M/S KAPSONS AGENCIES PVT. LTD.,CHANDIGARH vs. JCIT, R-III, 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)-1, Chandigarh [(in short ‘CIT(A)’] dated 26.4.2017, 7.3.2017 and 26.4.2017, passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’)

2 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

relating to assessment years 2010-11, 2011-12 and 2013-14

respectively.

2 . A t t h e o u t s e t i t w a s c o n t e n d e d b y b o t h t h e p a r t i e s

t h a t t h e r e w e r e c o m m o n i s s u e s i n v o l v e d i n t h e

a p p e a l s . Th e s e a p p e a l s w e r e t h e r e f o r e h e a r d t o g e t h e r

a n d a r e b e i n g d i s p o s e d o f f b y t h i s c o n s o l i d a t e d o r d e r .

W e s h a l l f i r s t b e d e a l i n g w i t h t h e a p p e a l o f t h e

a s s e s s e e i n I TA N o . 1 0 1 0 / C h d / 2 0 1 7 .

I T A N o . 1 0 1 0 / C h d / 2 0 1 7 : ( A . Y 2 0 1 0 - 1 1 ) :

3 . G r o u n d N o s . 1 a n d 4 r a i s e d , i t w a s s t a t e d b y t h e

L d . C o u n s e l f o r t h e a s s e s s e e , w e r e g e n e r a l i n n a t u r e .

Th e s a me t h e r e f o r e n e e d n o a d j u d i c a t i o n .

4 . G r o u n d N o . 2 r a i s e d b y t h e a s s e s s e e r e a d s a s

u n d e r :

“2. 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.2,11,095/- under section 36(1)(iii), being the amount of interest paid on bank loan for setting up new stores or stores in which business activities did not commenced in the year under reference.” 5 . Th e i s s u e r a i s e d i n t h e a b o v e g r o u n d r e l a t e s t o

d i s a l l o w a n c e o f i n t e r e s t e x p e n s e s o f R s . 2 , 1 1 , 0 9 5 / - u / s

3 6 ( 1 ) ( i i i ) o f t h e A c t . Th e f a c t s r e l a t i n g t o t h e i s s u e a r e

3 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

t h a t t h e a s s e s s e e h a d r a i s e d t e r m l o a n o f

R s . 4 2 , 4 8 , 6 6 9 / - f o r c a p i t a l w o r k i n p r o g r e s s i n n e w

s t o r e s a n d c l a i m e d t h e i n t e r e s t p a i d t h e r e o n a s

r e v e n u e e x p e n d i t u r e . Th e A O d i s a l l o w e d t h e s a m e

h o l d i n g t h a t t h e i n t e r e s t r e l a t e d t o t h e p e r i o d p r i o r t o

b u s i n e s s a c t i v i t i e s c o m m e n c i n g i n t h e s t o r e s , i . e p r i o r

t o t h e a s s e t b e i n g p u t t o u s e a n d w a s t h e r e f o r e n o t

a l l o w a b l e a s p e r s e c t i o n 3 6 ( 1 ) ( i i i ) o f t h e A c t . Th e

L d . C I T( A ) u p h e l d t h e d i s a l l o w a n c e holding at para 4.2

of his order as under:

“4.2 I agree with the addition made by the Assessing Officer. The appellant had taken a term loan and invested in new stores. The stores were not started, therefore the interest expense had to be capitalized as per the proviso to section 36(l)(iii) of the Act. The addition is therefore upheld and ground of appeal No. 2 is dismissed.” 6. Before us the Ld.Counsel for the assessee contended

