Income Tax Appellate Tribunal - Raipur
Rashmi Sponge Iron And Power Industries ... vs Dy. Commissioner Of Income Tax, ... on 29 October, 2024
आयकर अपीलीय अिधकरण, रायपु र ायपीठ, रायपुर
IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR
ी रिवश सूद, ाियक सद एवं ी अ ण खोड़िपया, लेखा सद के सम ।
BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
(ITA No. 406/RPR/2024)
(Assessment Year: 2018-19)
Deputy Commissioner of Income Tax, v Rashmi Sponge Iron and Power Industries
Raipur s Pvt. Ltd., 90, Industrial Growth Centre,
Phase-II, Siltara, Raipur
PAN: AAACJ2311G
(ITA No. 409/RPR/2024)
(Assessment Year: 2018-19)
Rashmi Sponge Iron and Power Industries v Deputy Commissioner of Income Tax,
Pvt. Ltd., 90, Industrial Growth Centre, s Circle-1(1), Raipur
Phase-II, Siltara, Raipur
PAN: AAACJ2311G
(Cross Objection No. 17/RPR/2024)
(Assessment Year: 2018-19)
Arising out of ITA No. 406/RPR/2024
Rashmi Sponge Iron and Power Industries V Deputy Commissioner of Income Tax,
Pvt. Ltd., 90, Industrial Growth Centre, s Raipur
Phase-II, Siltara, Raipur
PAN: AAACJ2311G
(अपीलाथ /Applicant) : ( यथ / Respondent)
िनधा रती क ओर से /Assessee by : Shri B. Subramanyam, CA
राज व क ओर से /Revenue by : Shri S. L. Anuragi, CIT-DR,
सुनवाई क तार ख / Date of Hearing : 28.10.2024
घोषणा क तार ख/Date of Pronouncement : 29.10.2024
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ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024
Rashmi Sponge Iron and Power Industries Pvt. Ltd.
आदे श / O R D E R
Per Arun Khodpia, AM:
The captioned cross appeals filed at the instance of revenue and assessee along with a cross objection by the assessee, directed against the order of Commissioner of Income Tax , NFAC, Delhi [in short "Ld. CIT(A)" ], u/s 250 of the Income Tax Act, 1961 [in short "The Act"], for the AY 2018-19, dated 09.07.2024. Which in turn arises from the order of Assessing Officer, National E-assessment Centre, Delhi, [in short "Ld. AO"], u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act, dated 06.04.2021.
2. The grounds of appeal raised in the aforesaid respective appeals are extracted as under:
ITA 406/RPR/2024 (Revenue's Appeal)
1. "Whether on the facts and in the circumstance of the case, and in law, the Ids CIT (A) was justified in deleting the additions of Rs. 14,25,104/- made on account of disallowances u/s 14A of the Income Tax Act, 1961?"
2. Whether on the facts and in the circumstance of the case, and in law, the Id. CIT (A was justified in partly deleting the additions of Rs. 5,28,284/- out of total disallowances of Rs. 10,99,712/- on account of balances written off/written back?"
3. "Whether on the facts and in the circumstance of the case, and in law, the Id.
CIT(A) was justified in deleting the additions of Rs. 8,47,248/- made on account of disallowances of Commission and Brokerage?"
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ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
4. Whether on the facts and in the circumstance of the case, and in law, the Id.
CIT(A) was justified in deleting the additions of Rs. 42,04,475/- made on account of disallowance of prior period expenses?"
5. Whether on the facts and in the circumstance of the case, and in law, the Id.
CIT(A) was justified in deleting the additions of Rs. 2,21,33,250/- made on account of disallowances of Interest u/s 36(1)(iii)?"
6. Whether on the facts and in the circumstance of the case, and in law, the Ide CIT(A) was justified in deleting the additions of Rs. 60,00,000/- made on account of disallowance of Freight outward, Loading & unloading expenses?"
7. "Whether on the facts and in the circumstance of the case, and in law, the Id.
CIT(A) was justified in deleting the additions of Rs. 1,71,047/- made on account of disallowances of excess depreciation?"
8. The order of Id. CIT(A) is not accordance with laws and facts of the case.
9. Any other ground which may be adduced at the time of hearing.
ITA 409/RPR/2024 (Assessee's Appeal)
1. The Ld. CIT Appeals erred in confirming the addition made by Ld. AO on account of payment of Interest of Rs. 1,58,922/- on payment of Entry Tax, Rs. 3, 73, 123/- on Sales Tax, Rs. 3,25,458/- on Central Excise, Rs. 3,22,634/- on Service Tax, Rs. 41,986/- on TCS and Rs. 54,709/- on TDS having TOTAL IQs. 12,76,832/- on delay payment by considering the same of being penal nature, not being in compensatory nature incurred under commercial expediency. The addition made by Ld. AO is highly arbitrary, unwarranted and unjustified on the facts and in the circumstance of the case may kindly be deleted.
2. That the appellant craves leave to add, alter or amend the ground either before or at the time of hearing.
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ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
CO No. 17/RPR/2024 (Assessee's CO)
1. On the facts and in the circumstances and in law, the Ld. CIT(Appeals) has rightly and justified in deleting the addition of Rs. 14,25,104/- made on account of disallowance u/s 14A of the Income Tax Act, 1961.
2. On the facts and in the circumstances and in law, the Ld. CIT(Appeals) has rightly and justified in partly deleting the addition of Rs. 5,28,284/- made out of total disallowances of Rs. 10,00,712/- on account of balances written off/written back.
3. On the facts and in the circumstances and in law, the Ld. CIT(Appeals) has rightly and justified in deleting the addition of Rs. 8,47,248/- made on account of disallowances of Commission and Brokerage.
4. On the facts and in the circumstances and in law, the Ld. CIT (Appeals) has rightly and justified in deleting the addition of Rs. 42,04,475/- made on account of disallowances of Prior Period Expenses.
5. On the facts and in the circumstances and in law, the Ld. CIT(Appeals) has rightly and justified in deleting the addition of Rs. 2,21,33,250/- made on account of disallowance of Interest u/s 36(1)(iii) of the Income Tax Act, 1961.
6. On the facts and in the circumstances and in law, the Ld. CIT(Appeals) has rightly and justified in deleting the addition of Rs. 60,00,000/- made on account of disallowances of Freight outward, Loading & Unloading expenses.
7. On the facts and in the circumstances and in law, the Ld. CIT(Appeals) has rightly and justified in deleting the addition of Rs. 1,71,047/- made on account of disallowances of excess depreciation.
3. Brief facts of the case, as stated are that the assessee is a resident limited company, engaged in the manufacturing and selling of Sponge Iron, MS Ingots & Power. The case of assessee was selected for complete scrutiny under the E- assessment scheme, 2019. During the assessment proceedings necessary submissions have been made by the assessee. After deliberating with the material 5 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
available and through the submissions of assessee, Ld. AO had enhanced the declared return income of assessee for Rs. 2,78,82,438/-, by making various additions / disallowances, aggregating to Rs. 3,83,85,611/-, accordingly, the taxable income of the assessee was determined and computed at Rs. 6,62,68,049/-.
4. Aggrieved with the aforesaid additions / disallowances, assessee preferred an appeal before the Ld. CIT(A), wherein the appeal of assessee is partly allowed, but with substantial relief by vacating the additions / disallowances made by the Ld. AO.
5. Being dissatisfied with the decision of Ld. CIT(A) in granting various reliefs by way of deleting the addition / disallowances made by the Ld. AO, the revenue had carried the matter further by filing of the instant appeal before this tribunal, which is under consideration under ITA No.406/RPR/2024.
6. In support of the order of Ld. CIT(A), the assessee herein have filed a cross objection in CO No. 17/RPR/2024 against the appeal (ITA 406/RPR/2024) filed by the revenue. The assessee have also filed a cross appeal in ITA No. 409/RPR/2024 to challenge the order of Ld. CIT(A) qua the additions / disallowances to the extent sustained by him.
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7. Since, the aforesaid appeals and cross objections are arising out of the impugned order, having common and interconnected issues therein, therefore, these appeals are considered to be heard and decided together under this common order.
8. First, we shall be taking up the appeal of the revenue (ITA 406/RPR/2024), for which our adjudications towards their ground wise grievances are as under:
9. Ground No. 1: Disallowances u/s 14A for Rs. 14,25,104/-
On this issue, in the assessment order Ld. AO had observed that the assessee has made investment in equity, eligible of earning exempt dividend income. He applied provisions of Rule 8D of the I.T. Rules, 1962 and have computed the amount of disallowance.
9.1 As the matter was assailed before Ld. CIT(A), wherein after giving a thoughtful deliberation on the observations of the Ld. AO, arguments and submissions by the appellant and relevant judicial pronouncements Ld. CIT(A), have decided the issue in favour of the assessee with the following observations:
6.2.4 Conclusion:
6.2.4.1 As per Section 14A of the Act r.w. Rule BD of Income-tax Rules, 1962, this provision can be applied by AO only if he is not satisfied with the claim 7 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
of the taxpayer. It is noted that the AO fails to specifically mention why he is not satisfied with claim of Appellant.
6.2.4.2 The AO seem to have erroneously stated in the Final assessment order that the investments made by the company are from the cash credit account maintained. This contention is incorrect and only on the assumptions of the AO without any corroborating evidence. Whereas the Appellant has correctly explained the fund flow and has submitted that the investments were made out of capital &free reserves.
6.2.4.3 Further, the Circulars issued by the CBDT are for the interpretational use of the Income-tax Authorities and are binding on the officers of the department but not on the tax-payers. They are not more than interpretation of taxing provisions by the Board itself. Circulars contrary to provisions of law have no existence under the law. When a matter is sub- judice, any interpretation by way of department circular shall give way to the judicial interpretation by the Hon'ble Supreme Court of India. 6.2.4.4 Further, I place my reliance on Hon'ble Gujarat High Court in the case of CIT vs. Cortech Energy P. Ltd. (2015) 372 ITR 97 (Gujarat) where it was held that when there is no claim for exempt income, Section 14A would have no application.
6.2.4.5 Also, Hon'ble Delhi High Court in the case of CIT Vs. Holcim India P. Ltd. (2014) 90 CH 81 (Delhi) has held that where no dividend income was earned by Appellant, disallowance u/s. 14A is not warranted. 6.2.4.6 Further the Balance Sheet of the Appellant reveals that the availability of interest free funds in the form of Share Capital and Reserves and Surplus were much more than the investment held by the Appellant. On this, the Hon'ble Delhi Tribunal in the case of M/s Interglobe Enterprises Ltd. v. DCIT (ITA No.1362 & 1032/DEL/2013) held that, Appellant had utilized interest free funds for making fresh investments and that too into its subsidiaries which were not for the purpose of earning exempt income but for strategic purposes only. No disallowance of interest is required to be made under rule 81) (i) & BC) (ii) as no direct or indirect interest expenditure has incurred for making investments. Strategic investment has to be excluded for the purpose of arriving at disallowance under Rule 3D
(iii).
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6.2.5 Accordingly, Ground No. 1 is allowed.
9.2 On this issue, Ld. CIT-DR, Shri S. L. Anuragi, have strongly supported the order of Ld. AO.
9.3 On the contrary, Shri B. Subramanyam, Chartered Accountant (CA), Authorized Representative of the assessee have submitted that the issue is rightly adjudicated by the Ld. CIT(A), therefore, have placed his reliance on the order of Ld. CIT(A) and placed his reliance on various judgments on the issue with the request to uphold the findings of First Appellate Authority.
