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TMI Blog2017 (3) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... ct for Assessment Year 2009-10 vide his order dated 29.12.2011 . Since some of the issues are common and facts are identical, we dispose of the same by this consolidated order for the sake of convenience. 2. At the outset, we find that there is a delay of 8 days in filing the appeal by the revenue before us in ITA No. 1575/Kol/2011 for Asst Year 2008-09. We have gone through the reasons given in the delay condonation petition and we are convinced with the same and hence the delay of 8 days is condoned and appeal of the revenue is hereby admitted for adjudication. 3. DISALLOWANCE U/S 14A OF THE ACT Grounds covered Ground No. 1 (a) & (b) in ITA No. 2776/Kol/2011 for Asst Year 2008-09 Ground Nos. 3 (a) &(b) in ITA No. 927/Kol/2013 for Asst Year 2009-10 The facts in Asst Year 2008-09 are taken up for adjudication and the decision rendered thereon would apply with equal force as the facts are identical in Asst Year 2009-10 also except with variance in figures. The brief facts of this issue is that the ld AO observed that the assessee had claimed dividend income of Rs. 3,20,894/- as exempt. The ld AO show caused the assessee as to why the disallowance u/s 14A of the Act read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case and without prejudice to ground no 3(a), the Ld. CIT(A) erred in upholding the disallowances made by the Ld. DCIT by invoking the provisions of Rule 8D while making disallowance under section 14A of the Act." 3.1. The ld AR argued that the assessee had own interest free funds many times over the investment made in Indian subsidiaries and further there was no direct nexus between interest bearing borrowed funds and such investment. The ld AR placed reliance on the following decisions in support of her arguments :- CIT vs Suzlon Energy Ltd (Tax case Appeal No. 223 of 2013 ) by Hon'ble Gujarat High Court CIT vs HDFC Bank Ltd (ITA No. 330 of 2012 ) by Hon'ble Bombay High Court CIT vs Reliance Utilities & Power Ltd reported in (2009) 313 ITR 340 (Bom) Without prejudice to the above, the ld AR argued that only investments which yielded dividend / exempt income should be taken into account for making disallowance under Rule 8D(2)(ii) and (iii) of the Rules. In support of this, she placed reliance on the following decisions :- Raniganj Co-operative Bank Ltd vs DCIT reported in (2016) 73 taxmann.com 90 (Kolkata Trib) REI Agro Ltd vs DCIT in ITA No. 1331/Kol/2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng reliance on the decision of the Hon'ble Supreme Court in the case of Exide Industries Ltd. Aggrieved, the assessee is in appeal before us on the following ground:- "2 That on the facts and circumstances of the case, the learned CIT (A) was not justified and erred in disallowing the claim of the Appellant in respect of deduction of provision for leave encashment of Rs. 1,117,925 under section 43B of the Act." 4.1. The Learned AR argued that since the decision of the Calcutta High Court in the case of Exide Industries Ltd 292 ITR 470 (Cal) has struck down the provisions of section 43B(f) of the Act, the deduction may be granted towards leave encashment made on provision basis itself in line with the decision of the Supreme Court in the case of Bharat Earth Movers Ltd reported in 245 ITR 428 (SC). In response to this, the Learned DR argued that the Hon'ble Supreme Court vide its interim order dated 8.5.2009 had held in the concluding paragraph that the assessee shall pay tax as if the provisions of section 43B(f) of the Act is there in the statute and the ld AO should disallow the same till the disposal of the main appeal by the Hon'ble Apex Court. 4.2. We have heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had debited under the head 'repairs and maintenance' expenditure incurred towards civil and roof repairs of factory walls, stores and office at Rs. 10,27,538/- ; repairs to floor factory and building at Rs. 5,22,914/- and change and repairs of doors amounting to Rs. 5,05,000/-. The ld AO show caused the assessee as to why the aforesaid expenditure should not be treated as capital in nature. The assessee replied vide its letter dated 11.10.2010 the complete details of repairs and maintenance together with the respective bills. The assessee vide further reply dated 30.11.2010 explained the nature of work carried out in respect of repairs and maintenance together with the names of the parties to whom the amounts were paid . It was stated that based on these submissions, the aforesaid expenditure are purely revenue in nature and allowable as deduction under the Act. The assessee referred to the provisions of section 30 of the Act which read as under:- 30. In respect of rent, rates, taxes, repairs and insurance for premises, used for the purposes of the business or profession, the following deductions shall be allowed - (a) where the premises are occupied by the assessee - (i) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doors of Rs. 1,600,952 by treating the same as capital in nature. 3(b) Without prejudice to Ground No. 3(a) taken here in above, the learned CIT (A) was not justified and erred in considering that the expenditure incurred on repairs and maintenance of office / factory roof etc had been incurred on acquisition of new assets and thus do not qualify for deduction under section 37 of the Act." 5.1. We have heard the rival submissions and perused the materials available on record. We have gone through the bills for repairs and maintenance incurred by the assessee. From the perusal of the same, we find that the expenditures were incurred only on account of current repairs which would definitely fall only under the ambit of revenue expenditure. We find that there is absolutely no enduring benefit that occurs to the assessee in the capital field. The ld DR argued that the assessee had been given depreciation on the said expenditure accepting its alternative argument before the lower authorities and hence there cannot be any grievance to the assessee in this regard. The ld AR argued that the assessee vehemently objected to treating the said expenditure as capital expenditure and depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon by the lower authorities, had held as under:- "7. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the claim of the assessee for deduct ion on account of replacement of flooring/ foundation has been considered by the authorities below only from the angle of current repairs as provided in sect ion 31(i ) and not under sect ion 37. As held, inter alia, by the Hon'ble Supreme Court in the cases of Badridas Daga -vs. - CIT [34 ITR 10] and Calcutta Company Limited -vs. - CIT [37 ITR 1] , even if the expenditure made by the assessee cannot be described as current repairs, he is entitled to invoke the benefit of sect ion 37. Even in the case of Modi Spinning & Weaving Mi l ls Co. Limited (supra), Hon'ble Delhi High Court while holding that the amount spent for replacement of administrative block of the assessee, which was long overdue, could not be allowed as deduct ion under the head "cur rent repairs", further clarified that such replacement amounting to renovation or repairs may be entitled to deduct ion under sect ion 37. Even in the case of Saravana Spinning Mi l ls (P) Limited (supra) cited by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same as capital nature is not sustainable. We, therefore, delete the said disallowance and allow Ground No.1 of the assessee's appeal ." 5.2. In view of the aforesaid facts and respectfully following the judicial precedents relied upon hereinabove, we hold that the expenditure incurred towards repairs and maintenance supra would be squarely allowable as revenue expenditure and the ld AO is hereby directed to delete the disallowance of the same. Accordingly, the Ground Nos. 3 (a) & (b) in ITA No. 2776/Kol/2011 in Asst Year 2008-09 are allowed. 6. CLAIM OF ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY Ground No. 4 in ITA No. 2776/Kol/2011 for Asst Year 2008-09 During the course of hearing, the ld AR stated that she is not pressing this ground. Accordingly, the same is dismissed as not pressed. 7. DISALLOWANCE OF LEGAL AND PROFESSIONAL CHARGES Ground Nos. 5(a) to 5 (c ) in ITA No. 2776/KOl/2011 for Asst Year 2008-09 The brief facts of this issue is that the ld AO observed that the assessee has paid professional fees to the following parties :- Deloitte Haskins and Sells Rs. 1,12,36,000 Patni Parmar & Co., Chartered Accountants Rs. 22,44,848 JRS Patel Management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , appointed PPC for compliance of legal and regulatory matter. In this connection, it is submitted that the said expenditure is not capital or personal in nature and the expenses has been incurred for the purpose of business." 7.1. The assessee pleaded that the aforesaid expenditure is squarely allowable as deduction u/s 37(1) of the Act. It placed reliance on various decisions in support of its contentions. The ld AO observed that the assessee had stated that the payment made to DHS was made for advisory services and in the case of PPC and JRS Patel Management Consultants Pvt Ltd , payments were made for management and financial consultancy services. The assessee was asked to furnish copy of the agreement between these parties and the report submitted by them proving the services rendered by them. Since no such papers were furnished by the assessee, the ld AO concluded that the aforesaid expenditure was not supported by any corroborative evidence and also the assessee was not able to prove the benefit it derived on account of professional services rendered by these parties to the assessee. Accordingly he disallowed the entire legal and professional charges of these three parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case, the learned CIT (A) was not justified and erred in considering that the legal and professional charges have not been incurred wholly and exclusively for the business of the Appellant and thus disallowing the claim of the Appellant in respect of legal and professional charges amounting to Rs. 16,851,648. 5(b) Without prejudice to Ground No. 5(a), the Ld. CIT(A) without appreciating the various documents submitted by the Appellant, erred in considering that no services were actually rendered by the service providers to the Appellant and that the Appellant used a colourable device to reduce his taxable income. 5(c) Without prejudice to the above grounds, in case your Honour is of the view that the claim is not allowable in the year under consideration, on the ground, as alleged by the Ld. CIT(A), that the said amount has not crystallized in the year under consideration, then your Honour may give necessary direction to the AO to allow the said claim, in the year the said amount has crystallized." 7.4. We have heard the rival submissions. We have gone through the contents of the paper book of the assessee in this regard. We find that Deloitte Haskins and Sells ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 6 raised by the assessee in ITA No. 2776/Kol/2011 for Asst Year 2008-09 is only consequential in nature and does not require any specific adjudication. 9. The Ground No. 7 raised by the assessee in ITA No. 2776/Kol/2011 for Asst Year 2008-09 is general in nature and does not require any specific adjudication. 10. DISALLOWANCE U/S 40(a)(ia) - Rs. 1,38,409/- Ground No. 1 in ITA No. 1575/Kol/2011 for Asst Year 2008-09 The brief facts of this issue is that the ld AO observed that the assessee had debited under the head 'miscellaneous expenditure' , payments made to Shri S Prajapati (Rs. 2,00,984/-) and Shri K C Papachan (Rs. 1,50,445/-) for design and drawings for machines and service engineering respectively. The ld AO observed that the assessee had deducted tax at source at the rate of 2% as against 10% prescribed u/s 194J of the Act by treating the said payments as fees for professional and / or technical services. Accordingly he found that the assessee is entitled to claim the expenditure to the extent of tax deducted at source. Accordingly he disallowed a sum of Rs. 1,38,409/- in the assessment u/s 40(a)(ia) of the Act. Before the ld CIT(A), the assessee submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued that since there is some deduction of tax at source, then it would only amount to short deduction of tax , for which the provisions of section 40(a)(ia) of the Act cannot be invoked. Reliance in this regard was placed on the co-ordinate bench decision of this tribunal in the case of DCIT vs S.K.Tekriwal reported in (2011) 15 taxmann.com 289 (Kolkata Trib). 10.2. We have heard the rival submissions. We find that the existence of employer - employee relationship has been proved by the assessee in the instant case and the ld CIT(A) had rightly deleted the disallowance u/s 40(a)(ia) of the Act in the instant case. We do not find any infirmity in the findings of the ld CIT(A). Accordingly, the Ground No. 1 raised by the revenue in ITA No. 1575/Kol/2011 is dismissed. 11. ADDITION TOWARDS RETENTION MONEY Ground No. 2 in ITA No. 1575/Kol/2011 for Asst Year 2008-09 Ground Nos. 1(a) to 1(d ) in ITA No. 927/Kol/2013 for Asst Year 2009-10 The brief facts of this issue is that the ld AO observed that as per note attached to the computation of total income, the assessee had stated that in respect of the contract business of the company , certain percentage is retained by the parties as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the volume and nature of the business had remained same in both the years. He further observed that since the retention money has been directly claimed as reduction from the total income in the computation of total income without any corresponding entry in the audited accounts, there is no safeguard for the revenue that it would be offered for taxation in future. Based on these observations, he confirmed the addition made towards retention money in the sum of Rs. 3,09,09,437/- for Asst Year 2009-10. Aggrieved, the assessee is in appeal before us on the following grounds:- "l(a) That on the facts and in the circumstances of the case, the Ld. CIT(A) failed to follow the decision of the Ld. CIT(A) - III, Baroda in appellant's own case for AY 2008-09 in relation to claim of retention money. I(b) That on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified and erred in not excluding retention money amounting to Rs. 30,909,437 in computing total income under the normal provisions of the Act on the ground that the claim of the deduction was not supported by audited accounts or any documentary evidence without giving any opportunity to the appellant. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not filed by the assessee before the lower authorities as they were not called for by the lower authorities. Once it is proved that the said nature comprises of retention money and the same is offered to tax by the assessee in the subsequent years then the entire findings of the ld CIT(A) for the Asst Year 2009-10 gets answered. In view of these facts and circumstances, we deem it fit and appropriate, in the interest of justice and fairplay, to set aside this issue of addition towards retention money for both the Asst Years 2008-09 and 2009-10, to the file of the ld AO , to verify the correctness of the offer of retention monies in subsequent years and accordingly decide the issue in accordance with law. Accordingly, the Ground No. 2 in ITA No. 1575/Kol/2011 raised by the revenue for Asst Year 2008-09 and Ground Nos. 1(a) to 1(d ) in ITA No. 927/Kol/2013 for Asst Year 2009- 10 raised by the assessee are allowed for statistical purposes. 12. DISALLOWANCE OF ADDITIONAL DEPRECIATION ON WINDMILL Ground No. 3 in ITA No. 1575/Kol/2011 for Asst Year 2008-09 The brief facts of this issue is that the ld AO observed that the assessee had claimed additional depreciation on windmill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the assessee and respectfully following the decisions of the Hon'ble Madras High Court supra , deleted the disallowance of additional depreciation on windmill. Aggrieved, the revenue is in appeal before us on the following ground:- "3. Ld. CIT(A) has erred on the facts and in law in deleting the addition of Rs. 79,69,231/- claimed by the assessee as additional depreciation on windmill, which is already allowed at a higher rate of depreciation i.e. 80%." 12.2. The ld DR argued that whether windmills were added during the year or in earlier years were not proved by the assessee. In response to this, the ld AR stated that both the ld AO as well as the ld CIT(A) had clearly bifurcated the depreciation and additional depreciation on windmills added during the year as well as in earlier years in their respective orders and hence the version of the ld DR deserves to be dismissed. 12.3. We have heard the rival submissions. We find that the issue under dispute is squarely covered by the decisions of the Hon'ble Madras High Court supra which has been rightly relied upon by the ld CIT(A). Hence we do not find any infirmity in the order of the ld CIT(A) in this regard. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount had been duly written off in the books of the assessee as irrecoverable and claimed as bad debts by the assessee u/s 36(1)(vii) of the Act. The assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of T.R.F. Ltd vs CIT reported in 230 CTR 14 (SC). The ld AO on scrutiny of the details of bad debts found that the amount of bad debts of Rs. 31,48,061/- was written off under the following heads :- 1) Eriez MBI India Ltd - Rs. 7,99,850/- related to the year 2007-08 towards sales commission 2) Differential Tax due to non submission of statutory forms - Rs. 51,007/- 3) Advances written off - Rs. 13,14,188/- 4) Bad Debts at Kumardhubi Branch for the year 2007-08 - Rs. 9,83,016/- The assessee was asked to explain as to how the debt had become bad in respect of the above and how the conditions u/s 36(1)(vii) read with section 36(2) of the Act were fulfilled by the assessee. The ld AO not convinced with the reply given by the assessee proceeded to disallow a sum of Rs. 31,48,061/- towards bad debts in the assessment. 14.1. Before the ld CIT(A), the assessee contended that the ld AO had wrongly considered the advances written off figure at Rs. 13,14, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hreyans Industries Ltd in ITA No. 277 of 2004 dated 15.11.2013 (b) Delhi Tribunal in the case of Kelly Services India Pvt Ltd vs DIT in iTA No. 5435/Del/2011 dated 16.9.2011 In respect of regular advances written off which were given in the ordinary course of business, she argued that the same would be squarely allowable as a trading loss u/s 28 of the Act . She placed reliance on the following decisions:- (a) Hon'ble Supreme Court in the case of Badridas Daga vs CIT reported in (1958) 34 ITR 10 (SC) (b) Hon'ble Calcutta High Court in the case of CIT vs Baldeoram Beharilal reported in (1975) 99 ITR 108 (Cal) (c ) Hon'ble Kerala High Court in the case of Travancore Tea Estates Co Ltd vs CIT reported in (1992) 197 ITR 528 (Ker) (d) Hon'ble Calcutta High Court in the case of CIT vs Gillanders Arbuthnot & Co Ltd reported in (1982) 138 ITR 763 (Cal) 14.3. In response to this, the ld DR argued that the provisions of section 36(2) of the Act were not complied with by the assessee for claiming deduction in respect of TDS recoverable written off and advance to suppliers written off. 14.4. We have heard the rival submissions and perused the materials available on record. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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