M/S KAPSONS FASHION PVT. LTD.,CHANDIGARH vs. ACIT, C-2(1), CHANDIGARH

आदेश/ORDER

PER BENCH: All the above appeals have been preferred by the same assessee , against separate orders of the Commissioner of Income Tax (Appeals)-I, Chandigarh [(in short ‘CIT(A)’] dated 26.4.2017, 7.3.2017 & 26.4.2017 ,relating to assessment years 2011-12 to 2013-14 respectively, passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).

2 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

At the outset it was stated by both the parties that

common issues were involved in all the appeals.All the

appeals were therefore taken up together for hearing and are

being disposed off by this common consolidated order.

We shall first be dealing with the appeal of the

assessee in ITA No.1014/Chd/2017 relating to A.Y 2011-12.

ITA No.1014/Chd/2017(A.Y. 2011-12):

for the assessee, were general in nature. The same therefore

need no adjudication.

“2. On the facts and circumstances of the case, the learned CIT(A) has erred , both on facts and in law in having confirmed the addition of Rs.3,92,453/- made to the income of the appellant being the difference in the amounts of commission and interest received as per form No. 26AS and as accounted for in the books of accounts of the appellant.” 4. Briefly stated, the issue relates to addition made on

account of difference in income as reflected in the Annual

statement of tax deducted at source of the assessee in Form

No.26AS and that reflected in the books of the assessee,

amounting to Rs.3,92,453/-. Ld.Counsel for the assessee

contended that despite pointing out the specific reason for

3 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

the difference, the Ld.CIT(A) had upheld the addition

without dealing with the specific factual submissions made

before him. Ld.Counsel for the assessee contended that it

was pointed out to the Ld.CIT(A) and even the Assessing

Officer (A.0),that the assessee had earned commission

income on sale of garments of a party made on consignment

basis. That the assessee was to be reimbursed the VAT

component of the sales made on behalf of the said party

alongwith commission. That accordingly bill was raised on

the said party for both the commission and VAT

reimbursement and though the said party was required to

deduct TDS only on the commission, It deducted the same

on the VAT component also. Accordingly VAT reimbursed

was also disclosed as income on which TDS was deducted.

though it was not in the nature of income of the assessee.

That for the aforesaid reason there arose difference in the

income returned by the assessee and that shown in Form

26AS.Our attention was drawn to the submissions made by

the assessee in this regard before the CIT(A) reproduced at

para 4.1 of the order as under:

“The facts in brief are that during the course of assessment proceedings, the appellant was required to reconcile the income/payments which were reflected in Form NBo.26AS with the corresponding entries/income shown in the books

4 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

of the appellant. Necessary reconciliation along with the explanation was submitted. However, the AO was not satisfied with the explanation of the appellant and made an addition of Rs. 3,78,337/~ to the income of the appellant being the difference in the receipts from M/s Priority Marketing Put, Ltd, (Supplier of readymade garments) to the tune of Rs. 2,22,673/- and from M/s Mohan Clothing Co. Put. Ltd. (Supplier of readymade garments) to the tune of Rs. 1,69,780/- respectively and as reflected inform NO. 26AS and the books of the appellant. In this regard, it is submitted, that a statement showing the difference in the amounts as reflected in the payments inform No. 26AS and as shown in the books of the appellant was submitted during the course of assessment proceedings which forms Annexure 'B' of the assessment order itself. As per this statement there was a difference of Rs. 2,22,673/- in the payments received from M/s Priority Marketing Put. Ltd and Rs. 1,69,780 in the payments of M/s Mohan Clothing Co. Put Ltd. Subsequently, a revised statement (Annexure 'A' forming part of assessment order) was also furnished to the Assessing Officer showing the nil difference in the payments received from the above persons as reflected inform No. 26 and as per the books of the appellant. The reasons for filing the revised statement where no difference in the payments as per form No. 26AS and as per the books was shown in these two accounts was that the appellant was selling the goods of M/s Priority Marketing Put. Ltd. the on consignment basis. As per the arrangement with this company, the appellant was to receive commission on sales as also the vat paid on their behalf. A consolidated bill for the commission as well as vat charges was issued by the appellant to this supplier. However, instead of deducing TDS on commission only the supplier have deducted TDS on vat reimbursed in some cases because of oversight as a single bill for the commission and vat recoverable was raised by the appellant." 5. The Ld.Counsel for the assessee contended that the

CIT(A) did not even consider the contention of the assessee

and wrongly held that the assessee had not been able to

5 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

explain the reason in the difference. Our attention was

drawn to the findings of the Ld.CIT(A) at para 4.2 of the

order as under:

“4.2 I have examined the issue in detail. The Assessing Officer has rightly applied the section. The income is charged to tax in the year the right to that income has accrued or arisen as per section 5 of the Act.The Assessing Officer has taxed the amount in this year as mercantile system is being followed by the appellant. The appellant has not been able to explain the exact reasons for difference between the two amounts listed in Form 26AS and income tax return. In reply it is stated that the reason may be because the deductor has deducted on consolidated amount. The appellant is not sure. The addition is confirmed and Ground of appeal No.2 is dismissed” 6. The Ld. DR, on the other hand, relied upon the order of

the authorities below.

through the orders of the authorities below. We find merit in

the contentions of the Ld.Counsel for the assessee that due

explanation for the difference in the income reflected in

Form No.26AS and that shown in the books of account was

given by the assessee. We have taken note of the

submissions made by the assessee before the Ld.CIT(A)

stating that in fact, there was no difference in the income

and TDS had been deducted on the service tax component of

6 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

certain bills raised which was not in the nature of income. A

detail explaining the difference as above was also filed. But,

we have noted from the order of the Ld.CIT(A), that no

cognizance of the same has been taken while adjudicating

the issue. The Ld.CIT(A) has in fact summarily dismissed

the ground raised by the assessee without dealing with the

factual contentions made before him. The findings of the

Ld.CIT(A) that the assessee himself was not sure about the

explanation being correct or not, we find, is ill conceived

since the written submissions of the assessee, reproduced in

the order of the CIT(A) show that specific detailed

submissions had been made and nowhere the assessee has

expressed uncertainty about his explanation. Since the

factual contentions of the assessee need verification, we

consider it fit to restore the issue back to the AO to verify

the contentions made by the assessee and thereafter

adjudicate the same in accordance with law. Needless to add

the assessee be granted due opportunity of hearing.

The ground of appeal No.2 raised by the assessee is

allowed for statistical purposes.

7 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

“3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the disallowance of an amount of Rs 4,01,065/- under section 36(1)(iii) being the amount of interest paid on bank loan taken for acquiring of assets not put to use in the year under reference.” 9. Brief facts relating to the issue are that the AO noted

that the assessee had opened eight new stores during the

year and done renovation/alteration in them and also

furnished them. He further noted that the term loan has

been taken from bank for the same on which interest had

been paid and claimed as revenue expenditure. The AO

noted that interest expenditure pertaining to loans used for

acquiring new assets, had to be capitalized till the asset was

put to use, as per the provisions of section 36(1)(iii) of the

Act. Accordingly, the AO disallowed the proportionate

interest paid on loans used for acquiring assets/shops not

put to use during the year, which was calculated at

Rs.4,01,065/-.

that identical disallowance had been made in the case of the

sister concern of the assessee, M/s Kapsons Agencies

Private Limited in A.Y 2010-11,2011-12 & 2013-14 and the

8 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

matter had travelled upto the ITAT. It was pointed out that

the said assessee had challenged the disallowance in ground

No.2&3 of its appeal filed before the ITAT, in ITA No.1010 &

1011/Chd/2017, which had been heard on 18.07.2019. It

was contended that in those cases the assessee had pleaded

that it had not purchased any shops and that the entire

expenditure related only to renovation of shops which was

released by way of loan by the bank only after incurring the

expenses. That therefore the interest paid on the loans

pertained to the period after the asset was put to use and

therefore there was no occasion for making any disallowance

of interest u/s 36(1)(iii) of the Act. It was pointed out that

additional evidences to substantiate the contention was also

filed alongwith an application seeking admission of the same

stating that they could not be filed earlier since the

documents had got misplaced on shifting the office of the

assessee.

impugned ground were identical to that in the case of the

sister concern of the assessee M/s Kapsons Agencies

(supra).

9 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

the sister concern as stated by the Ld.Counsel for the

assessee.

an admitted fact that the issue raised in the above ground

is identical to that raised in ITA No.1010/Chd/2017(supra)

in ground No.2. We have gone through the order passed in

that case which was pronounced on 23-08-19. The issue , we

find ,has been dealt with at para 8 &9 of the order

,admitting the additional evidences and thereafter restoring

the matter back to the AO for verifying the facts of the case

and adjudicating the issue afresh in accordance with law.

The said decision will squarely apply to the present case

also, following which we restore the issue back to the AO to

be decided afresh in accordance with law ,as per the

directions given in the case of M/s Kapsons Agencies (supra)

in ITA No.1010/Chd/2017 (supra).