9.4 We have considered the rival submissions, perused the material available on record, and the judicial pronouncements relied upon to decide the issue. The issue regarding disallowance u/s 14A has been discussed and deliberated by this tribunal and have concluded that in a case where the assessee has not earned any exempt income during the relevant year, no disallowance u/s 14A can be made. Our view is duly supported by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Chettinad Logistics Pvt. Ltd. (2018) 257 Taxmann 2 (SC) and in the case of Pr. CIT Vs. Oil Industries Dev. Board, 104 CCH 156 (SC). In present case, on perusal of the order of Ld. AO, it is discernible, as recorded by the Ld. AO in para 3.1 of the assessment order that the assessee in present case have not earned any exempt 9 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
income during the year under consideration. On perusal of the Audited Financial Statement of the assessee company also as per note 18 & 19 forming part of the Audited Proft & Loss Statement (Available at page no. 404 of the Assessee's PB), it is evident that the assessee have not generated any exempt income during the year. Under such facts and circumstances, Ld. CIT(A) had rightly deleted the addition, therefore, we, without hesitation, subscribe to the decision of Ld. CIT(A) in affirmative and confirm his finding to delete the addition of Rs.14,25,104/- made u/s 14A by the Ld. AO. In result, Ground No. 1 of the revenue raised against the settled principle of law, stands dismissed.
10. Ground No. 2: Disallowance on account of balances written off / written back for Rs. 10,99,712/-, partly deleted by the Ld. CIT(A) to the extent of Rs. 5,28,284/-.
During the assessment proceedings, Ld. AO had disallowed the expenditure debited by the assessee in its profit & loss account under the head "Balances Written off/ Written back" aggregating to Rs. 10,99,712/-. The amounts so debited includes (i) Keyman Insurance- Rs. 6,00,000/-, (ii) Prashant Associates - Rs. 2,17,417/- (iii) HDFC Limited - Rs. 1,67,945/- and (iv) Entry Tax receivable -Rs. 1,42,922/- . The addition was made by the Ld. AO, being dissatisfied with the contentions of the assessee that the balances were very old and non-recoverable, therefore, the same are required to 10 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
be write off. It is also the contention that the accounts of the assessee were finalized as per applicable law, the same has been assured by the qualified Chartered Accountant. It was the allegation by Ld. AO that the appellant was not able to clarify the fact that such expense are credited in P&L Account during any previous year or not.
10.1 When the issue is assailed before the Ld. CIT(A), Ld. CIT(A) after giving a thoughtful deliberation on the observations of the Ld. AO, arguments and submissions by the appellant and have decided the issue partly in favour of the assessee with the following observations:
6.3.3 Conclusion:
6.3.3.1 Based on perusal of arguments of the AO and the submissions of the Appellant, wrt the 4 balances that are written-off it is held that:
Keyman Insurance --This amount pertains to preceding years and in those years the said expense was recorded as Keyman Insurance in the balance sheet as an asset. Deduction could not be claimed in the Profit and Loss account as it was considered in current asset taking into consideration its maturity period and since in the year under consideration, no such claim remains to be made in view of the death of the concerned director in whose name such an insurance was effected, the relevant amount is correctly written off.
However, as per the provisions of the Act, keyman insurance is a deductible expenditure in the year in which it is incurred. Therefore, at first place this expense should have been debited to the P&L a/c in the year of occurrence. Claiming it now, as a write off, would be 11 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
claiming a prior-period expense, which is not allowable under the Act. Accordingly, this is not allowed.
• Entry Tax Receivable -- The Appellant has provided exemption certificate based on which it was expecting a refund. Therefore, the Appellant had reasonable cause of expecting to off-set this expense against refund, which could not happen after the introduction of GST law. Therefore, considering the business practice and accounting policies followed by the appellant, this is allowed.
• Prashant Associates --Regarding this, the Appellant stated that Prashant Associates did not entertain the refund request of the Appellant on raising objection regarding bad quality of goods supplied. This being a normal business loss incurred by the appellant in ordinary course of its business, the same is allowed.
• HDFC Bank From the sanction letter issued by the bank, it can be observed that purpose: of loan was working capital and interest calculation supports the amount debited by the bank. Even otherwise it was allowable had the Appellant debited it under the head Bank Interest/Charges. Hence, it is allowed.
6.3.4 Accordingly, Ground No. 2 is partially allowed.
10.2 Ld. CIT-DR representing the revenue have placed his reliance on the order of Ld. AO, he submitted that the decision of Ld. CIT(A) is not acceptable on merits as the assessee failed to furnish details of expenses, ledger accounts, copy of bills / invoice for verification during the assessment proceedings.12
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
10.3 On the contrary, Ld. AR of the assessee, have submitted that the issue has rightly been adjudicated by the Ld. CIT(A), therefore, requested to uphold the same. He further submitted that Ld. CIT(A) had disallowed the claim of assessee for Keyman Insurance amounting to Rs. 6,00,000/- under the head "Balances written off/ written back", the same is accepted by the assessee and had not assailed any further. Apropos, other 3 disallowances Ld. AR reiterated assessee's submissions before the Ld. CIT(A), the same are culled out for better appreciation of the facts:
• Entry Tax Receivable -- The Appellant has provided exemption certificate based on which it was expecting a refund. Therefore, the Appellant had reasonable cause of expecting to off-set this expense against refund, which could not happen after the introduction of GST law. Therefore, considering the business practice and accounting policies followed by the appellant, this is allowed.
• Prashant Associates --Regarding this, the Appellant stated that Prashant Associates did not entertain the refund request of the Appellant on raising objection regarding bad quality of goods supplied. This being a normal business loss incurred by the appellant in ordinary course of its business, the same is allowed.
10.4 We have considered the rival submissions, perused the material available on record, and the orders of authorities below.
10.5 Admittedly, the entry tax receivable for Rs. 1,42,922/-, which could not be utilized by the assessee in earlier years, and the same is not eligible for utilization after the GST Act has implemented with effect from 01.07.2017 in the relevant AY. Under such a scenario, as the assessee has no option to utilize this amount under the new 13 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
GST regime, therefore, it was necessary for the assessee to Write back such balance, which remains unrecoverable at any later stage.
10.6 Apropos, the amount of Rs. 1,67,945/- which is charged by HDFC Bank from the assessee on 17.04.2017 and relates to the year under consideration, however, the amount was inadvertently booked under the head "Balances written off/ written back", instead of debiting the same to bank interest / charges account. Ld. CIT(A) had observed that such expenses are even otherwise allowable as the same represents interest paid towards working capital loan during the relevant year, hence allowed. 10.7 Regarding amount paid to Prashant Associates of Rs. 2,17,417/-, it was the submission by the assessee that amount has been reversed due to dispute between the party and the amount paid to the said party which has been claimed as refund on account of inferior supply of material, but on refusal by the said party the same is not recoverable now. Ld. CIT(A) on this issue had treated this transaction as a normal business transaction, as the refund requested by the assessee from M/s Prashant Associates on account of bad quality of material supplied was not entertained by him. 10.8 After giving a thoughtful consideration to the aforesaid facts, we are of the strong conviction that the assessee had, though committed certain accounting mistakes but 14 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
at the end have rightly claimed the expenditure in P&L Account. We, thus, find merits in the conclusion drawn by the Ld. CIT(A) and in absence of any further contrary information/ evidence or material dislodging such conclusions of Ld. CIT(A) by the revenue, are of the considered view that the decision of Ld. CIT(A) holds substance for concurrence, thus, we approve the same. Resultantly, ground no. 2 of the revenue being devoid of merits, stands dismissed.
11. Ground No. 3: Disallowance of Commission and brokerage Rs. 8,47,248/- Ld. AO, on this issue have disallowed the expenditure booked by the assessee under the sub head "Sales Commission & Brokerage" to major head "Other Expenses". The details of disallowance made are as under:
Amount in Name of Party Narration Rs.
Shree Ganpati Steels being invoice no. 54 dt. 31.03.17 commission vision & 165915/-
(Kushal Dodeja) brokerage charge for the period 01.01.17 to 31.03.17 bill dt. 31.03.17 for brokerage commission of sponge iron Gaurav Agrawal 681333/-
from period 01.04.2016 to 31.03.17 Total 847248/-
11.1 On this issue, according to the Ld. AO, the assessee was unable to furnish any satisfactory explanation. Before Ld. CIT(A), it was the submission by assessee that the liability of commission which pertains to earlier years but was crystallized during the year, therefore, the same is allowable. To support its contentions, assessee placed 15 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
his reliance on the order of ITAT, Chandigarh in the case of Kamla Retail Ltd. vs Addl. CIT, reported in (2022) 140 taxmann.com 343 (Chand. Trib.). 11.2 Ld. CIT(A) had decided the issue in favour of the assessee, with the following observations:
6.4.5 Conclusion:
6.4.5.1 I have perused the details submitted by the Appellant in rejoinder dated 26.06.2024, the audited financial statement, the explanations & arguments of AO as well as that of Appellant.
6.4.5.2 It is understood that the commission amount is agreed upon by the appellant and the commission agent and the payment is not made mandatorily on monthly basis. It can be seen from the Commission Bill of Gaurav Agarwal that bill was received on 31 July 2017, however, at the end of the bill, the final payable amount was agreed between the parties and then the payment is made in August 2017. Similar pattern is noticed in ledger of Shree Ganpati Steels.
6.4.5.3 Further, it is pertinent to note that the tax auditor has also not classified the said expenditure as prior period item. Also, the case law relied on by the Appellant in the case of Kamala Retails (supra) is also relevant ot eh facts of the Appellant's case. Further, it is not doubted by the AO that the expenses were not incurred by the Appellant for its business purposes.
6.4.5.4 In case of BearingPoint Property Services (P) Ltd. vs. Dy. CIT [2014] 35 IT R 177 (Bang 'B'-Trib), it was held that in the light of the admitted position that the expenditure in question was wholly and exclusively for the purpose of business and that the same was genuine, the fact that the expenditure relates to an earlier period could not be a ground to deny the deduction, especially 16 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
when factually the crystallization of liability during the previous year had not been disputed.
Therefore, the expenses claimed by the assessee in that were directed to be allowed, even though they were related to prior period.
6.4.5.5 In case of Dy. ClT vs. Enercon India Ltd. [2016]48 ITR (Trib) 362 (Mum 'E - Trib), it was held that where expenses pertained to prior period but bills were received during the impugned assessment year, such expenses were to be treated as current year expenses.
6.4.5.6 Accordingly, Ground No. 3 is allowed.
11.3 Ld. CIT-DR representing the revenue have placed his reliance on the order of Ld. AO, he submitted that the decision of Ld. CIT(A) is not acceptable on merits as the assessee failed to furnish details / explanations before the Ld. AO. The assessee was following mercantile system of accounting in which he is obliged to claim the expenses in the particular year to which it pertains. There was no reason as to why the assessee could not claim the expenditure in preceding year AY 2017-
18. 11.4 On the contrary, Ld. AR of the assessee have submitted that the issue is rightly adjudicated by the Ld. CIT(A), therefore, requested to uphold the same. It is the submission that the bills / invoices in respect of these invoices are dated 31.03.2017 and pertains to the earlier previous year but the same are received by the assessee during the current year. It is further submitted that such expenses are 17 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
actually crystallised only during the year under consideration therefore, following the decision of Kamla Retail Ltd. (supra), the entire expenditure is allowable in the current year.
