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TMI Blog2021 (8) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... (12) TMI 16 - SUPREME COURT] wherein it was held that the interest on sales tax is compensatory in nature and would be allowable as deduction in computing profits of the business. Accordingly, we direct the ld AO to grant deduction towards interest on delayed payment of VAT. Disallowance of bad debts written off - HELD THAT:- We find that under invoicing of sale amounts got triggered pursuant to the Central Excise Audit conducted in earlier years and Audit Report dated 16.12.2005 was submitted wherein the under invoicing of sales to the extent of ₹ 39 lacs was pointed out to the assessee, which fastened an excise duty liability of ₹ 6,36,480/- on the assessee.This payment towards excise duty does not include any penalty for any violation of any law in force. Since the additional excise duty liability fastened on the assessee company could not be recovered from the customers, but still the assessee had to pay the same to the Government, the said excise duty was duly paid by the assessee and claimed as deduction during the year on the ground of bad debts written off. This is in our considered opinion, is squarely allowable as deduction both u/s 43B as well as u/s 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not at the stage of computation of the total income under Chapter VI. - Decided in favour of assessee. Computation of deduction u/s 10A - HELD THAT:- As AR stated that the ld AO had denied deduction u/s 10A of the Act in respect of export proceeds in the sum of ₹ 17.33 lacs which was realised beyond the prescribed period . In this regard, the ld AR submitted that the ld AO verify the Foreign Inward Remittance Certificate (FIRC) and decided the issue of allowability of deduction u/s 10A of the Act for the same in accordance with law. This was fairly agreed by the ld DR before us. Accordingly, we restore this issue to the file of ld AO to verify the FIRC and decide the issue of allowability of deduction u/s 10A of the Act for the same in accordance with law. Disallowance of interest u/s 36(1)(iii) - Sufficiency of own funds - HELD THAT:- We find from the perusal of the balance sheet of the assessee for the year under consideration, that the assessee is having sufficient own funds of ₹ 77.04 crores which is several times more than the Capital Work in Progress figure of ₹ 1.13 crores. Hence it could be safely presumed that the Capital Work in Progress ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax (Appeals)-24, Mumbai in appeal No.CIT(A)-24/ACIT-15(1)(2)/IT-158/2016-17 dated 31/10/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/03/2016 by the ld. Asst. Commissioner of Income Tax-15(1)(2), Mumbai (hereinafter referred to as ld. AO). ITA No.400/Mum/2020 This appeal in ITA No.400/Mum/2020 for A.Y.2010-11 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-24, Mumbai in appeal No.CIT(A)-24/10085/2014-15 dated 31/10/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 19/03/2014 by the ld. Dy. Commissioner of Income Tax (OSD)-10(3), Mumbai (hereinafter referred to as ld. AO). ITA No.401/Mum/2020 This appeal in ITA No.401/Mum/2020 for A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-24, Mumbai in appeal No.CIT(A)-24/ACIT-15(1)(2)/IT-235/15-16 dated 31/10/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain performance parameters in respect of fuel efficiency, which was not done by the assessee. The said addendum also provided that in case if the assessee does not meet diesel fuel utilisation criteria, JNPT will charge back to the assessee, the excess fuel utilised at prevailing market rate limited to 12% of the bill amount charged during the months. The assessee had raised an invoice of ₹ 1,40,000/- to JNPT on 30.4.2009 in respect of services provided during the period 1.4.2009 to 24.4.2009, against which , JNPT made payment of ₹ 1,14,017/- and deducted an amount of ₹ 25,983/- towards liquidated damages on account of deficiency in service for non-fulfilment of the obligation regarding adherence to a particular quality of service of fuel efficiency. Hence it is payment made for breach of contractual obligation by the assessee. These facts are not disputed by the revenue. Hence we hold that any payment made for breach of contractual obligation in the form of liquidated damages, cannot be construed as penal in nature. Hence the provisions of Explanation 1 to section 37(1) of the Act cannot be brought into operation at all in the facts of the instant case. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,20,00,000 1,11,00,000 9,00,000 5.2. The assessee submitted that it was unable to recover the excise duty on the differential sale amount from the customers and had therefore written off the amount of excise duty in the sum of ₹ 6,36,480/- being 16% of ₹ 39,00,000/- (₹ 6,24,000/-) and education cess of ₹ 12,480/- These contentions were not appreciated by the ld AO on the ground that the same falls within the Explanation 1 to section 37(1) of the Act and hence the ld AO proceeded to disallow the same, which action was upheld by the ld CITA. 5.3. With regard to deposits written off of ₹ 67,350/- ,the assessee submitted the break up of deposits written off as under:- Deposit with sales tax department ₹ 20,000/- Telephone Deposit ₹ 37,350/- Cylinder Deposit with Sri Sai Enterprises ₹ 10,000/- --------------- ₹ 67,350/- 5.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that during the course of assessment proceedings, the assessee was asked to submit the details of advances / written off in the sum of ₹ 24,77,225/- , which were duly submitted by the assessee vide letter dated 17.12.2013. The details of advances / deposits written off by the assessee in its books, as submitted before the ld AO are as under:- Party Name Cl. Bal Recoverable From GVK 12,18,607.75 B.B Patil 2.00 Avinash Gokhale 2,763.00 Trinity Air Travel Tours Pvt Ltd - Mac 21.00 St. John Transport Heavy Equipment P Ltd -1.00 Armugam Perumal -Advance 5.000.00 Amrita Consultancy 9,96,419.00 Allcargo Global Logistic Limited 2,33,759.52 Visakapatnam Port Trust 4.00 Seabridge Maritime Agencies Pvt Ltd. 22.