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Income Tax Appellate Tribunal, ‘’ B’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ B’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ITA No.304/AHD/2014 िनधा�रण वष�/Asstt. Year: 2009-2010 Sagar Powertex Pvt. Ltd., J.C.I.T., (Earlier Sagar Agencies Pvt. Ltd.) Vs. Range-8, 803, Sahajanand Complex, Ahmedabad. Shahibaug Road, Shahiibaug Ahmedabad-380004. PAN: AADCS0473P
(Applicant) (Respondent) Assessee by : Shri Manish J. Shah, A.R Revenue by : Shri R.R. Makwana, Sr.D.R सुनवाई क� तारीख/Date of Hearing : 06/05/2021 घोषणा क� तारीख /Date of Pronouncement: 23/06/2021 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-XIV, Ahmedabad, dated 21/11/2013 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2009-2010.
The assessee has raised the following ground of appeal: 1. To delete disallowance of Administrative expenses u/s.14A of Rs.5,882/- 2. To delete disallowance of claim of deduction u/s.80IA of Rs.12,83,372/-
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To delete disallowance of depreciation, Insurance, interest on vehicles and other Assests of Rs.2,72,818/- 4. To Delete Disallowance u/s.40(a)(ia) of Rs.5,20,924/- 2.1 The assessee vide letter dated 24 September 2019 has also filed the additional ground of appeal which is reproduced as under: The sales tax incentive received by the Appellant is a capital receipt, and thus, not chargeable to tax.
At the outset, we note that the assessee has also raised identical additional ground of appeal in its own case for the assessment year 2008-09 in ITA No. 493/AHD/2012 which was admitted by the ITAT vide order dated 28-9-2017. The relevant extract of the order is reproduced as under: The assessee also seeks to raise an additional ground that the above sales tax incentive amount disallowed in both the lower proceedings is in the nature of a capital receipt not excisable to tax. Learned Departmental Representative vehemently opposes admission of this additional ground. We find that this tribunal’s Special Bench decision in All Cargo Global Logistics Ltd. Vs. D.C.I.T(2012) 237 ITD (Mum) quotes hon’ble apex court’s judgment in NTPC’s case 229 ITR 383 (SC) that such additional ground can be admitted in order to determine appropriate tax liability of an assessee.
The learned DR at the time of hearing has not raised any objection on the admission of such additional ground of appeal and left the issue at the discretion of the Bench. In view of the above, we admit the additional ground of appeal raised by the assessee and decide to proceed to adjudicate the same on merit in the subsequent paragraph.
The learned AR at the time of hearing also contended that he has been instructed by the assessee not to press the ground No. 1 raised in relation to the disallowance of administrative expenses under section 14A of the Act for ₹ 5,882.00 on account of smallness of amount. Accordingly, we dismiss the same as not pressed.
5.1 The learned AR at the time of hearing has also not advanced any argument with respect to the ground of No. 2 raised in relation to the disallowance of the
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deduction under section 80 IA of the Act for ₹ 12,83,372.00. Accordingly, we dismiss the same as not pressed.
5.2 The issue raised by the assessee in the additional ground of appeal is that sales tax incentive received by it represents the capital receipt and therefore not chargeable to tax.
5.3 At the threshold, the learned AR brought to our notice that the identical issue was raised by the assessee in the assessment year 2008-09 in ITA No. 493/AHD/2012 which was set aside to the AO for fresh adjudication by the ITAT in its order dated 28 September 2017. Accordingly the learned AR before us prayed to restore the issue on hand to the file of the AO for fresh adjudication as per the provisions of law.
5.4 On the contrary the learned AR did not raise any objection if the matter is set aside to the file of the AO for the fresh adjudication as per the provisions of law. Heard the rival contentions of both the parties and perused the materials available on record. Admittedly the identical issue was raised by the assessee in its own case as discussed above which was set aside by the ITAT to the file of the AO for fresh adjudication as per the provisions of law. The relevant extract of the order of the ITAT reads as under: 5. We now advert to merits of the issue. It is not in dispute that the relevant sales tax incentive scheme announced by the Maharashtra State Government does not form part of case records before us. Learned CIT(A) observes that the said scheme envisages incentive @l/6th of the cost for a period of six years on the windmills installed in Maharashtra. He then concludes that nothing depend on quantum of electricity generated from the windmill leading to the impugned eligible profit. The assessee invites our attention to a co-ordinate bench decision In (2014) 62 SOT 74 (Ahd-Trib) livraj Tea & Industries Ltd. vs. ACIT remitting an identical issue back to the Assessing Officer pertaining to the above sales tax incentive scheme for afresh adjudication after verifying relevant details thereof. We reiterate that such details are also not forthcoming from the instant case records. Learned Departmental Representative is also unable to rebut all these legal developments. We therefore restore the instant issue as well back to the Assessing Officer for afresh adjudication as per law. Assessee's appeal is partly accepted for statistical purposes.
