9911796707
TMI Blog2018 (4) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... n with sales which are then reimbursed to them or deducted from the gross amount of sales. The actual payment of freight charges are made by the Consignment Agents. The assessee would get the sale proceeds net of these expenses. The Ld. CIT(A) was, therefore, justified in holding that freight payments are made by the Consignment Agents only and even the assessee may not aware of different transporters, shipping agents, therefore, it would impossible for assessee to deduct TDS on such payments. - Decided in favour of assessee Disallowance of certain expenditure claimed as revenue expenditure - Held that:- Since the cost of the packing was not included in the cost of D.G. set and it was spent for bringing the generator set to the premises of the assessee, it was incurred wholly and exclusively for the purpose of business. Therefore, it was rightly held to be revenue in nature. Further, out of packing no assets have been created in favour of the assessee. The other amount was incurred by assessee for upgradation of software or installation charges or better internet connectivity for business purposes. Therefore, same are revenue in nature. The Ld. CIT(A) on proper appreciation of fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties are trade creditors from whom security have been taken for making sales to them and in other cases, the assessee has specifically pleaded that they have sufficient amount in their books of account and bank to make investment in assessee-company. Therefore, the Ld. CIT(A), on proper appreciation of facts and material on record, correctly deleted the addition because assessee has proved the identity of the creditors, their creditworthiness and genuineness of the transaction in the matter. - Decided in favour of assessee Disallowance of expenses incurred through credit cards - Held that:- The assessee explained that credit card facilities were provided to the Directors only facilitating payment of expenses to be made on behalf of the company. The details of same were filed, which have not been disputed by the authorities below. The expenses are, therefore, incurred wholly and exclusively for the business of the assessee-company. Copy of the ledger account is also filed in the paper book to support the findings of the Ld. CIT(A). In earlier year, the Ld. CIT(A), deleted the similar addition on which nothing is brought to our notice if the findings of the Ld. CIT(A) in earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, thereafter, made a claim of refund on 21.09.2009 and according to the explanation of assessee, the amount of refund depends upon various calculations like rebate/interest etc., which may change the quantum of refund. Therefore, assessee would be knowing of the exact amount of refund due to assessee only on actual calculation made in this behalf. Therefore, the refund would depend upon the claim made by the assessee which was made in subsequent A.Y. 2010-2011. The receipt of the amount in question is finally crystalized in A.Y. 2010-2011 which have been correctly offered for tax in A.Y. 2010-2011 which have been assessed by the A.O. also in the order under section 143(3) of the I.T. Act. Therefore, no double addition should be made against the assessee.- Decided in favour of assessee Addition of discount allowed to foreign buyer - Held that:- Both the parties conducted the transaction through their respective Bankers and the genuineness of the transaction have not been doubted. The assessee produced confirmation from the party as well as other material on record to support the transaction that because of the discount offered, the assessee was able to sell the goods and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt because the assessee has not deducted TDS on the same payment as per Section 194C of the I.T. Act. 4.2. The assessee challenged the addition before Ld. CIT(A). The submission of the assessee is reproduced in the appellate order in which the assessee briefly explained that all these Inland Haulage charges are in the nature of reimbursement of expenses paid to the Clearing and Forwarding Agents on behalf of assessee to the Shipping Company and thus, Inland Haulage charges are not liable to TDS. The A.O. disallowed the same by stating that these payments are made against the bills of Clearing and Forwarding Agents towards Inland Haulage and was of opinion that these expenses are not mere reimbursement of expenses. The A.O. has ignored the fact that assessee is in the business of export of various items of iron and steel. The services of carrying and forwarding agents are important in the business of export so as to make the goods which in the instant case is H.R. coils available to the buyers in a short span of time as these agents possess the required expertise in shipping the consignment to far reached places. These agents utilised the services of various shipping companies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions made before the authorities below. He has submitted that expenses are in the nature of reimbursement, therefore, assessee is not liable to deduct TDS. He has relied upon the decision of Hon'ble Gujarat High Court in the case of CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd., (2014) 361 ITR 192 (Guj.) in which it was held that no disallowance under section 40(a)(ia) related to reimbursement of expenses to C & F Agents can be made. He has submitted that SLP of the Department has been dismissed vide order dated 14th January, 2014. Copies of the same are filed on record. He has submitted that same view have been taken by the Hon'ble Delhi High Court in the case of CIT vs. ONS Creations Pvt. Ltd., in ITA.No.1279/2011 vide order dated 14.12.2011, Order of ITAT, Delhi