This ground of appeal No.3 is allowed for statistical

purposes.

under:

10 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

“4. (I) On the facts and circumstances of the case, the CIT (Appeals) has erred in having confirmed additions of Rs.1,59,572/- and Rs.1,24,782/- being the amount of expenditure incurred by the appellant towards rent by holding that as the expenditure incurred related to earlier assessment year, the same could not be allowed in the year under reference as the appellant was following mercantile system of accounting whereas the liability to pay the same crystallized in the year under reference itself.” 16. Brief facts relevant to the issue are that the AO on

perusal of the Profit & Loss Account of the assessee and

details attached thereto found that the assessee had claimed

the following expenditures pertaining to preceding year:

a) rent paid to M/s Alpha G. Corp. Development Pvt. Ltd. being for the month of March, 2010 amounting to Rs.1,59,572/- and

b) CAM charges paid to M/s Para Re-facilities for the month of March, 2010 amounting to Rs.1,24,782/-.

holding them to be prior period expenses. The same was

upheld by the Ld.CIT(A) stating that the assessee was

following mercantile system of accounting and therefore the

prior period expenses could not be allowed.

that identical disallowance had been made in the case of the

sister concern of the assessee, M/s Kapsons Agencies

11 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

Private Limited in A.Y 2011-12 and the matter had travelled

upto the ITAT. It was pointed out that the said assessee had

challenged the issue in ground no.4 of the appeal filed in

ITA No. 1011 /Chd/2017, which had been heard on

18.07.2019. It was contended that in the said case the

assessee had pleaded that the expenses accrued and arose

in the impugned year only on account of agreement for

incurring the same entered into in this year. It was pointed

out that additional evidences to substantiate the contention

was also filed alongwith an application seeking admission of

the same stating that they could not be filed earlier since

the documents had got misplaced on shifting the office of

the assessee.

to that in the case of the sister concern of the assessee M/s

Kapsons Agencies (supra).

the sister concern as stated by the Ld.Counsel for the

assessee.

an admitted fact that the issue raised in the above ground

12 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

is identical to that raised in ITA No.1011/Chd/2017(supra)

in ground No.4. We have gone through the order passed in

that case which was pronounced on 23.08.2019. The issue ,

we find, has been dealt with at para 32 of the order,

admitting the additional evidences and thereafter restoring

the matter back to the AO for verifying the facts of the case

and adjudicating the issue afresh in accordance with law.

The said decision will squarely apply to the present case

also, following which we restore the issue back to the AO to

be decided afresh in accordance with law ,as per the

directions given in the case of M/s Kapsons Agencies (supra)

in ITA No.1011/Chd/2017 (supra).

Ground of appeal No.4 raised by the assessee is

allowed for statistical purposes.

under:

“5. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed disallowance of an amount of Rs.1,18,825/- being the amount of expenditure incurred on foreign travel of the Directors by treating the same as non business expenditure.” 23. The above ground raised relates to disallowance of

foreign travel expenses of the Director of the assessee

13 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

company Shri Vipin Kapoor being on account of visit to

China for the reason that the assessee was not able to

establish and prove that the said expenses were incurred in

connection with the business of the assessee.

findings of the AO that no evidence regarding the business

purpose of foreign trip were filed by the assessee.

that identical disallowance had been made in the case of the

sister concern of the assessee, M/s Kapsons Agencies

Private Limited in A.Y 2011-12 and the matter had travelled

upto the ITAT. It was pointed out that the said assessee had

contested the disallowance in ground no.5 raised in the

appeal filed in ITA No. 1011 /Chd/2017, which had been

heard on 18.07.2019. It was contended that in the said case

the assessee had pleaded that the though the assessee was

not in possession of any direct evidence to prove the

business purpose of the trip but at the same time

considering the nature of the business of the assessee

dealing in selling branded cloths, the Directors are required

to make visit to foreign countries for reviewing the foreign

market trends and for making purchases and visiting

14 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

prospective suppliers of cloths and therefore the

disallowance of the entire amount of foreign travel was

totally unjustified.

present case were identical to that in the case of the sister

concern of the assessee M/s Kapsons Agencies (supra).

the sister concern as stated by the Ld.Counsel for the

assessee.

an admitted fact that the issue raised in the above ground

is identical to that raised in ITA No.1011/Chd/2017(supra)

in ground No.5. We have gone through the order passed in

that case which was pronounced on 23-08-19. The issue, we

find, has been dealt with at para 38 of the order, restricting

the disallowance to 50% of the expenses. The said decision

will squarely apply to the present case also, following which

we restrict the disallowance of foreign travelling expenses

to 50% of that incurred, as per the directions given in the

case of M/s Kapsons Agencies (supra) in ITA

No.1011/Chd/2017 (supra).

15 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

The ground of appeal No.5 raised by the assessee is

partly allowed.