5.5 The facts of the case on hand are identical to the facts of the case as discussed above. Therefore following the order of the ITAT in the own case of the
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assessee (supra), we set aside the issue to the file of the AO for fresh adjudication as per the provisions of law. Hence the additional ground of appeal raised by the assessee is allowed for the statistical purposes.
The next issue raised by the assessee in ground No. 3 is that the learned CIT (A) erred in confirming the disallowance made by the AO for Rs. 2,72,818.00 on account of depreciation, insurance, and interest on vehicles and other assets.
The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of textile items, power generation and technical services. The assessee in the year under consideration has claimed depreciation with respect to certain items of assets which were not registered in its name. The details of such assets are furnished as under: S.No. Name of the item Name of the person Amount (Rs.) 1. Furniture Sagar group of enterprise 3,500.00 2. Mobile bill Branch head ( Mr.Sameer) 2,800.00 3. Car Shri Gautam C Shah 13,23,578.00
7.1 The assessee during the assessment proceedings submitted that the payment with respect to the above items of assets were made by it (the assessee) and it has dominions on all these assets. As per the assessee, all these items of assets were used for the purpose of the business. Therefore, the assessee is eligible to claim the deduction of depreciation on these assets for ₹ 1,99,097.00 besides interest and insurance expenses with respect to the car amounting to Rs. 42,864.00 and 30,857.00 respectively aggregating to ₹ 73,721.00 only. The assessee also contended that the car was purchased in the name of the person associated with the company but the payment of the same was made by it (the assessee). As such the car was purchased in the name of the individual in order to reduce the burden of road tax. In other words the assessee claimed the deduction with respect to the above items of assets aggregating to Rs. 2,72,818.00 only.
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7.2 However, the AO rejected the claim of the assessee by observing that there was no documentary evidence furnished by the assessee suggesting that the dominion over these assets were with the assessee. Thus the AO added the sum of Rs. 2,72,818.00 to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who dismissed the appeal of the assessee by observing as under: explanation in respect of such disallowances. It is therefore the disallowances so made are hereby confirmed and upheld. This ground is dismissed. I am inclined with the contention of A.O the as per settled legal proposition that claim u/s.37(1) of the Act has to be wholly & exclusively for the purpose of business and should not be against public policy. As far as registration of vehicles are concerned as per the RTO Act, vehicles can be purchased and get registered in the name of company but if the same are registered in the name of director or employee of the company than not only the same is against the public policy because the tax is more in the case the vehicle is registered in the name of company than in the name of individual but the personal use of such vehicle cannot be ruled out i.e the dominion control is not with the company. The specific work used as wholly and exclusively clearly stipulated that none of the component of claim in respect of such expenditure or deduction be other than that of business. Further the appellant failed to offer any satisfactory
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 27 and contended that the payment was made by the company for the purchase of the cars and other assets. Therefore the assessee was the beneficial owner of these assets. The learned AR in support of his contention drew our attention on the copies of the ledger of the motor car, invoice, bank details etc. which are available on record.
On the contrary, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the material available on record. Admittedly, it is necessary for the assessee to own the assets for claiming the depreciation on the assets. But the word ‘own’ has not been
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defined under the provisions of the Act whether the ownership refers to the legal ownership or the beneficial ownership. Undoubtedly, the assessee in the present case is not the legal owner of the vehicles but it has made the payment for the acquisition of the cars. Thus it can be inferred that the assessee owns the cars in the capacity of beneficial owner. Thus, in our considered view the assessee is entitled for the depreciation on the car. In holding so we draw support and guidance from the order of this Tribunal in case of ITO vs. Electro Ferro Alloys Ltd. in ITA no 2773/Ahd/2009 reported in 25 taxmann.com 458 where the relevant finding of the coordinate bench reads as under: 5. 2. On consideration of the facts of the appellant's case it is noticed that the motor car was purchased, though in the name of the appellant's director, it was purchased out of the funds of the appellant-company and it is also not in dispute that the motor car was purchased for the purpose of business of the appellant. Thus the motor car being, business asset of the appellant and purchased for the purpose of business and used as such by the appellant, in view of the decision in the case of Mysore Minerals Ltd. [1999] 239 ITR 775 (SC) referred to above and other decisions cited by the learned authorised representative, I hold that the disallowance made by the Assessing Officer on this ground is not justified and hence the same is directed to be deleted. 22. 2 In the present case it is not disputed that investment was made by the assessee in purchase of the motor car. It is shown as asset in the balance-sheet of the company. If expenditure for running the vehicle was incurred by the assessee, the assessee is de facto owner of the vehicle. It is not disputed that it was used for the purpose of business of the assessee company. The hon'ble Rajasthan High Court in the case of CIT v. Mohd. Bux Shokat Ali (No. 2) [2002] 256 ITR 357 (Raj) held that where vehicle was purchased by the firm used by it for the purpose of its business but it was registered in the name of one of the partners then the firm would be entitled to depreciation on vehicle. The hon'ble Delhi High Court in the case of CIT v. Basti Sugar Mills Co. Ltd. [2002] 257 ITR 88 (Delhi) held that where vehicle was owned and used by the assessee but no registration was done in its name then the assessee would still be entitled to depreciation on such vehicle. Therefore, the assessee has right to claim depreciation thereon. This ground of the Revenue is accordingly rejected. "
12.2 Likewise the expenses incurred by the assessee with respect to insurance and interest expenses in connection with such motor car, are also eligible for deduction under the provisions of section 37(1) of the Act. It is also important to note in respect of other expenses of fuel and maintenance on such cars, we find that the AO has not made any disallowance which implies that such expenses were admitted by the revenue. Furthermore, the company being a body corporate is different from the individuals. In other words in a body corporate there cannot be any element of personal expenses as alleged by the AO.
