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TMI Blog2018 (2) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred in connection with the business of the assessee. We note that sufficient details were duly filed by the assessee at the time of assessment proceedings in support of the cost incurred on the damages and no defect of whatever has been pointed out by the AO. The Ld. DR has also not brought anything on record contrary to the finding of Ld. CIT(A). Thus, we hold that the cost incurred for the damage of goods is directly connected with the business activities of the assessee and accordingly eligible for deduction u/s 37(1) of the Act - Decided against revenue Disallowance of provision of doubtful debts while computing the income u/s 115JB - Held that:- In the instant case, we note that the Ld. CIT(A) has admitted the fresh evidences in contravention to the provision of Rule 46A of Income tax Rules. We note that the necessary details of the provision created by the assessee in earlier years were not supplied by the assessee to the AO at the time of assessment proceedings. The issue of provisions for doubtful debts written back by the assessee for ₹ 1,16,27,000/- needs to be examined by the AO. In respect of issue it was agreed by both the parties that the issue must be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either during assessment proceeding nor before appellate authority. 4. That on the facts and circumstances of the case and as per law Ld. CIT(A) erred in restricting the provision of doubtful debts for computing income u/s 115JB amounting from ₹ 11627000/- to ₹ 2281000/- even though assessee did not produce any evidence or details during assessment proceeding. The Ld. CIT(A) also erred in allowing fresh evidence during appellate proceedings in violation of Rule 46A of I.T. Act. 4. The first issue raised by Revenue in grounds no. 1 and 2 are interrelated and therefore being taken up together that the Ld. CIT(A) erred in deleting the addition made by the AO for ₹ 1,00,66,944/- on account of nondeduction of TDS u/s 194H read with section 40(a)(ia) of the Act. 5. Briefly stated facts are that the assessee in the present case is a private limited company and engaged in the business of manufacturing and sale of soft ferrite components, DC and AC capacitors, metalized films etc. The assessee in the year under consideration has claimed expenses under the head trade discount and cash discount of ₹ 45,71,944/- and ₹ 54,95,000/- respectively. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194H of the Act. The assessee in support of his claim has also relied on the judgment of Hon ble Supreme Court in the case of CIT vs. Ahmadabad Stamp Future Association reported in 348 ITR 378 (SC). The Ld. CIT(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under: I have carefully considered the submission put forth on behalf of the appellant along with supporting documents case laws relied upon and perused the facts of the case including the contention of the AO in the assessment order. It is seen that the appellant has claimed deduction for cash discount and trade discount allowed to the customers for purchasing the product of the appellant in bulk quantities under section 37(1) of the Act while computing the total taxable income. The AO in his order passed u/s 143(3) of the Act has disallowed the deduction claimed on the alleged ground that similar disallowance was made in the immediately preceding year and the appeal for that year is still pending for disposal. From the perusal of the details filed by the appellant, it is observed that in the immediately preceding assessment year the disallowance of cash and tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscounts were allowed as business expenditure under the provision of section 37 of the Act for all the assessment years except the assessment year 2008-09, where the AO has stated that offering discount on sale would pertain the character of commission and as there was no deduction of tax at source from such commission, the entire amount was disallowed u/s 40(a)(ia) of the act. In this connection, it may be stated that though there are favorable decisions of various High Courts of the country that the discounts offered on sales would not partake the character of commission, there was no decision of the Hon'ble Supreme Court on this point. Now the issue has been set at rest by the decision of the Hon'ble Supreme Court in the matter of Ahmedabad Stamp Vendors Association (supra) wherein the Hon'ble Supreme Court has held that offering discount for purchase in bulk quantity would partake the character of discount on transaction of sale and as such, the provision of section 194H of the act has no application and hence, disallowance u/s 40(a)(ia) of the Act cannot be made. In view of the above submission especially in view of the binding decision of the Hon'ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts to the Dealer at List Price ruling at the time of delivery less normal Trade Discount on such List Price which will be notified to the Dealer, from time to time. The List Prices are the maximum prices. The Dealer is, however, free to charge lower prices than the prices mentioned in the List Price. 25.1 The payments shall be made to EPCOS by the Dealers before dispatch, unless credit facility has been granted or agreed 25.2. In case credit facility is given, payment should be made as per Business Policy letter intimated to the Dealer from time to time. The Ld. AR vehemently supported the order of Ld. CIT(A). 8. We have heard the rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements cited and placed reliance upon. The issue, in the instant case, relates to whether the amount of commission offered by the assessee is in the nature of commission as envisaged u/s 194H of the Act. At this juncture, we find important to refer to the meaning of commission or brokerage as provided in explanation to section 194H of the Act which reads as under: Explanation .- For the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. 12. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). The assessee before the Ld. CIT(A) submitted that on many occasions the goods sold to the customers were rejected on account of low quality. These goods were either brought back to the factory for repairing or these goods were scrapped at the customers end. The goods which were brought back for the purpose of repairing and the cost incurred thereon in the form of freight custom duty, octroi, excise duty and sales tax as well as cost of scrapping work was categorized under the head damages. The cost of damages was directly related to the business activities of the assessee and therefore, the same is eligible for deduction u/s 37(1) of the Act. 12.1 The assessee also submitted that necessary details were filed before the AO vide letter dated 25.02.2013. After considering the submissions of the assessee the ld. CIT(A) deleted the addition made by the AO in part by observing as under: I have carefully considered the submission put forth on behalf of the appellant along with supporting documents/details furnished and perused the facts of the case including the contention of the AO in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total claim as against ₹ 87,35,567/- made by the AO. Thus, this ground of appeal is partly allowed. Being aggrieved by this order of Ld. CIT(A) both Revenue and assessee are in appeal before us. 13. The Revenue is in appeal before us against the relief granted by the Ld. CIT(A) to the tune of 90% of damages expenses whereas the assessee is in appeal before us against the confirmation of the addition made by the AO to the tune of 10% of cost of damages in ITA No. 2253/Kol/2013. The ground of assessee appeal in ITA No. 2253/Kol/2013 for A.Y 2009-10 goes as under:- 1. That on the facts and the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) [hereinafter referred to as Ld. CIT(A) ] erred in restricting the expenditure incurred by the appellant under the head damages during the year under consideration to ninety percent of the actual expenditure incurred by the appellant and thereby not allowing the expenditure incurred to the extent of ten percent without assigning any reasons and even after accepting the fact that the requisite details to substantiate the claim were filed by the appellant before him as well as be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper book. The Ld. AR also drew our attention on the sample documents in support of expenses incurred on damages which are placed on pages 46 to 60 of the paper book. After perusal of the papers filed by the assessee we note that these documents have not been doubted by the lower authorities. 16. Indeed the assessee has not produced details of the sales which were returned back by the parties but in our considered view this cannot be the sole basis for making disallowance of damage expenses claimed by the assessee. The AO has not pointed out any defect in the submission made by the assessee before rejecting the claim made by it. In view of the above, we hold that the AO cannot just brush aside the details filed by the assessee and draw a conclusion that the expenses are not incurred in connection with the business of the assessee. We note that sufficient details were duly filed by the assessee at the time of assessment proceedings in support of the cost incurred on the damages and no defect of whatever has been pointed out by the AO. The Ld. DR has also not brought anything on record contrary to the finding of Ld. CIT(A). Thus, we hold that the cost incurred for the damage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 14,86,000 TOTAL 93,46,000 In view of the above, the assessee submitted that the amount of provision return back during the year should be allowed as deduction as per clause (i) of explanation 1 to section 115JB of the Act. The Ld. CIT(A) after considering the submission of the assessee deleted the addition in part made by the AO by observing as under:- DECISIONS: I have carefully considered the submission put forth on behalf of the appellant along with supporting documents/details furnished and perused the facts of the case including the contention of the AO in the assessment order. It is seen that while calculating the book profit under the provisions of section115JB of the Act, the appellant has claimed deduction of an amount of INR 1,16,27,000/- under the head provision for doubtful debts written back. The in his order passed under section 143(3) of the Act had disallowed the deduction claimed on the alleged ground that it was an actual bad debt written off through the provision account an further contended that no details of bad debt written off and added back whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the assessment proceedings. The details filed by the assessee before the Ld. CIT(A) were admitted in contravention to the provision of Rule 46A of the Income Tax Rules. Thus, the Ld. DR prayed before the Bench to restore the impugned issue to the file of AO for fresh adjudication in accordance with law. On the other hand, the Ld. AR raised no objection if the matter is remanded back to the file of AO for fresh adjudication. 20. We have heard the rival contentions and perused the material available on record. In the instant case, we note that the Ld. CIT(A) has admitted the fresh evidences in contravention to the provision of Rule 46A of Income tax Rules. We note that the necessary details of the provision created by the assessee in earlier years were not supplied by the assessee to the AO at the time of assessment proceedings. In view of the above, we are of the view that the issue of provisions for doubtful debts written back by the assessee for ₹ 1,16,27,000/- needs to be examined by the AO. In respect of issue it was agreed by both the parties that the issue must be restored back to the file of AO for fresh examination. Accordingly, we remit back the issue to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee is allowed. Coming to Revenue s appeal in ITA No.1325/Kol/2014 for A.Y. 08-09 . 30. Solitary issue raised by Revenue in this appeal is that Ld. CIT(A) erred in restricting the disallowance of R.1,06,86,737/- on account of expenses on damage goods. 31. It is relevant to observe here that the facts in ground No. 1 of this appeal are similar to the facts in ground No.3 in ITA No.2758/Kol/2013 for A.Y. 2009-10 and the findings given in ITA No.2758/Kol/2013 shall apply to this case also with equal force. Hence, this ground of Revenue s appeal is dismissed. 32. In the result, Revenue s appeal is dismissed. 33. To summarize: - ITA No. A.Y. Appeal by Result 2758/K/13 09-10 Revenue partly allowed for statistical purpose 2553/K/13 09-10 assessee allowed 1895/K/14 10-11 Revenue partly allowed for statistical purpose 1718/K/14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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