11.5 We have considered the rival submissions, perused the material available on record and case laws referred to in support of the contentions. On perusal of the facts on record in the form of account ledger, commission bill, TDS certificate in Form 16A, it can be observed that the bills were received by the assessee after the start of relevant FY and also the payments were made in the month of August, 2017. Even the TDS was deducted in the April to June & July to September quarter of the relevant year. All such evidence along with assessee's submission that 'C' Form against the sale were received from the commission agents, on receipt of which the sale is being considered as materialized, in the year under consideration. Under such circumstances, we find material substance in the conviction of the Ld. CIT(A) that the expenditure were crystallized during the relevant year. We, thus, in terms of our aforesaid observations approve the view taken by Ld. CIT(A), accordingly, uphold the same. Resultantly, we decline to accept the contentions of revenue raised under Ground no. 3 of the present appeal.
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12. Ground No. 4: Disallowance of prior period expenses of Rs. 42,04,475/- On perusal of the schedule of other expenses, it is observed by the Ld.AO that the assessee had debited a sum of Rs. 42,04,475/- towards prior period expenses. As per details furnished by the assessee, it is found that these expenses pertain to late payment, interest / penalty of TDS, TCS, Entry Tax, Sales Tax and Excise of the previous year. In explanation, it is submitted by the assessee that these prior period expenses were claimed for demand raised on account of late payment, interest / penalty on the above taxes, undisputedly, all these transactions were made through banking channel and for business purpose. It is further submitted except payment of sales tax, all the other payments were made in the impugned FY, thus, allowed u/s 43B of the Act. The amount of sales tax was made in the earlier year, since the assessee was in appeal against such demands imposed by the respective department, therefore, the same was accounted for as an asset in the books of assessee, subsequently, as the assessee's appeal was dismissed so the amount paid kept as an asset become non-recoverable and the said asset become unreal, therefore, the amount so booked treating the same as asset in the balance sheet by the assessee was to be reversed and to be written off. Such contentions of the assessee could not find favour by the Ld. AO, therefore, the addition of Rs. 42,04,475/- was made.
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12.1 The matter was carried before the Ld. CIT(A), wherein Ld. CIT(A) had considered the observations of the Ld. AO as well as the submissions of the assessee on the facts of the issue. After deliberations the issue is decided in favour of the assessee with the following observations:
6.6.3 Conclusion:
6.6.3.1 I have perused the details/ explanations submitted by the Appellant as well as the arguments of AO. I understand that the Appellant stated that except sales tax payment of INR 36.35 lakhs, all the other disputed expenses were paid in the impugned financial year, thus allowable under section 43 B of the Act.
6.6.3.2 Regarding recognition of payment of sale tax demand as an asset in balance sheet, during the assessment proceedings, the Appellant had submitted before the AO that the amount was paid in consequence of losing its appeal in AY 2017- 18. However, since further appeal was filed by the Appellant, such payment was carried forward as an asset in the balance sheet. Subsequently, during the impugned assessment year, considering the financial prudence, such asset was "written off' since no further appeal against such payment of demand of sales tax could be made during the year under consideration and, consequently, though the payment was not made during the impugned assessment year, the assets was finally written off during the impugned financial year in line with expert opinion and accounting prudence. Thus, the same was allowable in the current assessment year.
6.6.3.3 It is noted that the said expenditure was paid in FY 2016-17 and that in FY 2017- 18Ähe asset was written-off in P&L A/c on account of losing the appeal in FY 2017-18 and on deciding that no further appeal will be made.
6.6.3.4 It is evident that the Appellant had valid reason for not claiming the expense in the preceding FY and it is not that the said expenditure is no genuine and not incurred for the purposes of business of the Appellant.
6.6.3.5 Accordingly, Ground No. 5 is allowed.20
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
12.2 Aggrieved with the aforesaid conclusion, now the department is an appeal assailing the issue that Ld. CIT(A) was not justified in deleting the addition on account of disallowance of prior period expenses claimed by the assessee. 12.3 Ld. CIT-DR on this issue has vehemently supported the order of Ld. AO and have submitted that the assessee was unable to furnish satisfactory explanation along with supporting documents to substantiate that why the expenditure was not claimed during the period to which it pertains. As the assessee was following mercantile system of accounting, therefore, in terms of recognized accounting principles, it was obligatory on the assessee to claim the expenditure in a relevant period, there was no reason on account of which such expenses could be allowed in the year under consideration.
12.4 Ld. AR of the assessee on the other hand, relied on the order of Ld. CIT(A), have submitted that the major expenditure included in prior period expenses disallowance pertains to sales tax demand paid by the assessee in earlier year but not claim as an expenditure whereas shown as an asset in the balance sheet for the reason that the assessee has loose one appeal and has filed a further appeal. However, during the year under consideration, considering the financial prudence, as no further appeal against such payment of sales tax department could be made, 21 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
therefore, the asset so created was written off. The other payments made by the assessee are not paid in the earlier years but are paid in the year under consideration, therefore, the same are covered by provisions of section 43B of the Act and accordingly, are allowable expenditure.
12.5 We have considered the rival submissions and perused the material available on record. In present case, admittedly, the genuineness of the expenditure are not doubted by the revenue. The only grievance raised by the department is that the expenditure claimed by the assessee as prior period expenses pertains to earlier year, therefore, in absence of any plausible explanation by the assessee the same should be disallowed, as the assessee was following mercantile system of accounting. Herein, on perusal of the order of authorities below and explanations furnished by the assessee, we find force and merits in the contentions of the assessee qua the sales tax demand paid and recognized as an asset in the balance sheet of the assessee, stating the reason that the assessee was in appeal. However, during the year under consideration, since no further appeal against such payment of demand of sales tax could be made, therefore, the asset created became redundant, thus, was to be written off. Under such circumstances, the asset so created for sales tax advance was written off and debited as prior period expense. As per factual finding by the Ld. CIT(A), the aforesaid payments were made during 22 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
the FY 2016-17 and 2017-18 and the asset was written off in P&L A/c on account of dismissal of appeal of the assessee in the FY 2017-18 (AY 2018-19), accordingly, the issue assailed by the assessee in the said appeal challenging the demand raised by sales tax department has reached to the finality, as no further appeal could have been made. Under such circumstances, we approve the findings of Ld. CIT(A) to the extent of Rs. 36,35,984/- qua the sale tax demand.
12.6 For remaining amounts paid by the assessee towards Entry Tax of Rs. 5,47,892/- for FY 2011-12, Excise Audit revised expenses of Rs. 1049/- (FY 2014-
15) and Prior period tax of Rs. 19,550/- (FY 2013-14), since nothing is discernible from the records that such expenses are booked in the years to which they relate, also it could not be substantiated with any cogent evidence that such expenditure emerged or crystallized during the impugned AY 2018-19, therefore, we cannot find fault in the findings of Ld. AO, whereas there was no specific conclusion drawn for such expenses by the Ld. CIT(A). In view of such facts and circumstances, we are of the considered view that the claim of assessee for payment of prior period expenditure towards Entry Tax of Rs. 5,47,892/- for FY 2011-12, excise audit revised expenses of Rs. 1049/- (FY 2014-15) and prior period tax of Rs. 19,550/- (FY 2013-
14) aggregating to Rs. 5,68,491/- cannot be accepted as per the provisions of section 43B of the Act. Consequently, we sustain the addition of Rs. 5,68,491/- and direct to 23 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
vacate the remaining addition, in terms of our observations. Resultantly, we partly allowed Ground No. 4 of the department.
13. Ground No. 5: Addition of Rs. 2,22,33,250/- u/s 36(1)(iii) on account of disallowance of interest The aforesaid disallowance was made by the Ld. AO, after deliberations to the facts on record, submissions of the assessee and with due consideration to certain case laws relied upon. The exhaustive discussion in the assessment order qua the issue is culled out hereunder for the sake of completeness of facts:
8. Perusal of the statement of P&L reveals that a sum of Rs.833.44 lakhs has been claimed as finance cost which includes interest on working capital loan / mortgage loan, bank charges & other finance charges. As per the balance sheet, the assessee has shown long-term borrowing of Rs. 2029.99 lakhs and short-term borrowings of Rs 3772.25 lakhs. Further perusal of the loans & advances given by assessee reveals the following information: -24
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
As on 31.03.2018 As on 31.03.2017 Sl.
Name (amount in (amount in
No.
lakhs) lakhs)
1 Agarwal Sponge Ltd. Rs. 534.32 Rs. 715.89
2 Amal Agarwal Rs 17.86 Rs. 11.76
3 Ankur Agarwal Rs. 70.14 Rs. 31.34
4 Rashmi Ispat Pvt. Ltd. Rs. 169.95 Rs. 169.65
5 See Saw Iron & Steel Pvt. Ltd. Rs. 7.78 Rs. 3.66
6 Shri Kailash Chand Agrawal Rs. 265.61 Rs. 240.72
7 Shri Manoj Kumar Agrawal Rs. 403.66 Rs. 311.19
8 Smt. Rashmi Devi Agrawal Rs. 186.24 Rs. 63.38
9 Smt. Essa Agrawal Rs. 6.24 Rs. 8.60
10 Smt. Rajni Devi Agrawal Rs. 128.17 Rs. 111.30
11 Wamica Agarwal Rs. 4.80 Rs. 4.80
12 Other related parties Rs. 59.09 Rs. 163.02
8.1 The aforesaid loans & advances have been given to the related parties on which the assessee has not charged any interest on these advances. In view of this, the assessee was showcaused to justify the payment of interest and also as to why the proportionate interest may not be disallowed vide Notice u/s 142(1) dated 27.01.2021. Thereafter, another opportunity was provided to the assesse vide Notice u/s 142(1) dated 22/02/2021. In response to same. the assessee has furnish its reply through e-filing proceedings on 26/02/2021, which IS reproduced as under:-
QUOTE In continuation to our earlier submission filed from time t time with respect to the interest not charged with respect to the Long term and short term loan and advances given, it is explained as under:
• That out of the total long term loans/advances given amounting to Rs. 99,20, 560/- in comparison to the preceding year of Rs. 1,55,64,520/-, the main advance/deposit is on account of security deposits to M/S CSPDCL (Electricity Board) amounting to Rs. 94, 76, 005/- and remaining other to other departments. • That on comparing the short-term loans and advances with the preceding year as under:25
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
Your honour will find that, during the year under consideration out of the total increase of 15 crores approximately, Rs. 13 crores were increased in the head of advance to suppliers of raw materials and other materials which are on commercial term and no interest in general trade practice is chargeable, Rs. 75 lakhs approx for the advance for capital goods and 15 lakhs with revenue authorities etc. • Secondly, Rs. 18 lakhs approximately was also increased in the head of advance to related patties out of free reserve.
• That, all the long term and short term loans and advances given are purely for business expediency.