“6. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed disallowance of an amount of Rs. 8,53,062/- made by the Assessing officer by taking resort to the provisions of section 40(a)(ia) by holding that as no TDS was deducted out of the expenditure incurred on which TDS was deductable as per the provisions of the Act, the same was as such not an allowable expenditure. 30. Briefly stated, the AO had made disallowance of the

following expenses on finding that the assessee had failed to

deduct tax at source on the same:

Head of Expenditure Name of party

Advertisement Roshan Studios 32,450.00 Advertisement Wire & Wireless 38,913.00 Advertisement Synergy 174,384.00 Media Entertainment AMC Cool Tech Corporation 35,394.00 Sales Promotion Hotel Mountview 394,621.00 Events Swastic Audio 77,300.00 Professional Charges Kuldip Singh (Advocate) 100,000.00 Total 8,53,062.00

assessee had contested only two amounts before him being

payment made to Roshan Studios and Wire & Wireless

payment made to Hotel Mountview. He further held that on

both the said amounts the contentions of the assessee were

16 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

not acceptable since TDS was deductible on the payment

made to Roshan Studios since it exceeded the amount on

which TDS was deductible and vis-à-vis the payment made

to Hotel Mountview, he stated that it was in the nature of

work contract and, therefore, rejected the assessee’s

contention that it was not so.

that he had made specific submissions before the Ld.CIT(A),

who had passed the order without specifically dealing with

the contention of the assessee thus passing a non speaking

order on the issue. The Ld.Counsel for the assessee drew

our attention to the submissions made before the CIT(A)

reproduced at para 8.1 of the order as under:

“Payment to Roshan Studios and Wire & Wireless amounting of Rs. 32,450/- and Rs. 38,913/- respectively have been made for photography/ providing of sound system at the time of opening of two stores of the appellant. There was no single contract with them and the amount paid was below the limit of Rs. 75,000/- on which TDS is required to be deducted as provided u/s 194C of the Act. Similarly, payment of Rs. 3,94,621 / - to Mount View has been made for booking of hall charges for organizing fashion show. This payment does not fall under the category of any work contract and as such, no TDS was required to be deducted for such payment as there was no single contract with the hotel In any case, no addition is called for in the hands of the appellant on account of non deduction of TDS in other cases as the expenditure were genuine and was incurred for

17 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

business expediency and were actually paid in the year under reference." 33. Referring to the same it was contended that the

assessee had pleaded before the Ld.CIT(A) that the payment

made to hotel Mountview was for booking of hall charges for

organizing fashion show and thus did not fall under the

category of work contract and no TDS was required to be

deducted on the same. Similarly, the Ld.Counsel for the

assessee pointed out that it was pleaded before the

Ld.CIT(A) that there was no single contract with Roshan

Studios and Wire & Wireless and the amount paid was below

the prescribed limit on which TDS was required to be

deducted as per section 194C of the Act. The Ld.Counsel for

the assessee contended that the Ld.CIT(A) had failed to deal

with the specific contention of the assessee and has

summarily dismissed the same without giving any proper

reasons. He drew our attention to the finding of the CIT(A)

at para 8.2 of the order as under:

“8.2 I have considered the reply of the appellant and perused the order of the Assessing Officer. The appellant has contested only 2 amounts and not given reply with respect to others. As regards the payment to Roshan Studios, TDS was deductible because the annual payment exceeded the amount on which TDS is deductible. As regards the payment to Hotel Mountview, the expense has been booked under sales promotion and from the nature of expense it is a work contract in which

18 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

TDS was deductible. Hence, the order of the Assessing Officer on this issue is upheld and ground of appeal No. 6 is dismissed.” 34. The Ld. DR, on the other hand, relied upon the orders

of the authorities below.

the orders of authorities below. We agree with the

Ld.Counsel for the assessee that despite specific

submissions made by the assessee, the Ld.CIT(A) has upheld

the addition/disallowance ,giving no basis/reasoning for

arriving at his findings that the nature of expense relating

to Hotel Mountview was not in the nature of work contract

as contended by the assessee, nor has he given any basis for

stating that TDS was deductible on total payment made to

Rohan studios and every payment made was not to be

considered separately as pleaded by the assessee. The order

passed by the Ld.CIT(A), is, we find, not a reasoned and

speaking order on the issue. Since the facts pleaded by the

assessee need verification, we consider it fit to restore the

matter back to the AO to verify the contentions of the

assessee and thereafter adjudicate the issue in accordance

with law.

19 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

The ground of appeal No.6 is allowed for statistical

purposes.

“7. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed disallowance of an amount of Rs. 1,28,000/- made by the Assessing officer by invoking the provisions of section 40A(3) of the Act.” 37. Brief facts relating to the issue are that the AO noted

that the assessee had made payment for food and hospitality

during cricket match on 30.3.2011 of Rs.1,28,000/- in cash.

He held that the same was in violation of section 40A(3) of

the Act and accordingly, disallowed the same. The Ld.CIT(A)

upheld the disallowance so made by the AO.

that it had been explained to the authorities below that the

expenditure had been incurred for buying tickets for cricket

match and food for staff during cricket match and was not

paid to any single party and therefore, the provisions of

section 40A(3) of the Act were not attracted. The Ld.Counsel

for the assessee pointed out that the Ld.CIT(A) without

appreciating the contentions made, had summarily upheld

the addition by simply stating that the purchases in cash

20 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

exceeded Rs.20,000/-, the disallowance had been rightly

made.

of authorities below.

orders of authorities below. We do not find any merit in the

contentions of the Ld.Counsel for the assessee. The

assessee, we have noted, has consistently pleaded that the

payment was made in cash for purchasing tickets of cricket

match for its staff/customers and for providing food to them

during cricket match and that the payment was made to

different vendors at the spot where the cricket match was

conducted for buying food items. But no evidence has been

filed to substantiate the same. Therefore the fact remains

that the assessee has incurred expenditure in cash

exceeding Rs.20,000/-, thus violating the provisions of

section 40A(3) of the Act calling for disallowance of the

same. The order of the Ld.CIT(A) ,upholding the

disallowance of Rs.1,28,000/-,accordingly is upheld.

The ground of appeal No.7 raised by the assessee

dismissed

21 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

under:

“8. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed an addition of Rs. 1,16,000.00 being the amount of pre- paid expenses relating to the subsequent assessment year. In any case. In all fairness, directions should have been issued to allow this expenditure in the year to which the expenditure related.” 42. Brief facts relating to the issue are that the assessee

had incurred the expenditure of Rs.1,74,000/- on account of

music permission expense and the said amount had been

paid for three years. On taking note of the aforesaid fact,

the AO apportioned the expenses to three years and allowed

the claim of only Rs.58,000/- for the impugned year

disallowing the balance of Rs.1,16,000/-.

that the payment had been made for acquiring the licence

pertaining to music permission for three years and having

incurred in the impugned year was allowable in the

impugned year only. The Ld.Counsel for the assessee

pointed out that this was not a capital expenditure and

there were no provisions under the Act for deferment of

22 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

revenue expenditure and the same had to be allowed in the

year in which it was incurred.

the authorities below.

that the expenditure incurred on acquiring music

permission for a period of three years, was in the nature of

revenue expenditure of the assessee. It is not the claim of

the Revenue that the impugned expenditure was a capital

expenditure. On the contrary, we find that the Revenue has

accepted that it was in the nature of revenue expenditure

but on finding that the permission pertained to three years,

the expenditure was spread over three years and the claim

allowed accordingly. The Ld. DR has been unable to

controvert the contention of the Ld.Counsel for the assessee

that having treated the expenses as revenue, the same was

allowable in the impugned year and could not be deferred in

the next two years. The Revenue has been unable to draw

our attention to any provision under the Income Tax Act for

deferring revenue expenditure. We, therefore, agree with the

Ld.Counsel for the assessee that the said revenue expenses

23 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

were to be allowed in the impugned year itself. The claim of

the assessee of Rs.1,16,000/- is, therefore, allowed.

The ground of appeal No.8 raised by the assessee is,

therefore, allowed.

for statistical purposes.

We now take up the appeal of the assessee in ITA

No.1015/Chd/2017 relating to A.Y 2012-13

ITA No.1015/Chd/2017(A.Y.2012-13):

Ld.Counsel for the assessee, were general in nature. the

same therefore need no adjudication.

under:

“2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in having confirmed the addition of Rs.3,76,661/- made to the income of the appellant being the difference in the receipts as per form No. 26AS and as accounted for in the books of accounts of the appellant.”

24 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

of difference in income as per Form No.26AS and as per

income tax return.

present ground was identical to that raised in ground No. 2

of assessee’s appeal for A.Y 2011-12, in ITA

No.1014/Chd/2017 .

In view of the same, with the issue admittedly being

identical to that raised in ground No.2 in ITA restore the issue back to the AO to decide the same afresh

in accordance with our directions given at para 7 of our

order above.

The ground of appeal No.2 is allowed for statistical

purposes.

under:

“3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the disallowance of an amount of Rs 7,23,239/- under section 36(1)(iii) being the amount of interest paid on bank loan taken

25 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

for acquiring of assets not put to use in the year under reference.” 53. The above ground relates to disallowance of an amount

of 7,23,299/- u/s 36(1)(iii) of the Act being the amount of

interest paid on bank loan taken for acquiring of asset not

put to use in the year under reference.

present ground was identical to that raised in ground No. 3

of assessee’s appeal for A.Y 2011-12, in ITA

No.1014/Chd/2017 .

In view of the same, with the issue admittedly being

identical to that raised in ground No.3 in ITA restore the issue back to the AO to decide the same afresh

in accordance with our directions given at para 14 of our

order above.

The ground of appeal No.3 is allowed for statistical

purposes.

“4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in

26 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

having confirmed the allowance of depreciation on electrical installations and fittings at 10% instead of 15% as claimed by the appellant thereby confirming an addition of Rs. 11,64,638/-to the income of the appellant.” 56. The issue raised in the above ground relates to

allowance of depreciation on electric installation & fittings @

15% as claimed by the assessee as against 10% allowed by

the revenue authorities.

pleaded that its solitary prayer on the impugned issue was

that the claim of depreciation be allowed at the enhanced

WDV after allowing depreciation @ 10% on the impugned

assets. In view of the above, we direct the AO to recompute

the claim of depreciation on the impugned assets at the

prescribed rate in accordance with law. The ground of

appeal No.4 raised by the assessee is dismissed with the

above directions.

under:

“5. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed disallowance of an amount of Rs. 13,61,132/- being the amount of expenditure incurred on foreign travel of the Directors by treating the same as non business expenditure.”

27 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

expenses incurred on the directors of the assessee company

amounting to Rs.13,61,132/- which was entirely disallowed

by the AO treating the same as non business expenses in the

absence of any evidence furnished by the assessee for its

claim.

present ground was identical to that raised in ground No. 5

of assessee’s appeal for A.Y 2011-12, in ITA

No.1014/Chd/2017 .

identical to that raised in ground No.5 in ITA restrict the disallowance to 50% of the expenses ,in

accordance with our directions given at para 28 of our order

above.

The ground of appeal No.5 is partly allowed.

under:

28 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

“6. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed disallowance of an amount of Rs. 1,42,500/- made by the Assessing officer by taking resort to the provisions of section 40(a)(ia) by holding that as no TDS was deducted out of the expenditure incurred on which TDS was deductable as per the provisions of the Act, the same was as such not an allowable expenditure.” 63. The issue raised in the above ground relates to

disallowance of expenses on account of non deduction of

taxes at source by applying the provisions of section

40(a)(ia) of the Act. The AO had made disallowance on

account of the same of the following expenses:

1) Legal & Professional Fees = Rs.75,000/- 2) AMC = Rs.67,500/- Total = Rs.1,42,500/- 64. Before us at the outset itself the Ld.Counsel for the

assessee pleaded that the facts of the case are that the

assessee had deducted tax at source on both the expenses

and deposited the same also in the Government Treasury.

The Ld.Counsel for the assessee stated that the challans

evidencing the deduction of tax at source on these payments

and the deposit thereof in the Government Treasury was

available with the assessee and drew our attention to the

same filed in the Paper Book placed before us at page 5. Our

attention was also drawn to the acknowledgement of

statement of TDS, evidencing tax deducted on the impugned

29 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

payment and deposited in the Government Treasury. It was

contended that these documents were very relevant for

deciding the issue and the Ld.Counsel for the assessee

pleaded that the same may be admitted for adjudication. An

application for admission of the additional evidences was

filed before us dated 15.10.2018.

for the assessee and we are in agreement with the same that

the disallowance having been made on account of non

deduction of tax at source on certain payments made, the

evidences now filed by the assessee proving to the contrary

are very relevant for the issue and allowance of the claim of

the assessee. We, therefore, admit the additional evidences

filed by the assessee in the form of challans evidencing

deposit of tax deducted at source and the statement showing

tax deducted at source on the impugned payments. We

further restore the issue to the AO with the direction to

verify the evidences now filed by the assessee and thereafter

adjudicate the issue in accordance with law.

30 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

The ground of appeal No.6 raised by the assessee is,

therefore, allowed for statistical purposes.

pressed before us and, therefore, the same is dismissed as

not pressed.

In effect the appeal of the assessee is partly allowed

for statistical purposes.

We now take up the appeal of the assessee in ITA

No.1016/Chd/2017 relating to A.Y 2013-14

ITA No.1016/Chd/2017(A.Y.2013-14):

general in nature and hence, need no adjudication.

“2. On the facts and circumstances of the case, the learned CIT(A) has erred , both on facts and in law in having confirmed the addition of Rs.3,78,337/- made to the income of the appellant being the difference in the receipts as per form No. 26AS and as accounted for in the books of accounts of the appellant.”

31 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

of difference in income as per Form No.26AS and as per

income tax return.

present ground was identical to that raised in ground No. 2

of assessee’s appeal for A.Y 2011-12, in ITA

No.1014/Chd/2017 .

In view of the same, with the issue admittedly being

identical to that raised in ground No.2 in ITA restore the issue back to the AO to decide the same afresh

in accordance with our directions given at para 7 of our

order above.

The ground of appeal No.2 is allowed for statistical

purposes.

“3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the disallowance of an amount of Rs 6,95,680/- under section 36(1)(iii) being the amount of interest paid on bank loan taken for acquiring of assets not put to use in the year under reference.”

32 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

of 6,95,680/- u/s 36(1)(iii) of the Act being the amount of

interest paid on bank loan taken for acquiring of asset not

put to use in the year under reference.

present ground was identical to that raised in ground No. 3

of assessee’s appeal for A.Y 2011-12, in ITA

No.1014/Chd/2017 .

In view of the same, with the issue admittedly being

identical to that raised in ground No.3 in ITA restore the issue back to the AO to decide the same afresh

in accordance with our directions given at para 14 of our

order above.

The ground of appeal No.3 is allowed for statistical

purposes.

under:

“4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the disallowance of an amount of Rs

33 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

5,26,052/- under section 36(1)(iii) being the amount of interest paid on loans that should have been capitalized on capital work in progress in the hands of the appellant at the end of the year.” 76. The facts relating to the issue are that the AO noticed

that the assessee had shown capital work in progress of

Rs.40,46,558/- which had not been put to use. Accordingly,

he disallowed the interest pertaining to the interest bearing

funds used for the same on a proportionate basis,

amounting to Rs.5,26,052/-. The Ld.CIT(A) upheld the same

been pleaded before the lower authorities that no interest

bearing funds had been used for the said purpose and the

assessee had used its own funds which were available with

it by way of free reserves. That no term loan or any

unsecured loan was raised during the year, which fact was

clear from the Balance Sheet of the assessee. The

Ld.Counsel for the assessee stated that the Ld.CIT(A)

without dealing with the specific assertion made by the

assessee had upheld the order of the AO. Our attention was

drawn to the pleadings made before the CIT(A) reproduced at

para 5.1 of the order As under:

“5.1 In appeal, following explanation was offered by the appellant.

34 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

"In this regard, it is submitted that the learned AO did not firstly appreciated the fact that opening of retail stores by the appellant was an ongoing process and the assets were not acquired by the appellant for any expansion of the existing business of the appellant Opening of stores to market its products for retail purposes was an integrated, part of the business of the appellant and cannot be termed as expansion of the existing business. Secondly, it was also submitted before the learned AO that as no term loan was either raised by the appellant nor any borrowings were made for acquiring the assets of these new stores, no interest out of the interest paid by the appellant was disallowable under the proviso to section 36(l)(iii) of the Act in as much as it is only the interest paid on capital borrowed for acquisition of assets not put to use in the year under reference which is required to be disallowed under the proviso and otherwise. As already submitted no capital was borrowed for the acquisition of these assets which were acquired by using its own funds which were available with the appellant by way of free reserves with it. Neither any term loan was raised from the bank nor any unsecured loan was raised by the appellant in the year under reference as will be evident from the copy of the balance sheet attached herewith. The accretion in the unsecured loans is only on account of interest payable to them on their loans. Copies of their accounts are also attached herewith for your ready reference and kind perusal." And at para 6.1 as under:

“6.1 In appeal, the Ld. Counsel for the appellant made the following reply:- "This ground of appeal relates to the disallowance of a sum of Rs. 5,26,052/- out of the interest paid by the assessee on loans raised by the appellant by taking resort to the proviso to section 36(l)(iii) being the amount of interest required to the capitalized on the capital work in progress of the assets not put to use or where no commercial activity has been started in the year under reference. Our submissions are the same as has been made against ground No. 3 above for this ground of appeal.

35 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

They may kindly be taken into consideration while deciding this ground of appeal by your honour.” 78. Our attention was drawn to the findings of the

Ld.CIT(A) at para 6.2 of his order as under:

“6.2 I have examined the arguments extended by the Ld. Counsel for the appellant and also perused the assessment order. It is observed that the borrowed funds were used by the appellant for making investment in capital work in progress and the interest has not been capitalized. Therefore, the claim of interest as a revenue expense gets covered by the proviso to section 36(1)(iii) and accordingly upheld. The addition is confirmed and ground of appeal No.4 is dismissed.” 79. The Ld. DR, on the other hand, relied upon the order of

the CIT(A).

the contention of the Ld.Counsel for the assessee. The

assessee, we find, had made specific pleadings before the

Ld.CIT(A) of not having used any interest bearing funds for

investing in its capita work in progress and had also pointed

out that no fresh loans either secured or unsecured had

been taken by the assessee during the year. The Ld.CIT(A)

has, we find, upheld the disallowance of interest without

dealing with the specific submissions of the assessee and in

a summary manner. The order passed on the issue by the

CIT(A) is a non speaking order. Since the facts canvassed by

36 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

the assessee need verification, We restore the matter to the

AO to verify the facts and deal with the specific submissions

made by the assessee and thereafter decide the issue in

accordance with law. The ground of appeal No.4 raised by

the assessee is allowed for statistical purposes.

“5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in having confirmed the allowance of depreciation on electrical installations and fittings at 10% instead of 15% as claimed by the appellant thereby confirming an addition of Rs. 18,88,632/- to the income of the appellant.” 82. The issue raised in the above ground relates to

allowance of depreciation of electric installation of fittings @

15% as claimed by the assessee as against 10% allowed by

the revenue authorities.

present ground was identical to that raised in ground No. 4

of assessee’s appeal for A.Y 2012-13, in ITA

No.1015/Chd/2017 .

In view of the same, with the issue admittedly being

identical to that raised in ground No.4 in ITA 37 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14 dismiss the said ground in accordance with our directions

given at para 57 of our order above.

The ground of appeal No. 5 raised by the assessee is

dismissed with the above directions.

“6. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed disallowance of an amount of Rs.2,24,097/- being the amount of expenditure incurred on foreign travel of the Directors by treating the same as non business expenditure.” 85. The above ground relates to claim of foreign travel

expenses incurred on the directors of the assessee company

amounting to Rs.2,24,097/- which was entirely disallowed

by the AO treating the same as non business expenses in the

absence of any evidence furnished by the assessee for its

claim.

It was common ground that the issue raised in the

present ground was identical to that raised in ground No. 5

of assessee’s appeal for A.Y 2011-12, in ITA

No.1014/Chd/2017 .

38 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

identical to that raised in ground No.5 in ITA restrict the disallowance to 50% of the expenses ,in

accordance with our directions given at para 28 of our order

above.

The ground of appeal No.6 is partly allowed.

read as under:

“7. The CIT(Appeals) has erred in not having adjudicated the ground of appeal taken before him as regards the disallowance of an amount of Rs. 25,159/- made by the Assessing officer by taking resort to the provisions of section 40(a)(ia) by holding that as no IDS was deducted out of the expenditure incurred on which IDS was deductable as per the provisions of the Act, the same was as such not an allowable expenditure. 8. The CIT(Appeals) has also erred in not having adjudicated the ground of appeal taken before him as regards the disallowance of an amount of Rs. 6,37,708/- .made by the Assessing officer being the amount of one fourth of the expenditure incurred by the appellant towards running and maintenance of cars including deprecation on the same by treating the same as personal expenses of the Directors.” 88. The above grounds were taken up together by the

Ld.Counsel for the assessee stating that both the issues had

39 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

not been adjudicated by the Ld.CIT(A). Drawing our

attention to the order passed by the Ld.CIT(A), the

Ld.Counsel for the assessee pointed out that in ground

Nos.7 and 8 raised before the Ld.CIT(A) the assessee had

challenged the disallowance made by the AO by invoking the

provisions of section 40(a)(ia) of the Act of interest

amounting to Rs.25,159/- and of 1/4 th of the expenditure

towards running and maintenance of cars amounting to

Rs.6,37,708/-. The Ld.Counsel for the assessee thereafter

took us through the order of the Ld.CIT(A) and pointed out

that the Ld.CIT(A) had dealt with only up to ground No.6

and had left the issues raised in ground Nos. 7 & 8

unadjudicated. The Ld. DR agreed to the same.

adjudicated afresh but since we have restored certain issues

raised in this appeal to the AO, we restore these issues also

to the AO to deal with the same afresh. We direct the AO to

deal with the issue of disallowance of expenses incurred on

vehicle running and maintenance on account of personal

usage of the same by the Directors of the company on a

reasonable basis considering the past history of the

assessee, number of directors in the company, number of

40 ITA Nos.1014 to 1016/Chd/2017 A.Ys. 2011-12 to 2013-14

vehicles owned by the assessee company, the nature of business carried out by the assessee and such other factors. The AO is directed to provide due opportunity of hearing to the assessee and thereafter decide the issue in accordance with law.

Ground Nos.7 and 8 raised by the assessee are allowed for statistical purposes.

In effect, the appeal of the assessee is partly allowed for statistical purposes. 9 0 . In the result, all the appeals filed by the assessee are partly allowed for statistical purposes. Order pronounced in the Open Court.

Sd/- Sd/- अ�नपूणा� गु�ता �दवा �संह (ANNAPURNA GUPTA) (DIVA SINGH) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member �दनांक /Dated: 29th August, 2019 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar