9911796707
TMI Blog2018 (4) TMI 1829X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue under consideration is covered by the order of the Tribunal in assessee s own case for the assessment year 2006-07 2007-08 [ 2012 (12) TMI 632 - ITAT CUTTACK] issue decided in favour of the assessee - we allow the claim of the assessee on account of interest on disputed Govt. duty (Electricity duty and water charges) and this ground of assessee is allowed. Disallowance u/s. 14A r.w.r. 8D - As per AO Disallowance made suomoto by the assessee is very less compared to the administrative and employee cost devoted to earn the exempt income - HELD THAT:- AO while computing the disallowance under clause (iii) of Rule 8D has computed 0.5% of the average investments held by the assessee company in whole, which includes the investments in equity shares and long-term debt funds as well, income from which has not been claimed as exempt by the assessee AO could not make distinction between the equity shares and debt funds and calculated the disallowance, we are of the opinion this disputed issue has to be re-examined and apply the provisions of Section 14A r.w.rule 8D. Accordingly relying on H.T. MEDIA LIMITED [ 2017 (8) TMI 962 - DELHI HIGH COURT] we restore this di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee - CIT(A) has sustained the disallowance holding that the assessee could not claim the written off of the advances when they were not a part of income of earlier years - HELD THAT:- It is not in dispute that the amount of said advances has been given during the course of business and for business purpose only, which has become irrecoverable. Ld. AR drew our attention to paper book and submitted that the assessee has filed all the details before both the authorities below. Since the said amount has been utilized for business purpose and has to be allowed either as a business expenditure u/s 37(1) of the Act, or as a business loss while computing the profits and gains u/s 28 of the Act, considering the submissions of ld. AR of the assessee, we are of the opinion that the issue requires further examination by the AO - thus allow this ground of appeal for statistical purposes. Disallowance of Provision for Leave Encashment' u/s.43B(f) - AO alleging that the same is allowable only if the said expenditure has actually been paid by the assessee - CIT(A) has sustained the disallowance made by the AO holding that the decision in the case of Excide Industries Ltd. v. Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of loss on valuation of non-moving store and spares - AO has made the disallowance stating that the loss claimed on account of diminution in the value of non-moving stores and spares should be restricted to 25% of the original cost, instead of 95% as claimed by the assessee - HELD THAT:- As decided in own case [ 2005 (11) TMI 483 - ITAT CUTTACK] we set aside the order of the CIT(A) on this ground and direct the AO to allow the claim of loss on account of value of non-moving stores and spares. TDS u/s 195 - Payment to non residents - HELD THAT:- Amounts have been paid towards purchase of raw material, etc. on principal to principal basis and the assessee has procured the goods from the non-resident seller at its own cost after making payments on CIF basis. The raw material is sold by the non-resident seller in foreign soil, hence, no income accrues to the non-resident seller in the Indian territory. The Revenue has not controverted this finding of CIT(A) by bring any material on record nor it is apparent that income in respect of transactions arises in favour of the non-resident sellers in the Indian territory or that the income of such nonresidents in respect of transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TK/14 ITA No.340/CTK/2016) Shri N.S.Saini, AM And Shri Pavan Kumar Gadale, JM Revenue by: Shri Saad Kidwai, CIT DR Assessee by: Shri Ved Jain/B.K.Mahapatra, ARs ORDER Shri Pavan Kumar Gadale, These are the cross appeals filed by the assessee and Revenue and cross objections by the assessee, against the separate orders of the CIT(A), Bhubaneswar, for the assessment years 2010-2011, 2011-2012 2012-2013. 2. Since issues in all the appeals are common, they were heard together and disposed of by this common order. For the sake of convenience, we shall first consider the facts and grounds raised in assessee s appeal for the assessment year 2010-2011 in ITA No.352/CTK/2016 as under :- That the Order dated 09.06.2016 passed by the Learned Commissioner of Income Tax (Appeals) [in short CIT(Appeals) ], in so far as sustaining the additions and disallowance made by the Learned Assessing Officer, is based on irrelevant considerations, against natural justice, contrary to facts, arbitrary, erroneous and bad in law. 1. Disallowance under Peripheral Development Expenses ₹ 2,53,69,895/- a. That on the facts and in the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legally untenable. 3. Disallowance u/s. 14A ₹ 4,70,61,000/- a. That on the facts and in the circumstances of the case, the Order of the learned CIT (Appeals) in restricting/partly sustaining the disallowance of ₹ 4,70,61,000/- u/s.14A of the Act is based on irrelevant considerations, contrary to facts, arbitrary, erroneous and bad in law. b. That in similar facts and circumstances, for the Asst. Year 201112, the learned predecessor CIT (Appeals) having fully deleted similar addition u/s. 14A of the Act, the Order of the learned CIT (Appeals) in ignoring/not following the order and sustaining the disallowance of 4,70,61,000/- is unjustified, arbitrary, erroneous and bad in law. c. That the assessee having already added sum of Z 2,07,503 u/s.14A of the Act in the computation of income (returned income), Rule 8D is not applicable and the addition of 4,72,68,503 u/s.14A of the Act is unjustified, arbitrary, contrary to facts, erroneous and bad in law. d. The assessee's computation of the aforesaid ₹ 2,07,503/- u/s.14A of the Act is based on its books of accounts and is worked out in a reasonable and fair manner and the learned lower authorities have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the expenses debited under the said 'Prior period expenditure' are otherwise allowable in the past years, the aforesaid amount of ₹ 21,07,00,000/-, even though debited to the PIL account of the current year ought to be allowed. 6. Disallowance of amounts written off in respect of Claims, receivables, advances, shortages etc.- ₹ 12,75,994/- a. That on the facts and in the circumstances of the case, of the sustaining of the addition/disallowance of ₹ 12,75,994/- in respect of Claims, receivable, advances, shortages etc. written off by the learned CIT(Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. b. That the aforesaid ₹ 12,75,994/- under Claims, receivables, advances, shortages etc. written off being revenue/trading loss, the same ought to be allowed. c. That the learned CIT(Appeals) has mis-appreciated the facts and has erred in holding that the aforesaid is on capital account. d. That the learned CIT(Appeals) stating that no explanation has been offered during the appeal proceedings in respect of the aforesaid addition of ₹ 12,75,994/- is incorrect, contrary to facts, arbitrary and erroneous. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of: a. Long term Capital Gains ₹ 63,57,13,500/- h. Short term Capital Gains ₹ 1,89,869/- Totaling to ₹ 63,59,29,369/- as Income from Business a. That on the facts and in the circumstances the case, the dismissal of the ground and sustaining of the treatment of i. Long term Capital Gains of ₹ 63,57,13,500/-;and ii. Short term Capital Gains of ₹ 1,89,869/- totaling to ₹ 63,59,29,369/- as Income from Business by the learned CIT (Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. b. That in the facts and circumstances of the case, the lower authority holding that the transactions of the assessee in mutual funds and shares and securities should be treated as business activities and income earned from that should be treated as income from business is contrary to facts, arbitrary, erroneous and bad in law. bad, both in the eye of law and on facts. c. That the assessee having maintained its accounts and disclosed the investments in the Balance sheet under long term investments and having rightly computed its income u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef are that the assessee is engaged in the bauxite mining, manufacture of alumina and aluminium power generation and filed the return of income for the assessment year 2010-2011 with total income at ₹ 898,52,61,061/- and also declared under the provisions of Section 115JB of the Act at ₹ 1154,86,00,000/- and the return of income was processed u/s.143(1) and notice u/s.143(2) and 142(1) of the Act along with questionnaire were issued to the assessee. In compliance to the notice, ld. AR of the assessee appeared from time to time and submitted the details. The AO on perusal of the profit and loss account found that the assessee has debited peripheral development expenses of ₹ 13,83,79,264/- and called for the details. The assessee has filed written submission referred by the AO at page 2 to 12 of the order and after considering the submissions of the assessee the AO was not satisfied whether these funds have been utilized as per the instructions of Government Notification and if so shall be allowable as deduction u/s.35AC of the Act and therefore, expenditure claimed by the assessee does not comply the provisions of Section 37 of the Act and disallowed the claim. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture incurred through the corporate office at Bhubaneswar amounting to ₹ 2,53,69,895/- cannot be categorized as peripheral development expenses since the same is not covered in Govt. of Odisha notification. Some of the major expenses under this category are shown as under: Rotary Club, Bhubaneswar ₹ 5,00,000/- Secretary, National foundation for communal harmony ₹ 20,00,000/- East coast railway for passenger halt construction ₹ 26,00,000/- Supply of 15 Nos Tata Sumo to Commissioner of Police ₹ 66,84,705/- Entry tax, road tax etc for above Tata Sumo ₹ 11,78,197/- Prana Krushna Parija Trust ₹ 6,50,000/- Renovation of Anand Bazar at Puri ₹ 25,00,000/- Financial assistance to Tara Tarini Temple ₹ 5,00,000/- Director sports youth services ₹ 15,00,000/- The details of such ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the cases of the assessee as stated above are after due consideration to the said section. Further, section 35AC is an enabling provision to allow deduction in respect of specific eligible approved projects / schemes. However, in the case of assessee company, the peripheral development expenses are business expenses and are allowable u/s 37 of the Act, as has been held by this Hon ble Tribunal in earlier years. The complete details with regard to Peripheral Development expenses has been submitted before the AO as well as the Ld. CIT(A). The Ld. CIT(A) has also appreciated the fact that the expenditure incurred by the assessee is as per the Notifications / Orders issued by various local / state authorities. The Ld. CIT(A) has misinterpreted the clarification of the Order No. 33167 dated 21.08.2004 issued by the Revenue Department, Government of Odisha, whereby it has been clarified that the definition of peripheral area extends to the taluka or village where the activities of the company are carried on. The expenditure incurred by the assessee is incurred in the defined periphery and has been incurred for business purposes only. Therefore, the addition mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sustenance of the addition to the extent of ₹ 56,27,609/- cannot be overlooked. Accordingly, in the interest of justice, we remit this issue to the file of AO to verify the nature of expenditure incurred on the peripheral areas and decide the same on merits. This ground of appeal is allowed for statistical purposes. We respectfully follow the order of the coordinate bench of Tribunal and remit this disputed issue to the file of AO to verify the nature of expenditure incurred on the peripheral areas and decide on merits and allow this ground of appeal for statistical purposes. 9. Ground No.2 relates to disallowance of interest on disputed Govt. duty (Electricity duty and water charges). The AO found that the assessee company has debited an amount of ₹ 82,40,53,232/- on account of interest on the disputed Government dues of electricity duty and water charges. The assessee company has challenged the levy of electricity duty and water charges before Hon ble Orissa High Court. As per the Gazette Notification in this regard, the interest payable on these charges is 1.5% per month on electricity duty, and 2% on compound basis on water charges. The assessee has, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est being a period payment for the impugned year, has been provided for in the impugned Assessment year cannot be subjected to disallowance for claiming deduction u/s.37. The Assessing Officer after having applied his mind allowed the claim in the impugned Assessment Year on both these issues therefore cannot be thrust upon by the learned CIT holding a view other than the view which was legitimately accepted by the Assessing Officer but on the basis of arithmetical finding of the learned CIT which rather leans in favour of the assessee. 5. The issue under consideration are same, respectfully following the order of the Tribunal, we direct the AO to allow assessee s claim of interest insofar as assessee is also offering interest on the amount deposited in the bank account as per the direction of the Hon ble High Court. When interest on such deposit is brought to tax, there is no reason for disallowing interest payable to Government for non-payment of such duty in Government account. 6. The reasoning given by the AO for disallowing interest on non/delayed payment of water charges are that it was a contingent liability. We found that Tribunal in assessee s own case in earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. Against the same, assessee has suo-moto made a disallowance of ₹ 2,07,503/- in its Computation of Income. The computation of the said disallowance made by the assessee is enclosed. The AO, however, has made the impugned disallowance by invoking the provisions of Rule 8D read with section 14A. The AO has completely ignored the submissions and computation of the assessee and has alleged that the computation of disallowance by the assessee is very less in comparison to the exempt income earned. The AO, while ignoring the computation of the assessee, has not given any proper reasoning and has merely rejected the same on account of difference in the amount of expenditure incurred and income earned. Section 14A(2) of the Act requires the AO to first examine the accounts of the assessee and then record his satisfaction in this regard, which has not at all been done by the AO in the present case. It is a settled law that the AO has to first examine the records of the assessee, and only after arriving at the dissatisfaction as to the correctness of the claim of assessee in respect of expenditure incurred in relation to exempt income, that he can reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts held by it, details of which are provided in Schedule F of the Balance Sheet, enclosed at PB 53. The AO, however, while computing the disallowance under clause (iii) of Rule8D has computed 0.5% of the average investments held by the assessee company in whole, which includes the investments in equity shares and long-term debt funds as well, income from which has not been claimed as exempt by the assessee. It is a settled law that the disallowance u/s 14A could be made only with respect of the investments on which the assessee has earned the exempt income. Reliance in this regard is placed on the following judgments: (a) Delhi High Court in the case of ACB India Ltd. v. ACIT [2015] 