2023 (9) TMI 776 - AT - Income Tax

Disallowance of advance excise and deposit u/s 43B - HELD THAT - As decided in assessee own case 2013 (9) TMI 1239 - ITAT DELHI for the purpose of claiming benefit of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant and is only to be taken into account. The year in which the assessee incurred the liability to pay such tax, duty, etc., has no relevance and cannot be linked with the matter of giving benefit of deduction u/s 43B. Ins this view of the matter, the appeal deserves to be allowed. Prior period expenses disallowance - HELD THAT - The issue of allowability of prior period expenses involved in the above ground of appeals of the Revenue is no more Res-integra, the jurisdictional High Court in the case of CIT vs. Jagjit Industries Ltd. 2010 (9) TMI 58 - DELHI HIGH COURT true profit and gain of a previous year are required to be computed for the purpose of determining tax liability. The basis of taxing income is accrual of income as well as actual receipt. If for want of necessary material crystallizing the expenditure is not in existence in respect of which such income or expenses relates, the mercantile system does not call for an adjustment in the books of account on estimate basis. It is actually known income or expenses, right to receive or liability to pay which has come to be crystallized is to be taken into account under mercantile system of maintaining books of account. An estimated income or liability, which is yet to be crystallized, can only be adjusted as contingency item but not as an accrued income or liability of that year. Dilii Haat Rental Income - correct head of income - HELD THAT - As decided in 2018 (4) TMI 699 - ITAT DELHI rental income from craftsmen as Business income on the first principles, we do not consider it expedient to discuss other issues raised by both the sides in support of their respective claims as to whether or not the assessee was owner of Dilli Haat , which is a mandatory condition for computing income under the head Income from house property and rule of consistency etc. Thus we direct the A.O. to allow necessary deductions against these incomes as per law, after allowing opportunity of being heard to the Assessee. Disallowance of net loss to Delhi Institute of Tourism and Travel Management (DITTM) - HELD THAT - The similar issue of allowability of loss in respect of Institute of DITTM has been decided by the Coordinate bench of the Tribunal for the Assessment Year 2007-08 2018 (4) TMI 699 - ITAT DELHI as held loss of IITTM Delhi has been incorporated in the assessee's profit and loss account for the A.Y. 2012- 13, what transpired on 1.4.2009, in so far as a running of IITTM-D is concerned, is relevant. Necessary details about the changes made from 1.4.2009 are not readily available with leaned AR. We, therefore, set aside the impugned order on this issue and send the matter back to the file of the Assessing Officer for examining the assessee's contention about the change taking place from 1.4.2009 and then deciding the impact of such change on the income of the assessee before and after this change. Tourism Promotion and Tent Expenses - disallowance made as assessee has not furnished details/documentary evidences in relation to the expenses which were sought in the questionnaire - AO deleted 50% of the expenses - CIT(A) deleted addition - HELD THAT - The expenses claimed by the assessee has been made through cheques and the assessee had incurred the expenses on tourism promotion and hiring of tent and all the expenses are accounted for in the books of accounts. Assessee being corporation which is a Government undertaking requires to maintain proper account and also require to be audited by qualified CA/CAG, despite of the same, the CIT(A) has taken very reasonable view on this issue, since the Assessee is not in appeal before us, we are constrained to confirm the order of the CIT(A). Accordingly, we find no merit in ground of the Revenue. Deduction u/s 80-IA denied - assessee did not file Form No.10CCB along with the return of income on or before the due date prescribed u/s 139 (1) - HELD THAT - Although the assessee did not file Form No.10CCB along with the return of income on or before the due date prescribed u/s 139 (1) of the Act, but the Audit Report in Form No. 10CCB was made available before the A.O. before he completes the assessment u/s 143(3) of the Act, therefore, we are of the view that the A.O. ought to have considered the said Audit Report filed by the assessee and allow the deduction claimed by the Assessee u/s 80IA of the Act. This view of ours is fortified by the judgment of M/S G. M. Knitting Industries Ltd. 2015 (11) TMI 397 - SC ORDER wherein held that even though necessary certificate in Form No. 10CCB along with the return of income had not been filed but the same was made available to the A.O. before passing of final assessment order, the assessee is entitled to claim the deduction u/s 80IA of the Act, in view of the above ratio, we do not find any infirmity in granting 80IA deduction. Interest earned around on mobilization advance given to sub contractor - denial of deduction and treating the same as income from other sources - Mobilization advance is having direct proximate relationship with business of the assessee - it is integral and directly related to the business of the assessee which emerged from