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TMI Blog2016 (1) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the accounting methodology of assessee company and provisions of law on bad debts in the order of the Commissioner of Income Tax (Appeals) on this ground and same is upheld.- Decided against assessee. Contribution made towards the approved Employees Group Gratuity Fund Trust - Held that:- The Revenue has disputed this issue after post De-merger, even though there is no such change in objects. But the ld.CIT(A) erred in upholding the order of the Assessing Officer without realizing that gratuity fund is for welfare measures of the employees, and has been approved from 1990 onwards. Since there is a apprehension by the Revenue that approval has to be obtained for the name change, we remit the issue in dispute to the file of the Assessing Officer to re-examine the gratuity fund objective and contributions and assessee shall obtain necessary approvals from the Income Tax Department if required. It is nevertheless to say that opportunity of being heard be granted to the assessee and decide the issue on merits. Disallowance of foreign travel expenses - Held that:- The assessee company is having global business operations and definitely such subsidiary companies are to be manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no dispute about the investment. The Assessing Officer tried to make a distinction of provisions for restricting investment of ₹ 50,00,000/- only in one financial year. The assessee company has invested in two installments falling in two financial years and availed tax exemption. The ld.CIT(A) had examined the facts and dealt with Finance Act, 2014 on this issue and also relied on Jurisdictional High Court decision of C. Jaichander and Coromandel Industries Ltd (2014 (11) TMI 54 - MADRAS HIGH COURT ). We after considering the apparent facts and jurisdictional High Court decision are not inclined to interfere with the order of the Commissioner of Income Tax (Appeals) and accordingly, dismiss the Revenue ground.- Decided in favour of assessee - I.T.A. No. 2794/Mds/2014, I.T.A.No.2941/Mds/2014 - - - Dated:- 31-12-2015 - Shri Chandra Poojari, Accountant Member And Shri G. Pavan Kumar, Judicial Member For the Petitioner : Shri. Philip George, Advocate For the Respondent : Shri. P. Radhakrishnan, IRS, JCIT ORDER Per G. Pavan Kumar, Judicial Member These are cross appeals filed by assessee and department against order of Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has submitted Ledger Accounts, Sundry Creditors account and also Closing stock account as on 31.03.2010. The system of accounting being provision made but not credited to the Debtors account. It was explained that Debtor accounts is credited with provision it would be difficult for the recovery in the legal course. The assessee has claimed the Bad Debts written off following principles of Section 36(1) (vii) of the Income Tax Act, 1961 but the Assessing Officer relied on the decision of Allahabad High Court in the case of M/s. Jubilant Organosys vs. CIT (2004) 265 ITR 420. Further in the appellate proceedings before the Commissioner of Income Tax (Appeals) the assessee has filed written submissions and relied upon the decision of Supreme Court in the case of Vijaya Bank vs. CIT and Others (2010) 323 ITR 166 wherein it has been held that there is no need to debit the accounts of debtors and need not be squared off and the claim can be allowed subject to verification by Assessing Officer on the accounting treatment. The ld.CIT(A) relied on the findings of the Assessing Officer and considered that such provisions are against principles of Section 36(i)(vii) of the Act were the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee to say that he became pessimistic about the prospect of recovery of the debt in question. He must feel honestly convinced that the financial position of the debtor was so precarious and shaky and that it would be impossible to collect any money from him. The question is really one of fact depending upon the various facts and diverse circumstances bearing on the debtors pecuniary position, his commitments and obligations. The judgment of the assessee in regarding the debt as a bad debt must be an honest judgment and not a convenient judgment. The judgment of the assessee must be established to have been taken on relevant facts and circumstances which should show that the debt is not realizable for some fault on the part of the debtor or some supervening impossibility on the part of the debtor to pay, but not possible difficulties or hurdles the assessee may have to incur to compel the recalcitrant debtor to pay. The assessee for his convenience may decide that the debt is too small and it is not worthwhile to pursue the debtor but that judgment would not be an honest judgment, which would establish that the debt has become a bad debt. A time-barred debt can be assumed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isted for the benefit of staff, workmen and the employees of the manufacturing division of ElL are Concerned, upon the scheme becoming effective TDL shall stand substituted for ElL. Since, the scheme was made as per Hon'ble Madras High Court order there was no necessity for getting approval once again in the name of the new company as all employees, staff's were the same. Further, the Joint Commissioner of income tax failed to consider the following decisions: (i) Sri Krishna Drugs ltd Vs ACIT-ITAT Hyderabad (ii) Aspinwall co Vs CIT Kerala High Court Where it was held that contribution to even unregnized gratuity fund and unrecognized gratuity fund account is an allowable expenditure u/s.37 even if the same cannot be allowed under section 36(1)(V). Since the Joint Commissioner of Income Tax has not disputed the contribution made to the fund before filing the return of income, the contribution of 40,46,754/- will quality for deduction under section 37 if not allowable under section 36(1)(V) as it has been incurred wholly and exclusively for the purpose of business protection. The ld.CIT(A) acquainted with the order of Jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertheless to say that opportunity of being heard be granted to the assessee and decide the issue on merits. 6. The last ground raised by the assessee in respect of foreign travel expenses. The Assessing Officer has disallowed an amount of ;5,14,876/- in respect of foreign travel expense not related to business. In the assessment proceedings, the assessee has filed details of travel expenditure with statements. The assessee being a global company has branches and subsidiaries in many countries and incurs expenditure on business promotion or administrative works. The Assessing Officer contention that the expenses are related to subsidiary companies and the parent company cannot claim the deduction, and disallowed expenditure. Aggrieved, by the order the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 6.1 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) considered the submissions and also the reasons for expenditure incurred for the purpose of subsidiary companies. The Accounts department executives of assessee company has to travel to branches for consolidation of Accounts for preparation of Balance Sheet and incurred expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal ITA No.2941/Mds/2014:- 7. The first ground raised by the department with regard to non deduction of TDS on commission payment made to foreign agencies. The assessee has paid export commission of ;42,87,219/- and claimed in Profit and Loss account. In the assessment proceedings, the ld. Authorised Representative has produced TDS details and also commission details and explained that provisions u/s 40 (a)(ia) of the Act will not apply to the foreign agencies who do not have business connection or permanent establishment in India. All the foreign commission payments are incurred for the export turnover and no part of income was received by them in India which deemed to be accrued in India. The Assessing Officer on perusal of Sections 5(2) and 9(1) Explanations firmly believed that there is a establishment of business connection in India and such payment is subject to TDS. The assessee has filed detailed explanations covering the provisions of TDS applicability, residential status and also CBDT circulars and established that there is no business connection or foreign agent in India and relied on the Judicial decision of Apex Court in the case of CIT vs. Toshoku Ltd 125 ITR 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing ;26,47,092/- twice which is not correct. The export commission payment of ;42,87,210/- includes overseas sales commission of ;26,47,092/- which was overlooked while passing the order. Ledge abstract of the Commission is enclosed for your kind perusal. 7.2 The ld. Commissioner of Income Tax (Appeals) on perusing the information and judicial precedents and factual aspects of the situation relied on the citations and observed that the assessee has produced the details of the invoice overseas commission payments for the sale of Tread Rubber and Bonding Gum. The relationship between the assessee and the agent are principal to agent, and the agent do not have any permanent establishment in India and deleted the addition made by the Assessing Officer and aggrieved by Commissioner of Income Tax (Appeals) order the Revenue has filed appeal before Tribunal. 7.3 The ld. Departmental Representative raised the grounds on technical fees and payment made to subsidiary commission attract TDS provisions and relied on the judicial decisions. At the time of argument, the ld. DR submitted that Commissioner of Income Tax (Appeals) erred in allowing the ground of the assessee without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial on record. In our opinion, this issue is squarely covered by the earlier order of the Tribunal in the assessee s own case for the assessment year 2010-2011 in ITA No.2311/Mds/2013 vide order dated 28.03.2014. In the said order, the Tribunal observed as under:- 5. We have heard both parties and gone through the case file. As already stated hereinabove, the CIT(A), whilst deleting the impugned addition u/s 40(a)(i) pertaining to overseas payments made by the assessee on account of commission, warehousing and other charges, has followed order of the 'tribunal'(supra) qua the very issue. On being granted opportunity, the Revenue has failed to prove that these expenses are liable to be taxed in India as income in the hands of concerned payees or any services had been rendered in India. The Revenue submits that the 'tribunal's order has not been become final and its appeal is pending before the hon'ble high court. In our considered opinion, mere pendency of an appeal involving the same issue against the order of the 'tribunal' is no ground to adopt a different approach in the impugned assessment year. Thus, we agree with the findings of the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any has sold factory land at Ananthapur for the aggregating value of ;1,18,42,000/- and claimed exemption u/s.54EC of the Act and produced copies of investment. In assessment proceedings, it was submitted that the assessee company has sold the property and invested in 54EC Bonds of ;50,00,000/- on 28.02.2010 and ;50,00,000/- on 30.04.2010. As per the conditions specified u/s.54EC, the amount is required to be invested within a period of six months from the date of transfer for claiming exemption u/s.54EC of the Act. But the Assessing Officer interpreted that long term capital gains investment u/s.54EC of the Act during the financial year should not exceed ;50,00,000/- and accordingly excess claim of ;50,00,000/- u/s.54EC is disallowed and brought to tax. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 8.2 In the appellate proceedings, the assessee filed detailed written submissions establishing the investment made by the assessee is in National Highway Authority of India capital gain bonds before filing the return of income and claimed exemption u/s.54EC of the Act. The Authorised Representative r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... six months' limit from the date of transfer of capital asset; but; still able to place investment of ;50 Lakhs each in two different financial years, we cannot say that the restrictive proviso will limit the claim to ;50 Lakhs only. Since assessee here had placed ;50 Lakhs in two different financial years but within six months period from the date of transfer of capital asset assessee was definitely eligible exemption upto ;1 Crore. Similar view was also expressed in the case of the decision of the Hon'ble ITAT Chennai 'B' Bench, Chennai in the case of M/s. Coromandel Industries Pvt Ltd. Vs ACIT in ITA No.41/Mds/2013. Respectfully following the decision of the Jurisdictional Tribunal, the Assessing Officer is directed to delete the addition of ₹ 50 Lakhs and allow the claim of the appellant u/s 54EC of the Income Tax Act, 1961. This ground of appeal is ALLOWED and allowed the appeal. Aggrieved by the order, the Revenue filed an appeal before the Tribunal. 8.3 Before the Tribunal, the ld. Departmental Representative vehemently argued that the Commissioner of Income Tax (Appeals) has not considered spirit of Sec. 54EC and also amendment to Sec 54EC made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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