2018 (4) TMI 1754 - AT - Income Tax

Tribunal remits disallowances for fresh assessment, directs re-examination of various expenses. Reopening upheld.

The Tribunal remitted various disallowances back to the Assessing Officer for fresh adjudication, including peripheral development expenses, wheeling ... Disallowance of peripheral expenditure - Allowable revenue expenditure - HELD THAT:- AR referred to the nature of the expenditure incurred through the corporate office at Bhubaneswar and further substantiated that the assessee has evidence to prove the claim. Therefore, we, considering the apparent facts and material on record, are of the opinion that the claim of the assessee in respect of incurring of expenditure at peripheral areas as per the order of the Govt. is not disputed and the reasons recorded by the lower authorities in respect of 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 TDS u/s 194C - disallowance of wheeling charges for non-deduction of TDS under section 40(a)(ia) - scope of second proviso to Section 40 Sub-clause (ia) of clause (a), which was inserted by the Finance Act, 2012 with effect from 1st April, 2013 - HELD THAT:- Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] held that the proviso added u/s.40(a)(ia) of the Income Tax Act,1961 was retrospective in operation and the assessee is entitled to the benefit of the same. Accordingly, if the assessee substantiates with evidence that GRIDCO has offered the income in their income tax assessment, the assessee cannot be treated as “assessee in default”. Accordingly, we are of the opinion that the matter needs to be examined and we remit this disputed income to the file of the AO and the assessee shall cooperate and submit the income tax particulars in the assessment proceedings for early disposal of the case and this ground of appeal of the assessee is allowed for statistical purposes. Disallowance of additional depreciation u/s.32(1)(iia) - HELD THAT:- We restore this matter to the file of the AO for fresh adjudication in respect of the claim of additional depreciation u/s.32(1)(iia) of the Act and this ground of appeal of the assessee is allowed for statistical purposes. Disallowance of provision for leave encashment u/s.43B(f) - HELD THAT:- The assessee has made the provision for leave encashment and the provision was not added back in the computation of income. As the ld. AR submitted that the above issue is covered by the order of the coordinate bench of the Tribunal in the case of Baitarani Gramya Bank [1762067] remit this issue to the file of the AO to examine and allow the claim and this ground of appeal is allowed for statistical purposes. Disallowance of expenditure on departmental meetings, official lunch and dinner and company guests - expenditure on ceremonial expenses, other staff welfare expenses and cultural activities and also disallowance under other miscellaneous expenses - HELD THAT:- Tribunal in assessee’s own case and restrict the disallowance to ₹ 10,00,000/- under other miscellaneous expenses as against ₹ 34,85,383/- disallowed by the AO and in respect of estimation of expenses, departmental meeting, official lunch and dinner and company guests, ceremonial expenses, other staff welfare expenses and expenses on social & cultural activities, we rely on the Tribunal decision and are of the opinion that the expenses were incurred wholly and exclusively for the business and allowable u/s.37(1) of the Act and accordingly direct the AO to delete the addition and allow this ground of appeal of the assessee. Disallowance under prior period adjustments - HELD THAT:- 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 the assessee shall cooperate in submitting the information and this ground of appeal of the assessee is allowed for statistical purposes. Disallowance of amounts written off in respect of claims/receivables - AO has disallowed the claim of receivables as the assessee has not furnished any explanations with regard to the allowability - HELD THAT:- We found that the assessee has claimed ₹ 1,86,07,855/- on account of write off scraps and the same was considered by the CIT(A) and granted partial relief. This issue of claim of receivables of the company pertains to earlier years but the AO has not brought on record these facts that the assessee has not disclosed. Whereas ld. AR before us prayed that the assessee is eligible to write off the claim as they are pertaining to earlier years and prayed for an opportunity before the AO. We find strength in the submissions of the ld AR. Accordingly, we remit this issue to the file of AO and this ground of appeal of the assessee is allowed for statistical purposes. Disallowance of Electricity Duty u/s.43B - HELD THAT:- Claim allowed as relying on assessee own case Claim on account of diminution in the value of non-moving stores & spares allowed Addition u/s 40A - payment to benevolent scheme - HELD THAT:- We find in the instant case that the CIT(A) is justified in allowing the deduction towards the claim of payment under benevolent scheme. Accordingly, we dismiss this ground of Revenue. Addition on account of pot-reling expenses - HELD THAT:- Assessing Officer white making the addition has not made a case that by relining the pots and the assessee has virtually obtained an asset which could have been resulted into enduring benefit for the assessee to treat such expenditure as capital in nature. Apart from above facts, we have also considered the fact that the claim of the assessee was accepted by the Ld. CIT in succeeding year and the Department is not in appeal against the order of the Ld. CIT before this Tribunal. Allowability of peripheral development expenses - HELD THAT:- We find that the CIT(A) while considering this issue has dealt on the submissions