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Income Tax Appellate Tribunal, ‘ D’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
Appeal and cross objection filed by the assessee for assessment year 2008-09 are taken up first for disposal.
Appeal filed by the Department is delayed by ten days. 2.
Condonation petition has been filed. Reason shown for the delay seems to be justified. Ld. Authorised Representative did not raise any serious objection. Delay is condoned. Appeal is admitted
Department has taken altogether seven grounds of which grounds 1 & 7 are general in nature needing no specific adjudication.
Vide ground No.2, grievance raised by the Revenue is on 4. the deletion of an addition of �63,97,650/- made for closing stock of stores in the cement division.
Facts apropos are that assessee engaged in the business of 5. manufacturing and selling of cement, steel ingots and rods had filed return of income for the impugned assessment year disclosing income of �38,65,700/-. Its turnover for the relevant previous year came to �59.15 Crores with a gross profit of �9.59 Crores and net profit of , 1352 & 1851/Mds/14 :- 3 -: C.O. No. 54/14 & 01/Mds/15 �1.44 Crores. It had two divisions namely cement division and steel division. Cement division had turnover of �23.41 Cores, net profit of 0.90 Crores and steel division had turnover of 35.74 Crores with net profit of 0.54 Crores. In percentage terms gross profit came to 16.22% of the turnover and net profit came to 2.43% of the turnover.
Its steel division had started functioning from previous year relevant to assessment year 2007-2008 only. Comparative working results of the assessee for the impugned assessment year and the preceding two assessment years were as under:-
(Rupees in lakhs)
CEMENT STEEL
A.Y.06-07 A.Y.07-08 A.Y.08-09 A.Y. 07-08 A.Y. 08-09 Total Sales 1058 1873 2341 2625 3574 Net profit 67.44 341.68 90.03 (-) 228.64 53.72 Percentage 6.37% 18.24% 3.84% (-) 8.71% 1.5%
The reason for fall in the profits of cement division was questioned by the ld. Assessing Officer. Reply of the assessee was that cost of imported items as other material cost had gone up. Ld. Assessing Officer made an analysis of the claim of consumption of stores worth �1,27,95,299/- by the assessee. Assessee had shown whole of the purchases of stores as consumed. Ld. Assessing Officer , 1352 & 1851/Mds/14 :- 4 -: C.O. No. 54/14 & 01/Mds/15 was of the opinion that entire store purchases could not have been consumed during the year itself. Though the purchases were supported by proper bills, it seems consumption record for the stores items were not maintained by the assessee. Apart from items brought as stores, assessee had purchased raw materials worth of �6.95 crores on which a closing stock worth �4.71 crores was shown. The percentage came to 67.77%. As per ld. Assessing Officer assessee had failed to show the closing stock of stores. He considered 50% of the value of the stores purchased during the relevant previous years as closing stock and an addition of �63,97,650/- was made.
Aggrieved, assessee moved in appeal before the ld. 7.
Commissioner of Income Tax (Appeals). The ld. Commissioner of Income Tax (Appeals) deleted the addition noting that types of items which were falling under the stores were innumerable and not of a homogeneous in nature. As per ld. Commissioner of Income Tax (Appeals), raw material to product ratio of the assessee increased by 20%. Further, as per ld. CIT(A) average consumption of the assessee matched with the industrial average of 16%. Ld. Commissioner of Income Tax (Appeals) was of the opinion that presumption taken by the Assessing Officer that 50% of the stores items would have been there in stock was a mere surmise. He deleted the addition. , 1352 & 1851/Mds/14 :- 5 -: C.O. No. 54/14 & 01/Mds/15
Now before us, ld. Departmental Representative strongly 8. assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that when other raw materials were in stock, it was unbelievable that all stores items were consumed.
Per Contra, the ld. Authorised Representative strongly supported the order of the ld. Commissioner of Income Tax (Appeals).
