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TMI Blog2022 (6) TMI 1379X X X X Extracts X X X X X X X X Extracts X X X X ..... the flat owner) on which service tax was also collected during the year". 3. "The Ld. CIT(A) has erred in allowing the Maintenance Advance received for being taxed in respective assessment years ignoring the decision of the Hon'ble Supreme Court in the case of Sundaram Finance Limited vs. ACIT (2012) 349 ITR 356". 4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 5. The appellant craves leave to add, alter, amend and/or delete any of the grounds mentioned above." ITA No. 45/Bang/2017 (Assessee's appeal) - A.Y. 2010-11 "Based on the facts and circumstances of the case and in law. Total Environment Building Systems Private Limited (hereinafter referred to as "Appellant"), respectfully craves leave to prefer an appeal against the appeal order passed by the learned Commissioner of Income-Tax (Appeals) - 7 [hereinafter referred to as the "learned CIT (A)-] under section 250 of the Income-tax Act, 1961 ("Act") on the following grounds: That on the facts and circumstances of the case and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed money has been fully utilised wholly and exclusively for the purpose of business. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law." 2. Following on the grounds raised by the assessee for assessment year 2011-12: "Based on the facts and circumstances of the case and in law, Total Environment Building Systems Private Limited (hereinafter referred to as "Appellant"). respectfully craves leave to prefer an appeal against the appeal order passed by the learned Commissioner of Income-Tax (Appeals) - 7 [hereinafter referred to as the "learned CIT (A)"] under section 250 of the Income-tax Act, 1961 (-Act") on the following grounds: That on the facts and circumstances of the case and in law: 1. That the learned CIT (A) has erred in law and on facts in upholding the order of the learned AO. 2. The learned CIT (A) has erred in law and on facts in direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee appeared before the Ld.AO and filed requisite details as called for. The Ld.AO noted that, the assessee disclosed its income from construction projects by following percentage completion method of accounting. The Ld.AO noted that, the assessee received consideration under various heads like land cost, construction cost, customisation cost, car parking, eBay, architect fee, maintenance etc., however for the purpose of arriving at the sale to be booked on the basis of percentage completion of project, the assessee omitted to consider consideration received under the head maintenance. 3.2 The Ld.AO noted that the assessee disclosed only Rs. 1,22,32,859/-as maintenance income on completed project whereas it claimed the sum of Rs. 1,21,85,392/- as maintenance expenses on completed projects and claimed the same as expenditure by way of debiting it to the P&L account. The Ld.AO accordingly called upon assessee to furnish relevant details in respect of the same. 3.3 The Ld.AO to after considering the submissions of the assessee relied on the assessment order passed for assessment year 2010-11, wherein, similar issue was examined and the assessing officer therein concluded th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessee appeal and Ground No.2-3 in revenue for appeal are in respect of taxability of maintenance advance in the hands of assessee. 5.1 It is submitted that this issue arises in assessee's appeal for AY 2011-12, and revenue has not raked up any issue for ay 201112. Both sides submitted that facts are identical and therefore we are considering this issue for both the years under consideration. It is submitted that, the revenue in its appeal is aggrieved with the order of Ld.CIT(A), wherein the Ld.CIT(A) accepted the contentions of assessee by observing that the accounting treatment given for advance does not have much relevance as it depends on the income tax liability of a person depending on its nature of business and objects. The Ld.CIT(A) further directed the Ld.AO to compute the amount of expenditure incurred out of the maintenance advance received and then bring it to tax to which revenue is aggrieved. 5.2 On the contrary the Ld.AR submitted that, having held that assessee cannot be taxed on the entire maintenance advance received, partly allowed the issue. To this extent the assessee is aggrieved. 5.3 We have perused the submissions advanced by both sides in light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld.AR, we are of the view that the direction issued by the Ld.CIT(A) to the Ld.AO is in accordance with law and cannot be found fault with. We also agree with the submissions of the Ld.AR that, the decision relied by the Ld.AO in case of Sundaram Finance Ltd vs. ACIT (supra) are rendered on different facts and are distinguishable with that of assessee in the present case. 5.9 We accordingly direct the Ld.AO to compute the maintenance attributable for the years under consideration based on the expenditure incurred and the services rendered by the assessee. Accordingly, for AY 2010-11, Ground No.2 raised by assessee stands allowed and Ground No.2-3 raised by revenue stands dismissed. For AY 2011-12, Ground no.2 stands allowed. 