• That, on going through the audited financial statement of your assessee company your honour will find that, all the loans and advances in the questioned point is out of the capital and reserve fund utilised for the business expediency out of curtailing the inventories and trades receivables during the year under consideration. • Turnover on sale of finished products during the year under consideration is increased for Rs. 167.33 crores in comparison to the preceding year of Rs. 125.77 crores whereas the overall liability is decreased from 161.09 crores in the preceding year to Rs. 148.98 in the year under consideration.
• That, on considering the overall view your honour will certainly find that, there is better management of funds in your assessee company leads to earn more viable profit rather diversification of fund. In view of the above, your honour is requested not to take any adverse inference in this regard also.
• That on explaining the same it is also pertinent to mention here that, the advances given to the related parties were against the sale proceed agreement with the directors or their relative parties on their own propetties which were ought to be completed but duly utilised for the business purpose by your assessee company.26
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.27
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
On considering the overall view your honour will certainly find that, there is better management and utmost utilisation of funds for business purpose in your company leads to earn more viable profit rather diversification of fund.
In view of the above, your honour is requested not to take any adverse inference with respect to disallowance of proportionate interest u/s 36(1)(iii) and 37(1) of the IT Act in this regard.
UNQUOTE 8.2 The reply furnished by the assessee company has been considered but not found satisfactory in respect of Loans & advances given to its related parties. The assessee could not furnish any supporting documents in support of its contention that these advances were given for business 28 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
expediency. The assessee could not furnish copies of agreement for purchase of lands in support of its claim and also not clarified whether these agreement for purchase of lands have been materialized subsequent to the year under consideration. Further, the assessee also claimed that these loans and advances given out of capital and reserve. It is undisputed fact that on one hand, assessee is paying interest on its borrowal and on the other hand, no interest is being charged on the advances made to the related parties or to the sister concerns without any business expediency. The transaction has actually been carried out in the manner so as to avoid the provision of section 40A(2)(a) of the Income tax Act, 1961. But at the same time, there is no justification with assessee for utilizing the interest-bearing borrowed fund for advancing to sister concern without interest. Thus, the assessee is found to have passed on benefit to the related parties by way of advancing funds without charging any interest whereas the assessee is paying higher rate of interest on such borrowed funds. However, no justification other than the mentioned above has been furnished by assessee to prove any commercial expediency for advancing the aforesaid sum to the sister concerns.
8.3 The onus to prove that the borrowals have been fully utilized for the purpose of business is on assessee whereas in the instant case it can be seen that company's fund has been Utilized for making advances to its sister concerns either interest free or at a lower rate. The Hon'ble Punjab & Haryana High Court in the case of CIT vs Abhishek Industries Har.) has held that the stand that the onus of proving the nexus of funds available with the assessee with the funds advanced to the sister concerns without interest is on the revenue, is not correct. Section 36(1)(iii) provides for deduction of interest on the loan raised for business purposes. Once the assessee claims any such deduction in the books of account, the onus will be on the assessee to satisfy the Assessing Officer that whatever loans were raised by the assessee, the same were used for business purposes. If in the process of examination of genuineness of such a deduction, it transpires that the assessee had advanced certain funds to sister concerns or any other person without any interest, there would be very heavy onus on the assessee to be discharged before the Assessing Officer to the effect that inspite of pending terms loans and working capital loans on which the assessee is incurring liability to pay interest, there was justification to advance loans to sister concerns for non business purposes without any interest and, accordingly, the assessee should be allowed deduction of interest being paid on the loans raised by it to that extent. The only thing sufficient to disallow the interest paid on the borrowing to the extent the amount is lent to sister concern without carrying any interest for non business purpose would be that the assessee has some loans or other interest bearing debts to be repaid. In case, the assessee has some surplus amount which, according to it, could not be repaid prematurely to any financial institution, still the same is either required to be circulated and utilized for the purpose of business or to be invested in a manner in which it generates income and not that it is diverted towards sister concern free of interest. This would result in not presenting true and correct picture of the accounts of the assessee as at the cost being incurred by the assessee, the sister concern would be enjoying the benefits thereof. It cannot possibly be held that the funds to the extent diverted to sister concerns or other person free of interest are required by the assessee for the purpose of its business and loans to that 29 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
extent are required to be raised. The theory of direct nexus of the funds between borrowings of the funds and diversion thereof for non business purposes could not be subscribed to. Rather, there should be nexus of use of borrowed funds for the purpose of business to claim deduction U/s 36(1)(iii). (Emphasis supplied) 8.4 Here, I would also like to refer to section 36(1)(iii) of the Income-tax Act, 1961 which deals with the deduction on the amount of interest paid in respect of capital borrowed for the purposes of business or profession. It would be found from clause (iii) of sub-section (1) of section 36 of the Act that three conditions must be established by an assessee for getting the benefit under the aforesaid clause:
1. Interest should have been payable
2. There should be a borrowing, and
3. Capital must have been borrowed or taken for business purposes.
If the capital borrowed is not utilized for the purposes of the business, the assessee will not be entitled to deduction under this clause. In case, after having borrowed the capital for business purposes, the assessee gives the same to another person for his personal use or utilization, the assessee would not be entitled to claim deduction on the amount diverted for utilization for other purposes or by other persons. This question has been the subject matter of decisions by several High Courts. It is by now settled that an assessee cannot be entitled to claim deduction under clause (iii) of sub section (1) of section 36 of the Act on the amount which is not used for the purposes of business but is given to others for their personal use. Reference may kindly be made to the decisions in Milapchand R Shah v CIT [1965] 58 ITR 525 (Mad) and Roopchand Chabildass & Sons v. CIT [1967] 63 ITR 166 (Mad). The expression 'for the purpose of business' is wider in scope than the expression for the purpose of earning income, profit and gains- Madhav Prasad Jatia v. CIT [19791 118 ITR 200 (SC)/L.M. Thaparv. CIT [19881 173 ITR 577 (Cal.).
8.5 In the case of CIT v. Coimbatore Salam Transport Pvt. Ltd. (1966) 61 ITR 480, 487 (Mad.), it is held that the burden of proving that the money is borrowed had not been utilized for non business purposes is on assessee. In another case of Mir Mohd. Ali v. CIT (1960) 38 ITR 413, 418 (Mad.), their Lordship had observed that in order to deduct interest paid by the assessee on loans taken by him, it is for him to prove that each of the loans on which he paid interest in the accounting year was utilized for the purpose of his business. It is the view of various courts that where interest paid concerns, the borrowed money for business as we// as non business purposes, the claim may be disallowed in its entirety if no adequate material is adduced by the assessee to determine that portion of interest which pertains to business purposes [R. Dalmia v. CIT (1982) 133 ITR 169 (Del.), Indian Metals & Ferro Allows Ltd. v. CIT (1992) 193 ITR 344, 348 (Ori)]. Thus the primary onus lies on assessee to prove that the funds have been utilized for the purpose of business. In the instant case, it is company's funds which have been utilized for making advance either without interest or at a lower rate.
In this regard, I place further reliance in the case of Marolia & Sons. vs Commissioner of Income-Tax 129 ITR 475 (Alld), wherein it was held that in case of money borrowed by firm lent lent to partner for personal purposes without interest, the interest paid by firm on borrowed 30 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
money can be disallowed. The Hon'ble Allahabad High Court while deciding the similar issue in the Case CIT vs. H.R. Sugar Factory, 187 ITR 363 has held THAT "had this money been not advance to the directors, it was even available to the assessee for business purpose and to that extent it may not have been necessary to borrow from the banks. We are, therefore, of the opinion that the Income tax Officer was right in disallowing the difference of interest U/s 36(1)(iii) of the Income-tax Act, 1961 and that tribunals approach is not only superficial but to naive." Infact to this extent the case of S A Builders Ltd. vs. CIT (2007) 158 Taxman 74 (SC) is also applicable in the case of assessee since the assessee failed to prove that the said advance was made for commercial expediency.
Thus, in this case, the interest paid on borrowed fund to the extent of advancing those without interest or at a lower rate is not an allowable expenses U/s 36(1)(iii) since the borrowed fund is not used for the purpose of business. Thus, in this case, the interest paid on borrowed fund to the extent not utilized for the purpose of business and has been advanced for a purpose other than business, is not an allowable expenses U/s 36(1)(iii) of the Income-tax Act, 1961. Accordingly, the proportionate expenses claimed on account of interest paid on borrowals is liable to be disallowed U/s 36(1)(iii) of the Income-tax Act, 1961. 8.6 As per FAS-2019 guidelines issued by CBDT, a show-cause Notice along with Draft Assessment Order has also been issued to the assessee company on 25/03/2021 vide DIN No. ITBA/AST/F/143(3)(SCN)/2020-21/1031764041(1) proposing the above disallowance. In response to same, the assessee company has furnished its reply through e-filling account on 02/04/2021 which is reproduced as under:-
QUOTE
29. That under the said head of disallowance, your Honour has proposed disallowance of interest on borrowing o on the following grounds:
29.1 Advances has been made to related parties.
29.2 The advances have been made from borrowed funds while no interest has been charged morn the related parties.
29.3 Precedence laid down, by the hon'ble Punjab & Haryana High Court in case of CIT vs Abhishek Industries Ltd. (2006) 156 Taxman 257 29.4 Basis above proportionate disallowance of Interest should be made with respect to interest charged by the assessee Thus, the question of making Such advances to related party as against borrowed funds is beyond question. Consequently, any incurrence of interest expenses against such advances is impossible.
30. That with respect to the above observation it is humbly prayed that the advances to related patty were basically made considering the business expediency and expansion purposes 31 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
without which the functioning of the operations itself would have been impossible. Even otherwise such advances to related patties has hardly seen a movement of about INR 18 lacs during the impugned financial year when compared with last year Moreover, the overall borrowings have also come down considerably while the business operation have increased along with trade advances. Further, it is a known convention that there are frequent bank inspections and audit and use of cash-credit can only be made for working capital expenditure like trade advances alone. Because of the fact that such loans are only utilized for business expediency involving trade and business, no red-flag has ever been raised by the statutory or bank auditors.
Accordingly, it is established that no interest expenses have been incurred to make such advances and thus no interest may be disallowed against such advances.
31. That further your Honour has relied upon the judgement of Hon'ble Punjab & Haryana High Court in case of CIT vs Abhishek Industries Ltd . (2006) 1 56 Taxman
257. In this respect, it is submitted that the said judgement has been impliedly been over- ruled by Hon'ble Supreme Court in the following two instances:
31.1 Munjal Sales Corpn. Vs Commissioner of Income-tax, Ludhiana [2008] 298 ITR 298 {SC) - In the given matter, the fact of the case was that Assessee 's claim for deduction under section 36(1)(iii) was disallowed on ground that it had given interest-free advances to its sister concerns from interest-bearing loans taken from third parties. The matter went up to Supreme Court. before a bench comprising of Justice S. H Kapadia before which the revenue relied upon the above-mentioned case of Abhishek Industries.
however, the Hon'ble bench over-ruled the said judgment and held that interest on borrowed funds cannot be denied under section 36{1)(iii) only on the grounds that it was advanced to related patties without interest.