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12.3 With respect to the other item of assets being mobile and the furniture, we find that the genuineness of such expenses have not been doubted by the authorities below. Furthermore, the amount involved in these assets is of negligible value. Therefore, we are not inclined to uphold the same. In view of the above and after considering the facts in totality, do not find any reason to uphold the order of learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
The last issue raised by the assessee is that the learned CIT (A) erred in confirming the disallowance of ₹ 5,20,924.00 on account of non-deduction of TDS under section 194C of the Act.
The assessee in the year under consideration has claimed export freight expenses of Rs. 24,23,673.00 which were paid to various parties including the party namely M/s JR Corporation. The assessee paid M/s JR Corporation export freight expenses for an amount of ₹ 5,20,924.00 without deducting the TDS. On question by the AO, it was contended by the assessee that M/s JR Corporation is non-resident party and engaged in the business of shipping which is assessable under the provisions of section 172 of the Act. As per the assessee such payment being taxable under the provisions of section 172 of the Act was not subject to the TDS under section 194C of the Act. Accordingly, the TDS was not deducted.
14.1 However the AO found that the assessee failed to furnish any documentary evidence in support of its contention that the provisions of section 172 of the Act were applicable on the payment made to the M/s JR Corporation and therefore the same was outside the purview of the TDS. Accordingly, the AO disallowed the same under the provisions of section 40(a)(ia) of the Act and added to the total income of the assessee.
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Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO by observing that the assessee failed to produce the evidences justifying that M/s JR Corporation is a non-resident shipping company or the agent of such shipping company and therefore such payment is not subject to the TDS in pursuance to the circular No. 723 dated 19th September 1995 issued by the CBDT. Accordingly the learned CIT (A) confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us contended that Corporation is an agent of foreign shipping line companies. The details of such companies were available on page 23 of the paper book. Therefore the payment to such agent is covered in the circular bearing No. 723 issued by the CBDT. The learned AR in support of his contention also drew our attention on pages 24 to 27 of the paper book where the declarations of the M/s JR Corporation were placed that it is the agent of foreign shipping line companies.
On the other and the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. We understand that section 172 of the Act is applicable for the purpose of the levy and recovery of tax in case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India. The non-resident shipping companies are liable to pay taxes u/s 172 of the Act and such companies have to discharge tax liability on payments for carriage of goods from India or have to make satisfactory arrangements for discharge of tax liability thereof. Accordingly in case shipping company is taxable u/s 172 of the Act and the obligation to pay taxes arises in the hands of the master of the ship or any agent appointed by them in India. In this
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regard, reliance could be placed upon Circular No. 723 issued by CBDT clarifying the scope of section 172, 194C and 195 of the Act in connection with deduction of tax at source from payments made to foreign shipping companies or their agents. The said Circular No. 723 provides as follows:- “The provisions of Section 172 of the Act are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 are not applicable. The recovery of tax is to be regulated, for a voyage undertaken from any port in India by a ship under the provisions of section 172. There is no overlapping in the areas of operation of section 172 or 194C as former section deals with payments to non-resident and latter with payments to residents. Where payments are made to agents of non-resident ship-owners or charters for carriage of passengers etc. shipped at a port in India, since the agent acts on behalf of the non-resident ship-owner or charterer, he steps into the shoes of the principal. Accordingly, provisions of Section 172 of the Act shall apply and those of sections 194C and 195 of the Act will not apply”
19.1 In view of the above, we hold that such payment to the foreign shipping companies or to their agents is not subject to the TDS. However in the case on hand, we find that the assessee has not furnished the necessary details. As such the details, placed on pages 24 to 27 of the PB have been furnished 1st time before us which have been discussed in the contention of the learned AR of the assessee in the preceding paragraph. Accordingly in the interest of justice and fair play we are inclined to remit the issue to the file of AO for fresh adjudication as per the provisions of law. Hence the ground of appeal of the assessee is allowed for the statistical purposes.
In the result, the appeal of the assessee is partly allowed statistical purposes.
Order pronounced in the Court on 23/06/2021 at Ahmedabad.
Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 23/06/2021 Manish