6. Ground No.3 raised by assessee in respect of addition made by the Ld.AO on account of unpaid service tax liability of Rs. 1,22,43,872/-. 6.1 It is the submission of the Ld.AR that the assessee collected amount from its customers, towards service tax liability, however the same was not remitted. It is submitted that the assessee was relying on the circular issued by the Central Board of Excise and Customs exempting service tax on cost construction proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as follows:- "7. I have heard rival submissions and perused the material on record. Admittedly, the assessee has not remitted the employees' contribution of PF of Rs.1,06,190 and ESI of Rs.16,055 totaling to Rs.1,22,245 before the due date specified under the respective Act. However, the assessee had paid the same before the due date of filing of the return u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT reported in 366 ITR 408 (Kar.) has categorically held that the assessee would be entitled to deduction of employees' contribution to PF and ESI provided the payment was made prior to the due date of filing of return of income u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court differed with the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation reported in 366 ITR 170 (Guj.). In holding so, the Hon'ble High Court was considering following substantial question of law:- "Whether in law, the Tribunal was justified in affirming the finding of Assessing Officer in denying the appellant's claim of deductions of the employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT (supra) the assessee would have been entitled to deduction of employees' contribution of PF and ESI if the payment was made prior to due date of filing of the return of income u/s 139(1) of the I.T.Act. Therefore, the amendment brought about by the Finance Act, 2021 to section 36(1)(va) and 43B of the I.T.Act, alters the position of law adversely to the assessee. Therefore, such amendment cannot be held to be retrospective in nature. Even otherwise, the amendment has been mentioned to be effective from 01.04.2021 and will apply for and from assessment year 2021-2022 onwards. The following orders of the Tribunal had categorically held that the amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 is only prospective in nature and not retrospective. (i) Dhabriya Polywood Limited v. ACIT reported in (2021) 63 CCH 0030 Jaipur Trib. (ii) NCC Limited v. ACIT reported in (2021) 63 CCH 0060 Hyd Tribunal. (iii) Indian Geotechnical Services v. ACIT in ITA No.622/Del/2018 (order dated 27.08.2021). (iv) M/s.Jana Urban Services for Transformation Private Limited v. DCIT in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax assessment order and a notice of demand dated 17.06.2010 raising a demand of Rs.50,00,000/- pertaining the sales tax periods April 2008 to October 2008 and paid the same. Since the payment of the demand was made before the due date for filing the return for AY 2010-11, the same was claimed as a deduction for AY 2010-11 by the assessee. 9. The AO disallowed the same holding that since the demand pertains to AY 2009-10, the same could not be allowed in AY 2010-11. The CIT(A) upheld the same holding that the liability arose in AY 2011-12 and therefore could not allowed for AY 2010-11. 10. The Ld.AR submitted that assessee received the sales tax assessment order and a notice of demand of Rs. 50 lakhs pertaining to sales tax. April 2008 to October 2008. The assessee paid the same before the due date of filing of the return of Income vide 2010-11 and claimed it as a deduction for a wide 2010-11. 11. The Ld.AO disallowed the same by holding that, since the demand pertains to a white 2009-10 the same could not be considered for assessment A 2010-11 which was upheld by the Ld. CIT(A). 12. The Ld.AR before us, submitted that, the notice of demand was issued on 17/06/2010 that is rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to remit the same within the due date and the interest charged on such amount is only compensatory in nature. Here we notice that the co-ordinate bench of this Tribunal has already held the same view in the case of STUP Consultants (P.) Ltd. (supra) by observing as under :- '7. We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, AO has disallowed the interest expenses incurred by the assessee on account of late deposit of service tax and TDS after having reliance on the judgment of Hon'ble Supreme Court in the case of Bharat Commerce Industries Ltd. v. CIT (1998) (supra). The relevant extract of the judgment reads as under :- FACTS During the year under consideration, the assessee failed to pay advance tax equivalent to 75 per cent of estimated tax. The Assessing Officer levied\section 215 as well as under section 139. The assessee claimed that were payable were delayed, the assessee's financial resources increased available for business purposes. Hence, the interest which was paid Government was interest on capital that would be borrowed by the assessee otherwise. Hence, the amounts should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n making the payment of service tax & TDS is compensatory in nature. As such the interest on delayed payment is not in the nature of penalty in the instant case on hand. The issue of delay in the payment of service tax is directly covered by the judgment of Hon'ble Apex Court in the case of Lachmandas Mathura v. CIT reported in 254 ITR 799 in favour of assessee. The relevant extract of the judgment is reproduced below : "The High Court has proceeded on the basis that the interest on arrears of sales tax is penal in nature and has rejected the contention of the assessee that it is compensatory in nature. In taking the said view the High Court has placed reliance on its Full Bench's decision in Saraya Sugar Mills (P.) Ltd. v. CIT 11979] 116 TTR 387 (All.) The learned counsel appearing for the appellantassessee states that the said judgment of the Full Bench has been reversed by the larger Bench of the High Court in Triveni Engg. Works Ltd. v. CIT 119831 144 ITR 732 (All.) (FB) wherein it has been held that interest on arrears of tax is compensatory in nature and not penal. This question has also been considered by this Court in Civil Appeal No. 830 of 1979 titled Saraya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erify if the payee has paid the taxes on the interest component paid by the assessee. If the submission is found to be correct, the disallowance is directed to be deleted. Accordingly this ground raised by the assessee stands allowed for statistical purposes. 18. Ground no.9-10 for AY 2010-11 & Ground No.2011-12 for AY 2011-12 are in respect of disallowance of depreciation on computer software for non deduction of TDS under section 40(a)(ia) of the Act. 18.1 This issue is covered in favour of assessee by the decision of Hon'ble Karnataka High Court in case of PCIT vs.Tally Solutions (P.) Ltd reported in (2021) 123 taxmann.com 21. Hon'ble Court held as under: 9. We have considered the submissions made by learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of relevant extract of section 40 of the Act, which is reproduced below for the facility of reference: Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head" Profits and gains of business or profession", - (a) in the case of any assessee- ** ** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose claim is for depreciation, which is not in the nature of expenditure but an allowance. The depreciation is not an outgoing expenditure and therefore, provisions of Section 40(a)(1) and (ia) of the Act are not applicable. In the absence of any requirement of law for making deduction of tax out of expenditure, which has been capitalized and no amount was claimed as revenue expenditure, no disallowance under section 40(a)(i) and (ia) of the Act would be made. It is also pertinent to note that depreciation is a statutory deduction available to the assessee on a asset, which is wholly or partly owned by the assessee and used for business or profession. The depreciation is an allowance and not an expenditure, loss or trading liability. The Commissioner of Income Tax (Appeals) has held that the payment has been made by the assessee for an outright purchase of Intellectual Property Rights and not towards royalty and therefore, the provision of section 40(a)(ia) of the Act is not attracted in respect of a claim for depreciation. The aforesaid finding has rightly been affirmed by the tribunal. The findings recorded by the Commissioner of Income Tax (Appeals) as well as the tribunal canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 48,45,096/-. 21.2 We have perused the submissions advanced by both sides in the light of records placed before us. 21.3 The assessee made the submissions and after considering the submissions of the assessee, AO by invoking the provision of Rule 8D worked out the disallowance u/s 14A of the Act. The alternate submissions of the Ld.AR in working disallowance u/s 14A by considering the investment which have yielded tax free income is concerned, we find force in the submission of Ld.AR. We find that decision of Hon'ble Delhi High Court in case of CIT vs. Holcim India Pvt. Ltd. reported in (2014) 90 CCH 81, Hon'ble Gujarat High Court in the case of CIT vs. Corrtech Engineering Pvt. Ltd. reported in 372 ITR 97 and decision of Hon'ble Allahabad High Court in case of CIT v. Shivam Motors (P.) Ltd. reported in (2015) 230 Taxman 63 has held that Section 14A of the Act, cannot be involved when no exempt income was earned. The contention of the assessee that, it received dividend only from certain investments has not been controverted by the revenue. In such a situation, relying on the aforesaid decisions, we are of the view that disallowance u/s 14A needs to be re-worked on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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