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TMI Blog2021 (1) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be paid to the government exchequer and a certificate has to be issued to the concerned person who is recipient of such sum/income payable by the assessee. But the same is not possible where the recipient of such sum/income payable by the assessee is not identifiable. In other words, the assessee cannot comply the provisions of chapter XVII of the Act with respect to the expenses claimed on provisional basis in a situation where the recipients/parties/payees are not identifiable. In the case on hand, there was no allegation from the revenue that recipients/parties/payees are identifiable. Thus we can safely conclude that recipients/parties/payees are not identifiable in the present case in the given facts and circumstances and accordingly the assessee cannot be treated as assessee is default on account of non-deduction of TDS under the provisions of section 40(a)(ia) - Decided in favour of assessee. Depreciation on data processing equipment - HELD THAT:- As relying on assessee's own case we are of the view that the assessee is entitled for depreciation on data processing equipments at the rate of 60%. - ITA Nos. 1817/Ahd/2016, 2056/Ahd/2016, 2377/Ahd/2017 and 261 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the landlords. The Ld. CIT(A) ought to have appreciated, inter alia, that the said amount was paid to the landlords as security deposits for acquiring rented premises for its business purpose. However, refund of those security deposits could not be obtained for reasons such as the appellant's inability to occupy the premises for the purpose of its retail store and hence loss has occurred to the appellant. Therefore, the appellant has claimed it as business loss u/s. 28 and/or u/s. 37 of the Act. 4. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding the disallowance u/s. 40(a)(ia) of the Act amounting to ₹ 3,04,82,419/- on account of non-deduction of TDS in respect of provision for expenses. The Ld. CIT(A) ought to have appreciated, inter alia: (a) that the provision for expenses was made at the end of the year in accordance with the Mercantile system of accounting, which is mandatorily required to be followed by the companies as the provisions of Companies Act, 1956. (b) that the provision made on 31/03/2012 towards Provisions for Expenses were not liable for deduction of TDS as at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o of appeal. Accordingly we dismiss the same as not pressed. 4. The 2nd issue raised by the assessee is that the learned CIT(A) erred in confirming the addition made by the AO for ₹ 27,84,027/- under section 36(1)(va) of the Act on account of delay in the deposit of employees contribution towards PF and ESIC. 5. The learned AR for the assessee at the outset fairly conceded that the issue is covered against the assessee by the Hon'ble Gujarat High Court in the case of CIT vs. GSTRC reported in 41 taxmann.com 100. The relevant extract of the judgment reads as under: 7.4 Section 36 of the Act provides for deduction in computing the income referred to in section 28. The relevant provisions applicable to the present cases would be Section 36(1)(va). As per sub-section 36(1)(va), assessee shall be entitled to the deduction in computing the income referred to in section 28 with respect to any sum received by the assessee from his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employees' accounts in the relevant fund or funds on or before the Due Date . As per explanation to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed the addition made by the AO by holding as under: 6.3 I have carefully considered the Assessment Order and the submission filed by the Appellant. The Appellant has claimed write off of security deposits for ₹ 4,55,074/- on the ground that same is not recoverable from landlord. The Assessing Officer has disallowed the above claim on the ground that Appellant has failed to prove that amount written off as bad debt has been considered in computing the income of earlier Assessment Year. On the other hand, Appellant has argued that deposits were given for taking premises on rent and as landlord has not returned such deposits, it is claimed as loss under Section 28 or 37 of the Act. On careful consideration of entire facts, it is observed that Appellant has failed to submit any evidence which can justify that security deposits were given to landlord for taking premises on rent and reason for not getting any refund of such deposits. The Appellant is entitled to claim loss under Section 28 of the Act when it proves that loss has arisen 'in year under consideration whereas Appellant has failed to submit such details. Considering these facts, addition made by Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, we hold that the loss incurred in the course of the business is eligible for deduction. 22.3. However, the controversy arises whether such loss pertains to the year under consideration or in the earlier years. In other words it is to be found out the relevant year in which such loss would be eligible for the deduction. In this regard we note that there cannot be any set of rules to determine the fact of the crystallization of the loss. We can understand this fact with the help of an example. 22.4. Supposing the assessee (Mr. X) has acquired a property on lease for a period of 3 years after making the deposit of the security amount say ₹ 1 lakh only. As per the arrangement between the assessee and the lessor, the assessee was to get the security deposit on termination of the lease period. Let us assume, the assessee was to get the refund of the security deposit in the financial year 2010-11. But the lessor, failed to do so. However, the assessee kept showing such security deposit in its balance sheet for 2 years and also chased lessor for the recovery of the security deposits. But all the force of the assessee remains unfruitful. Finally, the assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2774630 5. Rework Charge 1131047 6. Commission (Sales CFA) 710176 7. Commission Export 1940561 8. Commission Others 9342553 9. Service Infra 1179474 10. RCM Others 9513556 11 Prof Consultancy 2840169 TOTAL 34094223 14.1. It was contended by the assessee that it is following mercantile system of accounting as prescribed under section 145 of the Act which requires to account for the expenses in the year to which it pertains. As such the aforesaid expenses were claimed by making the provisions in the books of accounts as these expenses are pertaining to the present assessment year. Accordingly, the assessee was of the view that there cannot be any disallowance of the aforesaid expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from outside India. As per the assessee the provisions with respect to the export commission does not fall within the definition of fees for technical services as provided under section 9 of the Act and therefore the same is not liable for TDS under the provisions of section 195 of the Act. 16. The learned CIT(A) after considering the submission of the assessee has held that the assessee is liable for deducting the TDS on the expenses claimed on provisional basis. In the event of non-deduction of TDS, impugned expenses cannot be allowed as deduction by virtue of the operations of the provisions of section 40(a)(ia) of the Act. 16.1. However the learned CIT(A) found that the assessee is not liable to deduct the TDS under the provisions of section 195 of the Act with respect to the foreign commission expenditure as it is not chargeable to tax under the provisions of section 9 of the Act. 16.2. In view of the above the learned CIT(A) allowed the appeal of the assessee in part. 17. Being aggrieved by the order of the learned CIT(A), both the assessee and the Revenue are in appeal before us. The assessee is in appeal against the confirmation of the addition for ₹ 3,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable to a resident which has to be deposited in the account of Government Exchequer as provided under section 200 of the Act by the assessee. Thereafter, the assessee shall prepare statement containing the details of tax deducted at source which shall be filed within the prescribed time to the income tax authorities as provided under subsection (3) to section 200 of the Act. 20.3. Subsequently, the assessee shall issue a certificate to the person to whose account such credit is given to the effect that tax has been deducted as provided under section 203 of the Act. 20.4. Thus the cumulative effect of the provisions of section 194C/194H/194J/200/203 of the Act is that after the deduction TDS from the sum/income payable to a person, the same has to be paid to the government exchequer and a certificate has to be issued to the concerned person who is recipient of such sum/income payable by the assessee. But the same is not possible where the recipient of such sum/income payable by the assessee is not identifiable. In other words, the assessee cannot comply the provisions of chapter XVII of the Act with respect to the expenses claimed on provisional basis in a situation where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be identified after the expiry of lease period. Therefore, even if the assessee deducts tax, it cannot be paid to the credit of any individual as rightly pointed out by the ld. Sr. counsel. The assessee has to issue Form 16A prescribed under Rule 31(1)(b) of the Income-tax Rules, 1962 for the tax deducted at source. The assessee has to necessarily give the details of name and address of deductee, the PAN of deductee and amount credited. In this case, the assessee could not identify the name and address of deductee and his PAN. The assessee also may not be in a position to quantify the amount required for incurring the expenditure for dismantling and restoration of site to its original position. In those circumstances, this Tribunal is of the considered opinion that the provision which requires deduction of tax at source fails. Hence, the assessee cannot be faulted for non-deduction of tax at source while making a provision. Therefore, we are unable to accept the contention of the ld. D.R. Accordingly, the orders of the lower authorities are set aside and this ground of appeal is allowed. 20.5. We also find support from the order of the Hon'ble Jurisdictional high court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is not computer. Accordingly, the AO disallowed ₹ 2,64,46,952/- being excess depreciation and added to the total income of the assessee. 24. Aggrieved assessee preferred an appeal before learned CIT(A) who deleted the addition made by the AO by following the order of his predecessor in the own case of assessee for immediate preceding AY 2011-12. 25. Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us. 25. The Learned DR before us vehemently supported the order of the AO whereas the Learned AR before us submitted that the Tribunal in the own case of the assessee has allowed the issue in its favour in ITA No. No. 3669/AHD/2015 for the Assessment Year 2011-12 vide order dated 28th of January 2020. The Learned AR vehemently supported the order of the Learned CIT(A). 26. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the Tribunal in the own case of the assessee in ITA No. No. 3669/Ahd/2015 for the Assessment Year 2011-12 vide order dated 28th of January 2020, involving identical issue has decided the matter in favour of the assessee. The relevant extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stification to set aside the issue to the file of the AO for fresh adjudication of the items of addition for ₹ 1,18,73,028/- under data processing equipments. 7.4. We also note that the appeal was filed by the Revenue and the onus was on it to high lights the infirmities in the order of the ld. CIT-A but the ld. DR appearing on behalf of the Revenue failed to do so. In holding so we draw support and guidance from the order of the Hon'ble Delhi High Court in the case of CIT Vs. Rama Krishna Jewellers reported in 52 taxmann.com 23 wherein it was held as under: Further, Revenue was aggrieved by the order passed by the Commissioner of Income Tax (Appeals) and was the appellant before the Tribunal. They should have highlighted and pointed out the factual inaccuracies and the incorrect findings recorded by the first appellate authority. Even before us, except for the remand reports, which have been filed in some appeals, no other details and particulars have been filed to challenge the factual findings recorded as perverse. 7.5. In view of the above and after considering the facts in totality, we are of the view that the assessee is entitled for depreciation on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,452/- made in the Assessment order on account of non-deduction of TDS in respect of provision for expenses. The Ld. CIT(A) ought to have appreciated, inter alia: (a) that the provision for expenses was made at the end of the year in accordance with the Mercantile system of accounting, which is mandatorily required to be followed by the companies as per the provisions of Companies Act, 1956. (b) that the provision made on 31/03/2013 towards Provisions for Expenses were not liable for deduction of IDS in view of the fact that at the time of making provision for Expenses the parties to whom payments made were not identifiable and even appreciating the fact that there will not be any income accrued to the payee as the provisions in question were reversed in the beginning of the next year and accordingly, there will be no liability to deduct TDS on the provisions. (c) that the amounts are credited to the accounts of respective parties in the next financial year on receipt of bills from parties and tax deducted at source relating to the same has been duly paid before the due date of filling the return of income. 4. In law and in the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in confirming disallowance of provision for expenses to the extent of ₹ 6,54,06,503 from out of the total disallowance of ₹ 6,91,12,924 made by the Assessing Officer by invoking the provision of section 40(a)(ia) of the I.T. Act for non-deduction of tax at source. 3. The appellant craves leave to add, alter amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. 38. The 1st issue raised by the assessee is that the learned CIT(A) erred in confirming the addition made by the AO for ₹ 574/- on account of delay in deposit of employee's contribution towards EPF 39. At the outset we note issue raised by the assessee is identical to the issue raised in ITA No. 1817/Ahd/2016 for A.Y. 2012-13 vide ground no-2 which has been decided against the assessee by us in paragraph no. 5 of this order. Accordingly following the same we dismiss the ground of appeal of the assessee. 40. The next issue raised by the assessee is that the learned CIT(A) erred in upholding the order of the AO by sustaining the disallowance of ₹ 6,54,06,503/- in part under section 40(a)(ia) of the Act on account of non-d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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