P. SURENDRAN,TRIVANDRUM vs. ACIT CIRCLE 1(2), TRIVANDRUM

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN

BEFORE SHRI SANJAY ARORA, AM AND MS. KAVITHA RAJAGOPAL, JM

ITA No. 978/Coch/2022 (Assessment Year: 2014-15) P. Surendran Sukanya Bhavan Asst. CIT-1(2) Vadayakkadu, Kunnukuzhy, P.O., Thiruvananthapuram Vs. Thiruvananthapuram-695 035

PAN/GIR No. AEMPP 6893 A (Assessee) (Respondent) :

: Shri N. S. Rajagopal Assessee by Respondent by : Smt. J M Jamuna Devi

Date of Hearing : 14.02.2024 Date of Pronouncement : 14.05.2024

O R D E R Per Kavitha Rajagopal, J M:

This appeal has been filed by the assessee, challenging the order of the learned

Commissioner of Income Tax (Appeals) passed u/s.250 of the Income Tax Act, 1961

(‘the Act') relevant to the Assessment Year (‘A.Y.’ for short) 2014-15.

2 ITA No. 978/Coch/2022 (A.Y. 2014-15) P. Surendran Sukanya Bhavan vs. Asst. CIT 5. The Commissioner of Income Tax (Appeals)ought to have found that the interest paid on account of delayed payment of VAT and TOT is an allowable expenditure. 6. The Commissioner of Income Tax (Appeals) has erred in upholding the addition of Rs.156660/- made by the Assessing Officer u/s.36(1)(va) of the Income Tax Act in the facts and circumstances of the case. 7. The Commissioner of Income Tax (Appeals) ought to have found that the expenditure of Rs.100000/- was disallowed by the appellant himself and added back to the income in the Income Tax Return filed for the assessment year 2014-15. Such being the case, the further disallowance of Rs.100000/- made by the Assessing Officer u/s. 40a(ia) of the Income Tax Act amounts to duplication of the addition and hence the same is absolutely unjustified and unwarranted. 3. This appeal has been filed with a delay of one day, for which the assessee

attributes to the postal delay. On perusal of the assessee’s petition for condonation of the

delay, we deem it fit to condone the delay of one day, as being due to sufficient cause.

Delay condoned.

income on 30.11.2014, declaring total income at Rs.1,75,34,220/-. The assessee’s case

was selected for scrutiny and notice u/s. 143(2) and 142(1) of the Act were duly issued

and served upon by the assessee. It is observed that a survey action u/s. 133A of the Act

was carried out in the assessee’s business premises on 08.10.2013 during which

discrepancies were noticed in the books of accounts of the assessee for which the

assessee had offered additional income of Rs.1 crore in addition to the regular return

income of Rs.1,11,620/- but had subsequently filed its revised return of income, declaring

only Rs.1,75,34,220/- instead of Rs.2,11,06,320/-. The assessee’s case was then selected

for scrutiny and the ld. A.O. passed the assessment order u/s. 143(3) of the Act,

determining the total income at Rs.2,25,54,266/-.

order dated 30.09.2022 had partly allowed the appeal filed by the assessee, thereby

confirming the most of the additions made by the ld. Assessing Officer ('A.O.' for short).

3 ITA No. 978/Coch/2022 (A.Y. 2014-15) P. Surendran Sukanya Bhavan vs. Asst. CIT 6. Further aggrieved, the assessee is in appeal before us, challenging the order of the

ld. CIT(A).

adjudication.

by the assessee. During the assessment proceeding, the assessee was summoned to

produce the proof of payment of sales tax which aggregated a payment of sales tax

amounting to Rs.2,14,89,344/- which included Rs.10 lacs advance tax payment on sales

tax which was debited in the profit and loss account of the assessee. The ld. A.O. added

the difference amount of Rs.27,66,203/- along with the advance tax of Rs.10 lacs which

according to the ld. A.O. was not related to the sales pertaining to the year under

consideration and made an addition of Rs.37,66,203/-.

