9911796707
TMI Blog2017 (8) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... y overt attempt by the assessee to conceals his income, inflate expenses or to defraud revenue calling for adhoc disallowance in the absence of incriminating material brought on record by the AO for which onus was on the AO as the assessee discharged its primary onus by bringing on record the relevant material. We have observed that the A.O. has not brought on record any cogent incriminating material, reasons or justifications while making adhoc disallowance of 25% of ice charges except taking a view that turnover of the assessee increased by 10% while ice charges increased in multiples which is not sufficient to sustain disallowance and fasten tax liability on the assessee, which additions in our considered view was rightly deleted by learned CIT(A) Disallowance of chemical expenses - Held that:- We have observed that the A.O. has not brought on record any cogent incriminating material, reasons or justifications while making adhoc disallowance of 10% of chemical expenses except taking a view that turnover of the assessee increased by 10% while chemical expenses increased in multiples which is not sufficient to sustain disallowance and fasten tax liability on the assessee, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot covered by 194C & 195 of the Act and thus, no disallowance is called for by filing details w.r.t. all twenty two parties which shall be evaluated/examined by the AO on merits both on facts and in law. The AO shall admit all evidences / explanations submitted by the assessee in the interest of justice and shall adjudicated the same on merits in accordance with law. Disallowance of interest expenses treating the same to be capital in nature - Held that:- The assesee submitted the detail before the ld. CIT(A) as to the dates on which the fixed assets were put to use and the interest capitalized by the assessee. We have observed that details were not furnished before the AO and these details require verification by the A.O. as the said details were not filed before the A.O. as is emerging from records. The ld. CIT(A) has not called for any remand report from the AO nor these details were forwarded by learned CIT(A) to the AO for verification/examination, as is contemplated by Rule 46A of the Income-tax Rules, 1962. In our considered view, this matter is to be set aside and restored to the file of the A.O. for de-novo determination of the issue on merits after verification / exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of ₹ 2,52,933/- on account of chemical expenses without appreciating the fact that there was an abnormal increase in this account and the disallowance made by the AO was reasonable as the turnover increased marginally compared to the preceding year. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of workmen compensation of ₹ 4,15960/- without giving any opportunity to the AO and without any verification of the assessee's contention as no documentary evidence was produced by the assessee before the AO. 5 (a). On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 32,44,766/- made u/s 40(a)(ia) without verifying whether payments were really made to the shipping agent of the non-resident ship owners as the assessee never furnished the details of ship owner before the AO. 5 (b) Without prejudice to (a), on the facts and circumstances of the case and in law, the Id. CIT(A) erred in allowing assessee appeal on the basis of Board's Circul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered appearance when the appeal was fixed for hearing on 02-09-2015, 17-03-2016, 21-09-2016, 30-03-2017 and finally on 10-08- 2017. The ld. DR relied on the assessment order of the A.O. and submitted that the disallowance made by the A.O. is justified as the turnover of the assessee has increased only 10%, whereas the processing charges had increased in multiples. It is submitted the assessment order of the A.O. should be upheld. We have heard the ld. DR and perused the material available on record. We have observed that the assessee has in its paper book filed with the tribunal enclosed copy of audited financial statement and tax audit report for the financial year ended 31-03-2006 (pb/page 1-39), wherein copy of P L account is filed along with annexures is also filed, it can be seen that the turnover of the assessee has increased from ₹ 37.06 crores during the financial year 2004-05 to 40.61 crores during financial year 2005-06 and the gross profit of the assessee has increased to ₹ 3.94 crores during financial year 2005-06 from ₹ 3.37 crores during financial year 2004-05. Thus, It is observed that the GP ratio has improved from 9.07% to 9.70%. The closing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of the 1961 Act observed that the assessee had debited an amount of ₹ 33,21,580/- towards ice charges. The A.O. asked for the details from the assessee and on perusal of the details observed that the turnover of the assessee had increased only 10% whereas the ice charges had increased multiple time . The AO observed that assessee had not given any satisfactory reply, the A.O. disallowed 25% of ₹ 33,21,580/- i.e. 8,30,395/- which was added to the total income of the assessee, vide assessment order dated 28-11- 2008 passed by the AO u/s 143(3) of the 1961 Act. On first appeal filed by the assessee with learned CIT(A) being aggrieved by the assessment order dated 28-11-2008 passed by the AO u/s 143(3) of the 1961 Act, the ld. CIT(A) deleted addition made by the A.O. on the ground that there was no justification and cogent reasons given by the AO backed with evidences before making such adhoc 25% disallowance, vide appellate order dated 19- 09-2011. Aggrieved by the appellate order dated 19-09-2011 passed by the ld. CIT(A), the Revenue is in appeal before the Tribunal. At the time of hearing before the tribunal, none appeared on behalf of the assessee, therefore, we p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee discharged its primary onus by bringing on record the relevant material. We have observed that the A.O. has not brought on record any cogent incriminating material, reasons or justifications while making adhoc disallowance of 25% of ice charges except taking a view that turnover of the assessee increased by 10% while ice charges increased in multiples which is not sufficient to sustain disallowance and fasten tax liability on the assessee, which additions in our considered view was rightly deleted by learned CIT(A) vide appellate order dated 19-09-2011. Thus, under these circumstances, we do not find any reason to deviate from the decision taken by the ld. CIT(A) vide appellate order dated 19-09-2011 with which we concur and appellate order of learned CIT(A) is hereby confirmed. We, therefore, dismiss the ground raised by the Revenue. Thus, Revenue fails on this ground.We order accordingly. 6. The next ground relates to disallowance of chemical expenses to the tune of ₹ 2,52,933/- on adhoc basis to the tune of 10% of total chemical expenses of ₹ 25,29,331/- . The A.O. on perusal of the records and submissions made by the assessee during the course of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncreased to ₹ 3.94 crores during financial year 2005-06 from ₹ 3.37 crores during financial year 2004-05. Thus, It is observed that the GP ratio has improved from 9.07% to 9.70%. The closing stock of finished goods had also increased to 11.69 crores during financial year ending 31-03-2006 from ₹ 8.02 crores last year. The chemical expenses, no doubt, had increased to ₹ 25.29 lacs for the financial year ending 31-03-2006 compared to ₹ 4.36 lacs during last year but nothing incriminating has been brought on record by the AO to suggest that there has been any attempt by the assessee to conceal income, inflate expenses or defraud revenue or manipulate /falsify its books of account thereof. The said chemical charges constitute insignificant proportion of the turnover achieved by the assessee and mere increase of chemical expenses to ₹ 25.29 lacs in the relevant year under consideration from ₹ 4.36 lacs during preceding year not in tandem with upward movement of turnover is not indicative of any overt attempt by the assessee to conceals its income, inflate expenses or to defraud revenue calling for adhoc disallowance in the absence of incriminati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance by the AO of above amount was absolutely baseless and learned CIT(A) deleted the disallowance made by the A.O., vide appellate order dated 19-09-2011. Aggrieved by the appellate order dated 19-09-2011 passed by the learned CIT(A), the Revenue is in appeal before the tribunal. At the time of hearing before the tribunal, none appeared on behalf of the assessee, therefore, we proceed to dispose of this appeal after hearing the ld. D.R. . We have observed that since 02nd September 2015 i.e. for almost last two years, the assessee has not entered appearance when the appeal was fixed for hearing on 02-09-2015, 17-03-2016, 21-09-2016, 30-03-2017 and finally on 10-08-2017. The ld. DR relied on the assessment order of the A.O. and submitted that the disallowance made by the A.O. is justified. It is submitted the assessment order of the A.O. should be upheld. We have heard ld. DR and perused the material available on record. We have observed that the assessee had paid an amount of ₹ 4,15,960/- under the head employees death which is claimed as deduction while computing business income of the assessee. The said amount was paid by the assessee as one of the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the previous year relevant to the impugned assessment year secondly the liability has arisen under the statute i.e. Workmen Compensation Act which the assessee is obliged under law to discharge, thereby fulfilling mandate of Section 37(1) of the 1961 Act from which ever angle it is seen, as it is a business expenses incurred wholly and exclusively for the purposes of business. We affirm well reasoned order of learned CIT(A) and refused to take a different view due to reasons cited above. Revenue fails on this ground also. We order accordingly. 8. The next ground relates to the disallowance of terminal handling charges and documentation handling charges, aggregating to ₹ 32,44,766/- u/s 40(a)(ia) of the Act. The A.O., on perusal of the records and submissions made by the assessee during the assessment proceedings u/s 143(3) r.w.s. 143(2) of the 1961 Act, observed that the assessee had debited an amount of ₹ 31,06,536/- towards terminal handling charges as well an amount of ₹ 1,38,240/- towards documentation charges. The assessee was asked to justify as to why these expenses should not be treated as a work contract in view of the provisions of Section 194 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documentation charges are not applicable in this case since the payments have been made to the- agents of foreign shipping companies. Such payments to foreign Shipping companies or to their agents of terminal handling charges and for documentation charges are exempted from TDS provision, vide circular No. 723 dated 19.09.1995 issued by the CBDT. A copy of the said circular is enclosed as Annexure G. It may please by noted from the circular that agents act on behalf of the nonresident ship owners and therefore they step into the shoes of the principal. The circular being self explanatory and being of binding nature, no further elaboration is required. Suffice it to say that provision Section 194C or 195 is not attracted in respect of payments made as THC. 13.4 In view of the express clarification issued by CBDT by the aforesaid circular there is not liability on the part of your appellant for TDS and hence no default is committed to attract the provisions of section 40(a)(ia) of the Act. Hence, the disallowance of ₹ 32,44,766/- made by the learned A.O. may please be deleted.L 12.3 It is seen that the Circular No.723 dated 19.09.1995 of CBDT at Para 4 5 states as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had made payment to 22 parties with respect to the terminal handling charges and documentation charges aggregating to ₹ 32,44,766/- as is emerging from details placed in paper book/page 100-102 .We have perused these details carefully . We have observed that with respect to these 22 parties, evidences w.r.t. only six parties have been enclosed in the paper book filed with the tribunal (page 104-110/pb) to claim that these payouts were to nonresident shipping companies and/or their agents which are covered by provisions of Section 172 of the 1961 Act and no disallowance is called for u/s 40(a)(ia) of the 1961 Act, and this claim of the assessee requires proper verification and examination both on facts and on law, by the AO. Thus, we deem it fit to set aside and restore the matter back to the file of the A.O. for de-novo determination of the issue on merit in accordance with law. The assessee is directed to appear before the A.O. and produce all cogent and relevant evidences to justify the claim that these amounts are not covered by 194C 195 of the Act and thus, no disallowance is called for by filing details w.r.t. all twenty two parties which shall be evaluated/examined b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only and the interest expenses of ₹ 92,91,068/- is revenue expense. The appellant also furnished date of installation of machinery and how it has capitalized interest of ₹ 59,739/-. Under the circumstances, estimated disallowance of ₹ 3,00,000/- is not warranted. Ground 13 is, therefore, allowed. Aggrieved by the appellate order dated 19-09-2011 passed by the ld. CIT(A), the Revenue is in appeal before the tribunal. At the time of hearing before the tribunal, none appeared on behalf of the assessee, therefore, we proceed to dispose of this appeal after hearing the ld. D.R. . We have observed that since 02nd September 2015 i.e. for last almost two years, the assessee has not entered appearance when the appeal was fixed for hearing on 02-09-2015, 17-03-2016, 21-09-2016, 30-03-2017 and finally on 10-08-2017. The ld. D.R. supported the assessment order of the A.O.. We have heard ld. D.R. and perused the material on record. The assesee submitted the detail before the ld. CIT(A) as to the dates on which the fixed assets were put to use and the interest capitalized by the assessee. We have observed that details were not furnished before the AO and these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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