that the correct facts relating to the issue had not been

brought before the authorities below. It was contended that

the assessee had not purchased any stores but had only

taken them on rent and had utilized the term loans for

renovating the stores. It was pointed out that the loans had

been sanctioned to the assessee by way of reimbursement of

expenses incurred on renovation and, therefore, the interest

pertained to the period after acquisition of the asset, if any,

4 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

and hence was allowable as per the provisions of section

36(1)(iii) of the Act. The assessee contended that the said

facts was evident from the sanction letter of the bank

granting term loan and the letter written by the assessee to

the Manager of the bank requesting to reimburse the

expenditure. The Ld.Counsel for the assessee contended that

these were additional documents being submitted which

were very relevant for the adjudication of the issue and

could not be produced before the lower authorities for the

reason that the assessee had shifted its office from

Chandigarh to Mohali in the year 2010 and certain records

could not be traced thereafter. The assessee filed an

application for admission of additional evidence under Rule

29 of the Income Tax Appellate Tribunal Rules, 1963

alongwith copies of the above stated additional evidences

and further filed an affidavit stating the aforesaid facts on

oath therein. The application submitted reads as under:

“The applicant/appellant begs your Honour's permission to rely on the documents as per Annexure-l attached which are very relevant and necessary to decide the issues in Ground Nos. 4(i), 4(iii) and Ground no.6. In this behalf it is respectfully submitted that all the documents mentioned in annexure-! could not be filed during the assessment proceedings due to the reason that some of the records/documents were misplaced during the course of shifting our office from Chandigarh to Mohali in the year 2010. Despite due diligence these documents could not be

5 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

produced before the lower authorities. Therefore in the interest of natural and substantial justice, the documents as mentioned in Annexure-l attached, may kindly be admitted as additional evidence and be adjudicated at the time of hearing.” 7. The Ld. DR objected to the admission of the additional

evidences and further relied upon the orders of the lower

authorities.

issue of admitting the additional evidences filed before us,

We hold that the same need to be admitted. The

disallowance of interest, admittedly has been made for the

reason that the assets /stores for which the loans had been

taken and to which the interest related, were not started

during the year. The additional documents filed by the

assessee by way of Sanction letter of Bank for term loans

taken and the utilization certificate of the term loans given

to the bank by the assessee, are in support of its claim that

interest paid pertained to loans utilized for renovating

shops and not acquiring them and in any case the interest

paid pertained to period after the asset for which the loans

were taken were put to use. The additional evidences ,we

find, therefore, go the root of the matter and are relevant for

bringing the correct facts on record for adjudicating the

6 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

issue. There is also reasonable cause adduced for not filing

the same earlier on account of shifting of the premises of

the company due to which the documents got misplaced. The

same has been also affirmed on oath by the Director of the

assessee company. The Revenue has been unable to

controvert the same.

additional evidences for adjudication of the present ground.

We further restore the matter to the AO to decide the issue

afresh. The AO is directed to verify the claim of the assessee

after considering the evidences filed by it and thereafter

adjudicate the issue in accordance with law. Needless to add

the assessee be given due opportunity of hearing.

The ground of appeal No.2 raised by the assessee 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 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.1,93,193/- to the income of the appellant.” 11. The disallowance disputed in the above ground relates

to claim of depreciation allegedly at a wrong rate resulting

7 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

in addition of Rs. 1,93,193/-. The Assessing Officer

observed that the assessee had claimed depreciation at the

rate of 15% on electrical installations. On examining the

details of the 'installations', the Assessing Officer noted that

they included electrical fittings like PVC wires, GI pipe,

bends, bolts etc. The Assessing Officer observed that the

installations were part of furniture & fittings and as per

prescribed rate 10% depreciation was admissible instead of

15%. No concrete argument was extended by the assessee

before the Assessing Officer who therefore restricted the

claim by disallowing Rs. 1,93,193/- as excess claim.

under:

“5.2 I have examined the plea of the appellant and perused the assessment order. The addition made by the Assessing Officer is upheld. The details of electrical fittings were examined and it becomes clear that they are in the nature of furniture & fittings. The rate of 10% on electrical fittings has been correctly applied by the Assessing Officer. The addition made by her is confirmed and ground of appeal No.3 is dismissed.” 13. Before us the Ld.Counsel for the assessee reiterated

the contentions made before the lower authorities.

the CIT(A)/AO.

