Income Tax Appellate Tribunal - Ahmedabad
Panchmahal Steel Ltd.,, Godhra vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A" AHMEDABAD
Before Shri, A.K.Garodia, Accountant Member and
Shri Kul Bharat, Judicial Member
IT A No.5-14/ Ahd/2010
Assessm ent Years:1999-00 to 2006-07
Deputy Commissioner of V/s. Panchmahal Steel Ltd.,
Income-tax, Panchmahal GIDC Estate, Kalol, Dist.
Circle, Godhra Panchmahal
PAN No. AABCP2643Q
(Appellant) .. (Respondent)
C.O No.61-63/ Ahd/2010
(arising out ITA No.07/Ahd/2010, ITA
No.08/Ahd/2010 & ITA No.13/Ahd/2010)
Assessment Years:2000-01, 2001-02 &
2005-06
Panchmahal Steel Ltd. V/s. DCIT, Panchmahal
GIDC Estate, Kalol Circle, Civil Lines Road,
PAN No. AABCP2643Q Godhra
(Appellant) .. (Respondent)
आवेदक कȧ ओर से/By Assessee Shri J.P.Shah, SR-AR
राजःव कȧ ओर से/By Revenue Shri Ravindra Kumar, CIT-DR
सुनवाई कȧ तारȣख/Date of Hearing 29-05-2012
घोषणा कȧ तारȣख/Date of Pronouncement 13-07-2012
ORDER
PER BENCH:-
ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 2 These are 10 appeals filed by Revenue and assessee filed 3 Cross Appeals (CO) are directed against different orders of Ld. Commissioner of Income-tax (Appeals)-VI, Baroda of even date i.e. 18-09-2009 for the assessment years 1999-00 to 2006-07. These are heard together and disposed of by a consolidate order for the sake of convenience. First we take up Revenue's appeal in ITA No.5/Ahd/2010 (A.Y. 99-00).
2. The Revenue has raised single effective ground, same is reproduced as under:-
"1(i) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of loss due to cancellation of forward contract amounting to Rs.34,88,834/-
1(ii) The Ld. CIT(A) in his order failed to address the issue whether forward contract would fall under speculative transaction or constitute revenue expenditure."
3. The facts in brief are that assessee filed original return on 29-03-2001 declaring total loss of Rs.9,72,95,505/-. Subsequently, a revised return was filed on 30-03-2001 declaring loss of Rs.7,73,42,356/-. A notice u/s. 148 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') was issued and served upon the assessee in response thereto the assessee vide letter dated 21-11-2003 requested to consider revised return filed on 30-03-2001 as the return in response to notice u/s. 148 of the Act. Thereafter, a notice u/s 143(2) r.w.s. 142(1) of the Act was issued along with questionnaire and the assessment u/s. 143(3) r.w.s. 147 of the Act was framed vide order dated 23- 09-2004. The Assessing Officer disallowed the loss claimed by the assessee on account of cancellation of forward contract booked for import of material. The assessee feeling aggrieved by this order filed appeal before Ld. CIT(A) who after considering the submissions of the assessee and perusing the record deleted the addition made on account of disallowance of loss due to cancellation of forward contract.
4. Against this order, Revenue is in appeal before the Tribunal. ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 3
5. Ld. CIT-DR vehemently argued that the order of Ld. CIT(A) is not sustainable and he heavily relied upon the order passed by Assessing Officer. On the contrary, Shri J.P. Shah, Ld. counsel for the assessee submitted that this issue is squarely covered by the judgment of Hon'ble jurisdictional High Court in the matter of CIT v. Friends And Friends Shipping Pvt. Ltd. Tax Appeal No.251 of 2010 dated 23-08-2011.
6. We have heard rival submissions of the respective Authorized Representative of the parties perused the materials available on record and judgment cited. The contention of Ld. A.R. is that the issue in dispute as raised in this ground of appeal is squarely covered by the Judgment of the Hon'ble Gujrat High Court in the case of CIT Vs. Friends and Friends Shipping Pvt. Ltd in Tax Appeal NO. 251 of 2010, in this case the question before the Hon'ble High Court for consideration was that whether the appellate Tribunal was right in law and on facts in reversing the order passed by Ld. CIT(A) and thereby deleting the disallowance of Rs. 15,04,910/- made on account of foreign exchange difference. The Hon'ble jurisdictional High Court followed the decisions of the Hon'ble Bombay High Court and the Hon'ble Culcutta High Court dismissed the appeal of Revenue. In CIT(A) Vs. Friends and Friends Shipping Pvt. Limited (Supra), the assessee was an exporter who had entered into forward contract with the bankers to hedge against any loss arising out of the fluctuation in foreign currency. Since on some occasions, the assessee was required to give instructions for cancellation of forward contract, the assessee had to pay charges to the Bank. In this process the assessee suffered loss of Rs. 15 lac. The Assessing Officer disallowed the loss holding it as speculative in nature and therefore covered under sub- section 5 of Section 43. In further appeal CIT(A) confirmed the order of Assessing Officer relying on the decisions of the Andhra Pradesh High Court in the case of M.G. Brothers V. CIT (1985) 154 ITR 195 (AP) and also in the case of Commissioner of Income Tax Vs. Joseph John, 67 ITR 74. However, on further appeal the Tribunal deleted the disallowance following the decision ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 4 of the Hon'ble Bombay High Court in the case of CIT v. Badridas Gaurida (P) Ltd 261 ITR 251 (Bom). We find that the facts of the case in hand are identical with the facts of the case of the Friends and Friends Shipping Pvt Ltd (supra), in the case present case also the assessee has claimed business loss of Rs. 34,88,834/- as foreign exchange ratio difference on account of cancellation of forward contract booked for import of material. In this view of the matter, respectfully following the decision of Hon'ble Gujrat High Court in the case of Friends and Friends Shipping Pvt Ltd. (supra), this ground of Revenue's appeal is dismissed.
7. In the result, Revenue's appeal is dismissed.
Now we take up Revenue's appeal in ITA No.6/Ahd/2010 (A.Y.99-00)
8. In the present appeal Revenue has raised following grounds of appeal:-
"1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.10,17,696/- on account of late payment of employees contribution to PF.
1(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section36(1)(va) r.w.s. 2(24)(x) of the Act."
9. The facts in this case are that assessment u/s. 143(3) r.w.s. 147 of the Act was passed by the Assessing Officer on 23-09-2004. Subsequently, it came to the notice of the Assessing Officer that while passing order u/s. 143(3) of the Act the claim made by assessee on account of Long Term Capital Loss of Rs.4,39,548/- arising out of sale of security was wrongly allowed. The assessee had also claimed deduction for payment of PF amounting to Rs.10,17,696/- and Rs.4,58,777/- also being the employee's contribution and employer's contribution respectively. Therefore a notice u/s. 154 of the Act was issued and served upon the assessee. The AO passed order u/s. 154 of the Act thereby making addition on account of loss on sale of securities of Rs.4,39,548/- and late payment of PF of Rs.10,17,696/- and ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 5 Rs.4,58,777/-. The total addition was made of Rs.19,16,021/-. Against this order assessee filed appeal before Ld. CIT(A) who after considering the submissions of assessee and facts of the case, partly allowed the appeal deleting addition made on account of PF contribution of employee and employer of Rs.10,17,696/- and Rs 4,58,777/- respectively. The Revenue being aggrieved by the order of Ld. CIT(A) is before this Tribunal by way of present appeal.
