedite the remaining recovery, all the efforts are being made by the NAFED including legal proceedings which have been initiated against the defaulting parties at various levels i.e., CBI, Enforcement of Economics Offences Wing, High Court, etc. Since, the tie-ups could be said to be a part of the business operation, no disallowance of interest on this account is called for and hence we decline to interfere with the order of the ld. CIT(A). Appeal of revenue dismissed.
Issues Involved:
1. Interest liability relating to M/s. Alimenta, Geneva. 2. Disallowance of expenses under Section 40(a)(ia). 3. Disallowance under Section 40(a)(ia) for late deposit of TDS. 4. Disallowance of depreciation under Section 32. 5. Disallowance under Section 14A. 6. Disallowance on account of claims rejected. 7. Disallowance under Section 37. 8. Disallowance of prior period adjustments. 9. Disallowance of interest under Sections 36/37. Detailed Analysis: Interest Liability Relating to M/s. Alimenta, Geneva: The assessee claimed a deduction for interest payment based on a decree by the Hon'ble Delhi High Court. The department contended that the interest was not charged as an expense in the audited accounts and was a contingent liability under the mercantile accounting system. The Tribunal found that the issue had been previously adjudicated, with the Special Bench and the Hon'ble Delhi High Court ultimately quashing the Special Bench's order. The Tribunal upheld the CIT(A)'s decision to delete the disallowance. Disallowance of Expenses under Section 40(a)(ia): The assessee, a nodal organization for agricultural produce purchase, was found to have paid amounts to State/District level Cooperative Societies as part of the purchase price, not as commission. The Tribunal noted that similar issues for earlier years were decided in favor of the assessee by the ITAT, confirming that the amounts paid were for purchases and not commission. Thus, no disallowance under Section 40(a)(ia) was warranted. Disallowance under Section 40(a)(ia) for Late Deposit of TDS: The AO disallowed expenses for late deposit of TDS deducted under Section 194C. The Tribunal, following the precedent set in the case of Taru Leading Edge (P) Ltd., ruled that no disallowance was called for since the TDS was deposited before the due date of filing the return. Disallowance of Depreciation under Section 32: The AO disallowed 50% of the depreciation on the warehouse, claiming it was used for less than 180 days. The assessee provided evidence of the warehouse's operation, including bills issued to FCI. The CIT(A) accepted this evidence, and the Tribunal upheld the CIT(A)'s decision, declining to interfere. Disallowance under Section 14A: The AO disallowed expenses related to earning dividend income. The Tribunal noted that a similar issue had been adjudicated in favor of the assessee for earlier years, with no material change in circumstances. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the disallowance. Disallowance on Account of Claims Rejected: The assessee claimed expenses not reimbursed by the Government of India/Railways under the Price Support Scheme and Market Intervention Scheme. The Tribunal found that these expenses were incurred in connection with the business and were not penal in nature, thus no disallowance was warranted under Section 37. Disallowance under Section 37: The AO disallowed an amount claimed as a reimbursement deficit to a business associate, alleging it was a collusive payment. The Tribunal found that the transactions were recorded as normal sales and purchases, with the difference being the actual income of the assessee. The Tribunal upheld the CIT(A)'s decision, finding no collusion or malafide intent. Disallowance of Prior Period Adjustments: The AO disallowed expenses classified as prior period adjustments, claiming they crystallized in previous years. The Tribunal upheld the CIT(A)'s decision to delete the disallowance, noting that the expenses crystallized during the year and were allowable. Disallowance of Interest under Sections 36/37: The AO disallowed proportionate interest on advances made for tie-up business, alleging they were not for business purposes. The Tribunal found that the advances were driven by commercial expediency and were part of the business operations. The Tribunal upheld the CIT(A)'s decision, finding no basis for disallowance. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all counts. The order was pronounced in the open court on 03/03/2022.
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