Case Law Details
DCIT Vs ABS Exports (ITAT Surat)
In this case, the Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals)-4, Surat, concerning Assessment Year 2018–19. The core issue revolved around the deletion of a disallowance of expenses amounting to ₹2,30,57,897 under Section 37 of the Income Tax Act, 1961.
The assessee had filed its return declaring nil income and a loss of ₹1,17,59,363. The case was selected for limited scrutiny, and the Assessing Officer completed the assessment under Section 143(3), determining total income at ₹1,12,98,530 after disallowing the said expenses. The disallowance was primarily based on the contention that the assessee had no business activity during the relevant period and that the expenses were not allowable, especially when income was shown under the head “house property.”
The Revenue argued that the CIT(A) erred in allowing the deduction, ignoring that the assessee had not reported business income since Assessment Year 2015–16. It was further contended that unsuccessful bidding does not constitute business activity and that the nature of expenses did not align with the heads of income prescribed under Chapter IV of the Act.
On the other hand, the assessee contended that the expenses were related to occupation charges payable to the Kolkata Port Trust, including applicable service tax, GST, and interest. These dues pertained to an earlier period but were settled during the relevant assessment year. The assessee also submitted that the interest component was ultimately not enforced by the Kolkata Port Trust.
Upon hearing both parties and reviewing the material on record, the Tribunal observed that the liability relating to occupation charges and associated dues was crystallized and settled during the year under consideration. It noted that the interest on occupation charges was not ultimately pressed by the Kolkata Port Trust and that the claim of such expenses under Section 37(1) was justified.
The Tribunal found that the CIT(A) had provided a clear and reasoned finding supporting the allowability of the expenses. It held that there was no need for interference with the CIT(A)’s order.
FULL TEXT OF THE ORDER OF ITAT SURAT
The appeal filed by the Revenue is against the order passed by the Ld. Commissioner of Income Tax (Appeals)-4, (in short “Ld. CIT(A)”), Surat on 12.127.2024 for A.Y. 2018-19.
2. The Revenue has raised the following grounds of appeal:
“a) On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of disallowance of expenses u/s. 37 of the Act amounting to Rs. 2,30,57,897/- without appreciating that during the period under consideration the Assessee had no business activity.
b) On the facts and in the circumstances of the case and in law the Ld. CTT(A) has allowed deduction of expenses claimed to be evolving as a consequence of the business of the Assessee against the income shown under the head of house property and has thereby ignored the essence of Chapter IV of the Income Tax Act, 1961 which deals with income and deductions which ore to be allowed respective to their nature and under the similar heads of income.
c) On the facts and in the circumstances of the case and in Jaw the Ld. CTT(A) erred in deleting the addition of Rs.2,30,57,897/- on the basis of contention of the Assessee and holding that the bid not successful is itself a business activity thereby totally ignoring that the Assessee has not shown any income from business or profession m any of the assessment years after the A.Y. 2015-16.
d) On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in being ignorant about the investment of the Assessee for which the Assessee has paid the occupational charge of Rs. 2,30,57,897/- and its implication over the computation of income”
3. The brief facts of the case are that the assessee company filed its return of income for A.Y. 2018-19 on 31.08.2018 declaring total income at Rs. NIL and current year loss of (-) Rs.1,17,59,363/-. The case was selected for limited scrutiny through CASS and the Assessing Officer completed the assessment under Section 143(3) of the Act on 17.06.2021 assessing total income Rs. 1,12,98,530/-. In the said assessment, the Assessing Officer made a single addition being disallowance of expenses under Section 37 of the Act amounting to Rs. 2,30,57,897/-.
4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.
5. The Ld. DR relied upon the assessment order and submitted that the Kolkata Port Trust is an artificial Juridical body as per the PAN data base and not a Government entity as claimed by the assessee and hence the provision of Section 43B of the Act shall not apply in assessee’s case.
6. The Ld. AR relied upon the order of the CIT(A).
7. We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that in the year under consideration i.e. A.Y. 2018-19 the Advocates and Solicitors of Kolkata Port Trust ask the assessee to pay the dues related to occupation charges on and from 01.01.2014 to 18.03.2015, service tax at 12.36 % per annum for the said period, interest @ 18% per annum from 01.10.2014 to 31.08.2017 and GST @ 18% per annum up to 31.08.2017. The assessee has also furnished a letter dated 11.10.2017 regarding the payment of occupation charges as made in the year A.Y. 2018-19. Since the payment of occupation charges and interest accrued thereon was finally settled between the assessee and the Kolkata Port Trust in the year under consideration i.e. A.Y. 2018-19. The interest on the said occupation charges was finally not pressed upon by the Kolkata Port Trust. Thus, the interest on occupation charges was rightly claimed under Section 37(1) of the Act. The CIT(A) has given a categorical finding to that extent and there is no need to interfere with the same.
8. In result, the appeal of the Revenue is dismissed.
Order pronounced under proviso to Rule 34 of ITAT Rules, 1963 on 06/04/2026
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