10. Ld. CIT-DR submitted that the order of Ld. CIT(A) is erroneous and strongly supported the order of the Assessing Officer passed u/s. 154 of the Act. On the contrary, Ld. AR for the assessee submitted that the issue is squarely covered by various judicial pronouncements in favour of assessee and this issue has already been decided by Hon'ble ITAT Ahmedabad in CO No.181/Ahd/2004 for A.Y. 1998-99 dated 20-08-2010 in assessee's own case.
11. We have heard rival submissions of Ld. Authorized Representative of the assessee perused the material available on record and the decision cited. It is recorded by the Assessing Officer that in this case employee's and employer's contribution has been made within grace period and not before due date. However the same was deposited before expiry of due date of filing of return. It is not controverted by the Ld. Departmental Representative that the PF contribution of employer and employee was deposited within grace period and well before filing of due date of income tax return. The Hon'ble Co- ordinate Bench in CO No. 188/A/2004 for the assessment year 1988-89 assessee's own case while deciding this issue in favour of the assessee has held as under:-
"5. Ground No.4 relates to confirmation of disallowance of Rs.5,65,278/- being the delayed Provident Fund payment. After careful consideration of the submissions made in the written submissions and after hearing the learned DR, we find that the issue is duly covered in favour of the assessee by the decision of this Tribunal Ahmedabad Bench-D in the case of M/s JMC Projects (India) Ltd. v. DCIT [ITA No.4175/Ahd/2007] wherein vide order dated 28-03-2008, this Tribunal has held as under:-
ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 6 'Moreover, Hon'ble ITAT "A" Bench, Ahmedabad in their order dated 10-08-2007 in ITA No.2262/Ahd/07 in the case of Sai Consulting Engineers I(P) Ltd. for assessment year 2004-05, relying upon the decision of the Delhi Bench of ITAT in the case of Addl CIT v. Vestas RRB India LT. (2005) 92 ITD 1 and the decision of ITAT Chennai Bench "A" (Special Bench) in the case of Kwalaity Milk Foods Ltd. 100 ITD 99 SB (Chennai), held that payment of employees' contribution having been made by the taxpayer being within the due date of filing of the return, deduction is allowable to the taxpayer. Even in terms of provisions of section 43B, as it stood prior to amendment w.e.f. 1- 4-2004, Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. 213 CTR (SC) 268 held that the taxpayer was entitled to claim the benefit in sec. 43B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return and affirmed the decision of Hon'ble Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd. 284 ITR 619 (Gau). In view of amendment of provisions of sec. 43 of the Act, with the omission of second proviso to the said section and in the light of aforesaid decision of Hon'ble Supreme Court, there is no relevance in considering the decisions of various High Courts, relied upon by the AO and ld. DR.
In view of the foregoing, we have no hesitation in holding that the employees' contribution towards PF, having been made by the taxpayer within the due date of filing of the return for the year under consideration, there is no ground for disallowing the same. Thus, ground nos. 1 & 2 of the appeal are allowed.' Admittedly the facts in the present case are similar to those as in the case of M/s. JMC Projects (India) Ltd., (supra), we allow the claim of the assessee. Thus, this ground stands allowed."
12. We find that there is no change in the facts and circumstances in the year under consideration. Therefore, respectfully following the decision of Hon'ble Co-ordinate Bench in CO NO. 181/A/2004 this ground of Revenue's appeal is hereby dismissed
13. In the result, appeal of the Revenue is dismissed.
Now we take up Revenue's appeal in ITA No.7/Ahd/2010 (A.Y.01-02)
14. The Revenue has raised the following grounds of appeal:-
ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 7 "1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.3,09,42,594/- on account of excise duty not included in the valuation of closing stock of finished goods.
1(ii). The Ld. CIT(A) failed to appreciate that the excise duty adopted at the rate of 16% was rightly included by the AO in the value of closing stock of finished goods, as mandated by section 145A of the Act.
2. On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.22,95,488/- on account of repairs and maintenance expenses treated as capital expenditure.
3(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.1,43,220/- on account of late payment of employees contribution to PF and ESI.
3(ii). The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s. 2(24)(x) of the Act."
15. Facts in brief are that return of income was declared loss of Rs.6,52,37,920/- was filed by assessee on 21-11-2000 subsequently case was selected for scrutiny. The Assessing Officer made various additions as under:-
"1. Addition on a/c of excise duty on finished goods Rs.3,09,42,594
2. Addition on a/c of capital expense Rs. 22,95,488
3. Out of misc. expenses Rs. 6,35,014
4. Out of staff welfare expenses Rs. 3,06,580
5. Out of vehicle expenses Rs. 3,24,742
6. OUT of traveling expenses Rs. 2,31,450
7. Out of telephone expenses Rs. 50,000
8. Out of previous year expenses Rs.3,30,27,388
9. On account of PF & ESIC Rs. 1,43,220
10. Out of discount, commission & credit notes on sales Rs. 18,29,655 ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 8
16. Against the above additions, assessee filed an appeal before Ld. CIT(A) who after considering the submission of the assessee partly allowed the appeal thereby deleted additions of 3,09,42,954 made on account of excise duty not included in the stock of finished goods, addition of Rs.22,95,488/- expenditure incurred on repairs and maintenance treated as capital expenditure and disallowance made on account of late depositing of PF and ESIC.