8 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

any reason to interfere in the order of the CIT(A). The

factual findings of the CIT(A) made after perusing the details

filed by the assessee that the additions made were in the

nature of furniture and fittings, have not been controverted

by the assessee by way of any explanation or detail filed

before us, nor the Ld.Counsel for the assessee was able to

point out any discrepancy in the findings of the Ld.CIT(A).

That the applicable rate of depreciation on the said assets is

10% is not disputed. In view of the same, we find no reason

to interfere in the order of the CIT(A) in restricting the

depreciation to 10% on electric fittings. The ground of

appeal No.3 raised by the assessee is dismissed.

In effect, the appeal of the assessee is partly allowed

for statistical purposes.

We shall now take up the appeal of the assessee

relating to A.Y 2011-12 in ITA No.1011/Chd/2017.

I T A N o . 1 0 1 1 / C h d / 2 0 1 7 : ( A . Y 2 0 1 1 - 1 2 ) :

t h e L d . C o u n s e l f o r t h e a s s e s s e e w e r e g e n e r a l i n

9 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

n a t u r e . Th e s a i d g r o u n d s t h e r e f o r e n e e d n o

a d j u d i c a t i o n .

1 7 . G r o u n d N o . 2 r a i s e d b y t h e a s s e s s e e r e a d s a s

u n d e r :

“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. 1,01,632/- made to the income of the appellant being the difference in the amount of interest receivable on FDRs on accrual basis and accounted for by the appellant on receipt basis in the books of accounts.” 1 8 . T h e f a c t s r e l a t i n g t o t h e i s s u e a r e t h a t t h e

Assessing Officer made an addition of Rs.1,01,632/- on

account of interest earned on Bank deposits, being the

excess amount of interest earned stated in Form No. 26AS

as compared to that returned by the assessee . The AO noted

that the assessee had earned interest income from bank

deposits in HDFC Bank to the tune of Rs.1,52,944/- , as

reflected in Form No .26AS,on which TDS of Rs.15,294/-

was deducted, however, income reflected in the return was

only of Rs.51,313/-. The Assessing Officer confronted the

assessee regarding the balance interest of Rs.1,01,632/-.

The assessee replied that the income was reflected in

subsequent years on maturity of the FDR. The Assessing

Officer observed that as per section 5 the income had to be

10 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

taxed in the year in which it accrued or arose and therefore

added it to the income of assessee.

5.2 as under:

“5.2 I have examined the issue in detail. 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. Income has accrued to the appellant in the current year as interest is generated on the deposit on daily basis but credited to assesses account on the day FDR matures. Therefore the Assessing Officer has rightly added the income. The addition is confirmed and ground of appeal No. 2 is dismissed.” 20. Before us the Ld.Counsel for the assessee reiterated

the contentions made before the lower authorities.

to interfere in the order of the Ld.CIT(A). Undisputedly the

in income had accrued in the impugned year to the assessee

and TDS also deducted on the same. The same has,

therefore, been rightly taxed in the impugned year.

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

therefore, dismissed.

11 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

2 3 . G r o u n d N o . 3 r a i s e d b y t h e a s s e s s e e r e a d s a s

u n d e r :

“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.15,78,866- under section 36(1)(iii), being the amount of interest paid on bank loan for setting up new stores/work in progress/ stores in which business activities did not commenced in the year under reference.” 24. It was common ground between both the parties that

the above ground raised by the assessee in this appeal was

identical to ground No.2 raised in ITA No.1010/Chd/2017,

relating to disallowance of interest u/s 36(1)(iii) of the Act

on account of the same pertaining to the period prior to

which the asset/shop was put to use. It was contended by

the Ld.Counsel that additional evidences to disprove this

finding of the Revenue authorities had been filed in this

case also as in Ground No.2 of ITA No.1010/Chd/2017 and

that the arguments also were identical.

identical to that raised in Ground No.2 of ITA

No.1010/Chd/2017, dealt with us above our decision

rendered therein at para 8 & 9 of our order, will apply to this

ground with equal force. Following the same we admit the

12 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

additional evidences filed by the assessee and restore the

issue to the AO to adjudicate the issue afresh in the light of

directions given in Ground No.2 of ITA No.1010/Chd/2017.