31.2 Hero Cycles (P.) Ltd. v. Commissioner of Income-tax (Central), Ludhiana [2016] 236 Taxman 447 (sc) -- More recently before a bench of Justice Rohinton Fali Nariman a similar matter had come to appeal against decision of Punjab & Haryana High Court. The High COUtt in its orderhad simply quoted from its own judgment in the case of CIT v. Abhishek Industries Ltd. 12006] 286 /TR 1 56 Taxman 257 (Pun). & Han). and held that when loans were taken from the banks at which interest was paid for the purposes of business, the interest thereon pou/d not be claimed as business expenditure. In appeal before honourable supreme court, with respect to the above, following observation were made by the Hon'ble Coutt in favour of the assessee:
"the revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the, role to decide how much is reasonable expenditure having regard the ease. No businessman can be compelled to maximize his profit and that the revenue authorities must pm themselves in the shoes of 32 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
the assessee and see how a prudent businessmen would act. The authorities must not look at the matter from their own viewpoint but that of a prudent businessman.
32. That as per the above orders of Hon'ble Supreme Court, the matter is settled and thus, calls for no addition in the given case.
33. That without prejudice to the above, it is also submitted that the total current assets of the assessee stand at a total of about INR 88.54 crores against total interest expenditure of INR 3.91 crores, while the total advances to related patty is INR 18.53 crores. Thus, even otherwise disallowance of interest of INR 2.21 crores is not justified on the basis the above proportion.
34. That it is therefore prayed that such proposed disallowance of interest may be kindly be dropped.
UNQUOTE 8.7 The reply of the assessee company was duly considered but not found tenable. The assessee company could not furnish any explanation along with supported documentary evidences that the above advances given to its related parties are on account of business expediency despite being specifically asked. The case laws cited by the assessee company are not applicable in this case since the facts of case are different from the facts presented before the court. The assessee company was provided ample opportunities to justify the interest free advances given to related parties, however the assessee has failed to furnish the same during the course of assessment proceedings. Further, the assessee company has submitted that the assessee has given advances Rs. 18.53 crores as against total current assets of Rs. 88.54 crores. It is undisputed fact that on one hand, assessee is paying interest on its borrowal and on the other hand, no interest is being charged on the advances made to the related parties or to the sister concerns without any business expediency. Fact is that had the assessee not given loans & advances, then the situation would have been different. thus there IS no justification for payment of interest on the borrowing on one hand and On the other hand, parking such precious funds in the name of interest free advance with Its sister concerns without any purpose of business. Thus, the assessee has actually passed on the benefit to its sister concern by paying a higher rate of interest and not charging any interest upon utilization of interest-bearing fund. The question here is not the prudence of assessee in advancing loan, but claiming a deduction requires fulfilment of certain conditions of the Income-tax Act 1961 In which the case 'of assessee does not qualify and accordingly, the proportionate interest attributable towards amount advanced as interest free is held disallowable U/s 36/37 of the Income-tax Act, 1961.
8.8 Considering all facts of the case such as having interest free funds at its disposal, a rate of 12% p.a. is held appropriate for working out the disallowance of interest. The average of the amount advanced without interest comes to Rs.1844.43 lakhs (Rs.18.35 crore + Rs.18.35 crore = Rs.36.88 cr. / 2 = Rs.18.44 crore). At the rate of 12%, the proportionate interest on the average advance made during the year without charging 33 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
interest to the related party comes to Rs.221.33 lakhs (Rs.1844.43 lakhs x 12%) which is held attributable towards the amount advanced to related parties either without interest. Accordingly, an amount of Rs.221.33 lakhs is being disallowed U/s 36(1)(iii)/ 37(1) of the Income tax Act, 1961 and added back in the income of assessee company.
(Addition U/s 36(1)(iii): Rs. 2,21,33,250/- ) 13.1 The issue was thereafter challenged before the Ld. CIT(A), wherein the assessee's submission and the conclusion drawn by the Ld. CIT(A) is culled out as under:
6.7.2 Arguments of Appellant in Appellant Proceedings 6.7.2.1 The Appellant have made the following further submissions during the course of this appellate proceeding:
• From the B/S as at 31.03.2017 and 31.03.2018, it can be seen that the advances to related parties stood at Rs. 18.35 crores and Rs 18.53 crores, respectively, meaning that during the year there was a marginal increase in such loans/advances to the tune of only Rs. 18 lacs.
• From the B/S as at 31.03.2017 and 31.03.2018, it can be seen that the Reserves and Surplus stood at Rs. 65.44 crores and Rs 68 crores, respectively; meaning that during the year there was an increase in free reserves and surplus to the tune of only Rs. 2.56 crores, enough to finance the above increase in loans and advances to related parties during the year of Rs. 18 lacs.
• Furthermore the appellant also relies on the verdict of Commissioner of Income Tax vs M/S Reliance Industries Limited [CIVIL APPEAL NO. 10 CF 2019 (@SLP(C) No.37/2019 @Diary No.32695/2018] where it was held by the Hon'ble Supreme Court that in case the assessee has sufficient non-interest bearing funds available with the assessee and such funds are sufficient to meet its investments then it can be presumed that the investments are made out of the interest free funds which are 34 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
available with the assessee. The Supreme Court therefore didn't disallow the expenditure under section 36(1)(iii).
The appellant also relies on the verdict held by I TAT Mumbai "G" bench in the case of Sudal Industries Limited v/s Dy. Commissioner of Income Tax (ITA No. 7271/Mum/2018). The verdict held in the case law has been reproduced before for your ready reference: "We have carefu//y considered the rival contentions and perused the orders of the lower authorities. The clear-cut finding on reading of the annual accounts of the assessee shows that assessee has interest free funds available with it in the form cf share capita/ and free reserve amounting to Rs. 273,830,630/- which is-a much-more that the interest free advances given by the assessee to its sister concern. Therefore the presumption is always available in favour of the assessee that assessee has uti/ised non-interest-bearing funds for giving impugned deposit to the sister concern. The contention of the assessee is also supported by several judicial precedents, which have upheld the above proposition. In view of this, we do not find any reason to uphold the orders of the lower authorities. Accordingly, ground number 1 of the appeal is allowed and the learned AO is directed to delete the disallowance of interest of Rs. 2, 136,252/-. "
67.3 Conclusion:
6.7.3.1 It is apparent that the Appellant's free reserves are more than total advances given interest-free to the related parties both in terms of absolute number (Rs. 68 crores of reserves against Rs. 18.53 crores of advances) and also in terms of increase in both the numbers during the year (Rs. 2.56 crores of increase in reserves as against Rs. 18 lacs of increase in advances). 6.7.3.2 The AO has not brought on record any trail of loans and advances given by the Appellant interest-free to its related patties out of interest-bearing funds so as to rule out any presumption to be drawn in favour of the appellant that the said advances were given out of free reserves available with it as per the figures mentioned above.
6.7.3.3 Further, the case law relied upon by the AO, viz., the judgement of Hon'ble Punjab & Haryana High Court in case of CIT vs Abhishek Industries Ltd.
(2006) 156 Taxman 257, has been reversed by the Hon'ble Supreme Court in the case of Munjal Sales Corpn v. Commissioner of Income-tax, Ludhiana [2008] 168 35 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
Taxman 43 (SC), wherein the Hon'ble Apex Court vide para 17 of its judgement held as under:
17. One aspect needs to be mentioned during the assessment year 1995-
96, apart from the loan given in August/September 1991, the assessee advanced interest-free loan to its sister concern amounting to Rs. 5 lakhs. According to the Tribunal, there was nothing on record to show that the loans were given to the sister concern by the assessee-firm out of its Own Funds and, therefore, it was not entitled to claim deduction under section 36(1)(iii). This finding is erroneous. The Opening Balance as on 1-4-1994 was Rs. 191 crores whereas the loan given to the sister concern was a small amount of Rs. 5 lakhs. In our view, the profits earned by the assessee during the relevant year were sufficient to cover the impugned loan of Rs. 5 lakhs.
In this judgement the Hon'ble Supreme Court allowed the interest claim of the said assessee on interest free loans given even on the basis of opening balance of own funds available.
As such, the disallowance of interest expenditure done by the AO of Rs. 2,21,33,250/- is hereby deleted and accordingly, Ground No. 6 is allowed. 13.2 On the aforesaid issue, Ld. CIT-DR submitted that the Ld. AO had elaborately deliberated upon the issue to which there was no justifiable explanations by the assessee. It is further submitted that during the assessment proceedings the assessee could not furnish necessary documents in support of its contentions. The assessee's claim that the loans and advances are given out of capital and reserve should not be accepted as on the one hand the assessee is paying interest on its borrowings and on the other hand no interest is being charged on the advances made to the related parties/ sister concern that too without business expediency. It is further 36 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
submitted that as per provisions of section 36(1)(iii), if the capital / funds borrowed are not utilized for the business purpose, the assessee will not be entitled for deduction under this section. It is, therefore, the prayer that addition made by Ld. AO but deleted by the Ld. CIT(A) deserves to be restored by setting aside the order of Ld. CIT(A).
13.3 Ld. AR on the other hand, vehemently supported the order of Ld. CIT(A) and have placed the reliance on the judicial pronouncements relied upon during the appellate proceedings before the Ld. CIT(A), extracted supra. 13.4 After giving a thoughtful consideration to the aforesaid facts and circumstances, in backdrop of submissions by both the parties, material available on record and the settled principle of law in terms of judgments relied upon. In present case, on perusal of the factual position through the Audited Balance Sheet of the assessee (assessee's PB page no. 394), it is evident that the balance of Share Capital and Reserves & Surplus of the assessee are Rs. 1.13 Crore and Rs.68.03 Crore, respectively. The impugned amount which is disputed by the Ld. AO as average loans and advances extended by the assessee to its related party was Rs. 18.44 Crores, on which Ld. AO considered 12% p.a. to be disallowed u/s 36(1)(iii) calculated at Rs. 2,21,33,250/-. It was the contention that the assessee has sufficient 37 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
interest free funds to provide loans and advances without charging any interest on the same and as per settled principle of law, disallowance u/s 36(1)(iii) cannot be imposed in a case where sufficient interest free funds are available with the assessee. On this issue, support is drawn from the following judgments:
(i) Commissioner of Income Tax vs. Reliance Utilities and Power Ltd.
[2009] 313 ITR 340 (Bom) dtd. 09.01.2009, in this judgment Hon'ble Mumbai High Court while deliberating on the issue, have held as under:
16. If there be interest-free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a Joan it can be presumed that the investments were from the interest-free funds available. In our opinion, the Supreme Court in East India Pharmaceutical Works Ltd. v. CIT [1997] 224 ITR 627 had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. [1982] 134 ITR 219 where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcombers of India Ltd.'s case [1982] 134 ITR 219 the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability 38 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
and the profits were deposited in the overdraft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle, therefore, would be that if there are funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption is established considering the finding of fact both by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal.
(ii) Commissioner of Income Tax (Large Taxpayer Unit) vs Reliance Industries Ltd. [2019] 410 ITR 466 (SC) dtd. 02.01.2019, wherein the findings of Hon'ble Apex Court on the issue of eligible deduction u/s 36(1)(iii) are extracted as under:
1. Whether the High Court is correct in holding that interest amount being interest referable to funds given to subsidiaries is allowable as deduction under section 36(1)(iii) of the Income Tax Act, 1961 (for short 'the Act') when the interest would not have been payable to banks, if funds were not provided to subsidiaries?39
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
7. In so far as the first question is concerned, the issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest-free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest-free funds available with the assessee. The Tribunal has also followed its own order for the assessment year 2002-03.
