9911796707
TMI Blog2019 (4) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... certained provision. According to us it is a definite and accrued liability of the assessee for the year for which the services have been rendered by the employees. It is nothing but additional variable salaries payable to the employees. Same partakes character of salary. - Decided in favour of assessee Disallowance of depreciation on 12 vans - HELD THAT:- On the fact that the assessee has shown the purchase of these vehicles, obtained the temporary registration of these vehicles, shown that after bodybuilding they have been received back by the assessee from 22 to 25/03/2004, and they have been used for the purposes of the shooting during the year, it cannot be said that assessee has not used these vans for the purpose of the business of the assessee. Therefore according to us, assessee has also satisfied user test for allowability of depreciation.- Decided in favour of assessee Addition on account of advances written off - advance given to employees who left - business loss - HELD THAT:- advances were given to employees for the purposes of business, such advances have become bad as employees left the assessee. They are not in the nature of bad debt so, not required to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consumption incentive. During the year, assessee has passed on this consumption incentive of ₹ 34059992/–. Learned CIT(A) has held that this is the expenditure in the nature of incentive to the advertiser and the assessee has also shown income against this expenditure. Before the learned CIT – A the assessee demonstrated by producing the copies of the deals of some of the parties and shown that it is not an asset or liability but actual expenditure. As held that assessee is eligible for deduction of the above expenditure. DR could not point out any infirmity in the order of the learned CIT(A). We confirm the order of the learned CIT(A) Disallowance of software expenditure - assessee has not furnished the adequate details before the lower authorities to demonstrate that the software expenditure incurred by the assessee is whether revenue expenditure or capital expenditure? - HELD THAT:- As the assessee has not submitted any details before the lower authorities, this ground of appeal is once again set aside back to the file of the learned assessing officer with a direction to the assessee to substantiate it within 30 days of this order before the assessing officer by s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that out of total amount of ₹ 2,05,69,769/- only a sum of ₹ 1,57,37,329/- pertains to current Assessment year i.e. 2004-05; (c) That the Learned Commissioner of Income Tax (Appeals) has gone wrong in stating that the assessee has not provided any documents or details on the basis of which incentive amount was justified whereas employee wise list / detailed working of calculation of incentive paid to the employees has been filed by the assessee company during the course of appellate proceedings; (d) That the Learned Commissioner of Income Tax (Appeals) has further gone wrong in ignoring the facts that exactly the similar issue has been decided in favour of the assessee by Ld CIT(A) for the Assessment Year 2008 - 09; (e) That the Learned Commissioner of Income Tax (Appeals) has also gone wrong in upholding that the incentive accrued but not due to the employees has neither been ascertained nor incurred during the current assessment year i.e. A.Y. - 2004-05; (f) That the Learned Commissioner of Income Tax (Appeals) has gone wrong in upholding that the assessee has failed to establish that the expenses have been incurred wholly and exclusively fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained that these expenses have been incurred in respect of the payments to be made to the employees for encouraging them to promote business of the assessee. Assessee also submitted that the incentive is meant for the employees which is pertaining to the financial year 2003 04. It is based on the performance of the employees and it has become due and payable to them based on certain criteria such a collection of sales, determination of profits after audit of annual account etc. The learned assessing officer noted that assessee has failed to discharge the onus cast upon him to prove that these expenses which have been claimed under section 37 of the Income Tax Act by furnishing relevant specific details as well as the name of employees. He also noted that assessee has failed to prove that these expenses were incurred wholly and exclusively relief for the purposes of business. The learned AO further noted that assessee also could not prove that the alleged payees have included respective amount into their corresponding income in addition to the salary. The learned Assessing Officer therefore noted that these expenses are neither ascertained during the previous year and not incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision is always written back to the profit and loss account in the subsequent year, if it is found to be short, further provision is made. This accounting practice is carried on by the assessee consistently. As the expenditure has been incurred for the incentive of the employees of the company raised on their performance for the same year for which the actual services have been rendered by the employees, above expenditure has been incurred by the assessee during the year only and exclusively for the purposes of the business. As the above expenditure has been made on the basis of the performance of the employees and allocated to each of the employees it is an ascertained provision. According to us it is a definite and accrued liability of the assessee for the year for which the services have been rendered by the employees. It is nothing but additional variable salaries payable to the employees. Same partakes character of salary. 11. Accordingly we reverse the finding of the lower authorities and allow the ground number 2 of the appeal of the assessee directing the learned assessing officer to delete the disallowance of ₹ 20569764/- on account of accrued incentive of the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore they were not used for the purpose of the business during the previous year. He further referred to the separate chart in respect of each of the Van showing shoot out time in minute and date wise. He further referred that the shoot out time claimed to have been telecast by the assessee with the help of these vans does not appear to be correct. He further held that fact is that those vehicles remained with the bodybuilder during the period in which the temporary registration remained effective does not entitle the assessee to claim depreciation u/s 32 of the income tax act and therefore he disallowed ₹ 15 52 6521. 13. The assessee challenged the same before the learned CIT A. The learned CIT (A) held that the assessing officer has made this disallowance on the appreciation primarily on the ground that since only temporary registration have been provided to these Vans. It implied that these Vans were not ready for use and only because of that regular registration has not been granted to these Vans. Secondly, he noted that the details regarding the shooting time during the period of the last week of March 2004 was disputed by the Assessing Officer, as accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisputed fact that these vehicles have not been registered as permanent registration up to 31/3/2004. The assessee has made an attempt to justify that these vans have been used by it by showing the shooting time which has been disputed by the learned assessing officer. The assessee has produced the copy of the invoices of body building raised by HFCL satellite communication Ltd in the name of the assessee company, which shows that these vans have been returned back to the assessee before the 31/03/2004. All the 12 invoices with respect to the bodybuilding are dated 22/3/2004 to 25/3/2004. Further the report of the utilisation has also been filed with the assessing officer, which shows that these vans have been used by the assessee on or before 31/3/2004. Merely because these vehicles are having temporary registration up to 31/3/2004, could not be registered as a permanent registration on or before that date, it does not show that these vehicles have not been actually owned by the assessee and used for the purposes of the business by the assessee. The assessee has also given the time for which these vehicles have been used for the shooting. The assessee has also stated that afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bharti. The CIT(A) failed to appreciate that section 10(23)(BBH) has been inserted with effect from 01.04.2013 and is not applicable to the assessment year under consideration. 3. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in deleting the addition of ₹ 4,27,172/- made by the AO on account of software expenses by treating them as capital in nature. The C1T(A) failed to appreciate that as per new appendix-1 of the Income Tax rules, 1962, 'Computers including computer software‟ included in the block of' Machinery and Plant‟ is eligible for depreciation @ 60%. This does not make difference between the application software‟ and the system software‟. 4. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in deleting the addition of ₹ 3,40,59,992/- made by the AO on account of provision consumption debtors. 21. The 1st ground of appeal is with respect to the disallowance of ₹ 80861/- made by the learned assessing officer deleted by the learned CIT A. The brief fact shows that the assessee has claimed advances written off of ₹ 8086 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted u/s 194A of the income tax act and therefore the disallowance was made. The learned CIT A held that it is a corporation established by or under the Central act which is under any law for the time being in force exempt from income tax on its income. He further noted that as per the Prasar Bharti Act 1990, Prasar Bharti is not liable to pay any income tax. Therefore he held that no tax was required to be deducted thereon. Hence he deleted the disallowance. 25. The learned departmental representative vehemently supported the order of the learned assessing officer whereas the learned authorised representative submitted that that there is no requirement of tax deduction at source on interest paid to any corporation established under the act income of which is being exempt. He also supported the order of the learned CIT A. 26. We have carefully considered the rival contention and perused the orders of the lower authorities. The learned CIT A has deleted the disallowance since Prashar Bharti is a corporation and not liable to pay income tax on its income as provided under 196 (ii) of the income tax act. Though we find that Prasar Bharti has been established under the Prasar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven discount to its debtors based on its consumption of Airtime during the financial year. It was further stated that the working of the debtors shows that company has given discount to debtors based on the consumption of Airtime during the financial year 2007-08. The assessee also submitted the working of the consumption debtors of ₹ 34,000,000, copies of deal in respect of certain clients and copy of the rate card. The learned assessing officer considered the explanation of the assessee, however rejected stating that nature of accounting head is a provision for discount and is not asset and liability debited to the accounts of the parties. Therefore he made the disallowance of ₹ 34059992/ . The assessee challenged the same before the learned CIT A who deleted the above disallowance. 29. The learned departmental representative relied upon the order of the learned assessing officer whereas the learned authorised representative relied upon the order of the learned CIT(A) and reiterated submission before him. 30. We have carefully considered the rival contention and found that the claim of the assessee is that company has given discount to its debtors based on co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Learned Commissioner of Income Tax (Appeals) is bad in Law on the facts and in the circumstances of the case; 2. (a) That the Ld Commissioner of Income tax (Appeals) has gone wrong in disallowing the accrued incentive of ₹ 64,58,780/- as claimed by the assessee company during A Y 2009- 10; (b) That the Learned Commissioner of Income Tax (Appeals) has gone wrong in treating the Accrued Incentive as Bonus ; 3. That the Learned Commissioner of Income Tax (Appeals) has gone wrong in disallowing a sum of ₹ 20,33,900/- towards interest payable to Prasar Bharti; 4. That the Learned Commissioner of Income Tax (Appeals) has gone wrong in disallowing a sum of ₹ 9,87,315/- towards claim of Software Expenses; 5. That the Learned Commissioner of Income Tax (Appeals) has gone wrong in disallowing expenses for earning dividend income to the extent of ₹ 36, 73,276/-; 6. That the Ld. Commissioner of Income Tax (Appeals) has gone wrong in disallowance a sum of ₹ 2,37,97,880/- towards leave encashment. 36. The 1st ground of appeal is against the disallowance made by the learned assessing officer confirmed by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be held to be the bonus as per the provisions of section 36 (1) (ii) of the income tax act. Accordingly, we hold that the additional salary payable by the assessee in form of incentive to various employees for the services rendered is not hit by the provisions of section 43B of the Income Tax Act, but as deduction under section 28 of the income tax act. Accordingly, we reverse the order of the lower authorities and direct the learned assessing officer to delete the above disallowance. 39. The 2nd ground of appeal is with respect to the disallowance of interest payable to Prasar Bharti of ₹ 2033900/-. The above issue has been considered by us in in the appeal of the assessee for assessment year 2008 09 wherein we have held that that income of Prasar Bharti is exempt from assessment year 2013 14 and therefore the assessee should have deducted tax at source on payment made of interest to it. Accordingly, for this year, learned CIT(A) has also upheld the disallowance on the same reason, relying on the board‟s circular number 3/2012 dated 12/6/2012 explaining that the amendment granting specific exemption from income tax to the Prasar Bharti Broadcasting Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be ascertained whether the expenditure incurred by the assessee on the software expenditure are revenue expenditure or capital expenditure. He therefore submitted that the above disallowance needs to be confirmed. 43. We have carefully considered the rival contention and found that the assessee has not furnished the adequate details before the lower authorities to demonstrate that the software expenditure incurred by the assessee is whether revenue expenditure or capital expenditure. In absence of the adequate details, it cannot be held that these expenses incurred by the assessee is a revenue expenditure. Reliance on the order of the appellate authorities in earlier years does not support the case of the assessee as it is required to be demonstrated each year whether the expenditure incurred by the assessee is for capital expenditure or revenue nature. As the assessee has not submitted any details before the lower authorities, this ground of appeal is once again set aside back to the file of the learned assessing officer with a direction to the assessee to substantiate it within 30 days of this order before the assessing officer by submitting the proper evidences in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Rule 8D of the Income Tax Rules, 1962. As held by the honourable Supreme Court that the satisfaction is the mandatory requirement for invoking the provisions Section 14A read with Rule 8D of the Income Tax Rules for making any disallowance. As the learned assessing officer has not recorded any satisfaction about the correctness of the claim of the assessee about the disallowance made by it in its tax audit report, the disallowance made by the learned assessing officer is not sustainable. Therefore, the addition made by the learned assessing officer of ₹ 3673276/ is not sustainable. Therefore, reversing the order orders of the lower authorities, we direct the learned assessing officer to delete the above disallowance. Accordingly, the ground number 5 of the appeal of the assessee is allowed. 48. Ground number 6 of the appeal of the assessee is towards disallowance of ₹ 2379780/- towards leave encashment expenditure. The learned assessing officer asked the assessee to reconcile the difference with the evidence for leave encashment closing balance of ₹ 44138967/- and opening balance of ₹ 20341087/-. In response to this, the assessee submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee for assessment year 2009 10 ( in ITA number 3657/Del/2013) wherein we have deleted the addition confirming the order of the learned CIT(A) and holding that the incentive bonus made by the assessee is not in the nature of Bonus but it is an additional salary for the work performed by the staff of the assessee. In view of this, the ground number 1 of the appeal of the learned assessing officer does not survive. 54. The 2nd ground of appeal is with respect to the deleting the addition of ₹ 24545215/- made by the assessing officer on account of consumption debtors. Identical issue has been considered by us in the appeal of the assessee for assessment year 2008 09 in ITA number 6080/del/2012, wherein ground number 4 of the appeal of the assessee, the identical disallowance is made. We have already deleted the above disallowance. Both the parties confirmed that there is no change in the facts and circumstances of the case. Therefore, for the reasons given by us, in disposing of ground number 4 of the appeal of the learned assessing officer for assessment year 2008 09, we also confirm the order of the learned CIT(A) in deleting the disallowance of ₹ 24545215/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical to the issue involved in the appeal of the assessee for assessment year 2009 10, wherein identical disallowance was made and confirmed by the learned CIT A. We have considered the above issue in the appeal of the assessee for assessment year 2009 10, wherein we have deleted the above disallowance holding that the additional incentive paid by the assessee is salary in nature and cannot be held to be the bonus and therefore the provisions of section 43B are not applicable to it. For the similar reasons we also deleted the disallowance made by the learned assessing officer of ₹ 9011627/ on account of incentive payable to the staff. Accordingly, ground number 2 of the appeal of the assessee is allowed. 59. Ground number 3 of the appeal of the assessee is with respect to the disallowance interest paid to Prasar Bharti of of ₹ 2007294/ on account of non-deduction of tax at source. Both the parties confirmed that the identical issue has been decided in the case of the assessee for the earlier years. On careful consideration of the argument of the assessee, it is notice that identical issue has been decided in the appeal of the assessee for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emonstrate that these expenses are revenue in nature. Accordingly, ground number 4 of the appeal of the assessee is set aside to the file of the learned assessing officer. 62. Ground number 5 is with respect to the disallowance of ₹ 1285000/- under section 14 A of the income tax act. The learned assessing officer found that assessee has made investment in shares and mutual fund for earning exempt income. Therefore, the assessee was asked to explain why expenses should not be disallowed under section 14 A of the income tax act applying the rule 8D of the income tax rules. The assessee submitted that it has disallowed a sum of ₹ 101140/- which is disclosed in form number 3 CD of the income tax act rules. However the learned assessing officer proceeded to disallow the expenditure applying rule 8D of the income tax rules 1962. It disallowed a sum of ₹ 1386140/ being 0.5% of the average value of the investment. As assessee has disallowed a sum of ₹ 1 01140 in its computation of the total income as well as in form number 3 CD the learned assessing officer made the net disallowance of ₹ 1285000/ . The learned CIT A, confirmed the above disallowance and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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