the business activities of the assessee and the same has to be considered as business income of the assessee and not otherwise. Accordingly, the assessee is entitled for deduction u/s 80IA of the Act. The other interest for which details are not furnished by the assessee, the assessee is not entitled for deduction u/s 80IA of the Act, on the said interest income. A.O. has to verify the records and grant the deduction accordingly. Disallowance u/s 40A(3) on account of cash reimbursement made by the assessee to its employees towards LTC and Children Tuition Fees - HELD THAT - As CIT(A) found that the reimbursed tuition fees Rs. 1,000/- per month for two children on aggregate basis and also reimbursement medical expenses at Rs. 800/- per month at aggregate basis, thus, cash payment of each employees exceeds Rs. 20,000/-. The assessee has not brought on record any evidence which proves that the case of the assessee is covered as per the proviso of Rule 6DD (j) of the Rules, apart from the same, in the auditor report, the auditor has qualified that the said amount falls u/s 40A(3) of the Act as the cash payment exceeds Rs. 20,000/- made to a person and therefore, the assessee is not entitled to claim deduction on account of such expenditure. No error or infirmity in the order of the CIT(A) in confirming the disallowance u/s 40A(3) of the Act. TDS Credit - Whether CIT(A) committed error in remanding the issue to the file of the A.O. to verify the claim of TDS Credit? - HELD THAT - Since, the CIT(A) has remanded the issue to the file of the A.O. for allowing the claim of TDS to the Assessee after verifying the records as per law, which requires no interference as we find no error in the direction given the CIT(A). Disallowance on account of reversal damage charges - CIT(A) deleted the addition - HELD THAT - The entire revenue booked for damage charges for F.Y 2011-12 and 2012-13 has been reversed in the Annual Accounts for the F.Y 2013-14 being found contrary to the AS-9 applicable to Assessee Corporation. The Company has been following mercantile system of accounting with compliance of mandatory AS as announced by ICAI from time to time. The AS-9 titled revenue recognization does not warrant he accounting of this abnormal revenue reorganization. But it was accounted for inadvertently due to mistake of conception of accounting standards. Also there has been litigation is also pending in the High Court, Delhi wherein in the interim order passed by Court on dated 23/09/2013 directs the licensee i.e. M/s ITE India (P) Ltd. to continue to pay license fees and other dues regularly. Considering the fact that since the said income of the assessee has been duly certified by the audited accounts and covered by the Clauses of the agreement, we are of the opinion that the CIT(A) has committed error in deleting the addition, accordingly, we deem it fit to remand the issue to the file of the A.O. to decide the same on the basis of final outcome of the decision of the Hon'ble High Court, which was pending for final order at the state of first Appellate Authority. Disallowance on account of writing off the liability - CIT(A) has deleted the addition - HELD THAT - The assessee had written back the said liability in the subsequent financial year without furnishing any explanation on the query why this should not written back in the previous year. As per the audited accounts, the said liability has ceased to exist in this year as such the same was required to be added to the income in the previous year, rather than postponing it to the subsequent years. Thus, in our opinion, the CIT(A) has committed error in deleting the said addition. Disallowance of unspent Revenue grant made by the A.O - CIT(A) deleted the addition - HELD THAT - It is found that the assessee had received grants from Government Agencies for carrying out day to day operations of the assessee which is in revenue field. In the course of carrying out of the business activities of the assessee, the amount received through grant from the Government Agencies, a certain portion was unspent and the same cannot lead to taxing the unspent balance, the assessee being an ongoing concern and following mercantile system of accounting and the activities for which the grant has been received has not been over and there was an obligation on the part of the assessee to spent the amount in whole for the purpose of which it has been received. Taxing of the said unspent revenue grant amounts to penalizing the assessee which cannot be permitted. Accordingly, we find no error or infirmity in the order of the CIT(A) in deleting the addition. Capital Reserve-Advance Rent received from Ministry of External Affairs and Ministry of Tourism - HELD THAT - The assessee in the present case following mercantile system of accounting and there is no dispute on the said fact. Being so, the income accrued and received relating to the year under consideration has to be taxed. In the present case, the assessee received advance rent from the Government Agencies which is not accrued to the assessee and the same has to be taxed in the assessment year for which the same is related. Therefore, it cannot be taxed in the hands of the assessee in the year under consideration. The said advance rent is subject to taxation in the subsequent Assessment Year, being so, the same cannot be taxed in the year under consideration.

Summary

Issues Involved:
1. Advance Excise Duty under Section 43B of the Act.
2. Prior period expenses.
3. Dilli Haat rental income.
4. DITTM loss.
5. Tourism promotion and tent expenses.
6. Exemption/Deduction of income under Section 80-IA.
7. Disallowance under Section 40A(3) for cash reimbursement of employee expenses.
8. TDS credit.
9. Reversal of damage charges.
10. Writing off liability.
11. Unspent revenue grant.
12. Capital reserve.
13. Contingent liability for rent.

Summary:

Advance Excise Duty under Section 43B of the Act:
The Tribunal dismissed the Revenue's appeals regarding the deletion of disallowance of advance excise duty on liquor trade. The issue was covered in the assessee's favor by previous Tribunal orders and the jurisdictional High Court's decision in CIT Vs. Maruti Suzuki India Ltd.

Prior Period Expenses:
The Tribunal upheld the CIT(A)'s deletion of disallowance of prior period expenses, relying on the jurisdictional High Court's decision in CIT vs. Jagjit Industries Ltd. and the Gujarat High Court's ruling in Saurastra Cement & Chemicals Industries Ltd. vs. CIT.

Dilli Haat Rental Income:
The Tribunal directed the AO to allow necessary deductions against rental income from temporary structures as business income and from permanent structures as house property income, following previous Tribunal orders in the assessee's own case.

DITTM Loss:
The Tribunal remanded the issue of disallowance of net loss to DITTM to the AO for re-examination, following the precedent set in the assessee's own case for earlier years.

Tourism Promotion and Tent Expenses:
The Tribunal upheld the CIT(A)'s deletion of the disallowance of tourism promotion and tent expenses, noting that the expenses were accounted for and paid through cheques.

Exemption/Deduction of Income under Section 80-IA:
The Tribunal dismissed the Revenue's appeal against the CIT(A)'s restriction of the disallowance of the deduction under Section 80-IA and partly allowed the assessee's appeal regarding the inclusion of interest on mobilization advance as business income.

Disallowance under Section 40A(3) for Cash Reimbursement of Employee Expenses:
The Tribunal upheld the disallowance under Section 40A(3) for cash reimbursement of LTC and children's tuition fees, finding no evidence that the case fell under the exceptions of Rule 6DD.

TDS Credit:
The Tribunal found no error in the CIT(A)'s remand of the issue of TDS credit to the AO for verification.

Reversal of Damage Charges:
The Tribunal remanded the issue of reversal of damage charges to the AO to decide based on the final outcome of the pending High Court decision.

Writing Off Liability:
The Tribunal allowed the Revenue's appeal, confirming the addition made by the AO on account of writing off the liability of Rs. 6,56,661/-.

Unspent Revenue Grant:
The Tribunal upheld the CIT(A)'s deletion of the disallowance of unspent revenue grants, noting that taxing unspent grants would penalize the assessee.

Capital Reserve:
The Tribunal deleted the addition of Rs. 8,02,16,000/- made by the AO, noting that advance rent received should be taxed in the subsequent assessment year.

Contingent Liability for Rent:
The Tribunal dismissed the assessee's ground regarding the disallowance of contingent liability booked for rent to DSIDC as it was not pressed by the assessee.

Conclusion:
The appeals filed by the Revenue were partly allowed for statistical purposes, while the appeals filed by the assessee were partly allowed for statistical purposes.