8. In view of the above findings, we find no reason to interfere with the judgment of the High Court in regard to the first question. Accordingly, the appeals are dismissed in regard to the first question.
(iii) CIT vs HDFC Bank Ltd (2014) 366 ITR 505 (Bom) In this Judgment Hon'ble Court had decided the identical issue, though while dealing with the applicability of Section 14A of the Act, it was held that if the assessee had own funds and non-interest-bearing funds in excess of investment in tax free-securities, it was not possible to apply rule 8D, read with section 14A. 13.5 The summary of analogy drawn from aforesaid judgments extracted is that, in case of CIT vs Reliance Utilities and Power Ltd (supra), the Hon'ble Mumbai High Court, while considering the issue of disallowance of interest expenditure made under section 36(1)(iii), has observed that if the assessee has a common pool of interest free and interest bearing funds and if the interest free funds 40 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
are sufficient to meet the investment, it has to be presumed that investments are made out of interest free funds. Though, the similar findings are guided by the Hon'ble Mumbai High Court in case of CIT vs HDFC Bank Ltd (supra) qua section 14A of the Act, however, the aforesaid proposition was upheld by the Hon'ble Supreme Court in case of CIT vs Reliance Industries Ltd (supra) qua the deduction u/s 36(1)(iii).
13.6 Coming to the facts of the present case, as analyzed by the Ld. CIT(A) and righty so that the free reserves available with the assessee as on 31.03.2018 were Rs. 68 Crores as against the advances of Rs. 18.53 Crore. The increase in reserves and surplus during the year on account of profit generated by the assessee company was Rs. 2.58 Crores, whereas the increase in impugned advances was of Rs. 18 lacs only. It is also observed by the Ld. CIT(A) that there was no information brought on record showing the trail of interest free loans and advances given by the assessee to its related parties out of interest-bearing funds, so as to rule out any presumption that the funds utilized for granting of interest free loans are not out of interest free reserves available with the assessee.
13.7 In backdrop of aforesaid facts and circumstances of the instant case, respectfully following the binding principle of law laid down by Hon'ble High Court, 41 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
further upheld by the Hon'ble Apex Court in their respective judgments referred to supra, the conclusion drawn by Ld. CIT(A), that the disallowance of interest expenditure u/s 36(1)(iii) made by the Ld. AO was against the settled ratio of law, when the assessee itself owns sufficient interest free funds to provide interest free loans to its related parties and sister concern, therefore, the order of Ld. CIT(A) qua the issue regarding disallowance u/s 36(1)(iii) contains no error so as to disturb the same. We, thus, in terms of these observations, are of the considered view that Ld. CIT(A) had rightly deleted the addition on account of disallowance of interest expenditure u/s 36(1)(iii), as the assessee maintains adequate interest free funds to disburse the same to its related parties or sister concerns, accordingly, the order of Ld. CIT(A) qua the eligibility of assessee to claim deduction of interest expenditure u/s 36(1)(iii) of the Act, deserves to be upheld and we do so. Consequently, Ground No. 5 of the Revenue's Appeal stands dismissed.
14. Ground No. 06: Disallowance of freight outward, loading and unloading expenses for Rs. 60,00,000/-
On this issue, Ld. AO's observations and assessee's reply before Ld. AO while making the disallowance are as under:
9. Perusal of the financial statement and details filed by the assessee it is noticed that the assessee has debited a sum of Rs. 64,31,250/- in its P & L A/c for the year under consideration towards 'Freight Outward, Loading & Unloading Expenses. It is also noticed that the above expenditure have been substantially increased during the year as 42 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
compared to previous two years. Accordingly, the assesse company vide Notice u/s 142(1) issued on 22/02/2021 through electronically mode vide DIN No. ITBA/AST/F/142(1)/202000021/1030863297(1) was asked to furnish the justification on substantial increase of the above expenses during the year and a justification note on allowability of the same. In response to same, the assessee has furnished its reply through e-filing proceedings on 26/02/2021, which is reproduced as under:-
QUOTE As desired with respect to freight outward and loading & unloading expenses claimed during the year under consideration with respect to the preceding years more it is explained that, • The freight out ward was actually incurred by the parties not by the assessee company. Only in the case of goods return the freight out ward was incurred by the assessee company. On going through the comparison chart as under in this head your honour will find that the loading charges claimed amounting to Rs 43,06,225/- in comparison to the preceding year amounting to Rs. 36, 663/-.
• For the measure difference in the loading charges it is explained that, during the year under consideration the coals purchased were transported through road where as it was transported through rail in the preceding year. In view of the above it is further explained that, the coal purchased cost which includes al/ freight, loading, unloading and lifting storage, ware house etc., was decreased to 37.8617 crores in comparison to the preceding year of 47.6647 Crores.
• During the year under consideration coal were transported more by road rather than Railway which was transported more in the preceding years. For the reason which is obvious to all that, al/ the time railway racks were not available and in the case of need it is not also available. For this reason during the year under consideration road transport of coals were more in comparison to preceding year.
• Though the Freight inward of coal for Railway, lifting and handling cost were claimed more due to payment to Chattishgarh earthmovers for unloading of coal through machinery at our plant during the preceding year in comparison to the year under consideration where as Freight inward of coal for Road, loading and unloading, lifting and handling cost etc., were claimed more in the year under consideration in comparison to the preceding year. • For this purpose the ledger account of coal purchase of both the years as well as. the relevant page of Balance sheet is separately attached for your kind perusal and ready reference • These expenses are based on facts and on above valid reasons which were necessary for the business of company. Therefore it is genuine and fully allowable. • Before your honour is requested to accept the book result and no adverse inference in this point may please be taken.43
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
UNQUOTE 9.1 The reply of the assessee company was examined but found general in nature. It can be seen that there is substantial increase of above expenses during the year as tabulated below:-
Particulars Amount &for FY Amount for Amount for FY
2017-13 FY 2015-16
2015-17
Sales/Turnover as per 1478601566 1492090995 1380890619
P&L A/c
Freight Outward, 64,31,250 3,66,542 28,282
Loading &
Unloading
Expenses
9.2 It can be seen that the Sales/turnover of the assesse has decreased during the year as compared to the previous year, however there is substantial increase under the above expenses for which no satisfactory explanation has been provided by the assessee. The assessee could not furnish the supporting documents in support of its contention. The assessee had not furnished any genuine reasons for increase in above expenses during the year as compared to previous year. I am afraid that mere making payment through bank will not entitle the assessee for claiming expenditure UIs 37(1) of the Income-tax Act, 1961. It is the first and foremost liability of assessee to prove that the expenditure incurred by him qualifies the necessary test of section 37(1) of the Income-tax Act, 1961. I find support in my view from the case of CIT v.
Calcutta Agency Ltd. [1951] 19 1 TR 191 (SC), wherein the Hon'ble Supreme Court has held that the onus of providing necessary facts in order to avail the deduction under section 37(1) is on the assessee. If, therefore, the assessee fails to establish the facts necessaty to support his claim for deduction under section 37(1), the claim for deduction of expenditure is not admissible. Further, in the case of L.H. Sugar Factory & Oil Mills (P) Ltd. V. CIT [1980] 125 ITR 293 (SC), the Hon'ble Supreme Court has held that where an assessee claims a deduction the onusüs on him to bring al/ material facts on record to substantiate his claim. In the instant case, the assessee did not furnish or 44 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
produce any evidence as to what is the actual expenditure and why it was incurred. The assessee has thus failed to qualify the first test of section 37(1) of the Income-tax Act, 1961. Mere claiming that the expenses were incurred will not itself make the expenditure allowable in the case of assessee as something more is required to allow the deduction U/s 37(1) of the Income-tax Act, 1961. The assessee vide its previous replies is only able to file copies of few bills regarding payment of above expenses. It is also relevant to mention here that Freight Outward expenses are directly relatable to the turnover. However, the assessee could not furnish any explanation about the above expenditure during the course of assessment proceedings. In the case of CIT v. Chandravilas Hotel [1987] 164 ITR 102 (Guj), it was held that mere production of vouchers in support of the claim for deduction of the expenditure would not prove the claim made by the assessee. It is his duty to prove payment especially when the ITO doubts the genuineness thereof. It appeas that the assessee does not want to produce such bill or evidence before the assessing authority knowingly that the expenses incurred under these heads are of non- business nature;
9.3 As per FAS-2019 guidelines issued by CBDT, a show-cause Notice alongwith Draft Assessment Order has also to the assessee company on 25/03/2021 vide DIN proposing the above disallowance. In response to same the assessee has furnished its reply/submission on the said disallowance through e-filing account on 02/04/2021 , which is reproduced as under:-
QUOTE
35. That on perusal of the draft order, it is observed that the said disallowance has been proposed to be made on following grounds:
35.1 Expenditure had increased substantially in comparison to the previous years
35. 2 The nature and needs of such expenses has not been aIlow the same 35.3 The entire set of bills has not been provided by the assessee.
36 That. with respect to the above, it is submitted that he expenses have mainly been incurred for freight charges as most of the raw material including coal was purchased through road transport and not by railways (unlike last year) which is otherwise a cheaper mode of transportation. However, considering the timely supply of raw materials by road transport and business circumstances at the time of procurement of materials, it was considered viable to opt for road transportation of materials.
Consequently, your Honour will observe that though the cost of purchase of coal has come down, the cost of freight, loading of material and uploading thereof has gone up.
37. That as explained above, the nature of these expenses are in- dispensable to the whole business and can lead to break-down of the entire supply chain. Thus, to ensure continuance of the business operations such expenditure is required by the assessee.
45
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
38. That in suppott of the above, your assessee has submitted complete ledger copes and sample bills as well which include some of the biggest names in the business of freight. Some of them are as under:
38.1 Nikhi/ Road/ines 38.2 Shri Ram Transport 38.3 TCI Express Limited 38.4 Gati 38.5 Safexpress Pvt Ltd.
39. That it is most humbly prayed that considering the voluminous number of transactions, it will be very difficult for your assessee to submit the entire set Thus, it is prayed before your Honour that a set of sample may be selected by your good office against which your assessee will be obliged to upload the necessary bills and invoices as selected by your Honour.