374 ITR 108 (b) ITAT Delhi in the case of ACIT v. Vireet Investment (P.) Ltd. [2017] 58 ITR(Trib.) 313 (c) ITAT Mumbai in the case of Amrit Diamond Trade Centre Pvt. Ltd. v. CIT in ITA No. 2642/Mum/2013 dated 15.01.2016 Therefore, the disallowance to be made, if any, has to be restricted to 0.5% of the Current Investments held by the assessee, which would work out as under: (a) Op. Current Investments ₹ 135.90 Crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34. The Assessee had explained that ₹ 3 lakhs was being disallowed voluntarily as an expenditure which could be attributable for earning the said income. The Assessee explained that the disallowance had been determined on the basis of cost of finance department in the ratio of exempt income to total turnover. On that basis the disallowance in AY 2005-06 was upheld by CIT (A) at ₹ 1 lakh. The disallowance for this AY was worked out as ₹ 1,42,404/- and since the Assessee had already made a disallowance of ₹ 3 Lacs, no further disallowance was called for. 35. In order to disallow this expense the AO had to first record, on examining the accounts, that he was not satisfied with the correctness of the Assessee's claim of ₹ 3 lakhs being the administrative expenses. This was mandatorily necessitated by Section 14A (2) of the Act read with Rule 8D (1) (a) of the Rules. 36. In para 3.2 of the assessment order, the AO records that, in answer to the query posed by the AO requiring it to produce calculation for disallowances, the Assessee submitted that they have not incurred any expenditure for earning the dividend income. Thereafter, in para 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 3.3.1 of the assessment order, which has been extracted by this Court hereinbefore, which contains general observations regarding earning of exempt income. This cannot be accepted as a recording by the AO of satisfaction regarding the claim of the Assessee after examining its accounts. Again, in para 34 of its order, the ITAT simply reproduced para 3.3.6 of the assessment order where, again, no reasons have been provided but only a conclusion has been reached that the AO was satisfied that the Assessee had incurred expenses to manage its investments which may yield exempt income, and Assessee grossly failed to calculate such expenses in a reasonable manner to ascertain the true and correct picture of its income and expenses. 40. Consequently on the aspect of administrative expenses being disallowed, since there was a failure by the AO to comply with the mandatory requirement of Section 14 A (2) of the Act read with Rule 8D (1) (a) of the Rules and record his satisfaction as required thereunder, the question of applying Rule 8D (2) (iii) of the Rules did not arise. The question framed in ITA 549 of 2015 is answered accordingly. We found that in the instant case the AO coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities have rejected the claim of assessee alleging that the said expenditure has been incurred prior to the commercial production, and thus, has to be capitalized, however, the AO as well as the Ld. CIT(A) have not controverted the fact that the Captive Power Plant of the assessee company has been duly commissioned in the year under consideration for commencing commercial production and we support our view with the decision of Hon ble Bombay High Court in the case of Pr. CIT Vs. Larsen Toubro Ltd., [2018] 89 taxmann.com 186 (Bombay), wherein the Hon ble High Court has held as under :- 6. In the present case the Tribunal, after having considered the orders passed by the Assessing Officer and the CIT (Appeals) was of the view that there was no merit in the denial of depreciation in respect of plant and machinery and that even if the same was to be used for trial production business of manufacture of 'Clinker', the assessee would be entitled to claim depreciation. The Tribunal also relied upon the decision of the Gujarat High Court in Asstt. CIT v. Ashima Syntex Ltd. [2002] 122 Taxman 230 which held that even trial production would fall within the ambit of used for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses incurred in the same year of sale. We respectfully follow the judicial decisions and direct the AO to treat the expenditure incurred by the assessee company on such trial operation as revenue expenditure and allow the claim and this ground of appeal is allowed. 19. Ground No.5 relates to Prior Period Adjustments. The AO has made the disallowance of ₹ 21,07,00,000/- alleging that the said expenses are not related to the year under consideration. On appeal, the Ld. CIT(A) has sustained the disallowance made by the AO holding that no evidence was filed in order to prove that the prior period expenses have crystallized during the year under consideration. 20. On further appeal, ld.AR before us submitted as under :- During the year under consideration, assessee company has booked net prior period adjustment of ₹ 11.71 Crores, details of which are given in Schedule W at PB 60. The prior period expenditure incurred by assessee was ₹ 21.07 Crores, which was adjusted against the prior period income and the net adjustment of ₹ 11,71 Crores was included in the taxable income, as is evident from the Profit and Loss Account enclosed at PB 50. It is pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. The Ld CIT(A) also confirmed the same, 17. It is a well settled proposition of law that the income relating to one year cannot be assessee in any other year. Under the same principle, the expenditure relating to one year cannot be claimed in any other year. Both the principles shall have exception, if it is expressly provided in the Act. Hence, we are of the view that the tax authorities are not justified in disallowing entire amount of prior period expenses, while assessing the entire amount of prior period income, without bringing support of any of the provisions of the Act. Accordingly, we are of the view that the assessee was justified in computing the disallowance by netting off the prior period income against the prior period expenditure. We further notice that the assessee has offered net income in assessment year 2007-08, i.e., the prior period income was more than the period expenditure. Further reliance in this regard is placed on the judgment of this Hon ble Tribunal in the case of DCIT v. Airports Authority of India in ITA No. 3841/Del/ 2011 dated 16.03.2012 for A.Y. 2007-08, wherein Hon ble Tribunal has held as under: 8. We have heard both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s own case for the assessment years 2007-08 2008-2009 in ITA No.343 392/CTK/2015, order dated 23. 04.2018, wherein the Tribunal observed as under :- 42. We have heard rival submissions and perused the material available on record. We found that the terminology prior period adjustment refers to the expenditure which was not accrued during the year but pertaining to earlier year but crystallized. The ld. AR emphasized that the AO has made addition but failed to consider the prior period income set off against the expenditure and has solely relied on the expenditure and ignored the income. Ld. AR further submitted that the prior period expenses consists of administrative expenses and other income and settlement of claims or crystallization of liability disclosed under prior period expenses adjustments as per the accounting disclosure. Ld. AR subsantiated the arguments with the paper book. Whereas the CIT(A) found that the liability has accrued in the earlier years and the assessee cannot claim the same in the current assessment year and also the reasons envisaged were not supported with the evidence for claim during the current financial year. We considering the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be allowed as a bad debt, as the same has not been included as income in the earlier years, but it has to be allowed as a business loss or business expenditure. Issue is covered by the judgment of the Supreme Court in the case of Badridas Daga Vs CIT 34 ITR 10(SC) Reliance in this regard is placed on the judgment of Hon ble ITAT Delhi in the case of ACIT v. Claridges Hotels Pvt. Ltd. in ITA Nos. 5848, 5849/Del/2014 dated 10.11.2017 Relevant findings being in Para 12. 25. Contra, ld. DR relied on the order of lower authorities. 26. We have heard rival submissions and perused the material on record. Prima facie, it is not in dispute that the amount of said advances has been given during the course of business and for business purpose only, which has become irrecoverable. Ld. AR drew our attention to the pages 610 to 616 of the paper book and submitted that the assessee has filed all the details before both the authorities below. Since the said amount has been utilized for business purpose and has to be allowed either as a business expenditure u/s 37(1) of the Act, or as a business loss while computing the profits and gains u/s 28 of the Act, considering the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that a perusal of the judgment of the Apex Court in the case of CIT v. Exide Industries Ltd. in Special Leave to Appeal No. 22889/2008 dated 08.05.2009 (enclosed at PB 619), clearly shows that the Apex Court has also held that the assessee is entitled to make a claim of the said amount in its return of income. Issue is covered by the judgment of ITAT Pune in the case of Minilec India P Ltd. Vs ACIT ITA No. 690/PUN/2015 dated 09.04.2018. Therefore, since the claim of the assessee is in line with the judgment of the Apex Court, the same should be allowed and the action of the Ld. CIT(A) in sustaining the addition made by the AO should be directed to be reversed. 30. Contra, ld. DR relied on the order of lower authorities. 31. We have heard rival submissions and perused the material on record. We found that the similar issue has been decided by the Tribunal in assessee s own case for the assessment years 2007-08 2008-2009 in ITA No.343 392/CTK/2015, order dated 23.04.2018, wherein the Tribunal has observed as under :- 28. We have heard rival submissions and perused the material on record. The assessee has made the provision for leave encashment and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has been decided against the assessee by this Hon ble Tribunal in assessee s own case for earlier years bearing ITA Nos. 196, 91/CTK/2010 dated 29.06.2012, wherein the findings of this Hon ble Tribunal are at Page 10 13 in Para 16 23 (PB 127 130). 34. Contra, ld. DR supported the order of lower authorities and submitted that this issue is not favour of the assessee and there is no merit in the claim of the assessee and liable to be dismissed. 35. We have heard rival submissions and perused the material on record. We find that this issue has been decided against the assessee by the Tribunal in assessee s own case for the assessment years 2007-08 2008-2009 in ITA No.343 392/CTK/2015, order dated 23.04.2018, wherein the Tribunal observed as under :- 49. We have heard rival submissions and perused the material on record. The liability of ₹ 47,35,67,572/- under the provisions of Section 43B of the Act disallowed by the AO dealt by the Cuttack Bench of the Tribunal in assessee s own case and matter is pending before the Hon ble High Court. We rely on the order of ITAT in ITA Nos.196 91/CTK/2010, order dated 29.06.2012, para 16 to 23 at pages 10 to 13. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held the investments in mutual funds / liquid funds under the head of ‗Investments . The said investments are primarily held for the purpose of earning dividend income, and not for trading the same.. The assessee has not purchased and sold shares. The gain is on the Mutual funds which are not tradable. The investment has to be made with the concerned Mutual fund and encashment is also from the mutual fund and hence it cannot be considered as trade. Further, it is to be noted that the total profit earned by the assessee company by way of capital gains is only about 4% of the total income of the assessee company, which clearly shows that the assessee company is engaged in the business of mining, manufacturing, generation and production of aluminium and not dealing in mutual funds / liquid funds. Further, it is important to note that no such disallowance has been made by the AO in the case of assessee company in the preceeding years, whereby also the assessee was following the same policy and showing the income from such investments under the head capital gain. Now, the CBDT, vide its Circular No. 6/2016 dated 29.02.2016 has also appreciated the fact that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertains to the treatment to the income earned by the assessee on sale of shares. The assessee contended that the shares were in the nature of his investment and the income earned should be treated as long term capital gain. The Revenue contends that looking to the pattern of holding the shares, the frequency of transactions and other relevant considerations, the assessee was dealing in the business of buying and selling the shares and the income should be taxed as a business income and the Tribunal took the relevant facts into consideration and referred to the circular of the CBDT dated 29.2.2016 and held that the return should be taxed as capital gain, be it long term or short term, as the case may be, and not as a business income. 6. Whether to tax the income generated from the sale of shares as capital gain or business income is an issue of frequent dispute between the revenue and the assessees. The Courts in the past have had occasions to consider such issue and through judicial pronouncement various parameters have been laid down to check whether the sale of shares would lead to business income or capital gain. Despite several judicial pronouncements, the controversy did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities. 7. Two things emerge from this circular. One is that the CBDT desires to obviate the difficulties of the assessees and simultaneously to reduce the litigation. In paragraph 3 of the circular, certain parameters have been laid down. Clause (b) thereof in particular provides that in respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. In other words, the Revenue would not pursue this issue if the necessary ingredients are satisfied, only rider bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same manner, we allow this ground in terms of findings given in the appeal for assessment year 2010-2011. 48. Ground No.5 in appeal for assessment year 2011-12 and 20122013 are relating to disallowance of provision for leave encashment. 49. We have already decided this issue in the appeal of the assessee for assessment year 2010-2011, wherein we restore this issue to the file of AO. Accordingly, following the same reasoning given in the aforesaid appeal, we restore this issue to the file of AO to examine and allow the claim of assessee. Hence, this ground of appeal for both the assessment years under consideration are allowed for statistical purposes. 50. Ground No.6 in appeal for assessment year 2011-12 and ground No.4 in appeal for assessment year 2012-2013 are relating to treatment of long term capital gains and short term capital gains as income from business. 51. We have already decided this issue in the appeal of the assessee for assessment year 2010-2011, wherein relying on the judicial decisions, we have directed the AO to treat the income as capital gains not as business income. Following the same reasoning given in the above appeal, we allow this ground of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99 2000-2001, order dated 30.11.2005, wherein the Tribunal after relying upon the various judicial pronouncements has held as under :- 19. Considering the totality of the facts of the case and relying on the above case decisions we set aside the order of the CIT(A) on this ground and direct the AO to allow the claim of loss on account of value of non-moving stores and spares at ₹ 4,86,70,639/-. We direct accordingly. The Grounds of appeal no.1 by the appellant is accordingly allowed. The Tribunal also in assessee s own case in ITA No.162 90/CTK/2010 for assessment year 2005-06 2006-07, order dated 29.06.2012, wherein the Tribunal has decided the issue in favour of the assessee. The observation of the Tribunal for the assessment year 2005-06 2006-07 are as under :- 9. The first ground raised in respective assessment year is with respect to loss in relation to non-moving stores and spares. This issue has been considered by the Tribunal in assessee s own case since assessment year 1994-95 by way of a combined order dated 30.11.2005 in ITA Nos.66-68/459/511/512/CTK/2003 for A.Ys. 199394 to 1998-99 and 2000-2001 and such disallowance was considered fit for deleti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 20122013 and ITA No.374/CTK/2014 for the assessment year 2011-2012 are allowed partly for statistical purposes. 62. Now, we shall take up the appeals of Revenue in ITA No.376/CTK/2014 (AY : 2011-2012), ITA No.339/CTK/2016 (AY : 201011) and ITA No.340/CTK/2016 (AY : 2012-2013). 63. Ground No.1 in appeal for assessment years 2010-11 and 20122013 are relating to disallowance of the loss claimed on account of revaluation of non-moving stores and spares. 64. We have decided this issue in appeal of the assessee for assessment year 2011-2012 (ITA No.374/CTK/2014) in favour of the assessee and against the Revenue relying on the decision of the Tribunal in assessee s own case for the earlier assessment years. We follow the same reasoning given in the aforesaid appeal and we do not see any reason to interfere with the order of the CIT(A), who has passed a reasoned. Accordingly, we dismiss this ground of Revenue raised in both the years under consideration. 65. Ground No.2 in appeal for assessment years 2010-11 and 20122013 and ground No.1 in appeal for assessment year 2011-2012 are relating to disallowance on account of peripheral development expenses. 66. We have decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination, the Payer is obliged to deduct tax only on the portion so determined. As per the provisions of sec.195(3)/(5) read with Rule 298 of the Act the specified recipient of such a sum can also make an application to the AO in the prescribed form for grant of a certificate authorising him to receive such sum without TDS and upon grant of such a certificate, the Payer is required to make payment without TDS. These provisions are largely used by foreign banks operating in India for receiving payments from their customers without TDS. Section 195(6) was introduced by the Finance Act, 2008 (with effect from 1.4.2008) providing that the Payer shall furnish the information relating to payments of such sums in the prescribed form and manner. For this Rule 37BB was introduced and the procedure for making remittances is provided for which the certificate of Chartered Accountant in the prescribed Form 15CB is required to be obtained by the Payer before making remittance to the Payee (New Procedure for Remittance). Earlier, there was a requirement for obtaining certificate of Chartered Accountant for making remittance to the Non-Resident, but the same was operating under the Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India in respect of cost of raw materials. The income, if any, earned by the non-resident seller of the raw materials is earned in foreign soil and not taxable under the Indian Income Tax Law. Further, application u/s.195(2) was required to be made in case the assessee was having any doubt about the proportion of income embedded in the remittance and in case the income itself was not assessable in India, there was no requirement to make any application u/s.195(2). In any case, not making an application u/s.195(2) before remittance could at best be considered as a violation and would not attract the provisions of section 40(a)(i). It was held by the Hon'ble ITAT, Hyderabad, in the case of SOL Pharmaceuticals Ltd. v. ITO [2002] 83 ITD 72 (Hyd.) that Section 195(2) is attracted only in a case where at least a portion of the payment to non-resident is chargeable as income. If no portion is chargeable, then section 195(2) is not attracted. It was held by the Hon'ble ITAT, Madras, in the case of Indopel Garments (P.) Ltd. v. DCIT, 86 ITD 102 (Mad), that no tax was deductible from the commission paid to the non-residents. Where there is no chargeable income, it is not nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of income chargeable to tax in India. It is in this context that the Supreme Court stated, If no such application is filed, income-. tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such 'sum' to deduct tax thereon before making payment. He has to discharge the obligation to TDS . If one reads the observation of the Supreme Court, the words such sum clearly indicate that the observation refers to a case of composite payment where the payeer has a doubt regarding the inclusion of an amount in such payment which is exigible to tax in India. In our view, the above observations of this Court in Transmission Corpn, of A.P. Ltd.'s case (supra) which is put in italics has been completely, with respect, misunderstood by the Karnataka High Court to mean that it is not open for the payer to contend that if the amount paid by him to the non-resident is not at all chargeable to tax in India , then no TAS is required to be deducted from such payment. This interpretation of the High Court completely loses sight of the plain words of section 195(1) which in clear terms lays down that tax at source is deductible only fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable under Indian Income tax Law. The CIT(A) while considering the disputed issue has relied on the decision of Hon ble Supreme Court in the case of GE India Technology Cen (P) Ltd. Vs. CIT, (2010) 327 ITR 456 (SC) and observed that if the payment is made to a non-resident, which is not a taxable income in India, then no tax is required to be deducted u/s.195 of the Act and deleted the addition. In view of the above, we do not see any reason to interfere in the order of CIT(A), who has passed a reasoned order and the same is upheld and the ground raised in both the appeals for assessment year 2011-2012 2012-2013 of Revenue is dismissed. 71. Ground No.2 in the appeal of Revenue for assessment year 201112 relates to deletion of addition made on account of provision for provisional salary claimed by the assessee u/s.37 of the Act. The AO stated that in case of the assessee the liability has not been actually arisen and it is merely anticipated and disallowed the same. On appeal, the CIT(A) deleted the addition observing as under :- The appellant company submitted that it has charged to the P L Account salary pending finalization of revision of wages/salary of its employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the impugned A/Ys. For the A/Ys. Just because pay revision occurs every 5 years applicable to the respective years in accordance with the price index. Therefore, we are of the considered view that the issues raised by the Ld. CIT have either being dealt with by us in assessee s own case or by the Assessing Officer in the impugned A/Ys against no loss to the revenue has been pointed out . In view of the above order of the ITAT, the above provision of ₹ 128,28,00,000/- for wage revision is to be allowed. 72. Ld. DR argued the grounds and relied on the order of AO and prayed for allowing the appeal. 73. Contra, ld. AR of the assessee supported the order of CIT(A) and relied on the order of Tribunal for earlier assessment years in assessee s own case. 74. We have heard rival submissions and perused the material on record. ld. DR submitted that the CIT(A) has erred in deleting the addition as the liabilities are unascertained liabilities, whereas ld. AR submitted that these are the ascertained liabilities and the assessee has filed details before the appellate proceedings. We found that the ld. DR could not controvert with any new findings of the CIT(A) except ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld.CIT(A) and accordingly, we uphold the same. 9.1. The issue is covered by the decision of the Hon'ble Delhi High Court in the case of CIT vs. BHEL352 ITR 88 (Del) wherein it was held that provision for wage revision was based on past experience, previous Pay Commission's reports and other relevant factors and the deduction claimed for period, between the expiry of one wage settlement or agreement, cannot be termed as contingent because the wage and the probable revision or rates of revision would be within the fair estimation of the employer thus, deduction claimed on account of wage revision are permissible. 9.2. Respectfully following the same we dismiss this ground of the Revenue. Respectfully following the judicial precedence and the facts and circumstances of the case, we are of the considered view that the CIT(A) has rightly deleted the addition and we do not see any reason to interfere with the findings of CIT(A) in this regard and we uphold the same and dismiss the ground of Revenue. 75. Ground No.4 in the assessment year 2011-2012 relates to disallowance made u/s.40(a)(ia) of the Act. The AO made the disallowance on account of non-deduction of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on record. We found that the terminology prior period adjustment refers to the expenditure which was not accrued during the year but pertaining to earlier year but crystallized. The ld. AR emphasized that the AO has made addition but failed to consider the prior period income set off against the expenditure and has solely relied on the expenditure and ignored the income. Ld. AR further submitted that the prior period expenses consists of administrative expenses and other income and settlement of claims or crystallization of liability disclosed under prior period expenses adjustments as per the accounting disclosure. Ld. AR subsantiated the arguments with the paper book. Whereas the CIT(A) found that the liability has accrued in the earlier years and the assessee cannot claim the same in the current assessment year and also the reasons envisaged were not supported with the evidence for claim during the current financial year. We considering the material aspects and the concept of income and expenditure remit this disputed issue to the file of AO to verify the claims and grant the set off of prior period income against the prior period expenses and passed the order on merits and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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