We have considered the rival contentions and perused the 10. orders of the authorities below. Claim of the assessee is that purchase of stores comprised of items which were consumed and therefore its cost was charged to the accounts then and there. Revenue has not doubted the claim of the assessee that the stores items which were considered by the assessee as consumed were small value items which were not significant enough to be shown through a stock register or through a consumption record. Even if, we presume that there would have been some items left in consumables at the end of the relevant previous year, value thereof would have come as opening stock also and no significant effect whatsoever would be there on the revenue of the assessee when considered so. Normal accounting methods do not spurn a write-off of store items in the year of purchase itself when such items are of small value. In our opinion, ld. Commissioner of Income Tax (Appeals) was justified in taking a , 1352 & 1851/Mds/14 :- 6 -: C.O. No. 54/14 & 01/Mds/15 view which any businessman would have taken in respect of such items. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Ground No.2 of the Revenue stands dismissed.
Vide its ground No.3, Revenue is aggrieved on deletion of an addition of �8,30,285/- for difference in stock of coal fines.
Facts apropos are that the ld. Assessing Officer from the 12. quantity of coal fines purchased and quantity of coal fines consumed arrived at theoretical year end quantity of 156.83 MT. Assessee had admitted only 44.335 MT on coal fines as closing stock. Difference was worked out by ld. Assessing Officer as under:-
Opening Stock Nil Purchases (as per purchase 1710.185 MT ledger a/c filed) Consumption during the year 1509.020 MT Closing stock 201.165 MT Less: Closing stock admitted 44.335 MT
Difference 156.83 MT The value for difference was arrived by the Assessing Officer applying the FIFO method and an addition of ��8,30,285/- was made. , 1352 & 1851/Mds/14 :- 7 -: C.O. No. 54/14 & 01/Mds/15
Aggrieved, assessee moved in appeal before the ld. 13.
Commissioner of Income Tax (Appeals). Argument of the assessee was that actual quantity of coal fines purchased by it was 1553.335 MT and not 1710.185 MT. Contention of the assessee was that latter figure was wrongly mentioned in the ledger. In support, assessee produced purchase bills. Ld. Commissioner of Income Tax (Appeals) was of the opinion that excess stock worked out by the ld.AO was based on a wrong entry in the ledger. According to him, actual quantity of coal fines purchase were 1553.355 MT only and thus there was no question of any addition in closing stock. He deleted the addition.
Now before us, ld. Departmental Representative strongly assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that co-relation of purchase bills and purchase quantities was never attempted by the assessee before ld. Assessing Officer.
According to him, ld. Assessing Officer was not given a proper opportunity, before relief was granted to the assessee by the ld. Commissioner of Income Tax (Appeals).
Per Contra, the ld. Authorised Representative strongly 15.
supported the order of the ld. Commissioner of Income Tax (Appeals). , 1352 & 1851/Mds/14 :- 8 -: C.O. No. 54/14 & 01/Mds/15
We have considered the rival contentions and perused the 16. orders of the authorities below. Assessee had produced books of accounts before the Assessing Officer and these were test checked. It is also mentioned by the Assessing Officer that various details called for were filed by the assessee. This being the case, we cannot accept the contention of the ld. Departmental Representative that purchase bills for coal fines were not produced by the assessee. The ld. Commissioner of Income Tax (Appeals) had only aggregated the purchase bills and reached a conclusion that total purchases were only 1553.355 MT and what was shown by the assessee in its ledger was an error. What we find is that no new evidence has been produced by the assessee before the ld. Commissioner of Income Tax (Appeals).
The ld. Commissioner of Income Tax (Appeals) computed the actual purchase quantity and made a comparison. This cannot be considered as an additional evidence. Hence, the question of giving an opportunity to the ld. Assessing Officer as mandated u/s.46A of the Income Tax Rules does not arise. We are of the opinion that the ld. Commissioner of Income Tax (Appeals) was justified in deleting the addition. Ground No.3 of the Revenue stands dismissed.
Vide its ground No.4, grievance of the Revenue is that an 17. addition for pro-rata bank interest of �4,96,460/- was deleted by the , 1352 & 1851/Mds/14 :- 9 -: C.O. No. 54/14 & 01/Mds/15 ld. Commissioner of Income Tax (Appeals), relying on the judgment of Apex Court in the case of S.A. Builders Ltd vs. CIT (A) and Another (2007) 288 ITR 1(SC).
Assessee had during the relevant previous year paid interest 18. of �68,57,763/- on its over draft and cash credit account. Ld. Assessing Officer found that assessee had given interest free advances to its sister concerns, which were defunct or were not having any business. Ld. Assessing Officer was of the opinion that interest bearing borrowed funds were used for purposes other than assessee’s business. Pro-rata disallowance of �4,96,460/- was made.
In its appeal before ld. Commissioner of Income Tax (Appeals), argument of the assessee was that the loans given to sister concerns were covered by Reserves & Surplus �25,65,446/- and interest free loans of �49,36,117/- received from its Director. Further as per assessee total loans due from sister concerns came to �1,46,60,880/- and purpose of giving the loans was only to meet the business needs. Ld. Commissioner of Income Tax (Appeals) was appreciative of these contentions. Relying on the judgment of Apex Court in the case of S.A. Builders (supra), he deleted the addition. , 1352 & 1851/Mds/14 :- 10 -: C.O. No. 54/14 & 01/Mds/15
Now before us, ld. Departmental Representative strongly 20. assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that assessee could not show any commercial expediency for giving the loans and the loans were much more than interest free funds available with the assessee.
Per contra, the ld. Authorised Representative strongly supported the order of the ld. Commissioner of Income Tax (Appeals)
We have considered the rival contentions and perused the orders of the authorities below. The ld. Commissioner of Income Tax (Appeals) had accepted the contention of the assessee that loans were given to sister concern for commercial expediency. What we find that none of the lower authorities had verified the relationship between the assessee and the debtors. Assessee is a company and how it was related to the debtors require verification before, we can answer the question regarding commercial expediency of such loans. We are of the opinion that issue requires a fresh look by the ld. Assessing Officer.
We set aside the orders of the lower authorities and remit the issue regarding interest disallowance for interest free loans given by the assessee, back to the file of the ld. Assessing Officer for consideration a fresh in accordance with law. Ground No.4 is allowed for statistical purpose. , 1352 & 1851/Mds/14 :- 11 -: C.O. No. 54/14 & 01/Mds/15
Vide its ground No.5, grievance raised by the Revenue is 23. that an addition of �39,96,726/- made by the ld. Assessing Officer considering purchase of part of the stores and building material as capital in nature was deleted by the ld. Commissioner of Income Tax (Appeals).
During the course of assessment proceedings, it was noted by the ld. Assessing Officer that out of total stores of value on �1,01,47,637/- purchased, a sum of �39,96,726/- was represented purchase of steel rods, M S angles from one M/s. Bawa Steel Corporation. Ld. Assessing Officer was of the opinion that these materials resulted in acquisition of capital asset and could not considered as consumable stores. He made a disallowance of �39,96,726/-.
In its appeal before the ld. Commissioner of Income Tax 25.
(Appeals), argument of the assessee was that steel rods and M S angles were used for poking purpose in the manufacturing process. As
per assessee such steel rods and M S angles melted in the process and formed part of the finished goods. As per assessee, for this reason, the value of such steel rods and M S angles were shown as , 1352 & 1851/Mds/14 :- 12 -: C.O. No. 54/14 & 01/Mds/15 additives. Ld. Commissioner of Income Tax (Appeals) was appreciative of these contentions. He deleted the addition made by the ld. Assessing Officer.
Now before us, ld. Departmental Representative strongly 26. assailing the orders of the lower authorities submitted that prime facie the materials purchased were capital in nature.
Per contra, the ld. Authorised Representative strongly 27.
supported the order of the ld. Commissioner of Income Tax (Appeals).
We have considered the rival contentions and perused the orders of the authorities below. What we find is that assessee had not done any construction work during the relevant previous year. This has been specifically pointed out by the ld. Commissioner of Income Tax (Appeals) in his order and stands unrebutted by the Revenue. Ld. Commissioner of Income Tax (Appeals) had examined process of manufacture and found that steel rod and M S angles used for poking, ultimately melted, and went into the finished product. In the circumstances of the case, we are of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in treating the expenditure incurred for such steel rods and M S angles as revenue outgo. We find no reason to interfere with the order of the ld. , 1352 & 1851/Mds/14 :- 13 -: C.O. No. 54/14 & 01/Mds/15 Commissioner of Income Tax (Appeals). Ground No.5 of the Revenue stands dismissed.
Vide its ground No.6, grievance raised by the Revenue is on the deletion of an addition for closing stock of stores �4,52,667/- in the steel division.
Facts apropos are that similar to the purchase of store items in cement division, there were purchases in the steel division also.
Total purchase in steel division came to �1,63,58,596/-. Out of this ld. Assessing Officer had treated �50,41,917/- as capital outgo and the balance came to �1,13,16,679/-. Ld. Assessing Officer was of the opinion that assessee would have had a closing stock of 4% of this.
The ratio was arrived in the basis of stock of other raw material to total purchase. An addition of �4,52,667/- was made.
On assessee’s appeal, ld. Commissioner of Income Tax 31.
(Appeals) deleted the above addition giving the same reasons which were given by him for deleting similar addition made for the cement division. , 1352 & 1851/Mds/14 :- 14 -: C.O. No. 54/14 & 01/Mds/15
For the same reasons what we have mentioned at above 32. para 10 above, we are of the opinion that the addition was rightly deleted by the ld. Commissioner of Income Tax (Appeals). We find no reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Ground No.6 of the Revenue stands dismissed.
When Cross appeal of the assessee was taken up, the ld. 33.
Authorised Representative that the only ground he was pressing was the one which sought carry forward of closing stock to the extent additions made in the closing stock of stores are sustained.
We have already upheld the order of the ld. Commissioner of Income Tax (Appeals) deleting such additions in closing stock of stores. Other grounds in the cross objection support the order of the ld. Commissioner of Income Tax (Appeals) in so far as it went in favour of the assessee. Hence, Cross objection filed by the assessee is dismissed as infructuous.
Now, we take Cross Appeal of the Revenue and assessee for 35. the assessment year 2009-2010 alongwith assessee ‘s cross objection.
Appeal of the Revenue is first taken up for disposal.
Revenue has raised three grievances in-toto. , 1352 & 1851/Mds/14 :- 15 -: C.O. No. 54/14 & 01/Mds/15
First grievance raised by the Revenue is that ld. 37.
Commissioner of Income Tax (Appeals) relied on a judgment of Hon’ble Apex Court in the case of DCIT vs. Core Healthcare Ltd (2008)
298 ITR 194 without considering the proviso which was added to Section 36(1)(iii) of the Act by Finance Act, 2003, while deleting an interest disallowance of �16,90,705/-
Facts apropos are that assessee had acquired machinery 38. during the relevant previous year which as per ld. Assessing Officer were under erection at the close of the year. Ld. Assessing Officer was of the opinion that interest payments on loans raised for acquiring such machinery, which was under erection had to be disallowed. As
per ld. Assessing Officer these were pre-operative expenditure. An interest disallowance of � 16,90,705/- was made.
In its appeal before the ld. Commissioner of Income Tax (Appeals) argument of the assessee was that the outgo was revenue in nature and was admissible u/s.36(1)(iii) of the Act. As per the assessee it was an existing manufacturing concern and the machinery under erection was not for any expansion. Reliance was placed on the judgment of Apex Court in the case of Core Health Care Ltd (supra).
Ld. Commissioner of Income Tax (Appeals) was appreciative of this , 1352 & 1851/Mds/14 :- 16 -: C.O. No. 54/14 & 01/Mds/15 contention. As per ld. Commissioner of Income Tax (Appeals) Sec.
36(1)(iii) of the Act required use of capital and not use of asset. As
per ld. Commissioner of Income Tax (Appeals) there was no distinction between capital borrowed for revenue purpose and capital borrowed for capital purpose. He deleted the disallowance made by the ld. Assessing Officer.
Now before us, ld. Departmental Representative strongly 40. assailing the order of the ld.CIT(A) submitted that proviso to Sec.
36(1)(iii) of the Act introduced by the Finance Act, 2003 w.e.f.
1.04.2004, obliterated the effect of judgment of Apex Court in the case of Core Health Care Ltd (supra). As per ld. Departmental Representative interest expenditure on capital borrowed for acquisition of an asset till the day on which it was first put to use could not be allowed as a deduction. According to him erection of the machinery had not been completed during the relevant previous year.
As per ld. Departmental Representative , Ld. Assessing Officer was justified in making pro-rata disallowance of interest on loans raised for acquiring such plant and machinery. , 1352 & 1851/Mds/14 :- 17 -: C.O. No. 54/14 & 01/Mds/15
Per contra, the ld. Authorised Representative submitted that 41.
proviso would apply only where there was expansion of an existing business and not for all acquisitions of machinery.
We have considered the rival contentions and perused the 42. orders of the authorities below. Sec. 36(1)(iii) and its proviso are reproduced hereunder:-
‘’(iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession : Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not) ; for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction :
If we apply the judgment of Hon’ble Apex Court in the case of Core Health Care Ltd (supra) there can be no distinction made on borrowings by an existing business, whether it was for acquiring a capital asset or it was for meeting expenditure which was non-capital in nature. However, by virtue of proviso to section 36(1)(iii) interest on loans where assets acquired using such loans were still to be put to use cannot be allowed as a deduction. Nevertheless, as mentioned by the ld. Authorised Representative this proviso would apply only if there , 1352 & 1851/Mds/14 :- 18 -: C.O. No. 54/14 & 01/Mds/15 was an extension of existing business. Ld. Assessing Officer has not verified whether assessee had done any expansion of its existing business. Considering the facts and circumstances of the case, we are of the opinion that issue whether the machinery acquired was for expansion of any existing business, and whether proviso 36(1)(iii) of the Act applied requires a fresh look by the ld. Assessing Officer. We therefore set aside the orders of the lower authorities and remit the issue back to the file of the Assessing Officer for consideration afresh in accordance with law. Related ground of the Revenue is allowed for statistical purpose.
Next grievance raised by the Revenue is on the direction of the ld. Commissioner of Income Tax (Appeals) to allow depreciation on items valued �51,71,191/-.
Facts apropos are that assessee had charged in its profit and loss account purchases of capital items aggregating to �1,19,50,399/- as a revenue outgo. During the course of assessment proceedings, assessee admitted that the acquisition were of capital asset but wrongly charged to the purchase account. Ld. Assessing Officer disallowed claim. However, depreciation was allowed by the ld. Assessing Officer only on �67,79,208/-, out of the total disallowance , 1352 & 1851/Mds/14 :- 19 -: C.O. No. 54/14 & 01/Mds/15 of �1,19,50,399/-. In other words, depreciation was denied by the ld. Assessing Officer on the capital outgo of �51,71,191/-.
Aggrieved, assessee moved in appeal before the ld. Commissioner of Income Tax (Appeals). Argument of the assessee was that depreciation was unfairly restricted, without any reason. As per the assessee, Assessing Officer, without specifying any reason made a differential treatment between various items comprised in the sum of �1,19,50,399/-. Ld. Commissioner of Income Tax (Appeals) was appreciative of this contention. According to him, acquisitions were of business assets and even if it was not used for manufacturing purpose, depreciation was admissible. He directed the ld. Assessing Officer to allow depreciation on balance amount of �51,71,191/- also.
Now before us, ld. Departmental Representative strongly 46. assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that capital goods worth �51,71,191/- represented machinery under erection. As per ld. Departmental Representative it was for this reason that the ld. Assessing Officer had disallowed depreciation on such amount. Submission of the ld. Departmental Representative was that ld. Commissioner of Income Tax (Appeals) admitted the claim without verifying the facts. , 1352 & 1851/Mds/14 :- 20 -: C.O. No. 54/14 & 01/Mds/15
Per contra, the ld. Authorised Representative strongly 47.
supported the order of the ld. Commissioner of Income Tax (Appeals).
We have considered the rival contentions and perused the orders of the authorities below. Though the ld. Assessing Officer has given the details of the expenditure of �1,19,50,399/- treated by him as capital outgo, at pages 6 & 7 of assessment order, the nature of these items were not mentioned. However, depreciation was allowed by him only on a sum of �67,79,208/- out of the total �1,19,50,399/-.
Ld. Commissioner of Income Tax (Appeals) on the other hand held that assessee was eligible for depreciation on the whole of the amount. Nature of the assets which were acquired by the assessee and the rates of depreciation that were to be applied on it, if it all these were eligible for depreciation, is not coming out of order of the ld. Assessing Officer or ld. Commissioner of Income Tax (Appeals). We are therefore of the opinion that issue requires a fresh look by the ld. Assessing Officer. We set aside the orders of the lower authorities and remit the issue back to the file of the Assessing Officer for consideration afresh in accordance with law. Related ground raised by the Revenue is allowed for statistical purpose. , 1352 & 1851/Mds/14 :- 21 -: C.O. No. 54/14 & 01/Mds/15
Last grievance raised by the Revenue is on a deletion of 49. disallowance of � 17,56,127/- made u/s.40A(3) of the Act.
Facts apropos are that ld. Assessing Officer on verifying the books of the assessee found the following cash expenditure under the head ‘’freight, repairs and maintenance’’ and ‘’Administrative Expenditure’’ beyond the limit specified u/s.40A(3) of the Act as under:-
Freight Charges, Repairs & Maintenance :-
Sl.No Date of payment Amount � 1 31.08.2008 23000 2 20.11.2008 25020 3 31.01.2009 34600 4 27.06.2008 32000 Total 1,14,620
Repairs and Maintenance :-
Sl.No Date of payment Amount
1 02.04.2008 25155 2 05.04.2008 45794 3 06.04.2008 44200 4 06.04.2008 45510 5 08.04.2008 43659 6 17.04.2008 44605 7 18.04.2008 44550 8 18.04.2008 24148 9 09.05.2008 39200 10 28.05.2008 41630 11 05.06.2008 39575 12 06.06.2008 40370 , 1352 & 1851/Mds/14 :- 22 -: C.O. No. 54/14 & 01/Mds/15
13 13.06.2008 42000 14 23.06.2008 41923 15 27.06.2008 40000 16 30.06.2008 31834 17 11.07.2008 20734 18 24.07.2008 44000 19 25.08.2008 38100 20 16.09.2008 31900 21 16.09.2008 31900 22 18.09.2008 25162 23 18.09.2008 54400 24 18.09.2008 39700 25 19.09.2008 39700 26 02.10.2008 36550 27 03.10.2008 36550 28 07.10.2008 33120 29 11.10.2008 39075 30 30.11.2008 48924 31 08.12.2008 40000 32 08.12.2008 50000 33 09.12.2008 44400 34 22.01.2009 24380 35 31.01.2009 45600 36 01.02.2009 46040 37 01.02.2009 45685 38 01.02.2009 45885 39 28.02.2009 29324 40 09.03.2009 36225 41 15.03.2009 40000 42 17.03.2009 40000
Total 1641507 Aggregate of these sums coming to �17,56,127/- was disallowed u/s.40A(3) of the Act. , 1352 & 1851/Mds/14 :- 23 -: C.O. No. 54/14 & 01/Mds/15
Ld. Commissioner of Income Tax (Appeals) on the appeal of 51. the assessee deleted the disallowance noting that each of the amount included in the table mentioned at para 50 above covered more than one bill and more than one person. As per ld. Commissioner of Income Tax (Appeals) entries in the books of accounts represented composite amounts comprising of more than one bill and if independently seen the payments were below the limit prescribed u/s. 40A(3) of the Act.
Now before us, ld. Departmental Representative strongly 52. assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that the ld. Commissioner of Income Tax (Appeals) without giving an opportunity to the Assessing Officer had accepted the submission of the assessee that each of the entry represented more than one transactions.
Per contra, the ld. Authorised Representative strongly 53.
supported the order of the ld. Commissioner of Income Tax (Appeals).
We have considered the rival contentions and perused the 54. orders of the authorities below. Contention of the assessee is that each of the entry in table mentioned para 50 above represented multiple bills for different parties each of which was less than �20,000/-. In other words as per assessee each payment being less than �20,000/- Sec. 40A(3)of the Act could not be applied. We are of , 1352 & 1851/Mds/14 :- 24 -: C.O. No. 54/14 & 01/Mds/15 the opinion that factual aspects are not clearly coming out from the orders of the authorities below. In our opinion the issue requires a fresh look by the ld. Assessing Officer. Ld. Assessing Officer has to verify whether the claim of the assessee that each of the entry represented payments to multiple parties, and each payment was less than the limit under Section 40A(3) of the Act is correct or not. We set aside the orders of the lower authorities and remit the issue back to the file of the Assessing Officer for consideration afresh in accordance with law. Related ground of the Revenue is treated as allowed for statistical purposes.
Now, we take up the cross appeal filed by the assessee. 55.
Assessee has filed this appeal with a delay of eighty two days. Condonation petition has been filed. Reasons shown for the delay seems to be justified. Ld. Departmental Representative did not raise any serious objection. Delay is condoned. Appeal is admitted.
The sole grievance raised by the assessee is on a 57. disallowance of �11,22,550/- paid to one M/s. Siva Earth Movers.
Facts apropos are that assessee has claimed an expenditure of �11,22,550/- as paid to M/s. Siva Earth Movers. It seems assessee could not produce any evidence for such claim before ld. Assessing , 1352 & 1851/Mds/14 :- 25 -: C.O. No. 54/14 & 01/Mds/15 Officer. Ld. Assessing Officer was of the opinion that the expenditure was actually incurred during the financial year 2003-04. He disallowed the claim.
Assessee’s appeal before ld. Commissioner of Income Tax 59.
(Appeals) did not meet with any success. Though the assessee stated that it was having bill dated 28.04.2008 raised by the above party as charges for mines development, mining and loading of limestone at Vayalapadi and Venkaachalapuram, the ld. Commissioner of Income Tax (Appeals) was not impressed. According to him, the payment of �11,22,550/- was effected on 31.03.2004 and the bill brought in as evidence was raised on 28.04.2008. The ld. Commissioner of Income Tax (Appeals) also noted that bill produced did not have a number.
According to him, the claim of the assessee if at all could be considered was only relevant for the previous year ending 31.03.2005.
As per the ld.CIT(A) the payments were for work done for financial year 2003-2004.
Now before us, ld. Authorised Representative strongly 60. assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that M/s. Siva Earth Movers had confirmed raising the bill vide their letter dated 25.01.2012. According to him, even tax was , 1352 & 1851/Mds/14 :- 26 -: C.O. No. 54/14 & 01/Mds/15 deducted at source on the payment and therefore disallowance was not warranted.
Per contra, the ld. Departmental Representative strongly 61.
supported the orders of the authorities below.
We have considered the rival contentions and perused the orders of the authorities below. No doubt it may be true that assessee had effected an payment of �11,22,550/- to M/s. Siva Earth Movers on 31.03.2004, tax was deducted at source thereon and remitted to Government. Form 16A dated 29.05.2004 is available on record.
However, bill raised by M/s. Siva Earth Movers is dated 28.04.2008. Essential particulars in the bill is reproduced hereunder:- Bill No.
To Dhandapani Cements Private Ltd, 69, Ganapathy Nagar, Thiruvani Koil, Trichy 620 005.
Sl.No Particular Quantity Rate Amount 1 Towards Mines Development, mining and loading of 11,22,550/- limestone carried out during Sept 2003 to Marc 2004 at Vayalapadi & Venkatachpuram
11,22,550/- , 1352 & 1851/Mds/14 :- 27 -: C.O. No. 54/14 & 01/Mds/15
(Rupees Eleven Lakhs Twenty Two Thousand Five Hundred and Fifty Only)
Bill clearly show that it has been raised for work done during the period September, 2003 to March, 2004. In the first place, work was done long back much before the relevant previous year and the liability if any was of an earlier year and not of the relevant previous year. Assessee being a company, it could not have postponed the charge of the expenditure to a subsequent year. It is also beyond comprehension as to why M/s. Siva Earth Movers, choose to raise a bill as late as April, 2008 for work done almost four years back. In the circumstances, we are of the opinion that the disallowance was rightly made by the ld. Assessing Officer and confirmed by the ld. Commissioner of Income Tax (Appeals). We do not find any reason to interfere with the orders of the lower authorities. Cross appeal filed by the assessee is dismissed.
When the Cross objection of the assessee was taken, ld. Counsel of the assessee submitted that it supported the order of the ld. Commissioner of Income Tax (Appeals) in so far as it went in favour of the assessee.
The Cross objection filed by the assessee is dismissed as 64. infructuous. , 1352 & 1851/Mds/14 :- 28 -: C.O. No. 54/14 & 01/Mds/15
In the result, appeal of the Revenue in is 65. partly allowed for statistical purpose and C.O of the assessee 01/2015 is dismissed, the appeal of the Revenue in is partly allowed for statistical purposes and Cross appeal of the assessee in ITA No.1851/2014 is dismissed. C.O.No.54/2014 of the assessee also stand dismissed.
Order pronounced on Wednesday, the 14th day of December, 2016, at Chennai.