17. Against the order of Ld. CIT(A), Revenue came in appeal before this Tribunal
18. The first ground of appeal is against the deletion of Rs. 3,09,42,954/- on account of excise duty not included in value of closing stock of finished goods. Ld. CIT DR vehemently argued that the order passed by Ld. CIT(A) is erroneous in view of the fact that excise duty is levied on manufacture of goods. It is submitted by Ld. CIT-DR that the assessee has not recorded in books of account that the excise duty is payable on removal of the goods. He submitted that incidence of excise duty is on manufacturing which is evident from the relevant provision of the central excise Act. On the contrary, Ld. Authorized Representative for the assessee submitted that this issue is squarely covered in favour of assessee by the judgment of Hon'ble jurisdictional High Court in the case of ACIT v. Namada Chematur Petrochemicals Ltd. (2010) 327 ITR 369 (Guj)
19. We have heard the rival submissions, perused the materials available on record and judgments cited by the parties. We find that Hon'ble jurisdictional High Court has decided this issue in favour of assessee in the case of Narmada Chematur Petrochemicals Ltd. (supra) wherein it has been held that according to the settled legal position and accepted principles of accounting, closing stock has to be valued, at the option of the assessee, at cost or market price, whichever is lower. Duty of Central excise is levied on ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 9 the goods manufactured, i.e. excisable goods manufactured by an assessee. It is not a part of manufacturing cost. It can be termed a post-manufacturing cost. Therefore, unless and until it is entered on one side, as an item of cost, it cannot be taken as a component of the value of the closing stock on the other side. The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account. It is further held by the Hon'ble jurisdictional High court that making of any entry or absence of an entry cannot determine the rights and liabilities of parties. In other words, if the law does not lead to incurring of a liability, or does not lead to a corresponding right to insist on discharging such a liability any accounting practice (even if suggested by the Institute of Chartered Accounts of India) cannot lay down anything to the contrary. It is held by the Hon'ble court that excise duty is admittedly an indirect levy. The manufacturer does not effectively pay from his own pocket. The duty of central excise is collected by manufacturer by a manufacturer from the purchaser, whether wholesaler or retailer. Hence, at the time of removal of excisable goods the duty is recovered by the manufacturer from the purchaser and simultaneously paid to the Revenue. The point of time of removal of excisable goods is the point of time when the liability to pay central excise duty is incurred resulting in corresponding right under law in the Excise Department to take steps to effect recovery if the liability is not discharged, till that point of time the liability to pay duty of central excise cannot be stated to have been incurred in law as the same is not due and payable. Relying upon various judgments, Hon'ble High court affirmed the decision of the Tribunal of excluding excise duty at the time of valuation of closing stock of finished goods at the end of account period. Respectfully following the judgment of Hon'ble jurisdictional High Court in the case of Narmada Chematur Petrochemicals Ltd. (supra) this ground of Revenue's appeal is hereby rejected
20. Next ground relates to deletion of disallowance of Rs.22,95,488/- made on account of repairs and maintenance expenses. Ld. CIT-DR relied upon the ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 10 order of Assessing Officer and submitted that order of Ld. CIT(A) is erroneous. On the contrary, Ld AR relied on the order passed by Ld. CIT(A) and submitted that there was no infirmity in the order of Ld. CIT(A). He further submitted that the expenditure was merely towards maintenance of existing plant and machinery and did not give any enduring benefit. Therefore, this could not be termed as capital expenditure. It is submitted by Ld. AR that expenditure was essentiality revenue in nature as the expenditure was made for purchasing spare for cooling tower for fabrication work pertaining to repairs of existing plant and machinery for painting work for structural steel consumption for fabrication work pertaining to repairs of existing plant and machinery.
21. We have heard the rival submissions, perused the materials available on record and case laws cited by the parties. We find that Ld. CIT(A) has returned a finding that expenditure incurred by the assessee was merely towards maintenance of the existing plant and machinery and did not give any enduring benefit. The Hon'ble Supreme Court in the matter of CIT v. Saravana Spinning Mills P. Ltd. (2007) 293 ITR 201 (SC) has held that basic test to find out as to what would constitute current repairs as that the expenditure must have been incurred to preserve and maintain an already existing asset, and the expenditure must not bring to a new asset into existence or to obtain new advantage and we find that Ld. CIT(A) has given a finding of fact that the expenditure were incurred on account of maintenance of the existing plant and machinery. The Revenue has not placed anything contrary on record suggesting that such expenditure was made for bringing into existence of a new asset on for the enduring benefit to the existing asset. In this view of the matter, the ground of Revenue's appeal is dismissed.
22. Next ground relates to deletion of add of Rs.1,43,220/- on account of late payment of employees' contribution. This issue we have already decided in Revenue's appeal in ITA No. 6/Ahd/2010 embodied in para-10 & 11 of this ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 11 order there is no change into facts as circumstance in this year also, therefore following our discussion in ITA No.6/Ahd/2010, this ground of Revenue's appeal is dismissed.
23. In the result, Revenue's appeal is dismissed.
Now we take up Revenue's appeal in ITA No.8/Ahd/2010 (A.Y.01-02)
24. The Revenue has raised following effective grounds of appeal:-
"1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition U/s 40(a)(ia) of Rs.21,83,593/- on account of commission paid to foreign agents in foreign currency without deduction of tax at source.
1(ii) The Ld. CIT(A) failed to appreciate that the Circular No.786 dtd.07.02.2000, in which he has relied upon on the above issues, has been withdrawn by the CBDT vide Circular No.7 of 2009 (F.No.500/135/2007-FTD-1), dtd. 22.10.2009. Further, on the issue of deduction of TDS on payments to Non-residents, recently the Hon. Karnataka High Court in its judgment in the case of CIT (International Taxation) Vs. Samsung Electronics Co. Ltd. reported in TIOL 2009-TIOL-629-HC-KAR-IT, relying upon the decision of the Apex Court in the case of Transmission Corporation Limited Vs. CIT. 2002 TIOL-471-SC-IT, has held that the obligation to deduct tax at source under section 195 has nothing to do, with the actual liability of the non-resident to tax under the provisions of the Act, including the quantum thereof. The payer in such circumstances should take recourse to the provisions of section 195(2) of the Act if he is of the view that only a part of the payment made by him or no part thereof would bear the character of income in the hands of the non-resident."
25. The facts, in brief, are that the case was re-opened and a notice u/s 148 was issued. While framing assessment u/s 143(3) read with 147 of the Income Tax Act, the Assessing Officer made various disallowance including the disallowance of Rs.21,83,593/- claimed as payment of commission in foreign currency. The assessee carried the matter before the CIT(A) who after considering the submission of the assessee partly allowed the appeal. Ld. CIT(A), while disposing of the appeal, deleted the disallowance of ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 12 Rs.21,83,593/-. Against order of ld. CIT(A), the present appeal has been filed before the Tribunal.
