9911796707
TMI Blog2019 (12) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 66,45,31,440/- under the normal provisions of the Income Tax Act [Act]. The return was processed u/s.143(1) of the Act and the case was selected for scrutiny, notice u/s.143(2) of the Act was issued and duly served on assessee. 3. The Assessing Officer (AO) passed the order u/s.143(3) of the Act, dt.28-12-2011, by making the following additions/disallowances to the returned income: Amount (Rs) 1. Sales incentives paid to stockists disallowed 9,23,76,914 2. Difference in inventory added 3,80,31,000 3. Director's commission disallowed 50,00,000 4. Difference in depreciation 13,57,000 4. The first issue in appeal for the A.Y.2009-10 is the disallowance of sales incentive to stockists on the ground that the assessee had not deducted the tax at source as required u/s.194H of the Act. The AO treated discounts given to stockists as commission and applied the provisions of Section 40(a)(ia) of the Act to the case and accordingly disallowed the amount of Rs. 9,23,76,914/- and added back to the income returned by the assessee. 5. Against the order of AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the addition made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on to the customers, hence, the discount does not attract TDS. Therefore, he argued that the AO had erred in making the addition u/s.40(a)(ia) of the Act, treating the same as 'commission'. Ld.AR also submitted that the case of the assessee is squarely covered by the decision of the Co-ordinate Bench of the Tribunal in assessee's own case in ITA Nos.917, 918 & 919/Hyd/2009, dt.02-07-2012 relating to AYs.2005-06 & 2006-07. 8. Per contra, the Ld.DR argued that the Hon'ble ITAT in the aforesaid case law relied upon by the assessee, remitted the matter back to the file of AO with a direction to examine the issue, hence argued that the issue may sent to the file of the AO for reconsideration. 9. We have heard both the parties and perused the material placed on record. The contention of the assessee is the payment made was discount and not the commission. Whereas the department's contention is that the payment was commission and attracts the TDS u/s 194H of the Act. The assessee relied on the decision of this Tribunal in the assessee's own case for the earlier assessment year, wherein the Tribunal has dismissed the revenue's appeal on the finding given by the Ld.CIT(A) that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction found to be fit for sale, hence, transferred the stocks as well as the expenditure incurred during the trial run production to the Profit &Loss account. Since the stocks were taken in the closing stock account and the cost of production of the stock related to the trial run production was debited to the Profit & Loss A/c under the head 'opening stock' thus, submitted that there is no overstating of the expenditure or difference in opening stock. Not being impressed with the explanation offered by the assessee, the AO viewed that assessee has debited the raw-material consumption relating to trial run production to the Profit & Loss A/c under the head opening stocks without taking the trial run stocks to trading account and hence the opening stock amount of Rs. 380.31 lakhs was added back to the total income of the assessee. 11. Against the order of AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of assessee. Hence, the assessee is in appeal before the Tribunal. 12. During the appeal hearing, Ld.AR reiterated the submissions made before the AO and submitted that the opening stock was related to Balasore Unit, which has started the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presenting stock to the trading account. The contention of the assessee is that the sum of Rs. 380.31 lakhs does not represent the closing stock of the earlier year and the same was related to the stocks generated out of trial run production and both the stock generated out of trial run production and the expenditure was transferred to the trading and manufacturing account of the year under consideration, therefore, there is no case for addition representing the opening stock. Though the Ld.AR also shown the transfer entries, the assessee has not placed any evidence relating to the stock transfer of trial run production to the trading account, with stock register. In the subsequent year, the AO has called for the details of sales made out of trial run production but the assessee could not furnish the evidence before the AO. When the assessee claims that both expenditure on the trial run production and the stocks were transferred to the trading account, it is incumbent upon the assessee to establish the transfer of stocks. However, the assessee did not establish the sales or transfer of stock relating to trial run production to the stock account with the stock and sales registers. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectors. Payment of commission is the business decision of the company and the assessing officer has no role in it. Therefore, there is no reason to make the disallowance of payment of commission, hence, we set aside the order of Ld.CIT(A) and delete the addition made by the AO. The appeal of the assessee on this ground is allowed. 