MYNAH INDUSTRIES LTD.,HOSUR vs. ITO TDS WARD, SALME

All the appeals of the assessee are directed against the respective orders of the Commissioner of Income Tax (Appeals), Salem. Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing the same by this common order.

There was a delay of 117 days in filing these appeals by the assessee. The assessee has filed petitions for condonation of delay. We find that there was sufficient cause for not filing these appeals before the stipulated time. Therefore, we condone the delay and admit the appeals.

Since the assessee did not appear before this Tribunal even after taking note of the date of hearing by making endorsement in the appeal folder, we heard the Ld. Departmental Representative and proceeded to dispose of the appeals on merit. for non-deduction of tax. Shri V.M. Mahidar, the Ld. Departmental Representative, submitted that the assessee has not deducted tax as required under Section 194A and 194C, 194-I and 194J of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. D.R., the Assessing Officer levied interest under Section 201(1)/201(1A) of the Act. The non-deduction of tax makes the assessee to pay not only interest but also the tax due. Hence, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.

We heard the Ld. D.R. and also carefully gone through the grounds of appeal raised by the assessee before this Tribunal. The case of the assessee appears to be that the recipient of the amount paid tax. However, it is not clear whether the recipient has paid the taxes. If the assessee failed to deduct tax as required under the statutory provision, the assessee has to be treated as assessee in default and the assessee is liable to pay not only tax but also interest. But, the interest component shall be restricted to the date of payment tax either by the assessee or by the recipient. Since the assessee claims that the recipient has paid the taxes, and the date of actual payment is not clear from the material available on record, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the entire issue of levy of interest under Section 201(1)/201(1A) of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the issue and bring on record the actual date on which the recipient has paid the taxes and thereafter determine the interest payable by the assessee till the date of payment of taxes by the recipient to the Government.

With the above observation, orders of both the authorities below are set aside and the issue is remitted back to the file of the Assessing Officer.

Now coming to assessment year 2014-15 in . The first issue arises for consideration is addition made under Section 56(2)(viib) of the Act towards share premium.

Shri V.M. Mahidar, the Ld. D.R., submitted that the assessee has received large amount of share premium to the extent of ₹45,61,32,384/-. The Assessing Officer found that the assessee has received share premium in excess of fair market value. Therefore, according to the Ld. D.R., the excess amount has to be taxed under the head “other sources”. On a query from the Bench how the shares were valued by the assessee and the Assessing Officer? The Ld. D.R. pointed out that the assessee itself worked out the fair market value of the shares at ₹32.34 per share. The face value is ₹10/- per share. However, the assessee allotted the share at a premium of ₹48.63 per share which is more than the fair market value of the shares as estimated by the assessee itself. Therefore, the Assessing Officer adopted the fair market value at ₹32.34 per share instead of ₹48.63 per share. Since the fair market value is adopted as per the working of the assessee at ₹32.34 per share, according to the Ld. D.R., no interference is called for.

We have carefully gone through the orders of both the authorities below in the light of the submission made by the Ld. D.R. As rightly submitted by the Ld. D.R., the assessee received ₹48.63 per share. The assessee appears to have submitted its own working of the fair market value at ₹32.34 per share in the course of assessment proceeding. Admittedly, the face value is ₹10/-. Since the Assessing Officer adopted the working submitted by the assessee during the course of assessment proceeding, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

The next issue arises for consideration is setting off brought forward losses.

We heard the Ld. D.R. and perused the relevant material available on record. From the material available on record, it appears that for the assessment year 2014-15, the assessee declared “nil” income after setting off the so called brought forward losses of ₹19,39,66,527/-. For the assessment year 2012-13, the assessee declared the taxable income of ₹1,11,55,850/- and also paid tax of ₹40,39,976/- which included the self assessment tax of ₹24,33,090/-. Therefore, it is obvious that the assessee has not declared any loss from business for the assessment year 2012-13. Even for earlier years, no losses were declared. Therefore, there is no question of any set off of losses as claimed by the assessee. For the purpose of claiming loss, the assessee has to necessarily file the return of income before the due date prescribed under Section 139(1) of the Act. For the assessment year 2013-14, the Assessing Officer appears to have disallowed the so called brought forward losses as well as the losses pertaining to the assessment year 2013-14. The assessee has not filed any appeal and that attained finality. In those factual situation, this Tribunal is of the considered opinion that the assessee is not eligible for set off of so called brought forward losses of the earlier year. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

Now coming to the debit note raised by M/s Sri Vasavi Industries Ltd., to the extent of ₹21,81,26,981/-. The Assessing Officer found that it is only an afterthought. This claim of debit note said to be received from M/s Sri Vasavi Industries Ltd. was raised before the Assessing Officer and the Assessing Officer found that the brought forward losses cannot be allowed. Therefore, this claim of debit note was raised as alternative plea to set off the so called brought forward losses. Therefore, this Tribunal is of the considered opinion that as rightly found by the lower authorities, the claim of debit note from M/s Sri Vasavi Industries Ltd. is only an afterthought. Therefore, it cannot be allowed.

Thus the assessee’s appeal for assessment year 2014-15 stands dismissed.

Now coming to assessment year 2012-13 in I.T.A. No.2436/Chny/2018.

The first issue arises for consideration is disallowance of expenditure to the extent of ₹7,13,773/- towards excise duty on closing stock.

We heard the Ld. D.R. and perused the relevant material available on record. From the orders of the lower authorities it appears that the assessee debited to Profit & Loss account an amount of ₹7,13,773/- towards excise duty on closing stock. The Assessing Officer found that Section 145A of the Act requires to include the value of excise duty paid on raw materials used for production while valuing the closing stock. Therefore, debiting the excise duty payable on the closing stock is against the provision of law. We have carefully gone through the provisions of Section 145A of the Act which reads as follows:-

Section 145A(a)(ii) clearly says that the valuation of purchase and sale of goods and inventory shall be estimated including duty, cess or fee paid or incurred by the assessee. In view of the above, the same cannot be reduced from the closing stock. Therefore, the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.

The next issue arises for consideration is disallowance of ₹11,03,000/- pertaining to professional fees.

The assessee claimed before the Assessing Officer that a sum of ₹11,03,000/- was paid to Techno Park for conducting feasibility study in the assessment year 2010-11 and it was written off as the project proposal has not taken off. The Assessing Officer disallowed the claim of the assessee on the ground that the so called expenditure of feasibility study does not relate to assessment year under consideration, therefore, it cannot be allowed during the year under consideration. Admittedly, the assessee is following the mercantile system of accounting, therefore, the assessee has to claim expenditure in the year in which it was incurred or paid. Admittedly, the so called fee for study the technical feasibility was paid during the assessment year 2010-

Now coming to assessment year 2011-12 in I.T.A. No.2437/Chny/2018.

After hearing the Ld. D.R., this Tribunal finds that the assessee invested a sum of ₹25 Crores in foreign country, namely, Singapore. The assessee claimed before the Assessing Officer that the share application money was used for investment in Singapore. The assessee claimed before the Assessing Officer that a sum of ₹25 Crores was received from one Shri Prashant Boogru towards share application money. However, the cheque was returned with an endorsement “insufficient funds” on presentation. Therefore, the assessee had no funds for making investment. The assessee has no other explanation to substantiate the source for making investment in M/s Atlanta Natural Resources Pvt. Ltd., Singapore. The CIT(Appeals) confirmed the addition. Since admittedly the cheque issued by Shri Prashant Boogru was returned for insufficient funds, the assessee could not explain any other source for making investment to the extent of ₹25 Crores in Singapore. This Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. Hence, there is no reason to interfere with the orders of the authorities below. Accordingly, the same is confirmed.

The next issue arises for consideration is investment to the extent of ₹17,89,02,182/-.

We heard the Ld. D.R. and perused the relevant material available on record. This investment of ₹17,89,02,182/- forms part of investment to the extent of ₹25 Crores. From the assessment order it appears that the assessee explained before the Assessing Officer that initially an amount of ₹17,89,02,182/- was invested in M/s Atlanta Natural Resources Pvt. Ltd., Singapore during the year 2011-12 through purchase of shares. In the balance sheet of the assessee-company, there was increase in the share application money to the extent of ₹25 Crores. The assessee also claimed that the cheque received from Shri Prashant Boogru was returned. Having considered the facts of the case, the Assessing Officer made addition of ₹25 Crores which included the addition of ₹17,89,02,182/-. No separate addition was made. Therefore, this ground raised by the assessee is part of addition made to the extent of ₹25 Crores, which was adjudicated in the earlier part of this order. In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

In the result, the assessee’s appeals in & 2434/Chny/2018 are allowed for statistical purposes and I.T.A. Nos.2435, 2436 & 2437/Chny/2018 are dismissed. Order pronounced in the court on 3rd September, 2019 at Chennai. sd/- sd/- (इंटूर� रामा राव) (एन.आर.एस. गणेशन) (Inturi Rama Rao) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member चे�नई/Chennai, �दनांक/Dated, the 3rd September, 2019.