26. Ld. Departmental Representative submitted that the order passed by ld. CIT(A) is erroneous as much as that the Ld. CIT(A) failed to take note of the judgment of Hon'ble Karnatka High Court in the case of CIT (International Taxation) v. Samsung Electronics Co. Ltd. reported in TIOL 2009-TIOL-629 HC-KAR-IT and the judgment of Hon'ble Supreme Court in the case of Transmission Corporation Limited v. CIT, 2002-TIOL-471-SC-IT. On the contrary, Ld. Authorized Representative submitted that the judgment of Hon'ble Supreme Court in the case of Transmission Corporation (supra) and the judgment of Hon'ble Karnataka High Court in the case of Samsung Electronics (supra) is not applicable in the facts and circumstances of the present case. He submitted that this issue has already been decided by the Hon'ble ITAT Ahmedabad Bench in ITA No.1443-1444/Ahd/2010 for the A.Ys 2002-03 and 2007-08 in assessee's own case. The Hon'ble Tribunal in ITA No.1443 of 2010 has held as under:-
"We have considered the rival submissions and the material available on record. The assessee specifically pleaded before the learned CIT(A) that tax was not deducted because income tax is deductible at source only from payments which are chargeable to tax under Income Tax Act. It was submitted that the amount was paid for commission in foreign currency was not chargeable to tax in India because these payments represented business income of non-resident and that none of the payees have permanent establishment or business connection in India within the meaning of section 9 of the I.T. Act. It was also explained that non- residents were not chargeable to tax in India due to various Double Taxation Agreements. It was also explained that payments were not for royalty or technical know-how and therefore, tax was not liable to be deducted. It was also submitted that the assessee did not deduct tax because of the existing circular issued by CBDT. Therefore, no disallowance could be made. The learned DR however, submitted that earlier Board circular relied upon by the assessee has been withdrawn with immediate effect vide subsequent circular dated 23.10.2009; therefore, earlier circulars would no longer survive. However, we do not agree with the submissions of the learned DR because ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 13 later circular dated 23.10.2009 was having no retrospective effect and also could not have the effect to the assessment years where the assessee filed the return of income on time in accordance with the existing Board circular. Therefore, there was no default on the part of the assessee not to deduct TDS in such circumstances based upon its opinion on the CBDT circulars. The JCIT, Godhra Range in the case of the same assessee for assessment year 2005-06 (copy of which is filed by the learned Counsel for the assessee) examined similar issue and the AO stated in the remand report that the assessee complied with the conditions of the earlier Board Circular No.786 (supra). It was also explained that the transactions of the assessee would not come within the purview of TDS provisions. Since the AO (JCIT, Godhra) accepted the claim of the assessee in the earlier year in his remand report before the learned CIT(A), therefore, the AO cannot deviate from its earlier stand taken on the identical matter against the same assessee. The Board circular on the basis of which the AO gave the remand report and the assessee claimed that the TDS provisions are not applicable in his case, were admittedly applicable in the assessment years under appeal i.e. assessment year 2002-03 and 2007-08 because the Board circular was withdrawn Later on, on 23.10.2009. Hon'ble Supreme Court in the case of Union of India v. Satish Panalal Shah [2001] 249 ITR 221 (SC) deprecated the practice of the department in accepting the correctness of the judgments in particular case and in challenging its correctness in another case. Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Vikas Chemi Gum India [2005] 276 ITR 32 held that "since the sources of income in any earlier year not challenged, it is not open to the revenue to challenge the same in subsequent year". Hon'ble Supreme Court in the case of Radhaswami Satsang Vs. CIT 193 ITR 321 held that "consistency in the approach by the revenue deptt. Should be maintained".
Hon'ble Pupnjab & Haryana High Court in the case of Prakash Industries Ltd. 324 ITR 391 held that "when the order for earlier year has become final, the rule of consistency should be followed." Considering the above, in the light of the finding of the learned CIT(A), we are of the view that since the claim of the assessee was based upon the circular existing at the time of assessment year under appeal and the view of the assessee has been accepted by the AO in assessment year 2005-06, therefore, the learned CIT(A) was justified in deleting the additions. We, therefore, do not find any perversity in the approach of the learned CIT(A). We confirmed his findings and dismiss both the appeals of the revenue."
ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 14
27. It is noteworthy Ld. CIT(A) has decided this issue in para 7.3 of his order which is reproduced as under:-
"I have considered submission of the appellant as well as facts of the case. Similar issue was remanded back to the AO for A.Y.A 2005-06 and AO through JT. CIT, Panchmahal Range confirmed that payment of commission in foreign currency does not come under the purview of TDS and therefore no Tax is required to be deducted. Considering said facts, circular of the Board and decisions relied upon by the appellant, disallowance of Rs.21,83,593/- is directed to be deleted."
28. From the above order of Ld. CIT(A) it is evident that he has relied upon the order passed in the case pertaining to assessment year 2005-06 wherein the Assessing Officer had submitted that in remand report that payment of commission in foreign currency does not come under the purview of TDS, therefore, no tax is required to be deducted. Admittedly, there is no change in the circumstances except that the contention of the Revenue that circular No.786 dated 7.2.2000 has been withdrawn vide circular No.7 of 2009 dated 23.10.2009. We find that this Tribunal in ITA No.1443/Ahd/2010 had considered this argument of the Revenue that circular No.23 dated 23.7.1969 and Circular No.786 dated 7.2.2000 were withdrawn vide Circular No.7 of 2009 dated 23.10.2009. So far the contention of the Revenue that Ld. CIT(A) has not appreciated the decision of Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. (supra) and the judgment of Hon'ble Supreme Court in the case of Transmission Corporation Limited (supra), we find that the decisions as relied by the Revenue in the ground of appeal was neither appreciated by Ld. CIT(A) nor considered by Hon'ble Tribunal in ITA No.1443 & 1444/Ahd/2010 however, the facts in the present case are different, as in the present case, the assessee did not deduct tax as it was not deductible in terms of CBDT's Circular No. 756 dated 07/02/2000. This circular No. 786/2000 was subsequently, withdrawn vide Circular No 7 of dated 23-06-2009 but subsequent to filing of return by the assessee. It is not disputed that in respect of assessment year 2005-06 the claim of the assessee was accepted by the Revenue and there is no change in the ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 15 circumstance except the contention that the Circular No.786 dated 7.2.2000 has been withdrawn vide Circular No.7 of 2009. This contention of the Revenue was considered and decided by the Tribunal that since the claim of the assessee was based upon the circular existing at the time of assessment year, no appeal, and the view of the assessee had been accepted by the Assessing Officer in assessment year 2005-06. Therefore, the order of Ld. CIT(A) no infirmity is found. Since the judgments as filed by the Revenue would not apply on the facts of the present case as the issue of Circular No 7 of 2009 was not before the Hob'ble High Court. Respectfully following the decision of the Hon'ble Co-ordinate Bench in ITA No. 1443-1444/Ahd/2010, this ground of the Revenue's appeal is dismissed.
29. In the result, the appeal of the Revenue is dismissed.
Now we take up Revenue's appeal in ITA No.9/Ahd/2010 (A.Y.01-02)
30. Revenue has raised following grounds of appeal:-
"1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.10,34,262/- on account of late payment of employees contribution of PF.
1(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s. 2(24)(x) of the Act.
2(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.47,729/- on account of late payment of employees contribution to ESI.
2(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s. 2(24)(x) of the Act.
ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 16
31. Ground Nos. 1(i) and 1(ii) are against the deletion of the addition made on account of late payment of employees contribution of PF. Similar ground was raised in ITA No.6/Ahd/2010 for the A.Y 1999-2000. Ld. Authorised Representative submitted that this issue has already been decided in favour of the assessee in the assessee's own case in C.O. No.181/Ahd/2004.