20. In the result, the appeal of the assessee for the A.Y.2009-10 is partly allowed. ITA No.1702/Hyd/2014 (AY.2010-11) 21. The AO passed the order u/s 143(3) dt.30-03-2013 and made the following additions/disallowances to the returned income: Amount (Rs) a. Claim of weighted deduction u/s.35(2AB) 1,62,15,011 b. Hiring of chartered flight for travel of Shri C.K. Birla, Chairman of the appellant 23,16,625 c. Payment for copyright infringement 2,88,400 d. Profit on sale of trial run stock 68,27,000 22. Ground No.1 is related to the weighted deduction u/s.35(2AB) of the Act. This issue is involved for the A.Y.2010-11 to 2013-14 for 4 assessment years. During the assessment proceedings, the AO found that the assessee has claimed the deduction u/s.35(2AB) of the Act to the extent of Rs. 1,62,15,011/- and the assessee fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd.,207 taxmann 216) and the decision of ACIT Cirle-6(3) vs Meco Instruments P Ltd, Mumbai in ITA No.4246/Mum/2009 dated 20th August 2010. The Ld.AR further submitted that the assessee has furnished the form 3CK as required under Rule 6 1B(iv) before the due date and the Government has approved the facility and the prescribed authorities required to pass an order in Form 3CM and 3CL which was not yet received by the assessee. Form 3CL quantifying expenditure incurred and the quantum deduction under sub section 2AB of Section 35 of the Act required to be furnished electronically by the prescribed authority to the Pr.CCIT or the Chief Commissioner of Income Tax, who is having jurisdiction over the said company. The Ld.AR stated that the company has maintained separate books of account as required under Rule 6 (1B) and furnished the report and complied with all the requirements on the part of the company, therefore, requested to allow the deduction u/s 35(2AB). Alternatively, Ld.AR pleaded that the AO may be directed to allow the weighted deduction as and when the certificate in form No. 3CL is received, without the time limit for rectification u/s 154. 25. Per contra, the Ld.DR s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has to submit the audit report along with Form 3CK and then only after satisfying the correctness, genuineness of expenditure and the quantification of expenditure the Government of India (DSIR) would issue form 3CL. On receipt of the Form 3CL the assessee would be entitled to weighted deduction. The AO is not permitted to grant the weighted deduction, when Rule prescribes to grant deduction on receipt Form 3CL. Certification of quantification and the genuineness of expenditure is the look out of DSIR but not the Income Tax department. The assessee relied on the decision of Hon'ble Delhi High Court in the case of Sandan Vikas India Limited (supra) and Meco Instruments P.Ltd. (supra) both the case were distinguished by the Ld.AO in his order. The coordinate Bench of ITAT, Hyderabad on similar issue in the case of Electronics Corpn. of India Ltd.v.Assistant Commissioner of Income-tax, Circle, 2(2), Hyderabad*[2012] 28 taxmann.com 280 (Hyd.) held as under: "As per the provisions of section 35(2AB) as applicable to the relevant Assessment year, the expenditure incurred by the assessee in any approved inhouse research facility, to the extent of approved by the prescribed aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is with regard to weighted deduction u/s 35(2AB) is to be allowed after satisfying the conditions specified in Rule 6(1B) and the quantification of expenditure required to be approved by the DSIR in form 3CL.Therefore, the AO is not permitted to allow the deduction without the approval from the prescribed authority, hence, we do not find any reason to interfere with the order of the Ld.CIT(A). This view is supported by the decision of coordinate bench of ITAT, Hyderabad in Electronics Corpn. of India Ltd and the decision Hon'ble Apex court in Dilip Kumar and ors supra. Accordingly we, uphold the order of the Ld.CIT(A) and dismiss the appeal of the assessee. This issue is involved for the A.Ys 2010-11,2011-12,2012-13 and 2013-14. The appeals of the assessee for all the impugned assessment years on the issue of deduction u/s 35(2AB) are dismissed. 26.3. Alternately, the assessee has made a request to allow the deduction u/s 35(2AB) as and when the approval is received without the limitation u/s 154 for rectification. We find merit in the submission of the assessee for which the Ld.DR also did not object. Therefore, we, direct the AO to allow the weighted deduction as and when the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of the assessee. 30. On the other hand, Ld.DR argued that the Chairman, Shri C.K.Birla has travelled from Kolkata to Hyderabad by chartered flight. From Hyderabad, the Chairman visited Delhi. Thus, the entire expenditure was not wholly and exclusively laid out for the purpose of assessee's business. Ld.DR further submitted that the assessee did not furnish the terms and conditions of the employment of Shri C.K.Birla. Unless there is a sanction and the terms and conditions of employment permits the travel the expenditure cannot be held to be treated as wholly and exclusively laid out for the purpose of business. Therefore, argued that the lower authorities have rightly made the addition and no interference is called for. 31. We have heard both the parties and gone through the material placed on record. It is not disputed that the assessee has paid a sum of Rs. 23,16,625/- towards hire charges to M/s.Forum I Aviation Ltd., for travel of Shri C.K. Birla, the Chairman of the company. Shri C.K.Birla is one of the business giants and industrialists and also happens to be the Director of many companies of Birla Group. However, the payment of chartered flight charges require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the software without proper authorization. Therefore, the Microsoft had initiated the legal action, which was settled out of court. Since the copy right was used for the purpose of business, though there was an infringement, which was settled out of court, we are of the opinion that the expenditure is required to be allowed. Accordingly, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee. 35. The fourth issue is with regard to addition of Rs. 68.27 Lakhs relating to the gross profit on trial run production which was claimed as opening stock in the earlier year. The AO made the addition of Rs. 68.27 Lakhs representing the Gross Profit on the value of opening stock added in the earlier year since the assessee failed to prove the transfer of stock to manufacturing and trading account or sales. 36. Against the order of AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of assessee by upholding the order of AO. Hence, the assessee is in appeal before the Tribunal. 37. We have heard both the parties, perused the material placed on record. The AO made the addition on gross profit @ 17.95% on the opening stock of Rs. 380 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... W) on 31.03.2011 at Gujarat and capitalised the expenditure of Rs. 12,58,08,664/- on this account. The assessee furnished the copies of letter from Vestas for commissioning the electric generator. As per the letter dated 01.04.2011 issued by the Manager (Projects) of M/s Vestas Wind Technology India Pvt. Ltd., Electric generator was successfully commissioned on 31.03.2011 and further informed that the customer service executive would be in touch with the assessee to take lead of project in post commissioning period and to guide the assessee on service or generation related queries. The copy of the commissioning certificate from the Gujarat Energy Development Agency(GEDC) dated 07.04.2011 was also filed by the assessee certifying that the commissioning took place on 31.03.2011. The wind farm was connected to 33KV grid line of GETCO's Samakhiyali substation. As per certificate of GEDC, the WEG was operated on 31.03.2011 from 16:50 hours to 17:15 hours for 25 minutes and generated 374 units of electricity. The AO during the assessment proceedings found that critical equipment like towers and turbine blades were delivered to the assessee on 16.03.2011 and 19.03.2011 at the site and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence dismissed the appeal of the assessee. Against the order of the Ld. Ld.CIT (A) the assessee is in appeal before us. 42. During the appeal hearing, Ld.AR submitted that assessee has acquired the Vestas make Wind Electric Generator V100(1800KW) on 31-03-2011 at Gujarat for an amount of Rs. 12,58,08,664/- and the amount was capitalized. The assessee produced the evidence for commissioning of the said wind mill from Gujarat Energy Development Agency, a Government of Gujarat Organisation and also commissioning letter from Vestas. Referring to Pg.5 of the Paper Book, the assessee furnished the copy of Gujarat Energy Development Agency dt.07.04.2011, certifying that the assessee had installed the wind mill on 31.03.2011 and had generated 347 units of electricity. The assessee also furnished a copy of Gujarat Energy transmission Corporation Ltd., in Pg.6, wherein the Gujarat GETCO has furnished the particulars of State Load Dispatch Centre(GOTRI) Vadodara furnishing the details of share of electricity generated by wind farm at Wandhiya for the month March 2011 in Sr.No.3 of part B and it was certified that the assessee company's share of active energy was 6.903 mv. In pg.7 the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 after 17:15 hrs. The wind mill was operated from 16:50 hrs to 17:50 hrs and did not function from 17:50 hrs onwards till 03.04.2011. Though the assessee has furnished the letter from Vestas stating that wind mill was successfully commissioned on 31.03.2011, it was stated in the said letter that the customer executive would stay in touch with the assessee for post commissioning work and the service on generation related queries. The letter further states that the assessee required to pay statutory taxes, duty cess etc., pertaining to WEG from the date of commencement to the respective government agencies. Further, insurances is also required to be taken for possible losses, damages arising out in the events of third party accidents liability etc. All the above evidences were not placed by the assessee either before the AO or before the Ld.CIT(A). Though the assessee stated to have commissioned the wind mill on 31.03.2011 as observed from the assessment order, critical equipment like towers and turbine blades were delivered on 16.03.2011 and 19.03.2011 at the site. According to the AO, substantial time would be taken to unpack and assemble the plant as well as to lay the foundatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the material placed on record. Assessee has purchased the computer operating system, which is part and parcel of the computer. Without the operating system, the computer cannot be operated and the purpose would not be served. It is a settled issue that the computer software is not intangible asset and forms part of the computer. Therefore, we hold that the assessee is entitled for depreciation @60%. Accordingly, we set aside the orders of the lower authorities and allow the depreciation @60% and 50% of 60% for the assets put to use less than 180 days. Accordingly the appeal of the assessee on this ground for the AYs.2011- 12 and 2012-13 are allowed. 48. The next issue is disallowance of foreign travel expenses for business purposes. The assessee had incurred the sum of Rs. 7,10,930/- towards foreign travel expenses to Nigeria incurred for travel of Shri S.P.Tiwari and Shri P.S.Rao, Senior Executives of M/s.Super Core Industries. The details of expenditure incurred by the assessee are furnished in Pg.5 of the assessment order as under: Date Amount in Rs. Description Purpose 24-06-10 1,76,494 P.S.Rao - Nigeria Tour OperationsHead - Super Core Inds 30-11-10 1,76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligation to meet the travel expenditure, hence, requested to allow the same. 51. On the other hand the Ld.DR argued that there was no business expediency for the assessee to visit Nigeria. The expenditure was not relatable to the assessee and the assessee could not establish the need for incurring such expenditure. The Ld.DR further submitted that for the A.Ys 2012-13 and 2013-14 though the Executives of the assessee company visited Nigeria, the assessee failed to substantiate the reason for incurring the expenditure by the assessee company instead of Super Core Industries. Thus argued that the expenditure on foreign travel to Nigeria has no business connection of the assessee. Hence, requested to uphold the order of the Ld.CIT(A). 52. We heard both the parties and observe from the arguments and the orders of the lower authorities that the expenditure was not incurred for the purpose of assessee's business and the expenditure was incurred in connection with Nigerian company, the assessee did not establish the business expediency of the expenditure incurred in the hands of the assessee-company relating to Nigerian company. During the appeal hearing also the assessee could not exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