UNQUOTE 9.4 The reply filed by the assessee company has duly been considered but not found tenable on the facts that the assessee has again failed to furnish the satisfactorily explanation about the huge increase in above head of expenditure during the year as compared to previous year despite the fact that the sales/turnover of the assessee company has been reduced during the year. Let us examine the claim of assessee UIs 37(1) of the Income-tax Act, 1961. In the instant case, the claim of assessee is to be examined on the test of purpose of expenditure and also as to whether the expenses is wholly and exclusively incurred for the purpose of business. It is settled by Hon'ble Apex Court that the onus is on the assessee to bring all material facts on record to substantiate his claim. I would also like to quote the case of Jaipur Electro (P) Ltd. V. CIT [1996] 134 CTR (Raj.) 237, wherein it was held that the doctrine that the businessman is the best judge of business expediency does not affect the right, any duty, of the assessing authorities to know whether it was incurred for business purpose and not for other extraneous considerations. It was the view of various Courts that to be an allowable expenditure under section 37(1), the money paid out or away must be (a) paid out wholly and exclusively for the purpose of the business or profession; and futther (b) must not be; (i) capital expenditure; (ii) persona/ expense; or (iii) an allowance of the character described in section 30 to 36 and section 80VV. CIT V. Indian Molasses co. (P) Ltd. [1970] 78 ITR 474 (SC)/ J.K. Cotton Mfrs. Ltd. V. CIT [1975] 101 ITR 221 (SC)/Sassoon J. David & co. (P) Ltd. V. CIT [1979] 118 ITR 261 (SC). In the case of CIT v. Shahibag Enterpreneurs (P) Ltd. [1995] 215 ITR 810 (Guj), it was held that it cannot be disputed that before an assessee can become entitled to an allowance under section 37(1), he must satisfy the department of the purpose for which the amount is spent. The assessee in this case is not able to prove satisfactorily that the expenses have been incurred for the purpose of business. The expression 'for the purpose of business' in section 37(1) of the Income-tax Act, 1961 is wider in scope than the expression 'for the purpose of 46 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
earning profit'. However, Wide the meaning of expression may be, its limits are implicit in it. The purpose shall be for the carrying on the business, that is to say, the expenditure incurred shall be forcarrying.om the business. It cannot include sums spent by the assessee as agent of a third party: whether the origin of the agency is voluntarily or statutory; in that event, the amount is paid on behalf of other and the purpose is unconnected with the business, Infact, for allowing expenditure U/s 37 of the Income-tax Act, 1961, the business expenditure should have the connection and object in real and not remote & illusory. The Hon'ble Gauhati High Court in the case of Assam Pesticides and Agro Chemicals v. CIT (1997) 227 ITR 846 (Gau) has held that mere payment by itself would not entitle the assessee for deduction of a expenditure unless the same was proved to be for commercial consideration; the onus of proof at al/ relevant times rest upon the assessee.
9.5 In view of this, the expenses to the tune of Rs. 60,00,000/- (out of total expenditure claimed of Rs .64,31 ,250/-) claimed by assessee under the head 'Freight Outward, Loading & Unloading Expenses' are hereby disallowed UIs 37(1) of the Income-tax Act, 1961 and added back in the income of assessee. Penalty proceedings U/s 270A of the Income Tax Act, 1961 for under-reporting of income is initiated on above issue.
(Addition: Rs. 60,00,000/-) 14.1 . Aggrieved with the aforesaid addition, assessee preferred an appeal before the Ld. CIT(A), wherein assessee's submissions and Ld. CIT's conclusion are extracted as under:
6.8.2 Arguments of Appellant in Appellant Proceedings 6.8.2.1 The Appellant's has submitted the ledger copies of the expenses incurred, invoices and the TDS details.
6.8.2.2 The Appellant further submitted a chart as under:
Coal Purchase Particulars 1-Apr-17 to 31- 1-Apr- 16 to Re-grouping Mar-18 31-Mar-17 47 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
Coat Purchase 158764336.09 167448026.00
Coal Purchase state CST 96883317.42
Coal Purchase state IGST 31725425.06
Imported Coal Purchase 153968773.00
COMPENSASTION CESS ON 7097409.90
COAL@400/-PMT
CUSTOM DUTY ON COAL 12140552.00 24162920.00
EDRM PERMISSION EXPENCES 24000.00
Freight Inwards Coal RIY 37219124.75 87380348.00
Freight Inwards [Coal] by Road 25283817.50 14352937.00
Freight Inwards[Coal] by Road GST 621521.00
PAID
Lifting and Handling Charges of 7185836.00 21509625.00 4306224
Coal
Loading & Unloading Coal 1486143.00 7824516.00
Storages & Ware House Service 185999.00
Grand Total 378617281.72 476647145.00 4306224.00
Re grouping of Lifting and Handling 4306224
Charges of Coal
Total 382923505.72 476647145.00
Coal Purchase Qty AS per 3CD 70418 97468
Report
Per MT Cost 5437.86 4890.29
48
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024
Rashmi Sponge Iron and Power Industries Pvt. Ltd.
On the perusal of above chart based on financial results of the appellant company your honour would find that all relates to regrouping/reclassification of expenses which the Ld AO failed to understand and preferred to make addition even when all the freight payments are duly backed by Invoices, and proves of freights purchased/movement by the appellant company and in this case mainly relates to purchase of coal.
6.8.3 Conclusion:
6.8.3.1 During the appeal proceeding, as asked appellant has provided details of amount of Rs. 43.06 Lacs incurred at the time of coal purchase made by the appellant. It can be observed that there was regrouping/reclassification of expenses.
6.8.3.2 AO could not bring anything on record to show that expenses claimed by the appellant were not genuine and it was not for business purpose. AO disallowed the expenses merely because Sales/turnover of the Appellant hag decreased during the year as compared •to the previous year however, corresponding freight expenses did not reduce. However, it is not necessary that all the expenses are exactly linked to sales so as to make proportionate changes in the said expenses with any increase or decrease in the sales.
6.8.3.3 Also AO has not conducted any independent inquiry to establish that expenses claimed by appellant were not genuine and/or were incurred by the Appellant for purposes other than its business.
6.8.3.4 Based on above submissions made by the Appellant wherein the expenses have been proved to be backed by supporting evidences, and in absence of any specific finding from the AO, Ground No. 7 is allowed.
14.2 On this issue of unexplained freight, loading and unloading charges claimed by the assessee for Rs. 64,31,250/-, out of which, as per Ld. AO the assessee was failed to furnish any plausible explanation towards huge increase in these expenses. It is observed by the Ld. AO that the freight outward, loading and 49 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
unloading charges claimed during the FY 2017-18 are Rs. 64,31,250/- as compared to Rs. 3,66,542/- in FY 2016-17and 28,282/- in FY 2015-16. It is also observed that the turnover of the assessee has been decreased as compared to preceding year. Accordingly, a lump-sum addition of Rs. 60 lacs are disallowed u/s 37(1) of the Act. This disallowance was assailed by the assessee before the Ld. CIT(A), wherein it is explained by the assessee that the method of transportation has been changed during the year, the freight outward was actually incurred by the parties and not by the assessee, only in cases where goods was returned the freight outward was incurred by the assessee. It is also explained that the major difference in loading charges during the year was because the coal purchased was transported through road whereas in preceding year it was done through trains. It is also clarified that whereas the cost of coal purchases includes all freights loading, unloading, lifting and storage warehouse etc. In totality the cost of purchase was actually reduce to Rs. 37.8617 Crores as compared to preceding year costs of Rs. 47.6647 Crores. A comparative analysis of the coal purchase price is also furnished before the Ld. CIT(A) (culled out supra). Accordingly, the cost of coal purchase was Rs. 5437.86 per MT, whereas it was Rs. 4890.29 per MT in the preceding year. It was the submission by assessee that there was a regrouping of expenses under the head "lifting and handling charges of coal" to the extent of Rs. 43,06,224/-, which the Ld. AO failed to comprehend while making the addition. It was also the contention of 50 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
assessee that the entire payment of freight are duly backed by invoices which proves the genuineness of said expenditure, therefore, no disallowance is called for. 14.3 Ld. CIT(A) found substance in the submissions of the assessee and have decided the issue in favour of the assessee with his conviction that (i) Nothing was brought on record by the Ld. AO that expenses claimed by the appellant are not genuine, (ii) that the expenses are not for business purposes and (iii) the disallowance was proposed on the basis of decrease in sales / turnover of the assessee, without examining and enquiring that there might be reason for certain expenses which not necessarily behave in the same fashion in which the sales / turnover is increasing and decreasing. Since the genuineness of expenditure and the evidence furnished by the assessee in the form of invoice of the expenditure incurred are not disbelieved / disputed by the Ld. AO, therefore, the disallowance made was only on the basis of presumption, surmises and guesswork thus, cannot sustain and are liable to be deleted.
14.4 Against the aforesaid decision of Ld. CIT(A), the revenue is in appeal before us, wherein at the threshold Ld. CIT-DR submitted that the decision of Ld. CIT(A), apropos the disallowance of freight outward, loading & unloading expenses of Rs. 60 lacs by the Ld. AO is not acceptable on merits. It was the submission that 51 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
during the assessment proceedings, Ld. AO had critically analysed the trend of assessee's turnover which was slightly decreased, whereas the impugned expenditure are substantially increased. The assessee could not furnish the supporting documents to substantiate its contention while explaining the reasons for increasing subject expenses. Under such circumstances, in absence of any genuine or plausible reason explained by the assessee, the disallowance made by the Ld. AO was reasonable and deserves to be sustained. It was, therefore, the prayer that the order of Ld. CIT(A) on this issue is liable to be reversed.
14.5 Ld. AR on the other hand reiterated the contentions and submissions by the assessee before the authorities below and have contended that while the expenditure incurred by the assessee are genuine and for the business purpose, necessary evidence to substantiate such expenditure were also produced before the Ld. AO, however, the disallowance was made only on the basis of guesswork under preconceived notion with the belief that the expenditure incurred should have been increase / decrease in the same proportion in which the sales / turnover is fluctuating. Whereas, there might be certain other external factors that may affect the cost of services for which the expenditure are incurred. Under such circumstances, the conclusion of Ld. AO only on the basis of change in the volume of assessee's turnover is farfetched and illogical, therefore, Ld. CIT(A) had rightly appreciated the 52 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
facts of the case and have deleted disallowance made by Ld. AO. It is the prayer that the order of Ld. CIT(A), therefore, merits approval.
14.6 We have considered the rival submissions and perused the material available on record. The addition of Rs. 60 lacs on account of disallowance of freight outward, loading and unloading expenses was made by the Ld. AO on the basis of analysis that if the turnover of the assessee is decreased then how the impugned expenditure are increased substantially. Ld. CIT(A) deleted the addition with the findings that the expenditure are genuine, for the business of assessee and there was no reason for the Ld. AO to make any addition without dislodging such facts by way of bringing any material on record to show that the expenditure claimed by the assessee are not real. The conviction of Ld. AO was based on his analysis, without conducting any independent inquiry about the expenditure so claimed to prove that such expenses are bogus. The external factors like change in the mode of transportation from train to road, the inclusion of such expenditure in the purchase price by the vendors earlier etc. may also have effect on the increase in the cost of impugned expenditure, further there was some regrouping in the financials of the assessee, all such factors needs to be looked into, which the Ld. AO missed to ponder upon. In backdrop of such facts to the issue, we find that Ld. CIT(A) had properly appreciated and deliberated on the facts, contentions, evidence and 53 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
financial regrouping by the assessee, therefore, the decision of Ld. CIT(A) qualifies to be relied upon and approved. Resultantly, Ground No. 6 of the revenue is dismissed.
15. Ground N0. 7: Disallowance of excess depreciation Rs. 1,71,047/- While making the disallowance for excess depreciation, Ld. AO in assessment order have observed as under:
DISALLOWANCE OF EXCESS DEPRECIATION CLAIMED
10. During the course of scrutiny, it has been noticed that the assessee claimed depreciation allowance to the tune of Rs. 2,08,88,728/- u/s 32 of the Income Tax Act, 1961.
However, perusal of 3CD Tax Audit Report submitted by the assessee it is noticed that allowable depreciation as per l. T. Act to the assessee company computed to Rs. 2,07,17,681/-. As per para 18 of form 3CD Tax Audit Report, allowable depreciation for the year under consideration is as under:-
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As apparent from above, the allowable depreciation u/s 32 of the Act comes to Rs. 20,717,681/- however the assessee has claimed depreciation in its Computation of income to the extent of Rs. 20,888,728/- for which no justification have been provided by the assessee during the course of assessment proceedings. It is also relevant to mention here that an Independent Tax Audit Report in form 3CA/3CD should be prepared by the Statutory Auditors of the company at the time of conducting/conclusion the audit, however the same was not produced/furnished during the course of assessment proceedings before undersigned.
10.1 As per FAS-2019 guidelines issued by CBDT, a show-cause Notice along with Draft Assessment Order has also been issued to the assessee company on 25/03/2021 vide DIN proposing the above disallowance. However, in response to same the assessee has not furnished any reply/explanation on the said disallowance in its reply filed through e-filing account on 02/04/2021.
10.2 In view of the above facts, the excess depreciation claimed by the assessee company to the tune of Rs. l , 71 ,047/- [20888728 -- 20717681] is hereby disallowed and allowable depreciation u/s 32 of the Act restricted to Rs. 20,717,681/- for the year under consideration. Penalty proceedings U/s 270A of the Income Tax Act, 1961 for under-reporting of income are also initiated.
(Addition of Rs. l,71,047/-) 55 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
15.1 On this issue, Ld. CIT(A)'s conclusion including assessee's response are culled out as under:
6.9.1.2 Arguments of Appellant in Appellant Proceedings 6.9.2.1 The Appellant submitted as under:
Working for depreciation as per Law: -
Particulars Opening Put to use Put to use Depreciation Closing
balance for More for less balance
than 180 than 180
da da s
P&M 15% 121832813 2415010 919091 18706106 106460808
P&M 40% 181766 124449 9752 124436 191531
Against the above, it was inadvertently shown as this in Form 3CD:
Particulars Opening Put to use Put to use for Depreciatio Closing
balance for More less than 180 n balance
than 180 da days
s
P&M 15% 118100235 3334101 0 18524420 102909916
P&M 40% 181766 134200 0 135075 180891
6.9.2.2 The Appellant has submitted the rectified Tax Audit Report in which the mistake was rectified by the tax auditor in clause 18 of the Tax Audit Report. The same was in sync with the details filed in Sch DPM of the ITR.
6.9.3 Conclusion:
I understand that this was an error in the Tax Audit Report, which was rectified by the Tax Auditor by issuing a rectified tax audit report that was signed on 25 56 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
June 2024. The rectified Tax Audit Report was submitted by the Appellant vide his submission dated 26 June 2024. Accordingly, Ground No. 8 is allowed.
15.2 Ld. CIT-DR vehemently supported the order of Ld. AO.
15.3 Ld. AR on the other hand relied on the order of Ld. CIT(A).
15.4 We have considered the rival submissions and perused the material available on record. Admittedly, the addition was made by the Ld. AO because there was an error in the tax audit report of the assessee, which subsequently was rectified and submitted before the Ld. CIT(A). As the mistake was rectified and it is factually verified by the Ld. CIT(A) that the claim of assessee was legitimate and permissible as per provisions of the Act, therefore, there is no reason before us to interfere with the findings of Ld. CIT(A), thus, we uphold the same. In result, Ground no. 7 of the department stands rejected.
16. Ground No. 8 & 9: These grounds are general and academic in nature, with no further advancement of arguments, therefore no separate adjudication is required.57
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
17. In result, appeal of the revenue in ITA No. 406/RPR/2024 is partly allowed in terms of our aforesaid observations.
18. CO No. 17/RPR/2024 of assessee (Arising out of ITA 406/RPR/2024 of revenue) 18.1 The cross objections filed by the assessee is supportive to the order of Ld. CIT(A) and against the present appeal of revenue. As the grounds of appeal of revenue in ITA No 406/RPR/2024 is decided by us in terms of our aforesaid observations, which applies mutatis mutandis to the respective grounds in CO No. 17/RPR/2024 of the assessee, consequently, the CO filed by the assessee is disposed of as partly allowed.
18.2 In result, Cross Objection of the assessee in CO No. 17/RPR/2024 is partly allowed in terms of our aforesaid observations.
19. ITA No. 409/RPR/2024 19.1 The main and sole ground raised by the assessee in this appeal is that the Ld. CIT(A) had erred in confirming the addition of Rs. 12,76,832/- made by Ld. AO on account of payment of interest on various Indirect Taxes, TCS, and 58 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
TDS treating the same penal in nature. The details of disallowance as summarized and furnished before us by the assessee through a written synopsis, the same is culled out as under for the sake of completeness of facts: 59
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.60
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.61
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.62
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.63
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.64
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.65
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.66
ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
19.2 On the aforesaid issue, it was the submission by Ld. AR that the payment of interest on taxes are compensatory in nature and not in the nature of penalty as held by Coordinate Benches of ITAT, Delhi Tribunal and Kolkata Tribunal in the cases referred to in its synopsis (extracted supra). It was the prayer that appropriate relief be granted to the appellant.
19.3 Contrary to the submission of the assessee, Ld. CIT-DR strongly supported the orders of revenue authorities and had placed his reliance on the 67 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
judgment of Hon'ble Apex Court in the case of Bharat Commerce and Industries Ltd. vs CIT (supra) and CIT vs Chennai Properties and Investment Ltd. (supra). It is requested that the order of Ld. CIT(A) on this issue be sustained. 19.4 We have considered the rival submissions, perused the material available on record and case laws relied upon by both the parties. On perusal of the facts of the present case it is observed the assessee had paid interest on delayed payment of taxes under various statutes such as Entry tax, Sales tax, Excise, Service tax, TCS & TDS. There were also certain disallowances qua the penalties paid by the assessee on CGST, SGST, Excise, Service Tax and Entry Tax, but the assessee wishes not to press against such additions. 19.5 On the issue of interest paid on late payment of taxes, assessee placed his reliance on the judgment of Hon'ble Apex Court in the case of Lachmandas Mathuradas vs CIT reported in 254 ITR 799, wherein the issue is decided in favour of the assessee and against the revenue with the following comments.
The question of law before the Hon'ble Apex Court are:
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" 1. Whether, the Tribunal was in law justified in allowing the assessee's claim in respect of interest on the arrears of sales tax in computing the asses-see's income for the year under consideration? and
2. Whether, the interest on the outstanding balance of sales tax was an allowable deduction under the Income-tax Act ?"
Observations:
"3. While granting special leave to appeal the appeal has been confined to questions Nos. 1 and 2 only. 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 decision in Saraya Sugar Mills P. Ltd. v. CIT [1979] 116 ITR 387 (All).
Learned counsel appearing for the appellant-assessee states that the said judgment of the Full Bench has been reversed by the larger Bench of the High Court in Triveni Engineering Works Ltd. v. CIT , 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 Sugar Mills Pvt. Ltd. v. CIT, decided on February 29, 1996. In that view of the matter, the appeal is allowed and questions Nos. 1 and 2 are answered in favour of the assessee and against the Revenue.
No order as to costs.
19.6 Ld. AR also placed his reliance on the order of Hon'ble Apex Court in the case of Saraya Sugar Mills (P) Ltd. vs CIT referred by the Hon'ble Apex 69 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
Court in the case of Lachmandas Mathuradas vs CIT (supra), wherein similar findings, that the interest on arrears on tax is compensatory in nature and not panel, has been accorded.
19.7 Based on aforesaid judgment, the coordinate benches of ITAT, Delhi & Kolkata in the case of Delhi Cargo Service Center vs ACIT (supra) and DCIT vs Narayani Ispat Pvt. Ltd. (supra) have decided the issue in favour of assessee observing that the interest on delay in payment of Service Tax and TDS was compensatory in nature and not in the nature of penalty.
19.8 Adverting to the judgments relied upon by the Ld. CIT(A) in his order in the case of Bharat Commerce and Industries Ltd. vs CIT (supra), wherein Hon'ble Apex Court had held that the interest on delayed payment of Income Tax or advance tax is inextricably connected with the assessee's tax liability, if the income tax itself is not permissible as deduction u/s 37, any interest payment for defaulted by the assessee in discharging his statutory obligation under the Act, which is calculated w.r.t. the tax on income, cannot be allowed as deduction. Ld. CIT(A) also placed his reliance on the order of Hon'ble Madras High Court in the case of CIT vs Chennai Properties and Investment Ltd. (supra), wherein it is 70 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
observed that the interest paid for the period of delay takes color from the nature of principle, if the principal amount would be the income tax and the interest payable for delayed payment is the consequence of failure to pay tax, in the circumstances, is in the nature of penalty. Therefore, the interest paid u/s 201(1A) could not be allowed as business deduction.
19.9 Referring to the aforesaid two decision, followed by the department, herein, we may observe that the aforesaid decisions of Hon'ble Apex Court and Hon'ble Madras High Court are qua the payment of interest on account of delay in payment of income tax, which is expressly an expenditure not allowable under the Income Tax Act, whereas the interest on delay of payment of taxes paid in the present case pertains to taxes other than assessee's own Income Tax, thus, has no direct implication in the present case. The interest paid by the assessee in present case is on the delayed payment of indirect taxes and TDS which are expressly or otherwise deductible under the Act, while computing the profit and gains of the business. Since the taxes involved in present case consequent to which the interest on delayed payment is made, cannot be construed as taxes on the income of the assessee, rather those relates to the expense of the assessee and taxes on the payee. The principal amount on which the interest is attracted are either indirect taxes collected under other Indirect Taxes Acts or deduction / 71 ITA No. 406, 409/RPR/2024 & CO No. 17/RPR/2024 Rashmi Sponge Iron and Power Industries Pvt. Ltd.
collection of taxes under the Income Tax Act on behalf of exchequer, while making the payment of admissible expenditure to the payees, thus, the principal laid down by the Hon'ble Apex Court in the case of Lachmandas Mathuradas vs CIT (supra) is squarely applicable in the present case, accordingly, the interest for delay in payment of taxes i.e., Entry tax, Sales tax, Excise, Service tax, TCS & TDS is held to be compensatory in the nature and not in the nature of penalty and are allowable as deduction u/s 37(1) of the Act.
19.10 In result, Ground No. 1 of Assessee's appeal in ITA No. 409/RPR/2024 is allowed.
20. Ground No. 2: This ground is general and academic in nature, with no further advancement of arguments, therefore no separate adjudication is required.
21. Resultantly, appeal of the assessee in ITA No. 409/RPR/2024 is allowed, in terms of our aforesaid observations.
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22. In combined result, appeal of the revenue in ITA No. 406/RPR/2024 and CO No. 17/RPR/2024 of the assessee are partly allowed and the appeal of assessee in ITA No. 409/RPR/2024 is allowed, in terms of our aforesaid observations.
Order pronounced in the open court on 29/10/2024.
Sd/- Sd/-
(RAVISH SOOD) (ARUN KHODPIA)
ाियक सद / JUDICIAL MEMBER लेखा सद / ACCOUNTANT MEMBER
रायपुर/Raipur; िदनांक Dated 29/10/2024
Vaibhav Shrivastav
आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-
2. थ / The Respondent-
3. आयकर आयु (अपील) / The CIT(A),
4. The Pr. CIT, Raipur (C.G.)
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur
6. गाड फाईल / Guard file.
// स या पत ित True copy // आदे शानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur