Income Tax Appellate Tribunal - Ranchi
Bihar Foundaary & Casting Ltd , Ranchi vs Dcit Circle-1 , Ranchi on 11 March, 2024
आयकर अपीलीय अधिकरण
र ांची पीठ, कोलक त में
IN THE INCOME TAX APPELLATE TRIBUNAL
RANCHI BENCH AT KOLKATA
[वचुअ
च ल कोर्ु]
[Virtual Court]
श्री अधिकेश बिर्जी, न्य धयक सदस्य
एवां
श्री धिरीश अग्रव ल, लेख सदस्य
के समक्ष
Before
SRI ANIKESH BANERJEE, JUDICIAL MEMBER
&
SRI GIRISH AGRAWAL, ACCOUNTANT MEMBER
I.T.A. No.: 99/RAN/2019
Assessment Year: 2015-16
Bihar Foundry and Castings Ltd..............................................Appellant
[PAN: AABCB 1852 D]
Vs.
DCIT, Circle-1, Ranchi..........................................................Respondent
Appearances:
Assessee represented by: Sh. D. Sannigrahi, A/R.
Department represented by: Md. A.H. Chowdhury, CIT D/R.
Date of concluding the hearing : February 8th, 2024
Date of pronouncing the order : March 11th, 2024
ORDER
Per Bench:
The instant appeal of the assessee was filed against the order of the Commissioner of Income-tax (Appeals)-Ranchi, Jharkhand [in brevity ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (in brevity the 'Act') for assessment year 2015-16 dated 31.01.2019. The impugned order was emanated from the order of the DCIT, Circle-1, Ranchi (in brevity the 'AO') passed u/s 143(3) of the Act dated 29.12.2017.
2. The assessee has taken the following grounds of appeal:
I.T.A. No.: 99/RAN/2019 Assessment Year: 2015-16 Bihar Foundry and Castings Ltd.
"For that, on the fact & circumstances of the case, the action of the Hon'ble Commissioner of Income Tax (Appeal) not proper in confirming wrong addition made by ld. AO for Rs. 50,43,431/- by disallowing expenditure incurred by appellant in course of business under various heads. The addition is totally arbitrary and is not legal, proper & justified and hence such addition of Rs. 50,43,431/- is liable to be deleted."
3. At the outset, it is to be mentioned that the assessee's case was emanated from the order of the Miscellaneous Application bearing MA No. 40/RAN/2020 dated 17.11.2022. The relevant part of the order is reproduced as below:
"5. In the above referred ground, disallowance of expenditure of Rs.50,43,431/- comprised of following:-
Nature of expenses Amount confirmed
Repair and maintenance
Repair and maintenance of building 18,02,515 Repair and maintenance of others 7,04,473 Sub-Total 25,06,991 Delayed payment charge Interest on income tax 13,37,984 Late filing fees 2,31,600 Interest on TDS 7,90,039 Sub Total 23,59,623 ROC filing fees 1,71,600 Rounded off 5,217 Total 50,43,431
6. On perusal of the paragraph 7 of the impugned order, we find that this Tribunal has dealt the issue of repair and maintenance of building and repair and maintenance of others, wherein originally the actual expenditure was Rs.50,13,981/- and the same was disallowed by the ld. Assessing Officer and when the matter travelled to CIT(Appeals), he sustained 50% disallowance which comes to Rs.25,06,991/- and the addition confirmed by the ld. CIT(Appeals) was deleted by this Tribunal observing that -
"Therefore, in our view, the action of the Commissioner of Income Tax (Appeals) for confirming the addition of 50% expenditure as capital expenditure on estimated basis is not tenable therefore, it needs to be deleted, accordingly, we delete the 50% addition confirmed by the ld. CIT(A)".
We, therefore, find that apart from the issue of repair and maintenance expenditure at Rs.25,06,991/-, the remaining expenditure of Rs.25,36,440/-, which was disallowed by the ld. Assessing Officer and thereafter confirmed by the ld. CIT(Appeals) remained to be adjudicated by this Tribunal. This is an apparent mistake and, therefore, we recall the order Page 2 of 8 I.T.A. No.: 99/RAN/2019 Assessment Year: 2015-16 Bihar Foundry and Castings Ltd.
dated 10.09.2020 for limited purpose of adjudicating the issue of disallowance of expenditure of Rs.25,36,440/- as indicated hereinabove."
4. The brief fact of the case is that appeal was generated from the order of the Miscellaneous Application. The only related to interest on income tax Rs. 13,37,984/-, late filing fee Rs. 2,36,100/-, interest on TDS Rs. 7,90,039/- are subject to challenge before the Bench as the payments are compensatory in nature and not the penal interest. Related to ROC filing fee the assessee claimed the expenses which was added back to the total income of the assessee and also the rounded off of income Rs. 5,217/- was added back which was total amount of Rs. 25,36,440/- which was directed to reconsider in the order of the Miscellaneous Application. The aggrieved assessee filed an appeal before ld. CIT(A). Ld. CIT(A) upheld the assessment order. Being aggrieved assessee filed an appeal before us and after disposal of the Miscellaneous Application in the second round the matter is adjudicated as below.
5. Ld. A/R vehemently argued and filed a written submission which are kept in the record. Related to expenses of interest on income late filing fee and interest on TDS the assessee claimed that the assessee is covered by the order of the Hon'ble Supreme Court in the case of Lachmandas Khandelwal and Harshad Shantilal Mehta vs. Custodian and Others 231 ITR 871 (SC) as the expenses are compensatory in nature. The issue was already adjudicated by the Coordinate Bench of ITAT Kolkata in the case of Premier Irrigation Adritec (P.) Ltd. v. ACIT, [2023] 146 taxmann.com 389 (Kolkata - Trib.). The relevant paragraphs are inserted as below: -
"22. The Hon'ble Madras High Court in the case of "Chennai Properties and Investment Ltd." (supra) has held that the interest paid for the period of delay takes colour from the nature of the principal amount required to be paid but not paid within time. That the amount required to be deducted was the amount payable as income-tax. The Hon'ble High Court, therefore, held that the interest paid under section 201(1A) of the Act, therefore, would not assume the character of business expenditure and cannot be regarded as a compensatory payment as contended by learned counsel for the assessee.Page 3 of 8
I.T.A. No.: 99/RAN/2019 Assessment Year: 2015-16 Bihar Foundry and Castings Ltd.
The Hon'ble Madras High Court further held that the fact that the income-tax required to be remitted was not income-tax payable by the assessee, but is ultimately for the benefit of and to the credit of the recipient of the income on whose behalf that tax is payable does not in any manner alter the character of the payment, namely, its character as income tax. The relevant part of the order of the Hon'ble Madras High Court is reproduced as under:
"15. Counsel for the assessee in support of his submission that the interest paid by the assessee was merely compensatory in character besides relying on the case of Makalakshmi Sugar Mills Co. also relied on the decision of the Apex Court in the cases of Prakash Cotton Mills Pvt. Ltd. v. CIT [1993] 201 ITR 684; Malwa Vanaspati and Chemical Co. v. CIT [1997]/225 ITR 383 and CIT v. Ahmedabad Cotton Manufacturing Co. Ltd. [1994] 205 ITR 163. In all these cases, the court was concerned with an indirect tax payable by the assessee in the course of its business and admissible as business expenditure. Further liability for interest which had been incurred by the assessee therein was regarded as compensatory in nature and allowable as business expenditure.
16. The ratio of those cases is not applicable here. Income-tax is not allowable as business expenditure. The amount deducted as tax is not an item of expenditure. The amount not deducted and remitted has the character of tax and has to be remitted to the State and cannot be utilised by the assessee for its own business. The Supreme Court in the case of Bharat Commerce and Industries [1998] 230 ITR 733, rejected the argument advanced by the assessee that retention of money payable to the State as tax or income-tax would augment the capital of the assessee and the expenditure incurred, namely, interest paid for the period of such retention would assume character of business expenditure. The court held that an assessee could not possibly claim that it was borrowing from the State, the amounts payable by it as income-tax, and utilising the same as capital in its business, to contend that the interest paid for the period of delay in payment of tax amounted to a business expenditure."
23. The Jurisdictional Calcutta High Court in the case of Martin & Harris (P.) Ltd. v. CIT [1994] 73 Taxman 555 observed in the case of default by the employer in deposit of tax deducted at the salary of the employee has held that the amount of tax deducted and not paid plus the amount of interest leviable under section 201(1A) was not a part of the salary of the employees which was withheld. It was tax on salary of the employees which was deducted but not paid.
Page 4 of 8I.T.A. No.: 99/RAN/2019 Assessment Year: 2015-16 Bihar Foundry and Castings Ltd.
Therefore what has been deducted is tax and it does not retain the character of salary although such deduction has been made from the salary. The Hon'ble Calcutta High Court, therefore, held that the character and quality of interest payable for non-compliance with the provisions of the Act would be the same, whether it is levied for non- submission of return in time or non-payment of tax within the prescribed time or for any other reason and that it cannot be allowed as deduction in computing total income as essentially interest in such a case for non-compliance with the provisions of the Act is inextricably connected with the amount of income-tax. The Hon'ble High Court categorically held that where income-tax itself is not a deductible amount, be it compensation or be it penalty, payable in addition to the tax cannot be allowed as a deduction in computing total income. The relevant part of the order of the Hon'ble Calcutta High Court in the case of "Martin & Harris (P.) Ltd." (supra) has already been reproduced above as reproduced in the impugned order of the CIT(A). The findings arrived at by the Jurisdictional Calcutta High Court are, otherwise, binding on this Tribunal.
24. **************
25. In view of the above discussion, we hold that the interest payment on delayed deposit of Income-tax, whether TDS or otherwise, is not an allowable expenditure.
There is no merit in the appeal of the assessee, the same is, hereby, dismissed."
5.1. Accordingly, he relied on the order of ITAT Kolkata the interest expenses are not compensatory in nature and the expenses are not eligible for deduction.
6. The ld. D/R argued and only relied on the order of the Revenue authorities.
7. We heard the rival submission and considered the documents available in the record. In relation to these expenses the issue is already covered by the ITAT, Kolkata Bench in the case of Premier Irrigation Adritec (P.) Ltd. (supra). So, all the interest expenses are not considered u/s 37 of the Act and further the expenses are generated during the time of computation after completion of the profit and loss account. So, in any case during finalization Page 5 of 8 I.T.A. No.: 99/RAN/2019 Assessment Year: 2015-16 Bihar Foundry and Castings Ltd.
of profit & loss the expenses cannot be determined till filing of the return. So, in our considered view the addition of all the three expenses amounting to Rs. 13,37,984/-, 2,31,600/- and 7,90,039/- are upheld.
The grounds of the assessee are dismissed.
8. The issue related to ROC filing fee amounting to Rs. 1,71,600/- the assessee only prayed that the assessee claimed these expenses u/s 37 of the Act. But the issue is duly covered by the order of Hon'ble Apex Court in the case of Brooke Bond India Ltd. vs. CIT [1997] 225 ITR 798 (SC). The relevant part is inserted as below: -
"6. Dr. Pal has, however, submitted that this decision does not cover a case, like the present case, where the object of enhancement of the capital was to have more working funds for the assessee to carry on its business and to earn more profit and that in such a case the expenditure that is incurred in connection with issuing of shares to increase the capital has to be treated as the revenue expenditure. In this connection, Dr. Pal has invited our attention to the submissions that were urged by the learned counsel for the assessee before the AAC as well as before the Tribunal. It is no doubt true that before the AAC as well as before the Tribunal it was submitted on behalf of the assessee that increase in the capital was to meet the need for working funds for the assessee-company. But the statement of case sent by the Tribunal does not indicate that a finding was recorded to the effect that the expansion of the capital was under taken by the assessee in order to meet the need for more working funds for the assessee. We, therefore, cannot proceed on the basis that the expansion of the capital was undertaken by the assessee for the purpose of meeting the need for working funds for the assessee to carry on its business. In any event, the above quoted observations of this Court in Punjab State Industrial Development Corpn. Ltd. 's case (supra)clearly indicate that though the increase in the capital results in expansion of the capital base of the company and incidentally that would help in the business of the company and may also help in the profit making, the expenses incurred in that connection still retain the character of a capital expenditure since the expenditure is directly related to the expansion of the capital base of the company.
7. In these circumstances, we do not find any merit in the appeal and it is accordingly dismissed. No order as to costs."Page 6 of 8
I.T.A. No.: 99/RAN/2019 Assessment Year: 2015-16 Bihar Foundry and Castings Ltd.
8.1. In this moment we are not able to find any of the reason to allow these expenses u/s 37(1) of the Act. Ld. A/R further argued that the rounded off expenses amounting to Rs. 5,217/- is also allowable expenses. The expenses has proximity with the business transaction. The assessee suffered the financial loss during the rounded off in financial transaction. The expenses of rounded off is allowable expenses. So, the addition amount of Rs. 5,217/- is quashed.
9. The ld. D/R argued and relied on the orders of the Revenue authorities.
10. We heard the rival submission and considered the documents available in the record. In our considered view the assessee has claimed the ROC filing fee Rs. 1,71,600/- and rounded off expenses Rs. 5,217/-. We respectfully relied on the order of the Hon'ble Apex Court in the case of Brooke Bond India Ltd. (supra). So, both the ROC filing fees expenses are not allowable u/s 37 of the Act as revenue expenditure but to be accepted as capital expenditure. So, the addition of ROC filing fees expenses Rs. 1,71,600/- is upheld and the addition is sustained. Only, the addition of rounded off expenses amount to Rs. 5,217/- is quashed.
11. In the result, appeal of assessee ITA No. 99/RAN/2019 is partly allowed.
Order pronounced in the open Court on 11th March, 2024.
Sd/- Sd/-
[Girish Agrawal] [Anikesh Banerjee]
Accountant Member Judicial Member
Dated: 11.03.2024
Bidhan (P.S.)
Page 7 of 8
I.T.A. No.: 99/RAN/2019
Assessment Year: 2015-16
Bihar Foundry and Castings Ltd.
Copy of the order forwarded to:
1. Bihar Foundry and Castings Ltd., Shanti Niwas, Main Road, Ranchi, Jharkhand-834 001.
2. DCIT, Circle-1, Ranchi.
3. CIT(A)-Ranchi, Jharkhand.
4. CIT-
5. CIT(DR), Ranchi Bench, Ranchi.
//True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata Page 8 of 8