National Fertilizers Ltd Vs DCIT (ITAT Delhi)
Bank guarantee commission cannot be said to be a “commission” as intended to u/s 194H of the but it is in the nature of Bank charges charged by the bank for provision of services to the assessee. TDS not deductible.
Facts-
Assessee has preferred appeal on account of disallowance of bank guarantee commission invoking Section 40(a)(ia).
Revenue has preferred appeal on account of deletion of addition of notional accrued interest without considering the fact that the assessee was following mercantile system of accounting.
Revenue has preferred appeal on account of deletion of disallowance of excess depreciation claimed on UPS by ignoring the fact that computer can run without UPS.
Revenue has preferred appeal on account of deletion of disallowance u/s 14A on the basis that allowability or disallowability of expenditure is not conditional
Conclusion-
Bank guarantee commission – It cannot be said to be a “commission” as intended to u/s 194H of the but it is in the nature of Bank charges charged by the bank for provision of services to the assessee. Now this issue has been decided by the honourable Bombay High Court in case of CIT – TDS (1), Bombay versus Larsen and Toubro Ltd.
Addition of notional accrued interest – in assessee own case it is held that there was no ‘real income’ and the question of adding any notional accrued interest to its income on such amount does not arise.
Additional depreciation on UPS – based on assessee own case, claim of dep @60% on UPS allowed.
Disallowance u/s 14 – no exempt income was earned during the year, thus, disallowance u/s 14A of the Act will not be applicable.
FULL TEXT OF THE ORDER OF ITAT DELHI
These four appeals are filed by the assessee and the Revenue against the order dated 28/02/2018 passed by CIT(A)-22,New Delhi for assessment year 2013-14 & 2014-15 respectively.
2. The grounds of appeal are as under:-
I.T.A. No. 3437/DEL/2018 (A.Y 2013-14) Assessee’s appeal
1. “ On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts.
2. a) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of an amount of Rs.7,29,769/- made by AO on account of bank guarantee commission invoking the provisions of section 40(a)(ia) of the Income Tax Act.
2 b) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO and ignoring the contention of the assessee that in view of the proviso to section 40(a)(ia), the deductee having including the income in its return of income the assessee cannot be treated as assessee in default and hence no disallowance can be made under section 40(a)(ia) of the Act.
I.T.A. No. 3697/DEL/2018 (A.Y 2013-14) Revenue’s appeal
1. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the addition of Rs. 6,48,20,000/- on account of accrued interest without considering the fact that the assessee was following mercantile system of accounting and the arbitration award give a right to the assessee to charge simple interest @ 5% per annum on the amount of advance given to M/s Karsan till the date of payment?
2. Whether on the facts and circumstances of the case, the Ld.CIT(A) is legally justified in deleting the disallowance of Rs. 2,59,00,000/- on account of demurrage and wharfage charges by ignoring the provision of the Railway Act, 1989 and Explanation 1 to Section 37(1) of the Income Tax Act 1961 (hereinafter referred to as “ the Act”)?
3. Whether on the facts and circumstances of the case, the Ld. CIT (A) is legally justified in deleting the disallowance of Rs. 3,91,00,000/- on account of write-off value of slow moving stores and spares by ignoring the provision of section 145 of the Act and without appreciating the fact that the assessee is not allowed to adopt any Accounting Standard of itschoice as and when it deemed to be beneficial to it?
0. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the disallowance of Rs. 25,031/- on account of excess depreciation claimed on UPS (Uninterrupted Power Supply) by holding the UPS as an integral part of computer by ignoring the fact that computers may run without UPS and hence, this was not an integral part 0 computers?
4. Whether on the facts and circumstances of the case, Ld CIT (A) is legally justified in delet the disallowance of Rs. 24,883/- u/s 14A of the Act without considering the legislative irof introducing section 14A of the Act 2001 as clarified by the CBDT’s Circular No. 5.201-r dated 10.02.2014.
5. Whether on the facts and circumstances of the case, Ld CIT (A) is legally justified in deleting disallowance of Rs. 24,883/- u/s 14A of the Act without considering legal principle that allowability or disallowability of expenditure under the Act is not conditional upon the earning of the income as upheld by Hon’ble Supreme Court in the case of CIT Vs. Rajendra Prasad Moody [1978] 115 ITR 519 and without considering ratio decidendi as upheld in the cases of CIT Vs. Walfort Share and Stock Brokers P. Ltd [2010] 326 ITR 1 (SC) and Maxopp Investment Vs CIT [2012] 347 ITR 272 (Delhi) on application of provisions of section 14A of the Act?
3. Whether on the facts and circumstances of the case, Ld CIT (A) is legally justified in deleting disallowance of Rs. 6,45,673/- on account of additional depreciation claimed u/s 32 (1) (iia) of the Act without considering the fact that the relevant provisions are affected w.e.f. 01.04.2013.
6. Whether on the facts and circumstances of the case, the Ld CIT(A) is legally justified in deleting the addition of Rs. 2,42,^01- on account of accrued interest on deposits without considering the fact that the assessee is following mercantile system of accounting?
9. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the disallowance of Rs. 41,47,983/- on account of ‘repair & maintenance expense’ without considering the facts recorded by the AO in assessment order and also by ignoring the provisions of section 37 (1) of the Act in this regard?”
I.T.A. No. 3438/DEL/2018 (A.Y 2014-15) Assessee’s appeal
1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts.
2 (i) 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.76,00,000/- made by AO on account of CSR Expenditure incurred by the assessee
(ii) That the disallowance has been confirmed ignoring the submissions along with the evidences filed by the assessee in this regard.
I.T.A. No. 3696/DEL/2018 (A.Y 2014-15) Revenue’s appeal
1. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the addition of Rs. 6,48,20,000/- on account of accrued interest without considering the fact that the assessee was following mercantile system of accounting and the arbitration award give a right to the assessee to charge simple interest @ 5% per annum on the amount of advance given to M/s Karsan till the date of payment?
2. Whether on the facts and circumstances of the case, the Ld.CIT(A) is legally justified in deleting the disallowance of Rs. 2,56,00,000/- on account of demurrage and wharfage charges by ignoring the provision of the Railway Act, 1989 and Explanation 1 to Section 37(1) of the Income Tax Act 1961 (hereinafter referred to as “ the Act”)?
3. Whether on the facts and circumstances of the case, the Ld. CIT(A) (A) is legally justified in deleting the disallowance of Rs. 3,07,00,000/- on account of write-off value of slow moving stores and spares by ignoring the provision of section 145 of the Act and without appreciating the fact that the assessee is not allowed to adopt any Accounting Standard of its choice as and when it deemed to be beneficial to it?
4. Whether on the facts and circumstances of the case, Ld CIT (A) is legally justified in deleting the disallowance of Rs. 33,734/- u/s 14A of the Act without considering legislative intent of introducing section 14A of the Act 2001 as clarified by the CBDT’s Circular No. 5/2014 dated 10.02.2014?
5. Whether on the facts and circumstances of the case, Ld CIT (A) is legally justified in deleting disallowance of Rs. 33,734/- u/s 14A of the Act without considering legal principle that allowability or disallowability of expenditure under the Act is not conditional upon the earning of the income as upheld by Hon’ble Supreme Court in the case of CIT Vs. Rajendra Prasad Moody [1978] 115 ITR 519 and without considering ratio decidendi as upheld in the cases of CIT Vs. Walfort Share and Stock Brokers P. Ltd [2010] 326 ITR 1 (SC) and Maxopp Investment Vs CIT [2012] 347 ITR 272 (Delhi) on application of provisions of section 14A of the Act?
6. Whether on the facts and circumstances of the case, the Ld CIT(A) is legally justified in deleting the addition of Rs. 2,42,880/- on account of accrued interest on deposits without considering the fact that the assessee is following mercantile system of accounting?
Firstly, we are taking I.T.A. No. 3437/DEL/2018 (A.Y 2013-14) which is assessee’s appeal and ITA No. 3697/Del/2018 which is Revenue’s appeal
3. The assessee is engaged in the business of manufacturing of Nitrogenous fertilizers and trading of Industrial Products. It filed its return of income for AY 2013-14 on 27/09/2013 declaring loss of Rs. 253,66,98,124/-. In the assessment u/s 143(3) vide the impugned order, the following additions were made:-
