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TMI Blog2021 (5) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the finding of the ld. CIT(A) is affirmed. Disallowance of sundry balance written off as trading loss - HELD THAT:- So far as claim No.(i) of reversal of Export rebate credited twice in the books the assessee explained that excess income was booked earlier and is admissible to the extent of such amount. We found that the assessee has reasonably explained the right of to that extent. Claim No.(ii) with regard to given to workers, and has not been repaid or adjusted against the wage payable. This amount is also clearly admissible under section 28 of the Act. Claim No.(iii) relates to uncashable soiled notes is also clearly a trade loss under section 28 of the Act. Claim No.(iv) relates to difference in opening balance of various parties assessee has claimed this amount relates to Birla Cellulosic, Futura Poly and Vardhaman Syntex, which was due to difference in opening balance of those parties. Therefore, considering the fact the assessee huge turnover and some difference may occur due to human error, therefore, this amount is also allowed to be write off. Claim No.(v) relates trade deposit given in the course of business of ₹ 1,355/-. The said amount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission payment to non-resident without TDS - HELD THAT:- There is no dispute that the assessee paid brokerage and commission to the agents who rendered services outside India. Further the assessing officer has not brought any material on record that the income of the recipient is taxable in India. The Hon'ble Delhi High Court in CIT Vs EON Technology (P) ltd [ 2011 (11) TMI 20 - DELHI HIGH COURT] held that when a non-resident agents operates outsides the country no part of his business arise in India, and since payment is remitted directly abroad, and merely because an entry in the books of accounts was made, it does not mean that the non- resident had received any payment in India. The Hon ble Apex Court in GE India Technology (P) Ltd [ 2010 (9) TMI 7 - SUPREME COURT] held that in case the amount paid by the appellant to the foreign software supplier was not royalty and the same did not give rise to any income taxable in India and therefore, the appellant was not liable to deduct tax at source, it arise only when such remittance is chargeable under the Act under section 4, 5 or 9 - when the brokerage and commission to the agents who rendered services outside India and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t A.O. cannot levy the penalty other than the charges on which it was initiated. The Ld. CIT(A) has also not specified the specific charge and only held that A.O. correctly levied the penalty on this addition. Thus, the penalty order qua this addition is also not sustainable. In the result, the grounds of appeal raised by the assessee are allowed. - I.T.A No.607/AHD/2014, I.T.A No.980/AHD/2017 - - - Dated:- 21-4-2021 - Shri Pawan Singh, Judicial Member And Dr. Arjun Lal Saini, Accountant Member For the Assessee : Shri Rajesh C. Shah CA For the Revenue : Mrs. Anupma Singla Sr. DR ORDER PER PAWAN SINGH, JUDICIAL MEMEBER: 1. These two appeals by the Assessee are directed against the order of ld.Commissioner of Income Tax (Appeals)-I, Baroda, hereinafter referred as Ld. CIT(A) dated 03.12.2013 and 01.02.2017, both for the assessment year (AY) 2005-06. In ITA No. 607/AHD/2014, the assessee has challenged the confirmation of additions in quantum assessment and ITA No.980/AHD/2017 is against the penalty levied under section 271(1)(c) on certain additions. For appreciations of facts the appeal is ITA No.607/AHD/2014 is treated as lead case. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. T. Act. It is, therefore, submitted that the said addition is bad-in-law and the same be deleted. 2. Brief facts of the case are that the assessee is a company engaged in manufacturing and trading of cotton and blended synthetic yarn. The assessee filed its return of income for relevant assessment year on 29.10.2005 declaring loss of ₹ 10 crore (approx.). The case was selected for scrutiny and the assessment was completed under section 143(3) on 24.12.2007. The Assessing Officer (AO) while passing the assessment order besides the other additions and disallowance made addition on account of disallowance of excise duty of ₹ 29,36,235/- and interest thereon of ₹ 15,11,014/- by taking view that liability for payment of excise duty was not crystallized during the relevant financial year, disallowance depreciation of furniture of ₹ 18,200/- (cost of furniture ₹ 1,22,000/- and claimed depreciation @15%), by taking view that the furniture was not used for the purpose of the business of the assessee and that it was used by the employee of sister concern of assessee, disallowed sundry balance written off of ₹ 18,03,983/- by taking view that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62/- are admissible for deduction. 4. On the other hand, the ld. DR for the Revenue supported the order of Lower Authorities. The ld. DR further submits that the liability was not crystalized during the year under consideration, thus, the assessee was not eligible for deduction on account of payment of excise duty and interest thereon, during the year under consideration. 5. We have considered the rival contentions of both the parties and the perused the material available on record. The assessing officer disallowed payment of excise duty and interest thereon by taking view that liability for payment of excise duty was not crystallized during the relevant financial year. The ld CIT(A) affirmed the action of assessing officer by taking view that the amount of ₹ 29,36,235/- and interest thereon of ₹ 15,11,014/- was paid by assessee on 04.05.2004. The liability was not crystallized till 31.03.2005. The liability was crystallized only on the final order passed by settlement commission on 11.05.2005. Before us the ld. AR for the assessee vehemently submitted that interim order was passed by the Excise Authorities on 15-04-2004 directing to pay ₹ 29,36,235/- and & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employee of sister concern of assessee. Before ld.CIT(A) the assessee made similar submissions as made before us. It was further stated that the assessing officer erred in making excess disallowance @ 15% instead of 10%. The ld.CIT(A) after considering the submissions of the assessee held that Aniruddh Bhudeka is not the employee of the assessee and that the expenses were not for the purpose of business of the assessee. However, the disallowance of depreciation was restricted to 10%. Before us the assessee has not filed any evidence to prove the fact that Aniruddh Budheka was having any casual connection of employment with the assessee. Therefore, we do not find any merit in the ground of appeal raised by the assessee. Hence, the finding of the ld. CIT(A) is affirmed. 9. Ground No.3 relates to disallowance of sundry balance written off aggregating to ₹ 17,88,952/- as trading loss. The ld.AR for the assessee explained the of sundry balances written off of each amount in the following manner by filing written note thereof as under: a) Reversal of Export Rebate credited twice earlier in the books is admissible to the extent of ₹ 8,842/- as excess income was booke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the loss amounts to Trade loss eligible for deduction under section 28 of the Act. Although it was for purchase of machinery, since the same could not be purchased under the above circumstances, the loss is admissible on the basis of the write off in the books of account. It will be appreciated that a closed company would not give any supporting letter or document. (*added by us) 10. The ld.AR for the assessee further submits that the aforesaid amounts were duly written off in the books of account and the Tax Audit Report also supported the same. Such write offs do not call for any documentary evidences. As per the amended provisions of section 36 relating to Bad Debts, it is sufficient, if the amounts are written off in the books of account and no legal actions or documentary proofs are required. Similarly, for allowing the above losses, write off should be accepted because no businessman is interested in losing the money and there is no contrary evidence to show that these are not genuine entries. 11. On the other hand, the ld. DR for the Revenue submitted that assessee has now shown income related with the balance written off during the previous year and has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g balance of those parties. Therefore, considering the fact the assessee huge turnover and some difference may occur due to human error, therefore, this amount is also allowed to be write off. Claim No.(v) relates trade deposit given in the course of business of ₹ 1,355/-. The said amount was deposits with Gujarat Gas, Ahmed Electricals, Indian Oils, Bharat Petroleum and BSES Ltd., and Sheetal Corporation. Since the amount was given during the course of business and was not refunded by various parties. Thus, this amount is also allowed as business loss. Claim No.(vi) relates to advances given for supply of store items of ₹ 89,100/-, which was not refunded nor the items were supplied. This amount was also paid as a business activities and loss thereof is allowable under business law. Claim No.(vii) relates to purchase of advance license for importing flex fiber of ₹ 2,16,367/-. The assessee claimed that due to market conditions the flex fibers were not imported and such license could not be used and on expiry of license period it was write off. We find that assessee claim is admissible under section 28 of the Act in Business Loss. Claim No.(viii) relates to paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence in the form of resolutions of the board of Directors of assessee s company or any agreement with the employee or their terms of contract of employment is filed. 16. We have considered the contention of both the parties and perused the order of Lower Authorities. The assessing officer made disallowance of electricity expenditure at the residence of employees and director of assessee by taking view that it was not business expenditure of the assessee and it was purely personal expenses. The ld. CIT(A) upheld the action of the assessing officer by similar view that it was not for the purpose of business of the assessee. Before us the ld AR for the assessee submitted that the assessee provided residential Bungalow to its Managing Director and staff quarters to its employee and recovered rent of ₹ 1,22,979/-, which is offered for tax. It was fairly conceded that due to lapse of time the assessee is unable to file document like Board resolution or appointments letter of the employee, however, the accounts of the assessee are duly audited and no adverse comments were made by Auditors. Considering the facts that during the assessment the assessee provided the complete detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 (SC). The ld.AR relied upon the following decisions : GE India Technology Co. P. Ltd. Vs CIT 327 ITR 456 (SC). C.I.T. Vs EON Technology P. Ltd. 203 Taxman 266(Del). D.C.I.T. V/s Divi's Laboratories -131 ITD 271 (HYD). 19. On the other hand, the ld. DR for the Revenue submits that the assessee has not deducted tax at source. The assessee was liable to deduct tax on the source for the income accrued or earned in India. The assessee s income is taxable income, thus, the assessee was liable to deduct the tax on the payment made outside India. The ld DR for the revenue strongly relied on the order of ld. CIT(A). 20. We have considered the contention of both the parties and perused the order of Lower Authorities. The assessing officer made disallowance by taking view that the assessee has not furnished any supporting evidence to establish that provisions of section 195 is not applicable in this case. The assessing officer also relied on the decision of Vijay Ship Breaking Corporation (261 ITR 113 Guj). The Ld. CIT(A) concurred with the finding of assessing officer that the ration of case law in Vijay Ship Breaking Corporation (supra) is applicable on this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was paid by the mode of releasing a letter of credit and received by the non-resident outside India from the negotiation/ intermediatory bank, such sum would be nonetheless income deemed to be accruing or arising to the non-resident in India. Hence, this ground of appeal is allowed. 21. In the result, appeal of the assessee is partly allowed. ITA No.980/AHD/2017 [penalty levied under section 271(1)(c) of the Act] 22. Facts leading the adjudication of the appeal as gathered from the record of the lower authorities are that while passing the assessment order under section 143(3) dated 24.12.2007, the assessing officer made following additions/ disallowances; (i) Income under section 2(24)(x) of ₹ 60, 372/-, (ii) Software capital expenses of ₹ 6,35,000/-, (iii) Excise duty and interest of ₹ 44,62,345/-, (iv) Disallowances of sundry written balance off ₹ 18,03984/-, (v) Income offered by assessee during assessment on account of receipt of receipt from Municipality ₹ 4,21,000/-, (vi) Interest income of ₹ 68,682/-, (vii) Disallowance of electricity expenses of ₹ 1,54,383/-, (viii) Disallowance of forwarding an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus, no penalty on the addition/disallowance on account of excise duty, disallowance on sundry balance written off and electricity expenses would survive. So far as, confirmation of depreciation on furniture of ₹ 1,22,00/- is concerned. The assessee claimed it revenue expenditure, the A.O. treated the same as capital expenditure and allowed the 15% depreciation. However, on appeal, the Ld. CIT(A) restricted the depreciation to 10%. In our view, the disallowance is based on difference of opinion between the assessee and assessing officer. Thus, no penalty on difference of opinion and on mere disallowance is levieable. 27. So far as penalty on addition on account of interest received from the Municipal Corporation is concerned, we have noted that the assessee offered the same during the assessment proceedings. Further, the A.O. levied the penalty on the addition along with other additions. No specific finding while levying penalty on this addition is recorded. The Ld. CIT(A) in para 11 of the impugned order discussed the fact in detail. As per the order of Ld. CIT(A), this amount was receivable by assessee which was adjusted by Municipality in F.Y. 2004-05 against the int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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