Rs.21,83,00,117/- out of Rs.27,65,203/- is found to be satisfactory and held Rs.5,82,816/-

to be not pertaining to the year under consideration. The ld. CIT(A) further held that the

payment of Rs.10 lacs towards advance tax was also not substantiated by the assessee

that the same related to the year under consideration, thereby restricting the addition to

Rs.15,82,816/- after giving relief of the balance amount.

assessee contended that the assessee had paid Rs.10 lacs as advance tax on 31.03.2014

for the sales tax which was due for March, 2014 and the balance Rs.5,82,816/- was

4 ITA No. 978/Coch/2022 (A.Y. 2014-15) P. Surendran Sukanya Bhavan vs. Asst. CIT alleged to have been paid on 30.04.2014 while filing the monthly sales tax return for

March 2014. The ld. AR further contended that the assessee had also furnished certificate

dated 12.10.2022 from Director of Sales Tax, Special Circle, Trivandrum undertaking

that the impugned amount pertain to A.Y. 2014-15 by way of additional evidence and

prayed that the same may be admitted.

controverted the said fact and stated that the said amount was disallowed for the reason

that it was paid in the month of April which according to the provisions mandate that

should be allowed in the year in which the payment was actually made. The ld. DR relied

on the order of the lower authorities.

record. The only issue that has to be adjudicated in this ground is whether the impugned

payment made by the assessee related to the year under consideration, i.e., A.Y. 2014-15

or the subsequent year. As the assessee has filed additional evidence to substantiate his

claim, in the interest of justice, we admit the same. It is pertinent to point out that the

assessee’s claim of deduction relating to the payment of sales tax which is otherwise an

allowable deduction, shall be allowed if the same is paid by the assessee on or before the

due date for furnishing of the return of income u/s. 139(1) of the Act with regard to the

previous year in which the liability to pay the same has incurred, for which the assessee is

to furnish evidence of payment along with his return of income. This negates the lower

authority’s contention that the payment made on 30.04.2014 was not to be allowed during

the relevant year under consideration. It is observed that this issue requires factual

5 ITA No. 978/Coch/2022 (A.Y. 2014-15) P. Surendran Sukanya Bhavan vs. Asst. CIT verification, hence, we deem it fit to remand it back to the file of the ld. A.O. for

verifying the fact that the impugned payments relates to the year under consideration.

Therefore, ground no. 2 raised by the assessee is allowed for statistical purpose.

to Rs.6,58,585/- where the assessee is said to have incurred expenditure, the payment or

the aggregate of the payment made to a person in a day exceeds Rs.20,000/- where the

payment is made otherwise then by an account payee cheque. The entries for which the

said disallowance is made are tabulated hereunder:

Date of payment Particulars Amount - Television Set – Sabari Park 29370 - Furniture & Fittings Hotel Aslya 144165 Grande 19.06.2013 Sabari Park 23450 11.11.2013 Hotel Aslya 28400 - Thyssenkurup Elevators Hotel 433200 Aslya Grande Total 658585

assessee has contended that the impugned payments are merely capital receipts for which

the assessee has claimed no deduction in his profit and loss account, as the same pertains

to acquisition of capital assets.

CBDT Circular No. 34 (F.No. 13A/92/69-IT(A-II) dated 05.03.1970) which has made the

following clarification which is cited hereunder for ease of reference:

The provisions of section 40A(3) would apply in computing the income under the head “Profits and gains of business or profession” and “Income from other sources” as per section 58(2). All payments in excess of Rs.2,500 at one time whether for goods or services obtained for cash or

6 ITA No. 978/Coch/2022 (A.Y. 2014-15) P. Surendran Sukanya Bhavan vs. Asst. CIT credit, which are deductible in computing the income, have to be made by crossed cheque or bank draft. Thus, the price of goods purchased for resale or use in manufacturing process or payments for services will be covered by the provisions of section40A(3). However, the section will not apply to payment of loans or payment towards the purchase price of capital assets such as plant and machinery not for resale.

pertains to the purchase price of capital assets, such as plant and machineries which are

not used for resale but for the assessee’s own purpose, then, the same would be excluded

from the disallowance u/s.40A(3) of the Act. In the present case in hand, it is observed

that the assessee has incurred expenditure in cash in excess of Rs.20,000/- for various

items specified in the tabular column. It is pertinent to point out that neither the A.O. nor

the ld. CIT(A) has specified whether the said expenditure is capital or revenue in nature.

The assessee has also not elaborated as to the nature of the expenses incurred by the

assessee. Even otherwise, if the same has not been claimed in the P & L account by the

assessee then there arises no disallowance. We, therefore, remit this issue back to the file

of the ld. A.O. to verify whether the assessee has claimed the same in his profit and loss

account and if not claimed, then the disallowance ought not to be made and if the same

has been claimed in the P & L account, then the ld. A.O. is directed to verify whether the

same is for acquisition of capital assets or not. The ld. A.O. is directed to delete the

disallowance, if in case, the expenditure is of capital in nature in such case, where it has

been claimed by the assessee in his P & L account. Ground no. 3 is, therefore, allowed

for statistical purpose.

depreciation, aggregating to Rs.3,18,045/-. It is observed that the assessee has made a

disallowance of Rs.94,360/- which is 16.66% of interest on car loan for the personal use

7 ITA No. 978/Coch/2022 (A.Y. 2014-15) P. Surendran Sukanya Bhavan vs. Asst. CIT of the assessee. The assessee has made no disallowance towards deprecation and,

therefore, the ld. A.O. computed 25% of interest on car loan and 25% of the depreciation

claimed, being Rs.2,70,870/- and added the same to the total income of the assessee. The

first appellate authority upheld the addition made by the ld.AO on the ground that the

assessee has failed to furnish any documentary evidences in support of his claim on

interest on car loan and car depreciation.

It is observed that the assessee has made a disallowance of 16.66% of the interest on car

loan and the lower authorities have increased the said disallowance to 25% along with

25% of depreciation which was not made by the assessee. Neither the assessee nor the

Revenue has given a finding as to how they have arrived at the rate computed by them. In

the absence of any such calculation, we deem it fit to hold that 25% is a reasonable rate

of disallowance made by the lower authorities. As we do not find any infirmity in the

order of the ld. CIT(A), we hereby dismiss ground no. 4 raised by the assessee.

amounting to Rs.20,553/-. It is observed that the assessee has claimed the said amount as

deduction towards interest paid on VAT and TOT which the ld. AO has disallowed being

penal in nature and the ld. CIT(A) has upheld the addition made by the ld.AO.

record, it is observed that the assessee has claimed Rs.20,553/- as deduction towards

interest/penalty for late payment, which according to the Revenue is not an allowable

8 ITA No. 978/Coch/2022 (A.Y. 2014-15) P. Surendran Sukanya Bhavan vs. Asst. CIT deduction. The ld. AR on the other hand, placed reliance on the decision of the Hon'ble

Apex Court in the case of Lachmandas Mathuradas vs. CIT [2002] 254 ITR 799 (SC)

which has held that payment of interest towards sales tax is compensatory in nature and

not penal. As this issue has been dealt with by the higher forums, we deem it fit to hold

that the interest paid towards VAT/TOT is an allowable deduction as per the above said

decision and, therefore, allow this ground of appeal raised by the assessee.

ESIC amounting to Rs.1,56,660/-. It is observed that the lower authorities have

disallowed the contribution made towards PF in ESIC deposited belatedly after the due

date prescribed under the relevant act but nevertheless before the filing of the return of

income. As this issue has been squarely covered by the decision of the Hon'ble Apex

Court in the case of Checkmate Service Pvt. Ltd. vs. CIT (in Civil Appeal No. 2833 vide

order dated 12.10.2022) and also the decision of the Hon'ble Jurisdictional High Court in

the case of CIT vs. Merchem Ltd. 378 ITR 443 (Ker.) against the assessee, we deem it fit

to dismiss this ground raised by the assessee. Therefore, ground no. 6 raised by the

assessee is dismissed.

assessee has challenged the grounds of disallowance made by the ld.AO and confirmed

by the ld. CIT(A) on the ground that the assessee has failed to deduct TDS as per the

auditor’s report which details are given below:

i) Expenses on which TDS not deducted Rs.24,67,723/- ii) Expenses on which TDS deducted but no paid within the due date Rs.50,000/- Total Rs.25,17,723/-

9 ITA No. 978/Coch/2022 (A.Y. 2014-15) P. Surendran Sukanya Bhavan vs. Asst. CIT 24. It is observed that the ld. A.O. has held that the assessee has added back only

Rs.24,17,723/- in the computation statement instead of Rs.25,17,723/- and made an

addition of Rs.1 lac for non deduction of TDS. The assessee contended that the assessee

has added back the entire amount of Rs.25,17,723/- in his computation of income while

computing the taxable income of Rs.1,75,34,224/-. The assessee has also furnished copy

of the computation to substantiate his contention. As this ground requires factual

verification, we remand this issue back to the file of the ld. A.O. to verify whether or not

the assessee has deducted TDS on the expenses claimed and whether the said TDS has

been paid within the due date and the assessee is directed to produced documentary

evidence of payment by furnishing the copy of the challan and also to substantiate

whether the same has been paid within the due date of filing of return of income. We,

therefore, allow ground no. 7 for statistical purpose.

purpose. Order pronounced on 14th May, 2024 under Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963.

Sd/- Sd/-

(Sanjay Arora) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 14.05.2024 Roshani, Sr. PS

10 ITA No. 978/Coch/2022 (A.Y. 2014-15) P. Surendran Sukanya Bhavan vs. Asst. CIT

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Cochin 5. Guard File BY ORDER,

(Dy./Asstt. Registrar) ITAT, Cochin