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court held that in case of embezzlement of money by servants or agents of assessee given for excise duty payment, loss of money must be regarded as having arisen in course of carrying on business of assessee. Further, reliance in this connection is placed on Kerala High Court decision in case of Churakulam Tea Estates (P.) Ltd. [1995] 81 Taxman 214. 2. B.B. Patil 2 Rounding off Difference 3. Avinash Gokhale 309 TDS was paid on behalf of the parties which was not received from the parties. Professional services obtained from the said parties in ordinary course of business. 4. Hi-Tech Tele Access Service Ltd 830 5. Xps 685 6. Ocean Enterprises 939 7. Trinity Air Travel Tours Pvt. Ltd. -Mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Rounding off difference 13. Se abridge Maritime Agencies Pvt. Ltd. 22 Rounding off difference 14. Macgregor Hydramarine AS - STPI 165 Rounding off difference 15. Write-off against Pune Office 21,192 Advance for petty cash expenses Various cash expenses of Pune office for which no vouchers were booked and hence, written-off. 16. Hind Terminal Pvt. Ltd. (727) Rounding off difference 17. Immaterial rounding off differences (3) Rounding off difference Total 24,77,225 6.3. We find that the aforesaid deposits / advances written off were sought to be disallowed by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794 dated 9.8.2000 which states in paragraph 15.6 that, The export turnover and the total turnover for the purposes of sections 10A and 10B shall be of the undertaking located in specified zones or 100% Export Oriented Undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision. 17. If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the department (No. 794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reasonable opportunity of being heard. The assessee is also at liberty to furnish fresh evidences, if any, in support of its contentions. Accordingly, the Ground No. 10 raised by the assessee is allowed for statistical purposes. 9. The Ground No. 12 raised by the assessee is with regard to quantification of carry forward of losses. At the time of hearing, the ld AR stated that the assessee had already preferred a rectification application u/s 154 of the Act before the ld AO which is pending adjudication. Hence we direct the ld AO to dispose of the said rectification application u/s 154 of the Act while passing the order giving effect to this tribunal order. The ld AO is also directed to determine the figure of carry forward of losses in accordance with law. Accordingly, the Ground No. 12 raised by the assessee is allowed for statistical purposes. 10. The Ground No. 13 raised by the assessee is with regard to granting of interest u/s 244A of the Act. At the time of hearing, the ld AR stated that the assessee had already preferred a rectification application u/s 154 of the Act before the ld AO which is pending adjudication. Hence we direct the ld AO to dispose of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of the Act. Accordingly, the Ground No. 6 raised by the assessee for the Asst Year 2011-12 is hereby directed to be allowed. 15. The Ground No. 7 raised by the assessee for the Asst Year 2011-12 is identical to Ground No. 7 raised for Asst Year 2010-11 and hence the decision rendered thereon would apply with equal force for this Asst Year also , except with variance in figures. 16. The Ground No. 8 raised by the assessee is with regard to deduction for share issue expenses. 16.1. We have heard the rival submissions and perused the materials available on record. We find that during the year under consideration the assessee had incurred an amount of ₹ 40,00,020/- towards share issue expenses. In the return of income, it had disallowed only an amount of ₹ 8,00,000/-. Hence the ld AO disallowed the remaining sum of ₹ 32,00,020/- in the assessment as the same was incurred towards stamp duty and filing fees for increase in authorised share capital of the assessee company. This action was upheld by the ld CITA. We find that there is no dispute that the amounts spent on account of share issue expenses were incurred only for increasing the authorised sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings, the ld AO vide notice u/s 142(1) of the Act dated 4.3.2016 directed the assessee to provide details as under:- 2. Justify the claim of ₹ 22.30 under the head other expenses . Why the same shoud not be disallowed adhoc basis. 22.2. We find that the assessee had filed its reply vide letter dated 14.3.2016 stating that there were multiple accounts grouped under the head Other Expenses‟ and provided account wise ledger extract for each of the accounts. But in the assessment order, the ld AO observed that no explanation was offered by the assessee regarding provision for warranties to the tune of ₹ 20,54,889/- and hence proceeded to disallow the same on that count. The main grievance of the assessee was that no opportunity was provided to the assessee in this regard by the ld AO in the assessment proceedings. We find that the assessee had furnished detailed explanation with regard to the provision for warranties before the ld CITA together with the basis of making the provision, its allowability as deduction in the earlier assessment years and with various decisions of Hon‟ble Supreme Court and Hon‟ble High Courts. We find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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