This ground of appeal No.3 is allowed for statistical

purposes.

assessee reads as under:

13 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

Assessing officer called for information u/s 133(6) of the Act

from suppliers of goods of the assessee. The Assessing

officer observed that there was a difference in the Closing

Balance with respect to the accounts submitted by M/s

Benetton India Ltd. and the accounts of the assessee. The

assessee was asked to reconcile the difference. On

comparing these accounts the Assessing Officer observed

that difference of Rs. 5,72,741/- was on account of rent of

March 2010 which was debited to the accounts in F.Y.

2010-11 even while it pertained to F.Y. 2009-10. On being

confronted, the assessee replied that since the rent was paid

in the current year therefore it was debited in this year. The

Assessing officer did not allow the expenditure of Rs.

5,72,741 /- holding that it did not pertain to the impugned

year. The Assessing officer also observed that there was a

difference of Rs. 2,42,868/- with the accounts obtained from

M/s Adidas. The difference was on account of difference in

cost of goods. The assessee, he noted had booked an

inflated cost in his books by taking the MRP value. On being

confronted the assessee did not furnish any reply to the

Assessing Officer on this issue. The Assessing Officer

observed that the excess booking was reversed in the next

14 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

year. But since there was an excess claim in the current

year, he disallowed this expenditure.

para 7.3 as under:

“7.3 I have considered these issues. Both the additions were made on account of wrong claim of expenses. The expense on rent of Rs.5,72,741/- for March 2010 could not have been claimed in F.Y 2010-11. The appellant is following mercantile system of accounting and therefore the expense was required to be debited in F.Y 2010-11 and not in 2011-12. Similarly the Assessing Officer has rightly disallowed inflated purchase with respect to bill from M/s Adidas, 1 uphold these additions. Ground of appeal No. 4 is dismissed.” 29. Before us the Ld.Counsel for the assessee filed

submissions in writing vis-à-vis the impugned grounds. The

content of the same, briefly stated, was that the rent

disallowed though pertaining to the month of March, 2010

i.e. the preceding year had actually accrued and arose in the

impugned year since the agreement on account of which it

arose was entered into in the impugned year. The

contentions made in this regard at para 1 to 7 are as under:

15 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

Limited but as the payment was made in the year under reference, the same was accounted for in this year"(para 4.2 of AO'S order) but the AO disallowed the same without any further discussion. The Ld.CIT(Appeals) confirmed the disallowance holding that the expenses on rent for March,2010 could not have been claimed in financial year 2010-11 as the appellant was following mercantile system of accounting(para 7.3). 2. The facts in brief relating to this issue, are that the assessee was appointed as Distributor by Benetton India (P )Ltd. vide "Distribution Agreement" dated 15.03.2010 (Pages 46-72 of Paper Book) to distribute and sell their products in the Territory(Punjab, Haryana, Himachal Pradesh, Jammu & Kashmir and Union Territory of Chandigarh) through its various outlets(clause 2.1 on page 52 of Paper Book). Then a tripartite Lease Deed was entered into on 12.04.2010 between Landlord, Benetton India Pvt. Ltd. and assessee(pages 1-19 of Additional evidence) showing Landlord as "Lessors" and Benetton India Pvt.Ltd. as "Lessee" and the assessee M/s Kapsons Agencies (P)Ltd. as "Nominee"(Page 1-2 of additional evidence). As per clause 2.2 (page 4 additional evidence) it was agreed upon that the premises shall be handed over to Nominee by the Lessee on the date of execution of this Lease Deed. As per clause 3.1 rent was fixed at Rs.5,76,000/- or 20% of net sales value per month plus service tax whichever is higher. Further kind attention is invited to clause 3.2 of lease deed at page 5 of additional evidence which is reproduced as under: "3.2.The lessee has already made payments of monthly rent to the Lessors upto 30th April,2010 as per terms of previous lease deed dated 25.03.2009 and addendum dated 25.08.2009 whereby the rent was increased from Rs.5,00,000/- to Rs.5,76,000/-executed between Lessors and Lessee. The obligation to make payment of Rent after execution of this lease deed shall be of Nominee. Without prejudice to the above, the Lessors hereby

16 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

confirm that the Lessee has paid rent @ 5,76,000/- per month until 31.03.2010." 3. It is clear from clause 3.2 as reproduced above, that the rent till 31.03.2010 has been paid by Lessee i.e. Benetton India Pvt.Ltd and the obligation to pay rent by the Nominee i.e. assessee, shall be only after execution of this lease deed i.e. 12.04.2010. 4. Further kind attention is also invited to letter dated 27.03.2014 addressed to the JCIT, Circle 2(1),Chandigarh, by M/s Benetton India Pvt.Ltd. furnishing information u/s 133(6)(pages 43-45 of paper book) where it has been clarified that rental amount has been charged to Kapsons Agencies Pvt.Ltd. by M/s Benetton India Pvt.Ltd and further that tax has been deducted from Landlord and deposited the same to the credit of central Govt. From here also it is clear that Benetton India Pvt.Ltd. made the payment of rent directly to the landlord after IDS and the account of assessee was later on debited by an amount of Rs.5,72,741/- on account of Rent/CAM/Elect.charged(page 44-45 of paper book) by Benetton India Pvt.Ltd. 5. From the above submissions, it is clear that the assessee rightly accounted for the expenditure of Rs.5,72,741/- during the financial year 2010-11(AY 2011-12) as the liability was crystallized only after execution of lease deed executed on 12.04.2010. Alternatively (ground 4(ii)) it is prayed that necessary directions may be given to allow the same in the preceding assessment year i.e. asstt.year 2010-11 as the genuineness of expenditure is not in doubt. Kind attention in this behalf is invited to the judgement of the Hon'ble ITAT, Delhi Bench, in the case of Caparo Maruti Ltd.New Delhi Vs.DCIT, ITA N0.5165 and 5059/Del/2014 decided on 09.08.2017(copy attached) where it has been held in para 12 on page 9 of the order as under: "12. The Ld.AR has brought to our notice that such amount was suo motu added by the assessee in its computation of total income for the immediately succeeding year, namely, A.Y. 2011-

17 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

disallowed amounting to Rs.2,24,868/-, the contention of

the Ld.Counsel for the assessee was that there was actually

no excess purchase booked but in fact the assessee had

been unable to point out to the authorities below that

against the so called excess purchases of Rs.5,61,666/- the

assessee had entered discount of the identical amount thus

reflecting net purchases of Rs.3,18,798/- only and there

was, therefore, no difference with respect to this figure as

reflected in the books of M/s Adidas. The submissions of the

assessee filed in writing before us at paras 8 to 10 of his

written submissions are as under:

18 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

“8. This ground relates to disallowance of Rs.2,42,868/- on account of excess purchase value from M/s Adidas booked on MRP(maximum retail price) at Rs.5,61,666/- instead of wholesale price at Rs.3,18,798/- and thus resulting in difference of Rs.2,42,868/- in the account of M/s Adidas. It was submitted to Id.AO vide reply dated 28.03.3014 at page 42 of paper book, that the mistake was rectified by making necessary rectification in the next financial year. The AO rejected the explanation of assessee and made disallowance. The Ld.CIT(Appeals) has upheld the disallowance in para 7.3 (page 5) holding that AO has rightly disallowed inflated purchase with respect to bill from M/s Adidas. 9. In this behalf kind attention is invited to ledger account of "Discount received" placed in additional evidence at pages 20-26. It is respectfully submitted that "Discount Received" account was credited on 31.03.2011 by the excess amount of Rs.2,42,868/-(page 25 of additional evidence) and correspondingly ledger account of "Discount Receivable" was debited on 31.03.2011(Page 27 of Additional evidence). Then the account of "Adidas" was debited on 01.04.2011 by the amounts of Rs.1,10,546/- and Rs.1,32,322/-(aggregate Rs.2,42,868/-) (pages 28 of additional evidence) and correspondingly ledger account of "Discount Receivable" was credited by the same amounts on 01.04.2011(page 29 of additional evidence). 10. Therefore effect of excess purchase value claimed, has been neutralized by crediting the Discount account by the same amount during this year itself and the account of Adidas was also reconciled by making necessary entries on 01.04.2011.” 31. The Ld.Counsel for the assessee contended that to

substantiate its above contention it wished to file additional

evidences in the form the lease deed entered into in April,

2010 for the payment of rent pertaining to the month of

19 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

March, 2010 and ledger account of Discount received and

contended that the same could not be filed earlier since

certain record and documents were misplaced during the

course of shifting of the office from Chandigarh to Mohali in

2010. An affidavit making the above affirmations on oath

was also filed before us. It was contended that the document

was relevant to the issue and the assessee, therefore,

requested that the same be admitted.

The Ld.DR on the other hand relied on the order of the

authorities below.

before us relates to disallowance of rent paid for the reason

that it pertained to preceding year and disallowance of

excess purchases booked .The Ld. Counsel for the assessee

has filed additional evidences before us contradicting the

findings of the Revenue. Copy of rent agreement entered into

during the year has been filed to show that the impugned

expenditure arose on account of the same and thus accrued

during the year itself. That accordingly it could not be

treated as prior period expense. Also vis a vis excess

purchases booked, the assessee has filed copy of purchase

account, discount account and ledger account of M/s Adidas

20 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

showing that corresponding entry of discount was passed in

the books of the assessee thus negativing the excess

purchases booked. All the documents we find are relevant

for establishing the correct facts relating to the issue for

adjudication. Also we find there was reasonable cause with

the assessee for not producing them before the lower

authorities, since as stated by the director of the company

on oath, the documents had got misplaced in shifting of the

premises of the assessee, which has not been controverted

by the Revenue. We therefore admit the additional evidences

.Further since the facts as contended by the assessee need

to be verified, we restore this issue back to the AO to verify

the contention of 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.4(i), (ii), (iii) and (iv) raised by the

assessee is allowed for statistical purposes.

21 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

Officer made addition of Rs. 3,79,021/- on account of

foreign travel expenses of the directors of the assessee

company and their family members incurred on trips to

China and Turkey. The expenditure included cost of air

tickets, hotel bills and visa fee. The Assessing Officer

confronted the assessee about the expense being of non-

business nature as the company did not have any export

business. The assessee in its reply stated that the both the

directors with their wives had visited these countries to

keep themselves appraised of the latest fashion trends. The

assessee had not furnished before Assessing Officer the

information regarding the fashion exhibition/ shows

attended, therefore the Assessing officer disallowed these

expenses being in the nature of personal use and for non-

business purposes.

under:

“8.2 I have considered this issue. 1 agree with the addition made by the Assessing Officer. The appellant did not furnish any information regarding the business purpose of the foreign trips. These trips were made with family apparently as tourists in personal capacity and could not have been claimed as business expenses. The addition is upheld and ground of appeal No. 5 is dismissed.”

22 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

that since the assessee was dealing in apparels, the

directors of the assessee company travelled abroad for

making purchases. The Ld.Counsel for the assessee though

fairly conceded that there was no evidence available with

him to substantiate his contention. Alternatively, he

contended that the entire foreign travelling in any case

could not be disallowed considering the business need of the

assessee and the same may be restricted to a reasonable

amount.

the Ld.Counsel for the assessee.

to disallowance of entire foreign travelling expenses

incurred by the assessee. We find that though undoubtedly

the assessee has not filed any evidence of foreign travel

undertaken for the purpose of its business, at the same

time, it cannot be completely ruled out that certain amount

of expenses is incurred in the course of its business

considering the nature of its business dealing in trading of

branded clothes/apparels. We, therefore, consider 50% of

23 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

the amount actually claimed by the assessee as reasonable

and disallow the balance 50%.

The ground of appeal No.5 is therefore partly allowed.

under:

“6. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed disallowance of an amount of Rs.3,79,914/- 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 following expenditure incurred by the appellant, the same was not an allowable expenditure:- (i) Expenditure on Advertisement Rs.1,48,748.00 (ii) Professional charges paid to Noshen Oceanic Rs.1,65,450.00 (iii) Expenses on repair and maintenance Rs. 67,716.00 40. Brief facts relating to this ground are that the

Assessing Officer made addition of Rs.3,79,914/- u/s

40(a)(ia) as the assessee failed to deduct TDS on contract

payments. The details of expenditure on which TDS was not

deducted are as under:-

Head of Expenditure Name of party Amount (in Rs.) Calender International 34,935/- Advertisement Advertisement Fine Ads 26,472/- Advertisement Krishna Neon Signs 87,341/- Professional Charges Noshe Oceanic 1, 65,450/- 65,716/- /I Repair & Maintenance Kone Elevator 3,79,914/- Total

24 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

under:

“9.3 I have considered the issue. The payments made were in the nature of Advertisements expense/ professional changes etc on which the appellant was liable as per law to deduct TDS irrespective of the fact that written contract was not entered. The contract in such cases is implied contract. Since the appellant did not comply with the TDS liability the expenditure was rightly disallowed by the Assessing Officer u/s 40(a)(ia) of the Act. Addition is upheld and the grounds of appeal Nos. 6(a) and (b) are dismissed.” 42. The sole contention raised by Ld.Counsel for the

assessee by was that out of the advertisement expenses, the

amount paid to Fine Ads of Rs.26,472/- did not qualify for

tax deduction at source since the limit for TDS was

Rs.30,000/- and above. Vis-à-vis the professional charges to

Noshe Oceanic, the Ld.Counsel for the assessee contended

that in fact TDS had been deducted on the impugned

payment. He filed copy of the TDS certificate issued to

Noshe Oceanic as evidence and pleaded that the same may

be admitted, being relevant to the issue at hand. He further

pleaded that the matter be restored back to the AO to verify

the above claim of the assessee. The Ld.DR did not object to

the same.

25 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

above averments of the assessee, we consider it fit to restore

the issue back to the AO to verify both the claims of the

assessee vis-à-vis the advertisement payment to Fine Ads

not qualifying for TDS deduction and the fact that TDS

having been deducted to Noshe Oceanic.The AO is directed

to adjudicate the issue in accordance with law after duly

verifying the contentions of the assessee. Needless to add,

the assessee be granted due opportunity of hearing.

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

allowed for statistical purposes.

In effect the appeal of the assessee is partly allowed

for statistical purposes.

We shall now take up the appeal of the assessee

pertaining to A.Y 2013-14

I T A N o . 1 0 1 3 / C h d / 2 0 1 7 : ( A . Y 2 0 1 3 - 1 4 ) :

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

same therefore need no adjudication.

26 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

“2. On the facts and circumstances of the case, the learned ClT(A) has erred , both on facts and in law in having confirmed the addition of Rs.7,96,537/- made to the income of the appellant being the difference in the amounts of receipt as per form No. 26AS and as accounted for in the books of accounts of the appellant.” 46. The facts relevant to the issue are that the Assessing

Officer made an addition of Rs.7,96,537/- on account of

mismatch in the income as per 26AS form and income as per

income tax return. The Assessing Officer examined the 26AS

form of the assessee and found that there was difference of

Rs. 7,96,537/- from M/s V.F. Brands India Pvt. Ltd. and in

the absence of any explanation regarding the same from the

assessee, added Rs. 7,96,537/- to the income of the

assessee.

under:

“5.2 I have examined the issue in detail. 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. Income has accrued to the appellant in the current year. The Assessing Officer had to brought to tax in this year as mercantile system is being followed. Issue of credit notes to set-off expenses against the income has been done in the next financial year as a result the income chargeability rightly added the income. The addition is confirmed and ground of appeal No, 2 is dismissed.” 48. Before us the Ld.Counsel for the assessee reiterated

the contention made before the lower authorities that

27 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

mismatch was on account of reimbursement of

advertisement expenses made by M/s V.F. Brands which was

accounted for in the books of account of the assessee in the

subsequent year. It was also pointed out that it had been

explained to the authorities below that the reason for

accounting for in the subsequent year was that the credit

note was received in the subsequent year and, therefore, the

amount had accrued to the assessee in the subsequent year

only. The Ld.Counsel for the assessee drew our attention to

the submissions made in this regard before the CIT(A) and

reproduced in the order of the Ld.CIT(A) at para 5.1 of the

order.

of lower authorities.

assessee had consistently pleaded that the difference was on

account of reimbursement received from M/s V.F. Brands

which was booked in the subsequent year when the fact of

the reimbursement came to its knowledge by way of credit

notes issued. The CIT(A), we find, despite specific averments

made by the assessee upheld the disallowance by giving

general findings that income is to be taxed on accrual basis

28 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

and that income had accrued to the assessee, without

addressing the facts as stated by the assessee and pointing

out how he arrived at the finding that income accrued to the

assessee in this year. We, therefore, consider it fit to restore

the issue back to the AO to consider the contention of the

assessee specially the fact that it was the reimbursement of

expenses and also the fact that the credit note relating to

the same had been received in the next year only. The AO is

directed to adjudicate the issue in accordance with law

giving reasonable opportunity of hearing to the assessee.

The ground of appeal No.2 raised by the assessee 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 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. 9,05,692/-to the income of the appellant.” 52. Both the parties stated that the above ground raised by

the assessee in this appeal was identical to ground No.3

raised in assesses appeal in ITA No.1010/Chd/2017 .

29 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

In view of the same our decision rendered therein at para

15 will apply to this ground with equal force. Following

the same this ground of appeal No.3 is dismissed

53, Ground No.4 raised by the assessee reads as under:

“4. On the facts and circumstances of the case, the learned ClT(Appeals) has erred in having confirmed disallowance of an amount of Rs. 9,25,537/- being the amount of expenditure incurred on foreign travel of the Directors by treating the same as non business expenditure.” 54. It is relevant to mention here that the above ground

raised by the assessee in this appeal, it was admitted by

both the parties, was identical to ground No.5 raised in

assesses appeal in ITA No.1011/Chd/2017 dealt with us

above.

In view of the same our decision rendered therein at

para 37 will apply to this ground with equal force.

Following the same this ground of appeal No.4 is partly

allowed.

In effect the appeal of the assesses is partly allowed for

statistical purposes.

No.1010/Chd/2017, ITA No.1011/Chd/2017 & ITA

30 ITA Nos.1010 to 1013/Chd/2017 A.Ys.2010-11,2011-12 &2013-14

No.1013/Chd/2017 are partly allowed for statistical purposes.

Order pronounced in the Open Court.

Sd/- Sd/- �दवा �संह अ�नपूणा� गु�ता (DIVA SINGH ) (ANNAPURNA GUPTA) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member �दनांक /Dated: 23rd 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