9911796707
TMI Blog2018 (12) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... re involved, these appeals were heard together and disposed of by this common order. First, we shall take up appeal of the assessee for AY 2006-07. Since common issues are involved our decision for AY 2006-07 shall apply mutatis mutandis to the same issues in AY 2007-08, 2008-09 and 2009-10 respectively. 2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") for AY 2006-07 in ITA No. 369/Mum/2013, reads as under:- "On the facts and in law: 1. Disallowance out of travelling expenses : Rs. 3, 19, 386/- 1) The ld. CIT(A) erred in sustaining the disallowance of Rs. 3, 19, 386/- out of travelling expenses incurred by the appellant and that relying on the grounds taken by the ld. predecessor CIT(A) in A. Y. 2005-06. The appellants submits that since then the assessment for A. Y. 2005-06 has been set-aside by the Hon'ble ITAT. The appellant further submits that, in any case, the disallowance is excessive. 2. Disallowance of Rs. 1, 56, 449/- termed as penalties and fine: i) The ld. CIT(A) erred in sustaining the disallowance of Rs. 1, 56, 449/-for the expenditure incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been taken as held by various courts. 6. Disallowance u/s 14A r. w. s. 8D: The ld. CIT(A) erred in upholding disallowance at 10% of dividend earned, whereas no disallowance u/s 14A r. w. s. 8D was justified. 7. Non-consideration of expenses disallowed in earlier years and claimed as deductions in A. Y. 2006-07, subject to the outcome in the pending assessments pursuant to ITAT orders for earlier years: i) The ld. CIT(A) erred in not considering the following disallowances/additions; a) Prior period expenses: Rs. 27, 40, 436/-. b) Non-deduction of TDS: Rs. 4, 48, 69, 244/-. c) Prior period adjustment (net): Rs. 31, 74, 810/-. ii) The appellant submits that the above claims are alternate claims and made without prejudice to the outcome in the pending assessments pursuant to the orders of the ITAT for earlier years. Your appellant craves leave to add to, alter, amend or delete all or any of the grounds of appeal on or before the date of hearing. 3. The brief facts of the case are that assessee is engaged in the business of hotel and flight kitchen. The assessee did not filed return of income within due date as prescribed u/s. 139(1) of the Act, or even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its letter dated 01. 12. 2009. The AO intimated to the assessee vide letter dated 10. 12. 2009 that there were some defects in the return of income filed by the assessee on 01. 12. 2009. The defects were removed by the assessee by filing fresh return of income on 24. 12. 2009 wherein the income declared was Rs. 33, 71, 53, 047/- . With this back ground, we now proceed to adjudicate this appeal filed by the assessee for AY 2006-07. 4. Disallowance of Foreign Travelling expenditure of Rs. 2, 19, 386/- and Domestic Travel expenses of Rs. 1, 00, 000/-, aggregating to Rs. 3, 19, 386/- . These expenses were disallowed by the AO on the grounds that spouses/family members of Directors have also travelled along with Directors and it could not be proved that the spouses/family members of Director's visit / expenses were wholly and exclusively connected with the business of the assessee. The assessee has only given bald statement that in many business trips, presence of spouse is desirable. The AO rejected the contentions of the assessee as the assessee failed to discharge its onus to prove that the expenses were incurred wholly and exclusively for the purposes of its business and only bald ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee with tribunal, at page no. 134 to 139 . It was submitted that in all fairness this issue should be restored back to the file of AO for fresh adjudication . Our attention was also drawn to page no. 140 to 145, wherein Form No. 35 dated 9th April 2014 ( filed with learned CIT(A) on 10-04-2014) for AY 2005-06, Grounds of appeal and Statement of Facts for AY 2005-06 filed before Ld. CIT(A) for AY 2005-06 to challenge the assessment framed in pursuance to the appellate order passed by the tribunal dated 07. 11. 2012 is placed, wherein this issue is claim to be adjudicated afresh by AO in pursuance to the directions of the tribunal vide assessment order dated 25. 02. 2014 u/s 143(3) read with Section 254 of the 1961 Act. The assessee has however not placed the said assessment order passed by the AO in pursuance to direction of the tribunal. 4. 4. The Ld. DR raised no objection to the restoration of this issue arising in the ground of appeal back to the file of AO for fresh adjudication 4. 5 After considering rival contentions and perusing the material on record, we are of the considered view that this issue of disallowance of Foreign Travelling Expenses and Domestic Travelling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompensatory in nature and are not paid for infringement of any law. The detail of said penalties are placed in paper book at page no. 106 to 118. On Perusal of these details which are placed in paper book filed with tribunal, we have observed that these expenses are toward traffic challan, interest, tax etc and in all fairness to both the parties, the matter need to be set aside and restored to file of the AO who shall analysis each and every claim of these expenses as claimed by the assessee. The onus is on the assessee to place all details before the AO and If these expenses are found to be penal in nature and hit by explanation 1 to section 37(1), the same shall be disallowed by the AO in set aside proceedings but if the same are found to be compensatory in nature the same shall be allowed by the AO. The complete details are not furnished by the assessee and the assessee is directed to provide details with respect to each of these expenses claimed by the assessee with cogent evidences to substantiate that these payments are not penal in nature. Thus, we are restoring this issue back to the file of AO for fresh adjudication after considering the submissions of the assessee. Needl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or AY 2005-06 and sustained disallowance of Rs. 90, 000/- as was made by the AO vide appellant order dated 31. 10. 2012, by holding as under:- " 7. 3 I have gone through the issue. I find that this issue is a repetitive issue. My predecessor has decided the issue in A. Y. 2005-06 against the appellant. Para 24 of the appellate order is extracted below: Ground of appeal number five is against addition of any amount of Rs. 90, 000/- on account personal use of vehicles. The auditors in their special auditors report stated that details of personal use of vehicles was not provided to them. Before assessing officer appellant contended that in terms of the ITAT order disallowance of an amount of Rs. 6, 600/- per directors should be adequate. Assessing Officer has categorically observed that the order relied upon by the appellant pertain to year 1990 and has no significance for the A. Y. under consideration. He has particularly argued that looking to the inflation and interest and costs over a period of 16 years disallowance of Rs. 30, 000/- per year per director is justified. I have perused the facts of the case. I find that 16 years back Hon'ble Tribunal had confirmed the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which itself was set aside by the tribunal. . Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The relevant explanations/evidences submitted by the assessee in its defence shall be admitted by the AO and be adjudicated on merits in accordance with law. The issue in this ground of appeal filed by the assessee is allowed for statistical purposes. We order accordingly. 7. The next issue concerns itself with the expenses incurred for Pali Hill Bungalow owned by the assessee which were disallowed by the AO to the tune of Rs. 5 lacs on the grounds that part of the said Bungalow was used for residence of Directors and also perquisite value in the hands of the Directors as well expenses incurred by the assessee on behalf of the Directors was not yet determined, as reported by the Auditors in their audit report vide note number 8 . The AO observed that the assessee company has not quantified the expenses in respect to Pali Hill bungalow which were incurred for personal/non business in nature and the assessee has generally stated that these expense to be allowed k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer or before me. It is necessary to look into the decision of Hon'ble ITAT. This decision was delivered as long back as 1986. More than 20 years in the past. The utilization of the property is a question of fact and is bound to be major change in the utilization of the property particularly because the family tree grows and therefore, leading to shortage of space. This is not a conjecture. This is a logical conclusion drawn from the fact that appellant is relying on an ITAT order which is 25 years old. To my mind there is no basis on which one can conclude that this situation has not changed in the last 25 years. Appellant ought to have brought on record detailed evidence that property is being used by the assessee for its own use. Since this has not been done, the objection cannot be accepted. As far as appellant's contention that auditors have not understood the fact is concerned, it is surprising to note that appellant is objecting to auditors report, a report which was prepared in consultation with appellant and its staff and is essentially a report of the appellant submitted to the I. T. Department. It is a different matter that the report was at the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 7. 4 The learned DR did not objected to the restoration of this issue to the file of the AO for fresh adjudication on merits in accordance with law. 7. 5 After considering rival contentions and perusing the material on record, we are of the considered view that this issue of disallowance of Expenses relating to Pali Hill Bungalow, aggregating to Rs. 5, 00, 000/- has to be restored back to the file of AO for fresh adjudication on merits in accordance with law and we restore this issue back to file of AO for fresh adjudication after considering the submissions of the assessee, as the learned CIT(A) followed the decision of his predecessor for AY 2005-06 which itself was set aside by the tribunal. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The relevant explanations/evidences submitted by the assessee in its defence shall be admitted by the AO and adjudicated on merits in accordance with law. This ground of appeal number 4 filed by the assessee is allowed for statistical purposes. We order accordingly. 8. The ground number 5 raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 30. 12. 2009 passed u/s 143(3) read with Section 147 of the 1961 Act. 8. 2 The matter reached Ld. CIT(A) at the behest of the assessee wherein the assessee filed first appeal against assessment order and the summarised contentions of the assessee as submitted before learned CIT(A) are as under:- " 9. 1 During the appellate proceedings, the appellant submitted that disallowance was made on technical ground that return of income was not filed by the due date u/s. 139(1), hence claim u/s. 80IA was rejected. Pursuant to the order dated 14. 5. 2009, of the Supreme Court audit could be completed on 11. 12. 2009 and return filed on 1. 12. 2009 followed by revised return on 24. 12. 2009. It was further submitted that section 80IA being a machinery provision, requires to be liberally interpreted in the special circumstances of the case. 1. CIT Vs Contimeters Electricals P. Ltd. (2009) 178 Taxman 422 (Del) 2. CIT Vs Ace Multitaxes Systems P. Ltd. (2009) 317 ITR 307 (Kar) 3. CIT Vs Medicaps Ltd. (2010) 323 ITR 554 (MP)" 8. 3 The learned CIT(A) was pleased to reject the contentions of the assessee, vide appellate order dated 31. 10. 2012, by holding as under: "9. 2 I have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003, 2004, 2005, 2006, 2007, 2008 and 2009 by 9th July 2009. The matter to come up on 13th July 2009, At this stage, we do not wish to pass any orders in terms of prayer clause (b) of the I. A. M/s. BSR & Co. is also directed to submit a status report on the account before the next date. It is made clear that the non-applicant, if so advised, may file a reply to the I. A before the next date of hearing. " It was submitted that it is only on the basis of audited accounts prepared and drawn by said firm M/s B S R & Company, Chartered Accountants pursuant to the directions as are contained in the aforesaid orders of the Hon'ble Supreme Court, the assessee was able to file return of income in the month of December 2009 and claim for deduction u/s. 80IA was made in the said return of income duly supported by audit report in form no. 10CCB was submitted. It is claimed that the said claim of deduction u/s 80IA was with respect to wind mills installed by the assessee at Tamil Nadu. It was submitted that for earlier years, the claim of deduction u/s 80IA was allowed. It was also submitted that Section 80AC was inserted by Finance Act, 2006 wef 01. 04. 2006 and this is the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nth of December 2009 which was admittedly beyond the time stipulated u/s 139(1) and also the return of income was filed beyond the time stipulated u/s 139(4) of the 1961 Act. There is no dispute that the return of income was not filed within the time prescribed u/s 139(1) of the 1961 Act. The assessee has submitted that its claim of deduction u/s 80IA was denied by Revenue in this year under consideration based on newly inserted provision in the 1961 Act wherein Section 80AC was inserted by Finance Act, 2006 wef 01. 04. 2006. The said Section clearly mandates that in order to grant deduction u/s 80IA, the return of income has to be filed within the due date as stipulated u/s 139(1) which undisputedly the assessee did not comply with. The Section 80AC as was applicable for the impugned assessment year is reproduced hereunder: "Deduction not to be allowed unless return furnished. 