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2024 (2) TMI 786 - AT - Income TaxDelay in payment of both the employer s and employees contributions to the PF authorities - HELD THAT - The entire belated amount cannot be disallowed even as per the case of Checkmate Services (P) Ltd. ( 2022 (10) TMI 617 - SUPREME COURT . In the interest of justice, we direct the AO to make 50% disallowance of the late payment. Thus, this ground of appeal raised by the Revenue is partly allowed. Miscellaneous expenses - As assessee company was a sick company during that period, it could not produce the details of miscellaneous expenses, AO made disallowance of 1/4th of the expenses for want of verification - CIT(A) appreciated the circumstances of the assessee case and held that the adhoc disallowance made by the AO without pointing out specific items which were not verifiable - HELD THAT - Before us, the Ld.CIT-DR could not justify the deletion made by the Ld.CIT(A) and therefore, this ground raised by the Revenue is devoid of merit and, therefore, the same is dismissed. Disallowance of commission expenses - assessee-company did not provide any information on what basis commission was paid and also questioned whether TDS was deducted and also the commission expenses increased during this assessment year comparing with the earlier assessment years - HELD THAT - CIT(A) held that the disallowance made by the AO without making any enquiries and without brining any material on record is unjustified. There is ample material to show that the sales were effected through selling agents and further the assessee also submitted proof of TDS to the commission agents, where major portion in US and exports of goods. Therefore, the disallowance made by the AO was deleted. Before us CIT-DR could not place before us any contra views or documents against the finding of the CIT(A). Therefore, this ground raised by the Revenue is devoid of merit and, therefore, the same is hereby dismissed. Nature of expenses - legal and professional charges - HELD THAT - No legal infirmity in the order passed by the Ld.CIT(A), the expenditure incurred relating to sale of the immovable property and to be allowed as expense while calculating the Capital Gain, therefore, this ground raised by the Revenue is dismissed. Disallowance of bad and doubtful debts - CIT(A) had taken note of the shifting of assessee s operations from Kolkata to Ahmedabad and closure of old plant, which was sustaining losses and the circumstances where there is no likelihood of cost effective recovery of debts - HELD THAT - No infirmity in the order passed by the Ld.CIT(A), since in the case of TRF Ltd. 2010 (2) TMI 211 - SUPREME COURT held that it is not necessary for the assessee to establish that debt, in fact, has become irrecoverable, it is never if bad debt is written off as irrecoverable in accounts of the assessee. Respectfully following the ratio laid down by the Hon ble Apex Court, the above ground raised by the Revenue is devoid of merit and the same is hereby dismissed. Capital gain computation - Cost of acquisition of land - AO while calculating the capital gain has not accepted the fair market value of the land as on 01/04/1981 as Rs. 1.25 crores as claimed by the assessee, on the ground that no valuation report from Govt. Approved Valuer was submitted by the assessee - CIT A accepted the assessee s submission of the Government Approved Valuer s Report, and directed the AO to adopt the fair market value of the land as on 01/04/1981 at Rs. 1,17,40,000/- for the purpose of computing the capital gain - HELD THAT - No infirmity in the order passed by the CIT(A). AO without making any reference u/s. 55A of the Act, suo moto estimated the cost of the land as on 01/04/1981 at Rs. 25 lakhs, which is legally not permissible under the Act. Whereas the assessee has submitted Government Approved Valuer s Report valuing the land as on 01/04/1981 at Rs. 1,17,40,000/- for computing the capital gains. Thus, ground raised by the Revenue is devoid of merit and the same is hereby dismissed. Determination of value u/s 50C - Validity of order of CIT(A) directing the AO to recalculate the capital gain on sale of land taking total value of property of Rs. 6.05 Crs. after deducting value of Rs. 1.75 Crs. towards Building, Plant Machinery - HELD THAT - Section 50C provides that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted shall be deemed to be the full value of the consideration received or accruing as a result of such transfer, for the purpose of section 48 of the Act. Plain reading of the section makes it clear that the valuation is not only for land or building or both. In this case, there is no reference about the under valuation of the building and therefore land alone is valued at Rs. 6.05 crores by the State Government Authority, therefore the CIT A is not correct in holding that 50C valuation is not applicable to building. The assessee has not produced the copy of the Valuation Report to ascertain the value determined towards land alone or also building, plant machinery. Therefore, the direction given by CIT A is against the provision of law and liable to be reversed and the order of the Ld AO is to be restored, but the cost of acquisition as on 1-4-1981 to be adopted. Thus, the Grounds of Appeal raised by the Revenue is allowed.
Issues Involved:
1. Late payment of contribution to PF. 2. Deletion of miscellaneous expenses. 3. Disallowance of commission expenses. 4. Disallowance of legal and professional charges. 5. Disallowance of bad and doubtful debts. 6. Cost of acquisition of land. Summary: 1. Late Payment of Contribution to PF: The Revenue contended that the deletion of the addition on account of delayed payment of PF contributions amounting to Rs. 8,96,190/- was contrary to Section 36(1)(va) of the Act. The Tribunal noted that both employer's and employees' contributions were delayed. The Tribunal directed the Assessing Officer (AO) to make a 50% disallowance of the late payment, thus partly allowing the Revenue's appeal. 2. Deletion of Miscellaneous Expenses: The AO disallowed 1/4th of miscellaneous expenses amounting to Rs. 7,44,598/- due to lack of verification. The CIT(A) deleted the addition, noting the assessee's circumstances as a sick company. The Tribunal upheld the CIT(A)'s decision, dismissing this ground of the Revenue's appeal. 3. Disallowance of Commission Expenses: The AO disallowed Rs. 55,62,090/- out of total commission expenses due to lack of substantiation and TDS details. The CIT(A) deleted the disallowance, noting that the assessee provided sufficient proof of TDS and commission payments. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground. 4. Disallowance of Legal and Professional Charges: The AO disallowed Rs. 2,79,418/- as capital expenditure. The CIT(A) directed the AO to allow Rs. 2,20,150/- as an expense while calculating capital gains. The Tribunal found no legal infirmity and dismissed the Revenue's appeal on this ground. 5. Disallowance of Bad and Doubtful Debts: The AO disallowed Rs. 64,04,221/- due to lack of details. The CIT(A) allowed the deduction, citing the Supreme Court's judgment in TRF Ltd. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground. 6. Cost of Acquisition of Land: The AO calculated the cost of acquisition at Rs. 25 lakhs, while the CIT(A) accepted the Government Approved Valuer's Report valuing it at Rs. 1,17,40,000/-. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground. Recalculation of Capital Gain: The AO valued the land at Rs. 6.05 crores, while the CIT(A) directed a deduction of Rs. 1.75 crores for building, plant, and machinery. The Tribunal reversed the CIT(A)'s direction, restoring the AO's order but adopting the cost of acquisition at Rs. 1,17,40,000/-. Conclusion: The appeals filed by the Revenue in ITA No. 1298/Ahd/2014 and ITA No. 1297/Ahd/2014 for AY 2004-05 are partly allowed.
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