of the assessee and findings of the AO and decided the disputed issue based on the order of the Government of Orissa and treated the entire expenditure on development of the two districts viz.: Angul and Koraput as peripheral development expenditure incurred wholly and exclusively for the purpose of business and restricted the disallowance to ₹ 56,27,609/- and granted relief to the assessee for ₹ 7,62,83,499/-. Hence, we are not inclined to interfere with the order of CIT(A) on this ground Gift coupons to the employees - HELD THAT:- AO disallowed the claim of the assessee because the payments made by the assessee were in the nature of ex-gratia payments. The CIT(A) held that the expenditure is clearly incurred wholly and exclusively for the purpose of business and has to be allowed as a deduction u/s.37(1) of the Act. We find that the similar expenditures were claimed in the earlier years and the Revenue has accepted the same. In our considered view the CIT(A) has rightly deleted the disallowance made by the AO on account of gift coupons to the employees. Accordingly, we upheld the action of the CIT(A) and dismiss the ground of appeal of Revenue. Issues Involved:1. Disallowance under Peripheral Development Expenses.2. Disallowance under Section 40(a)(ia) for Wheeling Charges.3. Disallowance of Additional Depreciation under Section 32(1)(iia).4. Disallowance of Provision for Leave Encashment under Section 43B(f).5. Disallowance of Expenditure on Departmental Meetings, Official Lunch & Dinner, and Company Guests.6. Disallowance of Expenditure on Ceremonial Expenses, Other Staff Welfare Expenses, and Cultural Activities.7. Disallowance under Other Miscellaneous Expenses.8. Disallowance under Prior Period Adjustments.9. Disallowance of Amounts Written Off in Respect of Claims/Receivables.10. Disallowance under Section 43B for Electricity Duty.11. Disallowance of Management Development & Training Expenses under Section 40(a)(ia).12. Reopening of Assessment under Section 147.Detailed Analysis:1. Disallowance under Peripheral Development Expenses:The assessee claimed peripheral development expenses, which the AO disallowed, stating they were not incurred wholly and exclusively for business purposes. The CIT(A) partly sustained the disallowance. The Tribunal remitted the issue to the AO to verify the nature of the expenditure incurred and decide on merits.2. Disallowance under Section 40(a)(ia) for Wheeling Charges:The AO disallowed wheeling charges paid to GRIDCO for non-deduction of TDS under Section 194C. The CIT(A) confirmed this disallowance. The Tribunal remitted the issue to the AO to verify if GRIDCO had offered the income in their assessment, thereby not treating the assessee as 'assessee in default.'3. Disallowance of Additional Depreciation under Section 32(1)(iia):The AO disallowed the additional depreciation claim due to the absence of acquisition dates for new plant and machinery. The CIT(A) upheld this disallowance. The Tribunal restored the matter to the AO for fresh adjudication, following its earlier decision in the assessee's favor.4. Disallowance of Provision for Leave Encashment under Section 43B(f):The AO disallowed the provision for leave encashment, which the CIT(A) confirmed. The Tribunal remitted the issue to the AO to re-examine and allow the claim, referencing a similar decision in the case of Baitarani Gramya Bank.5. Disallowance of Expenditure on Departmental Meetings, Official Lunch & Dinner, and Company Guests:The AO disallowed 30% of the claimed expenses, which the CIT(A) sustained. The Tribunal, following its earlier decision, directed the AO to delete the disallowance, recognizing the expenses as incurred wholly and exclusively for business purposes.6. Disallowance of Expenditure on Ceremonial Expenses, Other Staff Welfare Expenses, and Cultural Activities:The AO disallowed 30% of the claimed expenses, which the CIT(A) reduced. The Tribunal directed the deletion of the disallowance, following its earlier decision that such expenses were wholly and exclusively incurred for business purposes.7. Disallowance under Other Miscellaneous Expenses:The AO disallowed 20% of the claimed expenses. The CIT(A) confirmed this. The Tribunal restricted the disallowance to Rs. 10,00,000, following its earlier decision.8. Disallowance under Prior Period Adjustments:The AO disallowed prior period expenses, which the CIT(A) confirmed. The Tribunal remitted the issue to the AO to verify the claims and grant set-off of prior period income against expenses.9. Disallowance of Amounts Written Off in Respect of Claims/Receivables:The AO disallowed the write-off of claims/receivables, which the CIT(A) partly sustained. The Tribunal remitted the issue to the AO for fresh examination.10. Disallowance under Section 43B for Electricity Duty:The AO disallowed the electricity duty deposited in a designated bank account as per the High Court's direction. The CIT(A) confirmed this. The Tribunal upheld the disallowance, following its earlier decision in the assessee's case.11. Disallowance of Management Development & Training Expenses under Section 40(a)(ia):The AO disallowed the expenses for non-deduction of TDS. The CIT(A) directed the AO to verify the information furnished by the assessee and recompute the disallowance. The Tribunal upheld the CIT(A)'s direction.12. Reopening of Assessment under Section 147:The assessee contested the reopening of the assessment, which the CIT(A) upheld. The Tribunal did not specifically address this issue, focusing on the disallowances made in the reassessment proceedings.Separate Judgments:The Tribunal delivered a common judgment for the cross appeals and cross objections, addressing each issue comprehensively and remitting several issues back to the AO for fresh adjudication.