80AC. Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC, no such deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d time stipulated u/s 139(1) for allowing deduction u/s 80IC despite in breach of Section 80AC of the 1961 Act. This matter went to Hon'ble Andhra Pradesh High Court at the behest of Revenue wherein the appeal of the Revenue was dismissed by Hon'ble Andhra Pradesh High Court on the grounds that it does not raises any substantial question of law. It is now settled by the Constitution Bench of Hon'ble Supreme Court in the case of Commissioner of Customs(Imports), Mumbai v. Dilip Kumar and Company & others in civil appeal no. 3327 of 2007 vide orders dated 30th July 2018 that exemption provisions are to be strictly construed. The conclusion arrived at by Hon'ble Supreme Court in the aforesaid decision are as under: "52. To sum up, we answer the reference holding as under (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid observations, we are restoring this issue back to the file of the AO for fresh adjudication of the issue on merits in accordance with law. The assessee is directed to produce all relevant records concerning dispute /litigation as well relevant orders of Hon'ble Courts before the AO to prove supervening impossibility of performance. We order accordingly. 9. The ground number 6 concerns itself with disallowance under section 14A of the 1961 Act r. w. r. 8D of the Income Tax Rules, 1962. The disallowance was made by the AO of Rs. 16, 102/- u/s 14A of the 1961 Act. The assessee has received dividend income of Rs. 26, 134/- which was claimed as an exempt income u/s 10(34) of the 1961 Act. The learned CIT(A) restricted the disallowance u/s 14A to 10% of the dividend income received by the assessee. The assessee has now filed an appeal with the tribunal against the appellate order of learned CIT(A). The Ld. Counsel for the assessee at the outset submitted that this ground of appeal bearing number 6 is not pressed and the same may be dismissed as not being pressed. The learned DR raised no objection to dismissal of this ground of appeal as not been pressed. After hearing both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 31/03/2001 2, 654, 991 1, 440, 662 86, 276 6, 565, 699 200, 472 25, 045 24, 075 10, 997, 220 31/03/2002 2, 627, 627 308, 103 63, 812 9, 146, 758 1, 394, 507 107, 646 - 13, 648, 453 31/03/2003 14, 426, 263 1, 820, 833 3, 298, 537 9, 434, 737 26, 124, 308 781, 651 - 55, 886, 329 31/03/2004 6, 132, 350 922, 998 577, 716 17, 843, 901 51, 039, 079 6, 696, 812 - 83, 212, 856 31/03/2005 2, 750, 909 1, 687, 542 417, 798 30, 151, 860 12, 099, 046 537, 523 3, 200 47, 647, 878 31/03/2006 2, 325, 569 1, 069, 150 1, 999, 541 16, 649, 655 5, 717, 782 372, 895 - 28, 134, 592 31/03/2007 2, 531, 413 5, 854, 894 2, 996, 961 3, 421, 367 11, 607, 363 136, 136 - 26, 548, 134 31/03/2008 36, 228, 072 3, 952, 290 182, 077 11, 436, 712 1, 601, 014 1, 229, 451 - 54, 629, 616 31/03/2009 3, 928, 045 6, 072, 068 2, 516, 027 8, 557, 827 8, 737, 462 1, 375, 590 - 31, 187, 019 31/03/2010 4, 357, 427 3, 238, 990 562, 240 4, 209, 611 2, 433, 299 1, 655, 754 - 16, 457, 321 31/03/2011 3, 079, 667 1, 636, 154 837, 115 216, 614 2, 634, 937 744, 305 - 9, 148, 792 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33, 299 1, 655, 754 - 16, 457, 321 31/03/2011 3, 079, 667 1, 636, 154 837, 115 216, 614 2, 634, 937 744, 305 - 9, 148, 792 The assessee has also filed audited financial statements for the financial year ended 31.03.2000 to 31. 03. 2005(PB/page 3-23). Thus, the assessee has claimed that perversity entered into an assessment order and it had been pleaded to admit this ground of appeal. After considering rival contentions, we are of the view that this additional ground of appeal needs to be admitted as perversity of the orders of the authorities give rise to question of law. Moreover, the mandate of the Act is to the levy tax on the correct income which is chargeable to tax as provided under the provisions of the 1961 Act, which is in consonance with Article 265 of the Constitution of India that no tax can be levied or collected save by the authority of law. The facts are available on facts but they need verification. The contention of the assessee that it has complied with provisions of Section 80HHD so far as utilisation of the reserve created for the financial year ended 31.03.2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin provisions of Section 80HHD of the 1961 Act and the said reserve amount was utilised within time period as mandated u/s 80HHD for the purposes as are stipulated u/s 80HHD. With the aforesaid observations, we are restoring this issue back to the file of the AO for fresh adjudication of the issue on merits in accordance with law. We order accordingly. 12. In the result appeal of the assessee in ITA no. 369/Mum/2013 for AY 2006-07 is partly allowed for statistical purposes. AY 2007-08-ITA no. 370/Mum/2013 13. Since appeal for AY 2007-08 involves common issues as were there in AY 2006-07, including raising of additional ground with respect to claim of deduction u/s 80HHD, our decision in AY 2006-07 shall apply mutatis mutandis to the issues involved in AY 2007-08. We order accordingly. 14. In the result appeal of the assessee in ITA no. 370/Mum/2013 for AY 2007-08 is partly allowed for statistical purposes. AY 2008-09-ITA no. 721/Mum/2013 15. The assessee has also raised an ground no. 4 in memo of appeal filed with tribunal which is concerning short deduction of TDS to the tune of Rs. 18, 449/- and non applicability of provisions of Section 40(a)(ia) of the 1961 Act. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, the same was not claimed. It was submitted that this claim for expenses were disallowed for AY 2008-09 as the payment was made only on 10.12.2008 which is beyond the end of the financial year as also beyond the time stipulated for filing of return of income u/s 139(1). Our attention was drawn to the assessment order for AY 2008-09 as under:- "9. PROPERTY TAX PAYMENT: Form the computation of income filed with the return of income, it is noticed that an amount of Rs. 32,10,870/- under head provision for property tax' (Pallawa) has been added and the same amount has been further claimed as allowable deduction. Vide order sheet noting dated 17.12.2010, the assessee was required to explain and furnish the proof of payment of property tax during the F. Y. 2007-08 relevant to current A. Y. or till the due date of filing of return for the current assessment year. The assessee has produced copy of payment of property tax to the tune of Rs. 32,10,870/- which is paid in the F. Y. 2008-09 (payment date 10/12/2008). The assessee has claimed that this quantum of property tax pertain to enhanced value of property tax by Municipal Authorities after survey action and hence the same is claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainly takes care of the property tax. As the property tax payment is made on 10/12/2008, the amount of Rs. 32,10,870/- was disallowed as per section 43B of the Act and added to the total income. 8. 2. During the appellate proceedings, the appellant reiterated the submission made before the AO. 8. 3. I have gone through the issue. It is very clear that property tax is also covered under the provisions of section 43B of the Income-tax Act. It is undisputed fact that the property tax of Rs. 32,10,870/- was not paid during the accounting period or before the due date for filing the return. In view of this, I hold that Rs. 32,10,870/- is correctly disallowed by the AO u/s 43B of the Income-tax Act. Addition is upheld. 17. 2. Now, the assessee has raised this ground of appeal as an additional ground of appeal before tribunal for AY 2009-10 . We have gone though assessment order for AY 2008-09 as well appellate order passed by Ld. CIT(A) order for AY 2008-09 and we have also considered statement of fact filed by the assessee for AY 2009-10 along with additional ground of appeal as an Annexure, which reads as under:- "Statement of facts: The appellant owns and runs interalia 3 hotel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m for deduction of the additional property tax of Rs. 32,10,870/- in respect of the Hotel property at Chennai, which was dealt by the A. O. in the assessment order dated 29.12.2010 for A. Y. 2008-09. as stated above in para 1 hereof. 4. The appellant submits that all the relevant facts in respect of the above claim of Rs. 31,10,870/- are already on the records of the AO and the additional ground is purely a legal ground and does not require any detailed investigation, hence prays for admission. " 17. 3. In our considered view, the assessee is entitled for this deduction toward additional property tax paid towards Hotel Pallava, Chennai as payment has been undisputedly made on 10.12.2008 and keeping in view provision of section 43B(a) this expenditure is to be allowed as deduction for AY 2009-10 as the payment is actually made by the assessee for this additional property tax by the assessee on 10.12.2008, as per facts emerging from records. We order accordingly. 17. 2 Since, other issues in appeal for AY 2009-10 involves common issues as were contained in AY 2006-07, our decision in AY 2006-07 on other issues raised in appeal for AY 2009-10, shall apply mutatis mutandis to the ..... 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