Bench in the case of Surinder Kumar vs. ACIT dated 16th June, 2015, order of ITAT, Mumbai Bench in the case of ACIT vs. Paramount Forge dated 24th February, 2015 and Order of ITAT, Ahmedabad Bench in the case of Prayas Engineering Ltd., vs. Addl. CIT dated 29th April, 2014. Copies of the same are filed on record. Learned Counsel for the Assessee also submitted that CIT(A) disallowed 10% of such expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee briefly explained that assessee is engaged in the business of manufacturing of steel pipes, tubes and trading of H.R. Coils etc., The trading of H.R. Coils and various other items is done majorly by way of exports. Considering the quantum of export sales made during the year under consideration, services of various Consignment Agents are undertaken. In Consignment, the Agent incurs all the expenditure in connection with sales which were then either reimbursed to them or deducted from the gross amount of sales. In the instant case, the material for sale is supplied to these Agents. It is the duty of the Consignment Agent to incur all expenses as and when required to make the sales like freight expenses, insurance charges etc., and after deducting various expenses incurred on its own, the remaining amounts is remitted back to the assessee. The actual payment of freight had been made by the Consignment Agents and not by the assessee. The assessee produced sufficient evidence before the authorities below to indicate the sale proceeds net of freight payment made by Agent on behalf of the assessee. It would show that assessee simply interested with the net amount that have been receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Consignment Agents. The services of various Consignment Agents are undertaken by assessee who incurred the expenses in connection with sales which are then reimbursed to them or deducted from the gross amount of sales. The actual payment of freight charges are made by the Consignment Agents. The assessee would get the sale proceeds net of these expenses. The Ld. CIT(A) was, therefore, justified in holding that freight payments are made by the Consignment Agents only and even the assessee may not aware of different transporters, shipping agents, therefore, it would impossible for assessee to deduct TDS on such payments. Ld. CIT(A), therefore, correctly deleted the addition. This ground of appeal of Revenue fails and is dismissed. ISSUE No.3 : 9. On ground No.4, Revenue challenged the order of the Ld. CIT(A) in deleting the addition of ₹ 8,54,521/- on account of disallowance of certain expenditure claimed as revenue expenditure by the assessee. 9.1. The A.O. made the above addition holding the expenditure to be capital in nature. The assessee submitted before the Ld. CIT(A) that amounts were paid to three parties, details of which are noted in para 8.1 of the appellate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iterated the submissions made before the authorities below and submitted that there is only improvement in the year. Software expenses are allowable expenditure. In case the expenses incurred on DG set are disallowed, depreciation may be granted to assessee. He has submitted that software expenses are revenue expenditure and relied upon decision of Hon'ble Delhi High Court in the case of CIT vs. Asahi India Safety Glass Ltd., (2012) 346 ITR 329 and CIT vs. Amway Enterprises (2012) 346 ITR 341. 11. After considering the rival submissions, we are of the view that no interference is called for in the matter. Learned Counsel for the Assessee relied upon the decision of the Hon'ble Delhi High Court above in which it was held that expenses incurred by assessee on account of software and professional expenses are revenue expenditure in nature. The assessee further explained that assessee purchased D.G. set costing ₹ 56 lakhs which was imported from France. Since, generator sets were special in nature and of high value items, required specialized packing, the cost of the packing was thus not part and parcel of the generator set. The explanation of assessee have not been disputed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, it is a mere tax neutral exercise and relied upon decision of the Hon'ble Delhi High Court in the case of CIT vs. Dinesh Kumar Goel (2011) 331 ITR 10. 15. After considering the rival submissions, we do not find any merit in the departmental appeal. The assessee has given details of entire expenses which is reproduced in the appellate order which shows that the bills have been received in assessment year under appeal and settled. The liabilities to pay these expenses have, therefore, crystalized during assessment year under appeal. Same practice has been followed in earlier year, on which, expenses have been allowed by the Department. Therefore, rule of consistency also applies against the Revenue. Further, whether expenses are allowed in this year or in earlier year, it is not reported as to if revenue has been deprived of any tax. Therefore, it is a mere tax neutral exercise and such expenditure are allowable in assessment year under appeal. We, rely upon the decision of Hon'ble Bombay High Court in the case of CIT vs. Nagri Mills Co. Ltd., (1958) 33 ITR 681. Ground No.5 of appeal of Revenue is accordingly dismissed. ISSUE No.5 : 16. On ground No.6, Revenue challenged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outstanding for more than 4-5 years and hence, were irrecoverable. Copies of the accounts for this year and earlier years were filed in support of the contention. Ld. CIT(A), however, noted that the amount does not qualify as bad debt because it was advance paid for acquisition of capital asset. However, the amount is only loss to the assessee and would be an allowable expenditure under section 37 of the I.T. Act. This ground was allowed and addition was deleted. 21. The Ld. D.R. relied upon the order of the A.O. and Learned Counsel for the Assessee reiterated the submissions made before the authorities below. 22. After considering the rival submissions, we don't find any merit in this ground of appeal of Revenue. It is claimed that assessee has given advance of ₹ 1 lakhs to Shri Satyanarayana Gupta in the course of business. He did not carry out his obligation and assessee could not recover the amount in question. Therefore, it were written off in assessment year under appeal. This amount was paid earlier during the course of business, therefore, it is allowable as business loss. Learned Counsel for the Assessee relied upon the decision of Hon'ble Supreme Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni Traders Pvt. Ltd., M/s. Nirmal Pipes and M/s. Mangla Enterprises, it was also explained that they are trade creditors and assessee made substantial sales to them and these are the amounts received as security for allowing credit against sale to these parties. The details of the same are also noted in the appellate order. It was, therefore, explained that assessee proved identity of the creditors, their creditworthiness and genuineness of the transaction in the matter. 24. The Ld. CIT(A) noted that similar ground have been decided by him in favour of the assessee for A.Ys. 2003-2004 to 2006-2007. Following his order for these years, he has deleted the addition. 25. The Ld. D.R. relied upon the order of the A.O. 26. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and filed copies of the appellate orders of Ld. CIT(A) for A.Ys. 2003-2004 to 2006-2007 and submitted that to his knowledge these are not challenged by the department. 27. After considering the rival submissions we do not find any merit in this ground of appeal of the Revenue. Assessee explained before Ld. CIT(A) that in case of the creditors, it has filed confirmations, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess purposes and disallowed the same. The Ld. CIT(A) noted that he has deleted similar addition in A.Y. 2003-2004 to 2006-2007. Addition was accordingly deleted. 30. The Ld. D.R. relied upon the order of the A.O. 31. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that expenses were incurred for and on behalf of the assessee-company and order of the Ld. CIT(A) for earlier years have not been reversed. 32. After considering the rival submissions, we do not find any merit in this ground of appeal of the Revenue. The assessee explained that credit card facilities were provided to the Directors only facilitating payment of expenses to be made on behalf of the company. The details of same were filed, which have not been disputed by the authorities below. The expenses are, therefore, incurred wholly and exclusively for the business of the assessee-company. Copy of the ledger account is also filed in the paper book to support the findings of the Ld. CIT(A). In earlier year, the Ld. CIT(A), deleted the similar addition on which nothing is brought to our notice if the findings of the Ld. CIT(A) in earlier year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterated the submissions made before the authorities below and submitted that Ld. CIT(A) has confirmed the disallowance being interest paid on bank loan on the ground that same has been utilised for the purpose of generator set. Disallowance is unjustified as the interest expenditure has been incurred for the money borrowed for the purpose of business. There is no dispute to the fact that same have been disallowed on the ground that expenditure is capital nature by applying proviso to Section 36(i)(iii) of the I.T. Act. However, this proviso is applicable only when interest paid in respect of capital borrowed for acquisition of asset for extension of existing business. The generator was for running the existing business more efficiently. Thus, this proviso comes into play only when there is an extension of existing business and not when capital asset is acquired during the course of existing business whereby no extension has taken place. In the case of assessee, generator set is meant for existing business and it was not an extension. Hence, disallowance is unjustified. He has also submitted that the proviso to Section 36(i)(iii) have been amended w.e.f. 01.04.2016 which would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee did not press ground Nos. 1 to 6, 9 and 10 of the cross objection. The same are dismissed as not pressed. 41. Ground No.1 of Departmental appeal is general and need no adjudication. The Revenue on Ground No.2 challenged the deletion of addition of ₹ 15,26,417/- on account of disallowance of Inland Haulage for export consignment, on which, no TDS was deducted. On the same issue, assessee raised Ground No.7 in the Cross Objection, challenging the sustaining of part addition of ₹ 1,69,602/- on account of Inland Haulage of export consignment. 42. On Ground No.3, Revenue challenged the deletion of addition of ₹ 49,01,524/- on account of disallowance of freight payment to Consignment Agents without deducting TDS. On Ground No.4, Revenue challenged the deletion of addition of ₹ 5,63,796/- on account of disallowance of certain expenses claimed as revenue expenditure by assessee. However, A.O. treated the same as capital expenditure. On ground No.5, Revenue challenged the deletion of addition of ₹ 40,301/- on account of disallowance of prior period expenditure. On Ground No.8, Revenue challenged the deletion of addition of ₹ 12 lakhs on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te that same is business expenditure. During the assessment year under appeal, specific exercise was carried out by the assessee wherein it contacted HSEB and asked for refund of the same. Since the Board has intimated assessee that it is nonrefundable, therefore, it was charged to P & L A/c. Since the amount is not recovered from the Electricity Board, therefore, it was claimed as deduction. The Ld. CIT(A) noted that while adjusting a portion of the deposit to bill raised by HSEB was net of the amount deducted/adjusted. Thus, electricity charges paid by the assessee to HSEB over a period of time was net of the adjusted amount. Apparently, assessee was unware of this adjustments and requested for refund, whereupon, it was informed to the assessee that amount was non-refundable and had already been adjusted in the electricity bills of the assessee. The assessee, on receipt of this information, made entries in the books of account and charged to P & L A/c. The Ld. CIT(A), therefore, noted that in view of this factual position, there were no reason for the item to continue as an asset on the balancesheet as the amount had already been adjusted and no more outstanding as payable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 21,250/-. For the remaining amount, assessee explained that it had installed the S.S. Plant during the F.Y. 2007-2008 and capitalized the same on 29th February, 2008. The said plant was put to use immediately and S.S. coils totaling to 8.60 MT valuing ₹ 10.77 lakhs were purchased vide Bill No.647 dated 15th March, 2008 and were issued for various processes. This can be verified from the Excise records. Assessee, therefore, submitted that since asset has been owned by assessee and put to use for business purpose, therefore, assessee is entitled for depreciation. 52. Ld. CIT(A) accepted the explanation of assessee and noted that there was a mistake in calculation and as regards the disallowance of ₹ 4,18,557/- being depreciation claimed on SS Pipe Plant, it was noted that the assessee installed the same in assessment year under appeal and put to use for production by installing the machinery on 29.02.2008. Therefore, addition was deleted. 53. After considering the rival submissions, we do not find any merit in this ground of appeal of the Revenue. The assessee pointed out to the Ld. CIT(A) that there is a mistake in calculation of disallowance which was accepted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same amounting to ₹ 19,13,073/-. On Ground No.7, Revenue challenged the deletion of addition of ₹ 1,20,861/- on account of foreign travel expenses. On ground No.8, Revenue challenged the deletion of addition of ₹ 7,77,260/- on account of disallowance of expenses incurred through credit cards. 61. Learned Representatives of both the parties submitted that Ground Nos.2, 3, 4, 6 and 8 of the Departmental Appeal and Ground No.3 of the cross objection are same as have been considered in A.Ys. 2007-2008 and 2008-2009. They have also submitted that Ground No.7 of the Departmental appeal is same as have been considered in A.Y. 2008-2009. Learned Representatives of both the parties, therefore, submitted that order for these years may be followed in this year. Following the orders for A.Ys. 2007-2008 and 2008-2009 (supra), these grounds of Departmental Appeal (2, 3, 4, 6, 7 and 8) are dismissed and Ground No.3 of the cross objection of assessee is allowed. The remaining issues are decided as under. ISSUE No. 1 : 62. On ground No.5, Revenue challenged the deletion of addition of ₹ 1,17,32,766/- made by A.O. on account of sales tax incentive receivable during asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Sales Tax authorities. Therefore, it should be added in the same year. 64. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below. 65. After considering the rival submissions, we do not find any merit in this ground of appeal of Revenue. The assessee explained that due to applicability of VAT Act, the assessee was directed to collect and deposit full amount of tax and then was eligible to claim the excess amount paid as refund. The assessee received letter from Sales Tax authorities on 10.11.2008 intimating the assessee that he was entitled for refund. The assessee, thereafter, made a claim of refund on 21.09.2009 and according to the explanation of assessee, the amount of refund depends upon various calculations like rebate/interest etc., which may change the quantum of refund. Therefore, assessee would be knowing of the exact amount of refund due to assessee only on actual calculation made in this behalf. Therefore, the refund would depend upon the claim made by the assessee which was made in subsequent A.Y. 2010-2011. The receipt of the amount in question is finally crystalized in A.Y. 2010-2011 which have been cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was collusive in nature. The transaction has been put through Bankers of two sides, therefore, it was held as genuine transaction and addition was deleted. 69. The Ld. D.R. relied upon the order of the A.O. and submitted that no formal agreement was produced to offer discount. 70. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that all the relevant documents were filed in support of the explanation, therefore, addition was correctly deleted by the Ld. CIT(A). 71. After considering the rival submissions, we do not find any merit in this ground of appeal of Revenue. The assessee explained the reasons and the circumstances under which the assessee has to pay for demurrages charges and to give discount to the party. M/s. Titan Steel FEZ raised number of discrepancies before accepting the goods on sale and since party was situated outside India and because of non-delivery of goods under sale, heavy demurrages were being charged from the assessee, therefore, under these compelling reasons, assessee agreed to give discount and to pay demurrages charges to the purchaser. Only after making the above concessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