32. We find that the facts are identical as in ITA No.6 of 2010. Since this issue we have already decided in favour of the assessee in ITA No.6 of 2010, therefore, this ground of appeal of the Revenue is dismissed. The other ground is related to the payment of employees' contribution to the ESI. This issue has also been decided in favour of the assessee by Hon'ble ITAT in assessee's own case in A.Y 1998-99 in C.O. No.181/Ahd/2004. Ld. A.R. also relied upon the judgment of Hon'ble Madras High Court in the case of CIT v. Nexus Computer P. Ltd. reported in (2009) 313 ITR 144 (Mad) wherein Hon'ble High Court held that if the contribution had been paid prior to filing of the return, the assessee is entitled to the benefit u/s 43B of the Income Tax Act. Ld. A.R. has also placed reliance on the judgment of Hon'ble Karnataka High Court in the case of CIT v. ANZ Information Technology P. Ltd. reported in [2009] 318 ITR 123 (Karn) wherein the Hon'ble High Court, followed the decision in ITA No.107 & 108 of 2007 and the judgment rendered in the case of CIT v. Sabari Enterprises reported in [2008] 298 ITR 141 (Karn). Respectfully following the ratio laid down in CIT v. Sabari Enterprises (supra) and Hon'ble Madras High Court in the case of CIT v. Nexus Computer P. Ltd. (supra) and the decision of Hon'ble ITAT in C.O. No. 181/Ahd/2004, this ground of the appeal of the Revenue is dismissed.
33. In the result, Revenue's appeal is dismissed.
Now we take up Revenue's appeal in ITA No.10/Ahd/2010 (A.Y.02-03)
34. Revenue has raised following grounds of appeal:-
ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 17 "1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.37,15,954/- on account of late payment of employees contribution to PF. And addition of Rs.4,82,915/- on account of late payment of employees contribution to ESI.
1(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s. 2(24)(x) of the Act."
35. We find that the facts and the grounds in this appeal are identical with ITA No.9/Ahd/2010. Since these issues we have already decided in ITA No.9/Ahd/2010 of Revenue's appeal, following our decision in ITA No.9/Ahd/2010, this ground of the appeal of the Revenue is also rejected.
36. In the result, Revenue's appeal is dismissed.
Now we take up Revenue's appeal in ITA No.11/Ahd/2010 (A.Y.03-04)
37. The Revenue has raised following grounds of appeal:-
"1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition u/s 40(a)(ia) of Rs.49,48,283/- on account of commission paid to foreign agents in foreign currency without deduction of tax at source.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition u/s 40(a)(ia) of Rs.16,66,673/- on account of professional fees paid in foreign currency without deduction of tax at source.
3. The Ld. CIT(A) failed to appreciate that the Circular No.786 dtd.07.02.2000, in which he has relied upon on the above issues, has been withdrawn by the CBDT vide Circular No.7 of 2009 (F.No.500/135/2007-FTD-1), dtd. 22.10.2009. Further, on the issue of deduction of TDS on payments to Non-residents, recently the Hon. Karnataka High Court in its judgment in the case of CIT (International Taxation) Vs. Samsung Electronics Co. Ltd. reported in TIOL 2009-TIOL-629-HC-KAR-IT, relying upon the decision of the Apex Court in the case of Transmission ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 18 Corporation Limited Vs. CIT. 2002 TIOL-471-SC-IT, has held that the obligation to deduct tax at source under section 195 has nothing to do, with the actual liability of the non-resident to tax under the provisions of the Act, including the quantum thereof. The payer in such circumstances should take recourse to the provisions of section 195(2) of the Act if he is of the view that only a part of the payment made by him or no part thereof would bear the character of income in the hands of the non-resident.
4(i) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs.17,55,340/- on account of late payment of employees contribution to PF and addition of Rs.1,67,882/- on account of late payment of employees contribution to ESI.
4(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s. 2(24)(x) of the Act."
38. The facts of the present appeal is identical as were in ITA No.8/Ahd/2010. This identical issue, we have already decided in ITA No.8/Ahd/2010 of Revenue's appeal, following our decision in ITA No.8/Ahd/2010, this ground of Revenue's appeal is dismissed.
39. In the result, Revenue's appeal is dismissed.
Now we take up Revenue's appeal in ITA No.12/Ahd/2010 (A.Y.04-05)
40. The Revenue has raised following grounds of appeal:-
"1(i) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition u/s 40(a)(ia) of Rs. 4196,552/- on account of commission paid to foreign agents in foreign currency without deduction of tax at source.
1(ii). The Ld. CIT(A) failed to appreciate that the Circular No. 786 dated 7.02.2000, in which he has relied upon the above issues, has been withdrawn by the CBDT vide Circular No. 7 of 2009 (F NO. 500/135.2007-FTD-1), dtd 22.10.2009. Further, on the issue of deduction of TDS on payments to Non-residents, recently the Hon'ble Karnataka High Court in its judgment in the case of CIT (International ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 19 Taxation Vs. Samsung Electronics Co. Ltd. reported in TIOl 2009-TIOL- 629-HC-Kar-IT, relying upon the decision of Apex Court in the case of Transmission Corporation Ltd., Vs. CIT-2002-TIOl-471-SC-IT, has held that the obligation to deduct tax at source u/s 195 has nothing to do, with the actual liability of the non-resident to tax under the provision of the Act, including the quantum thereof. The payer in such circumstances should take resource to the provision of section 195(2) of the IT Act, if he is of the view that only a part of the payment made by him or no part thereof would bear the character of income in the hands of the non-resident.
3(i) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,01,487/- on account of late payment of employees contribution to ESI.
3(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s 2(24)(x) of the Act."
41. The first effective ground is against the deletion of addition made on account of commission paid to foreign agent in foreign currency without deduction at source. The identical ground was raised in Revenue's appeals in ITA NO. 8/Ahd/2010 as well as in ITA No.11/Ahd/2010.
42. The facts in the present appeal is identical as it were in ITA No. 8/Ahd/2010 of Revenue's appeal. There is no change into the facts and circumstances. Hence, this ground of the Revenue is rejected in terms of our decision in ITA No. 8/Ahd/2010.
43. Nest ground is raised against the deletion of addition made on account of late payment of employees' contribution to PF and ESI the identical facts same are raised in ITA No.10/Ahd/2010 for the A.Y.2002-03. There is no change in the facts and circumstances following our decision in ITA NO. 10/Ahd/2010 hence, this ground of the Revenue's appeal is rejected.
44. In the result, Revenue's appeal is dismissed.
ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 20 Now we take up the ITA No. 13/Ahd/2010 (A.Y.05-06)
45. The Revenue has raised the following grounds of appeal.
"1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition U/s. 40(a)(ia) of Rs.77,33,477/- on account of commission paid to foreign agents in foreign currency without deduction of tax at source.
1(ii) The Ld. CIT(A) failed to appreciate that the Circular No. 786 dtd. 07.02.2000, in which he has relied upon, has been withdrawn by the CBDT vide Circular No. 7 of 2009 (F No.500/135/2007-FTD-I), dtd. 22.10.2009. Further, on the issue of deduction of TDS on payments to Non-residents, recently the Hon. Karnataka High Court in its judgment in the case of CIT (International Taxation) Vs. Samsung Electronics Co. Ltd. reported in TIOL 2009-TIOL-629-High Court-KAR-IT, relying upon the decision of the Apex Court in the case of Transmission Corporation Limited Vs. CIT. 20002-TIOL-471-Supreme Court-IT, has held that the obligation to deduct tax at source under section 195 has nothing to do, with the actual liability of the non-resident to tax under the provisions of the Act, including the quantum thereof. The payer in such circumstances should take recourse to the provisions of section 195(2) of the Act if he is of the view that only a part of the payment made by him or no part thereof would bear the character of income in the hands of the non-resident.
2(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the disallowance of excess payment of interest of Rs.35,27,425/- u/s. 40A(2)(b) of the Act.
2(ii) The Ld. CIT(A) failed to allow an opportunity to the Assessing Officer to verify the assessee's claim that liability to pay interest pertaining to past years got crystallized in the A.Y. 2005-06, which is in contravention to Rule 46A of the I.T. Rules 1962.
3. On the facts and in the circumstances of the case, the learned CIT(A) erred in allow additional depreciation as claimed by the assessee ignoring the fact that he assessee has not made any claim for additional depreciation in the original return of income for A.Y. 2005-06. The first claim of this was made in the revised return of income and the claim was made at a time when the limitation for filing revised return had lapsed."
46. The first ground is against the deletion of addition u/s 40(a)(ia) of the Act of Rs.77,33,477/- on account of commission paid to foreign agents in foreign currency without deduction of tax at source. ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 21
47. We find that this identical ground was raised by Revenue in ITA No.8/Ahd/2010 in assessee's own case in respect of A.Y. 2001-02 and no change in facts and circumstances in pointed out by the Ld. CIT-DR in ITA No.8/Ahd/2010. Hence, this Tribunal has decided this issue in para-28 of this order, which is reproduced hereinbelow:-
28. From the above order of Ld. CIT(A) it is evident that he has relied upon the order passed in the case pertaining to assessment year 2005- 06 wherein the Assessing Officer had submitted that in remand report that payment of commission in foreign currency does not come under the purview of TDS, therefore, no tax is required to be deducted.
Admittedly, there is no change in the circumstances except that the contention of the Revenue that circular No.786 dated 7.2.2000 has been withdrawn vide circular No.7 of 2009 dated 23.10.2009. We find that this Tribunal in ITA No.1443/Ahd/2010 had considered this argument of the Revenue that circular No.23 dated 23.7.1969 and Circular No.786 dated 7.2.2000 were withdrawn vide Circular No.7 of 2009 dated 23.10.2009. So far the contention of the Revenue that Ld. CIT(A) has not appreciated the decision of Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. (supra) and the judgment of Hon'ble Supreme Court in the case of Transmission Corporation Limited (supra), we find that the decisions as relied by the Revenue in the ground of appeal was neither appreciated by Ld. CIT(A) nor considered by Hon'ble Tribunal in ITA No.1443 & 1444/Ahd/2010 however, the facts in the present case are different, as in the present case, the assessee did not deduct tax as it was not deductible in terms of CBDT's Circular No. 756 dated 07/02/2000. This circular No. 786/2000 was subsequently, withdrawn vide Circular No 7 of dated 23- 06-2009 but subsequent to filing of return by the assessee. It is not disputed that in respect of assessment year 2005-06 the claim of the assessee was accepted by the Revenue and there is no change in the circumstance except the contention that the Circular No.786 dated 7.2.2000 has been withdrawn vide Circular No.7 of 2009. This contention of the Revenue was considered and decided by the Tribunal that since the claim of the assessee was based upon the circular existing at the time of assessment year, no appeal, and the view of the assessee had been accepted by the Assessing Officer in assessment year 2005-06. Therefore, the order of Ld. CIT(A) no infirmity is found. Since the judgments as filed by the Revenue would not apply on the facts of the present case as the issue of Circular No 7 of 2009 was not before the Hob'ble High Court. Respectfully following the decision of the Hon'ble Co-ordinate Bench in ITA No. 1443-1444/Ahd/2010, this ground of the Revenue's appeal is dismissed."
ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 22 Following our decision in ITA No. 8/Ahd/2010, this ground of Revenue's appeal is dismissed.
48. Next ground is raised against the deletion of disallowance of excess payment of interest amounting to Rs.30,27,425/- u/s40A(2)(b) of the Act. Ld. CIT-DR submitted that the order of Ld. CIT(A) is erroneous and submitted that Ld. CIT(A) did not give any opportunity to Assessing Officer to verify the assessee's claim that liability to pay interest pertaining to past years got crystallized in the year under consideration, which is in contravention to Rule 46A of the I.T Rules, 1962. He placed stay reliance on the assessment order.
49. On the contrary, Ld. Authorized Representative for the assessee submitted that the approach of the Assessing Officer is all through out remained erroneous. He submitted that proper working of rate of interest is 12% but not 21% as worked out by the AO. He relied on the order of Ld. CIT(A).
50. We have heard the rival submissions, perused the material available on record. We find that Assessing Officer while making disallowance as observed as under:-
"g. Disallowance u/s. 40A(2)(b) The details of payments covered u/s. 40A(2)(b) of the Act show that the assessee Co. has claimed an expense of Rs.1,13,57,425/- on account of interest payments to M/s. Honevick Enterprises Pvt. Ltd., on unsecured loan of Rs.5,40,00,000/-. The rate of interest work out to 21% per annum. (1,13,57,425 x 100/55,40,00,000). During the course of assessment proceedings, the assessee Co. was asked to give reasons for interest payments at higher rates to the person covered u/s. 40A(2)(b) of the Act. In its reply dated 26/11/2007, the assessee Co. as under:-
'The payments are made to the person covered u/s. 40A(2)(b) are in ordinary course of business. The first payments for interest rate @ 12% whereas the then rate was @ 14.50%' ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 23 Assessee's reply on the issue has been considered carefully. The prime lending rate during the year under consideration was @ 14.5% per annum. The assessee co. is paying interest @ 14.5% to the bank for availing loan facility. Considering the facts, it is found that the assessee co. has claimed expenses of Rs.1,13,57,425/- on account of interest payments to M/s. Honeyvick Enterprises Pvt. Ltd. at a very higher rate of interest i.e.@ 21% penalty annum. Thus, I am of the opinion that the claim of interest expenses to M/s. Honeyvick Enterprises Pvt. Ltd. by the assessee co. is excessive. The rate of interest is restricted to 14.5% per annum on such interest payments to the person covered u/s. 40A(2)(b) by the assessee co. The amount of interest @ 14.5% per annum on unsecured loan of Rs.5.40 crore works out to Rs.78,30,00/-. Therefore, invoking provisions of 40A(2)(b) of the Act, the excessive interest of Rs.35,27,425/- ( 1,13,57,425 - 78,30,000) is disallowed and accordingly an addition of Rs.35,27,425/- is made to the income returned by the assessee co."
However, Ld. CIT(A) has decided this issue in para-8.2 of his order, which is reproduced hereinbelow:-
"8.2 In appeal it is submitted that originally the amount was accepted from promoters as required under structuring scheme and not as unsecured loan. However, later on restructuring scheme was not implemented and so appellant was obliged to pay interest on said advance as unsecured loan to the Company. Further, the interest on it was required to be paid from the date from which the amount was actually received by the appellant. Since the liability to pay the interest crystallized during the relevant previous year, appellant has paid interest for the period from which the loan was taken till the date of repayment i.e. for more than 12 months at an agreed rate of 12% only and not @ 21% as mentioned by AO in the said order. The appellant also furnished detailed working for the same and it is verified that interest is actually paid at 12% p.a. and not at 21%."
51. The contention of the Ld. CIT-DR is that the Assessing Officer was not afforded opportunity to verify the claim of the assessee that the liability to pay interest crystallized in the A.Y. 2005-06 which is in contravention to Rule 46A of IT Rules, 1962. After considering the submissions of the respective parties and all aspects of the matter in the interest of justice, we restore back the matter to the file of AO to verify the claim of the assessee that the liability to pay interest crystallized in the A.Y. 2005-06 and also working out of rate of ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 24 interest. Therefore, this ground of Revenue's appeal is allowed for statistical purposes.
52. Next ground is raised against the allowing additional depreciation. Ld. CIT-DR submitted that the claim of additional depreciation was made in revised return and the revised return submitted when the limitation of filing of such return was expired. On the contrary, Ld. AR for the assessee submitted that Ld. CIT(A) has allowed additional depreciation having called for remand report of the Assessing Officer.
53. We have heard the rival submissions, perused the materials available on record. We find that Ld. CIT(A) has decided this issue in para-4.4 of his order, which is reproduced hereinbelow:-
"4.4 I have considered submissions of the appellant, gone through the order and also considered the Remand reports of both Jt. CIT and DCIT. I have also gone through various facts of the case placed before me. The AO in its order has disallowed depreciation regular as well as additional on the ground that SS Wire Drawing plant and Billet Yard being pat of SMS project were never put to use in A.Y. 2005-06 and accordingly the question of allowing depreciation does not arise at all. I am therefore inclined to decide first whether the claim of the assessee about putting various plants of SMS project to use or not. In the appeal before me technical details of SMS project were furnished and it was also submitted that it is not necessary that entire SMS project should be started simultaneously. It is up to the assessee to start various down stream facilities though part of SMS project earlier and that too without commissioning entire SMS project. The AO has heavily relied on the Annual Reports of the Company for 2004-05, 205-06 and 2006-07 but not appreciated the facts placed on records by the assessee. It is also worthwhile to note that all the facts submitted in appeal were also present before the AO while passing the order and AO was generous enough to state the same in his order. In the remand report both the Jt. CIT and DCIT after due verification confirmed that both the plants were put to use in A.Y. 2005-06, but based on production the JCIT has opined that in as much as additional depreciation is concerned, it is allowable in the A.Y. 2004-05. On the basis of facts placed before me, I do not have any reason to believe that those plants were not put to use. Accordingly, I differ with the report of the JCIT, to the extent that if production as per the excise records has started in a previous. A.Y then both regular and additional depreciation should be allowable first in the ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 25 A.Y. 2004-05, for the second half of the year, as noted in the excise duty record. Hence, it is not acceptable that the SS Wire Drawing plant and Billet Yard were both commissioned and put to use in A.Y. 2005-06 as claimed by the assessee because trail run and regular run were commissioned in the second half of the previous A.Y. 2004-05, even though these assets were capitalized in books on 01-04-2004.. It is not a material as to on what date the plant and machinery was put to use. Accordingly the AO is directed to allow depreciation and additional depreciation for later half of the year 2003-04, relevant for the A.Y 2004- 05 on SS Wire Drawing plant and Billet Yard and based on the closing WDV consider depreciation in this A.Y, if necessary after obtaining necessary clarifications from the appellant. Thus, this ground of appeal regarding depreciation and additional depreciation is disposed off accordingly."
It is evident from the finding of Ld. CIT(A) that for the additional depreciation has been allowed after receiving remand report. In this view of the matter, we do not find any infirmity into the order passed by Ld. CIT(A). This ground of Revenue's appeal is dismissed.
54. In the result, Revenue's appeal is partly allowed for statistical purposes.
Now we take up Revenue's appeal in ITA NO. 14/Ahd/2010 (A.Y.06-07)
55. The Revenue's has raised the following grounds of appeal:-
"1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition U/s. 40(a)(ia) of Rs.35,52,739/- on account of commission paid to foreign agents in foreign currency without deduction of tax at source.
1(ii). The Ld. CIT(A) failed to appreciated that the Circular No.786 dtd. 07.02.2000, in which he has relied upon has been withdrawn by the CBDT vide Circular No. 7 of 2009 (F No.500/135/2007-FTD-I), dtd. 22.10.2009. Further, on the issue of deduction of TDS on payments to Non-residents, recently the Hon. Karnataka High Court in its judgment in the case of CIT (International Taxation Vs. Samsung Electronics Co. Ltd. reported in TIOL 2009-TIOL-629-High Court-KAR-IT, relying upon the decision of the Apex Court in the case of Transmission Corporation Limited Vs. CIT 2002-TIOL-471,-Supreme Court-IT, has held that the obligation to deduct tax at source under section 195 has nothing to do, with the actual liability of the non-resident to tax under the provisions of the Act, including the quantum thereof. The payer in such ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 26 circumstances should take recourse to the provisions of section 195(2) of the Act if he is of the view that only a part of the payment made by him or no part thereof would bear the character of income in the hands of the non-resident."
56. The effective ground in this appeal against the deletion of addition made under Section 40(a)(ia) of the Act on account of commission paid to foreign agent without deduction at source. The identical ground was raised in ITA No. 8/Ahd/2010 following there is change into the facts and circumstances following our decision in ITA NO. 8/Ahd2010 this ground of the Revenue is rejected.
57. In the result, this appeal of the Revenue is dismissed. Now we take up assessee's CO No.61/Ahd/2010 (A.Y.00-01)
58. The assessee has raised the following grounds of C.O.:-
"1.00 On the facts and in the circumstances of the case as well as in law, the learned CIT(A) '"ld. CIT(A)" in sort] erred in confirming the following disallowances:
(i) Disallowance of Rs.6,35,014/- being 1/3rd out of Miscellaneous Expenditure;
(ii) Disallowance of Rs.3,06,580/- being 1/10th out of Staff Welfare Expenses;
(iii) Disallowance of Rs.3,24,742/- being 1/10th out of Vehicle Running Expenses and related depreciation thereon'
(iv) Disallowance of Rs.2,31,450/- being 1/10th out of Travelling Expenses;
(v) Ad-hoc Disallowance of Rs.50,000/- out of Telephone Expenses;
(vi) Disallowance of Rs.2,12,852/- being 1/10th out of discount on sales and Rs.1,16,803/- being 1/10th out of commission on sales."
59. All the grounds of CO have been decided by Ld. CIT(A) together therefore they are being taken up together for the sake of convenience. The Ld. Authorized Representative submitted that the disallowances in respect of misc. expenditure were restricted by Ld. CIT(A) to 50,000/- vide order dated 18-05-2004 for A.Y. 1998-99 and Hon'ble ITAT Ahmedabad in C.O. No.181/Ahd/2004 (arising out ITA No.2252/Ahd/2004) deleted the ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 27 disallowances. On the contrary, Ld. CIT-DR relied upon the order of Assessing Officer.
60. We have heard the rival submissions perused the materials available on record. We find that order of Ld. CIT(A) is cryptic and no reasoning is given as to why the disallowances are confirmed. The Ld. CIT(A) has decided in para-5 and 5.1 of his order, which is reproduced hereinbelow:-
"5. Grounds No3, 4 6 & 9 relate to the disallowance of various expenses.
5.1 I have also gone through the order of the Assessing Officer. Looking to the nature of disallowances and for want of check, the disallowances thus made are fair and reasonable. Thus these grounds are dismissed."
Therefore all the issues are restored back to the file of Ld. CIT(A) to decide these issues afresh after providing reasonable opportunity of being heard to both sides.
61. In the result, assessee's CO is allowed for statistical purposes.
Now coming to assessee's CO No.62/Ahd/2010 (A.Y.01-02)
62. The assessee has raised the following grounds in its CO:-
"1.00 On the facts and in the circumstances of the case as well as in law, the learned CIT(A) erred in disallowing expenses incurred on purchase of gift articles amounting to Rs.1,12,715/-.
1.01 The decision of learned CIT(A) that the appellant is not ale to prove the necessity of expenses and accordingly it can not be allowed as incurred for the purpose of business is not acceptable, as the appellant has incurred such expenditure on the occasion of diwali towards purchase of gift vouchers and cards to be distributed to various persons to maintain business relations. The learned CIT(A) was not able to prove personal element involved in incurring such expenditure.
2.00 On the facts and in the circumstances of the case as well as in law, the learned CIT(A) erred in disallowing Rs.51,000/- paid towards contribution to Shri Hindu Smashan Samiti.
ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 28 2.01 The decision of learned CIT(A) that the appellant is not able to prove the necessity of expenses and accordingly it can not be allowed as incurred for the purpose of business is not acceptable, as the appellant has incurred such expenditure understanding its social responsibility which the society expects from every rational businessman. The learned CIT(A) was not able to prove personal element involved in incurring such expenditure."
63. First ground is against the purchased of gifts amounting to Rs.1,12,715/-. Ld. Authorized Representative for the assessee relied upon the judgment of Hon'ble jurisdictional High Court in the case of CIT v. S.L.M. Maneklal Industries Ltd. (1997) 107 ITR 133 (Guj) and assessee has incurred the expenses for the encourage of working ability to its workers. On the contrary, Ld. CIT-DR could not controvert the submission of Ld. AR as he simply relied on the order of Ld. CIT(A).
64. We have heard the rival contentions perused the materials available on record. We find that the judgment cited by Ld. AR in the case of S.L.M. Maneklal Industries Ltd. (supra) and in view of the decision of Hon'ble jurisdictional High Court we allow the claim of assessee. This ground of assessee's CO is allowed.
65. Next ground is against payment to Shri Hindu Smashan Samiti as contribution of Rs.51,000/-. Ld. AR submitted that the said contribution was paid to said Samiti on humanitarian ground and he has cited a case law of Hon'ble jurisdictional High Court in the case of CIT v. Navsari Cotton & Silk Mills Ltd. (1982) 135 ITR 546 (Guj). On the other hand, Ld. CIT-DR supported the order of Ld. CIT(A).
66. We have heard the rival submissions perused the materials available on record. We find that case law cited by Ld. AR is similar to the ground pressed by assessee. Hence, this ground of assessee's CO is allowed. ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 29
67. In the result, assessee's CO is allowed.
Now we take up assessee's C.O. No.63/Ahd/2010 (A.Y. 05-06)
68. Assessee has raised the following grounds in its CO:-
"1.00 On the facts and in the circumstances of the case as well as in law, the learned CIT(A) ["ld. CIT(A)" in short] erred in confirming the disallowance of advance written off amounting to Rs.10,00,000/- claimed u/s. 37(1) of the Act.
1.01 The ld. CIT(A) failed to appreciate the allowability of advance written off u/s. 37(1) of the Act accepting the principles of commercial practice and business exigencies.
2.00 On the facts and in the circumstances of the case as well as in law, the ld. CIT(A) erred in confirming the addition to the extent of Rs.65,634/- on account of capital expenditure on a wrong plea that the appellant has not pressed for the same during appeal proceedings."
69. The first ground is against the confirmation of disallowance the advance of Rs.10 lakh as claimed u/s. 37(1) of the Act. Ld. AR submitted that the assessee had given advances of Rs.10 lakh to M/s. Syline Sales & Services Pvt. Lt. long back and since the amount is not receivable, the assessee has written off the same during the relevant pevious year and claimed u/s. 37(1) of the Act. He further submitted that the assessee had never claimed it as bad debt u/s. 36(2) of the Act. Ld. DR supported the order of Ld. CIT(A).
70. We have considered rival submissions. Ld. CIT(A) has given a clear finding that the assessee could not establish business expediency for giving the advance in question. In respect of this, nothing is brought on record before us also to establish business expendiency or giving the advance in question. In the absence of this, it is not acceptable that this is a business advance. Hence, the same is neither allowable u/s. 37 of the Act nor u/s. 28/29 of the Act as business loss. This ground is of assessee's CO is rejected. ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 30
71. Next ground is this that Ld. CIT(A) has wrongly stated that the issue of Rs. 65,634/- was not pressed.
72. We therefore restore the matter back to Ld. CIT(A) to decide this issue on merit after hearing both sides.
73. In the result, assessee's CO is partly allowed for statistical purposes.
73. In combined result, Revenue's appeals in ITA No. 05/Ahd/2010 to 12/Ahd/2010 and ITA No.14/Ahd/2010 are rejected and ITA No.13/Ahd/2010 is partly allowed for statistical purposes. Assessee's CO No.61/Ahd/2010 is allowed for statistical purposes; CO No.62/Ahd/2010 is allowed and CO No.63/Ahd/2010 is partly allowed for statistical purposes. Order pronounced in Open Court on the date mentioned hereinabove at caption page.
Sd/- Sd/-
(A.K.Garodia) (Kul Bharat)
(Accountant Member) (Judicial Member)
Ahmedabad,
*Dkp
Ǒदनांकः- 13/07/2012 अहमदाबाद ।
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, /True Copy/ उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।
Strengthen preparation & delivery of orders in the ITAT
1) date of taking dictation 6/06, ITA No.5-14/Ahd/2010 & CO 61-63/Ahd/2010 A.Ys. 99-00 to 06-07 DCIT PNC Cir.GRD v. Panchmahal Steel Ltd. Page 31
2) direct dictation by Member straight on No. computer/laptop/dragon dictate
3) date of typing & draft order place before Member 8/06
4) date of correction 29/06, 2/07
5) date of further correction 3/07, 04/07, 6/07, 10/07
6) date of initial sign by Members 11/07 7) order uploaded on 13/07
8) original dictation pad-part has been enclosed in the file Yes
9) final order and 2nd copy send to Bench Clerk on 13/07