BULLETIN(Issue No.124)DT.02-10-2020
Compiled by Vinod Kumar Goel, Advocate
CIRCULARS/NOTIFICATIONS
F. No.370133/22/2020-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)
Circular No. 17 of 2020, Dated: 29th September, 2020
Sub.: Guidelines under section 194-0 (4) and section 206C (1-1) of the Income-tax Act, 1961 - reg.
Finance Act, 2020 inserted a new section 194-0 in the Income-tax Act 1961 (hereinafter referred to as "the Act") which mandates that with effect from 1 st day of October, 2020, an e-commerce operator shall deduct income-tax at the rate of one per cent (subject to the provisions of proposed section 197B of the Act) of the gross amount of sale of goods or provision of service or both, facilitated through its digital or electronic facility or platform. However, exemption from the said deduction has been provided in case of certain individuals or Hindu undivided family fulfilling specified conditions. This deduction is required to be made at the time of credit of amount of such sale or service or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant, whichever is earlier.
2. Finance Act, 2020 also inserted sub-section (1 H) in section 206C of the Act which mandates that with effect from 1 st day of October, 2020 a seller receiving an amount as consideration for sale of any goods of the value or aggregate of such value exoeeding fifty lakh rupees in any previous year to collect tax from the buyer a sum equal to 0.1 per cent (subject to the provisions of proposed sub-section (lOA) of the section 206C of the Act) of the sale consideration exceeding fifty lakh rupees as income-tax. The collection is required to be made at the time of receipt of amount of sales consideration.
3. Sub-section (4) of section 194-0 and sub-section (I-I) of section 206C of the Act empowers the Board (with the approval of the Central Government) to issue guidelines for the purpose of removing difficulties. Various representations have been received by the Board for issuing guidelines for removing certain difficulties. In exercise of power contained under sub-section (4) of section 194-0 of the Act and sub-section (I-I) of section 206C of the Act, the Board, with the approval of the Central Government, hereby issues the following guidelines.
4. Guidelines
4.1 Applicability on transactions carried through various Exchanges:
4.1.1 It has been represented that there are practical difficulties in implementing the provisions of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) contained in section 194-0 and subsection (I H) of section 206C of the Act in case of certain exchanges and clearing corporations. It has been stated that sometime in these transactions there is no one to one contract between the buyers and the sellers.
4.1.2 In order to remove such difficulties, it is provided that the provisions of secti0n 194-0, and subsection (I H) of section 206C, of the Act shall not be applicable in relation to,-
(i) transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges or recognized clearing corporation located in International Financial Service .Centre; II Pa g e https://itatonline.org
(ii) transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC; and
For this purpose,-
(i) "recognized clearing corporation" shall have the meaning assigned to it in clause (i) of the Explanation to clause (23EE) of section 10 of the Act;
(ii) "recognized stock exchange" shall have the meaning assigned to it in clause (ii) of the Explanation 1 to sub-section (5) of section 43 of the Act; and (iii) "International Financial Services Centre" shall have the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 .
4.2 Applicability on payment gateway:
4.2.1 In e-commerce transactions, the payments are generally facilitated by payment gateways. It is represented that in these transactions, there may be applicability of section 194-0 twice i.e. once on emain commerce operator who is facilitating sell of goods or provision of services or both and once on payment gateway who also happen to qualify as e-commerce operator for facilitating service. To illustrate a buyer buys goods worth one lakh rupees on e-commerce website "XYZ" . He makes payment of one lakh rupees through digital platform of "ABC". On these facts liability to deduct tax under section 194-0 may fall on both "XYZ" and "ABC".
4.2.2 In order to remove this difficulty, it is provided that the payment gateway will not be required to deduct tax under section 194-0 of the Act on a transaction, if the tax has been deducted by the ecommerce operator under section 194-0 of the Act, on the same transaction. Hence, in the above example, if "XYZ" has deducted tax under section 194-0 on one lakh rupees, "ABC" will not be required to deduct tax under section 194-0 of the Act on the same transaction. To facilitate proper implementation, "ABC" may take an undertaking from "XYZ" regarding deduction of tax.
4.3 Applicability of on insurance agent or insurance aggregator:
4.3.1 It has been represented that insurance agents or insurance aggregators in many cases have no involvement in transactions between insurance company and the buyer for subsequent years. It has been represented that in subsequent years, the liability to deduct tax may arise on the insurance agents or insurance aggregators even if the transactions have been completed directly with the insurance company. This may result into hardship for the insurance agents/aggregators.
4.3.2 In order to remove difficulty it is provided that in years subsequent to the first year, if the insurance agent or insurance aggregator has no involvement in transactions between insurance company and the buyer of insurance policy, he would not be liable to deduct tax under section 194-0 of the Act for those subsequent years. However, the insurance company shall be required to deduct tax on commission payment, if any, made to the insurance agent or insurance aggregator for those subsequent years under the relevant provision of the Act.
4.4 Calculation of threshold for the financial year 2020-21.
4.4.1. Since both section 194-0 , and sub-section (I H) of section 206C, of the Act would come into effect from 1 sl October, 2020, it was requested to clarify how the varioLls thresholds specified under these JI P -:' rT O https://itatonline.org sections shall be computed and whether the tax is required to be deducted/collected in respect of amounts received before 1 5t October, 2020.
4.4.2 it hereby clarified that,-
(i) Since the threshold of five lakh rupees for an individual/ Hindu undivided family (being ecommerce participant who has furnished his PAN/Aadhaar) is with respect to the previous year, calculation of amount of sale or services or both for triggering deduction under section 194-0 of the Act shall be counted from 1 st April, 2020. Hence, if the gross amount of sale or services or both facilitated during the previous year 2020-21 (including the period up to 30th Sept 2020) in relation to such an individual! Hindu undivided family exceeds five lakh rupees, the provision of section 194-0 shall apply on any sum credited or paid on or after 15t October, 2020.
(ii) Since sub-section (1H) of section 206C of the Act applies on receipt of sale consideration, the provision of this sub-section shall not apply on any sale consideration received before 1 5t October 2020. Consequently it would apply on all sale consideration (including advance received for sale) received on or after 1 5t October 2020 even if the sale was carried out before 1 5t October 2020.
(iii) Since the threshold of fifty lakh rupees is with respect to the previous year, calculation of receipt of sale consideration for triggering TCS under sub-section (1 H) of section 206C shall be computed from 1 5t April, 2020. Hence, if a person being seller has already received fifty lakh rupees or more up to 30th September 2020 from a buyer, the TCS under sub-section (1 H) of section 206C shall apply on all receipt of sale consideration during the previous year, on or after 15t October 2020, from such buyer.
4.5 Applicability to sale of motor vehicle:
4.5.1 The provisions of sub-section (1 F) of section 206C of the Act apply to sale of motor vehicle of the value exceeding ten lakh rupees. Sub-section (1H) of section 206C of the Act exclude from its applicability goods covered under sub-section (IF). It has been requested to clarifY that whether all motor vehicles are excluded from the applicability of sub-section (I H) of section 206C of the Act.
4.5.2 It this regard it may be noted that the scope of sub-sections (IH) and (IF) are different. While sub-section (1 F) is based on single sale of motor vehicle, sub-section (1 H) is for receipt above 50 lakh rupee during the previous year against aggregate sale of good. While sub-section (1F) is for sale to consumer only and not to dealers, sub-section (1H) is for all sale above the threshold. Hence, in order to remove difficulty it is clarified that,-
(i) Receipt of sale consideration from a dealer would be subjected to TCS under sub-section (I H) of the Act, if such sales are not subjected to TCS under sub-section (1 F) of section 206C of the Act.
(ii) In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value of ten lakh rupees or less to a buyer would be subjected to TCS under sub-section (1 H) of section 206C of the Act, if the receipt of sale consideration for such vehicles during the previous year exceeds fifty lakh rupees during the previous year.
(iii) In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value exceeding ten lakh rupees would not be subjected to TCS under sub-section (lH) of section 206C of the Act if such sales are subjected to TCS under sub-section (IF) of section 206C of the Act,
4.6 Adjustment for sale return, discount or indirect taxes
4.6.1 It is requested to clarify that whether adjustment is required to be made for sales return, discount or indirect taxes including GST for the purpose of collection of tax under sub-section (lH) of section 206C of the Act. It is hereby clarified that no adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under sub-section (IH) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration.
4.7 Fuel supplied to non-resident airlines
4.7.1 It is requested to clarify if the provisions of sub-section (IH) of section 206C of the Act shall apply on fuel supplied to non-resident airlines at airports in India. To remove difficulties it is provided that the provisions of sub-section (1 H) of section 206C of the Act shall not apply on the sale consideration received for fuel supplied to non-resident airlines at airports in India.
(Ankit Jain)
Under Secretary to the Govt. of India
F. No. 225/150/2020-ITA-II
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North Block ITA-II Division
New, Delhi the 30th September, 2020
Order under Section 119(2)(a) of the Income-tax Act, 1961
The date of furnishing of Income-tax returns under section 139 of the Income-tax Act, 1961 (‘Act’) for the Assessment Year 2019-20 was 31st March, 2020. However, on consideration of difficulties being faced by the taxpayers due to COVID-19 pandemic, the said date was initially extended to 30th June 2020 and subsequently to 31st July 2020 and 30th September, 2020 vide the Taxation and other laws (Relaxations of certain provisions), Ordinance dated 31-03-2020, Notification No. 35/2020 dated 24-06-2020 and Notification No. 56/2020 dated 29-07-2020 respectively.
In this context, on further considerations of genuine difficulties being faced by the taxpayers due to the outbreak of COVID-19 pandemic, the Central Board of Direct Taxes (CBDT), in exercise of powers conferred under section 119(2)(a) of the Act, hereby, further extends the date for furnishing of belated and revised returns for the Assessment Year 2019-20 under Sub-Section (4) and (5) of section 139 of the Act respectively, from 30th September, 2020 to 30th November, 2020.
(Rajarajeshari R.)
Under Secretary to the Govt. of India
F. No. 225/126/2020-ITA-II
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes (ITA-II division)
North Block, New Delhi, the 30th September, 2020
To,
All Pr. Chief-Commissioner of Income-tax/Chief-Commissioner of Income-tax All Pr. Director-Generals of Income tax/Director-Generals of Income-tax.
Madam/Sir,
Subject: Extension of time limit of compulsory selection of returns for complete scrutiny during the Financial Year 2020-21 – regarding –
Kindly refer to Board’s letter dated 17-09-2020 regarding Guidelines for compulsory section of returns for Complete Scrutiny during the Financial Year 2020-21.
2. Vide the said letter, the following time limits were prescribed for completion of certain actions :
a) Selection of cases for compulsory scrutiny on the basis of prescribed parameters shall be completed by 30th September 2020.
b) The Survey Cases with impounded materials have to be transferred to the Central Charges under section 127 of the Income-tax Act, 1961 (Act) within 15 days of issue of notice U/s 143(2) of the Act.
(c) Search cases U/s 153C of the Act, if lying outside the Central Charges, have to be transferred to the Central Charges U/s 127 of the Act within 15 days of issue of notice U/s 143(2) of the Act.
3. Considering the difficulties faced by the field formation due to COVID-19 pandemic and PAN migration related issues, this matte has been reconsidered and it has been decided to extend the date for selection of cases for Compulsory Scrutiny on the basis of prescribed parameters, as communicated vide Board’s letter dated 17-09-2020, from 30th September 2020 to 31st October, 2020.
4. It is clarified that even though the new statutory time limit as per the Taxation and other laws (Relaxations and amendment of certain provisions) Act, 2020 for selection of cases for Compulsory Scrutiny on the basis of prescribed parameters was extended to 31st March, 2021, still for the purposes of timely allocation of cases to NeAC, the above time limit will have to be strictly adhered to, otherwise, the allocation of cases to NeAC will get considerably delayed.
5. Further, for the same reasons as above in para 4, the cases covered under the scenarios mentioned in para 2(b) and 2(c) of this letter shall be transferred to the Central Charges by Issue of order U/s 127 of the At, immediately after service of notice U/s 143(2) of the Act.
6. These instructions may be brought to the notice of all concerned for necessary compliance.
7. This issue with the approval of Chairman (CBDT).
(Rajarajeshari R.)
Under Secretary to the Govt. of India
CASE LAWS
Imtiara Consultants P. Ltd.(P) Ltd v.DCIT in ITA No. 8177/D/19, dated 24-08-2020
Held, On merit, as regards to Ground Nos. 3, 3.1, 3.2, 3.3, 3.4 & 3.5, the Ld.AR submitted that Indian Inc. is a sole proprietorship firm of Ms. C.E. Rai wasset up in the year 1989. The said firm was carrying on the business of BuyingAgency and Running Services to overseas buyers for sourcing of merchandisefrom India. The sole proprietorship carried on the said business till the year2002 and the business profit were tax in the hands of Ms. C.E. Rai. In theyear 2002 with a view to operate in a corporate structure considering thatbusiness was growing and employees strength was also increasing, theoperations were carried on by the assessee company in which Ms. C.E. Rai wasthe majority share holder and Managing Director. Since, the assesseecompany had just taken over the operations and there was a need to ensurecontinuity with the customers and vendors, Ms. Rai permitted the use ofLogo/trade name “Indian Inc.” on a royalty free basis to the assessee company.This was an informal understanding and no written agreement in this contextwas entered into in 2002. An oral agreement also equivalent as per thedecision of the Hon’ble Delhi High Court in case of Nanak Builders andInvestor Pvt. Ltd. Vs. Vinod Kumar Alag AIR 1993 Delhi 315. Being acommercial decision between private parties, the charging or non-charging or afee cannot be question by a tax authorities, more so when the provisions of theAct did not maintains such an action/imputation. The trade name “IndianInc.” is an integral part of the identity of the assessee company and is usedextensively in its correspondence and internal documents. The AssessingOfficer has also no disputed assessee’s use of the trade mark “Indian Inc.” foridentifying itself in the business fraternity. The Website of the company iswww.indianinc.com which also unequivocal indicates that for the externalworld the identity of the company is with this name only. Considering that theturnover of the assessee increased manifold from Financial Year 2002-03 toFinancial Year 2014-15, it was decided that Ms. C.E. Rai be compensated forthe use of the trade mark which had contributed significantly for the growth ofbusiness. Indian Inc and assessee entered into a formal License Agreement onJuly 22, 2014, pursuant to a Board Resolution dated April, 11, 2014 by theassessee for a period of 5 years and decided to pay royalty at the rate of 2% ofnet revenue of the assessee. The Assessing Officer on the basis, of thedefinition of royalty under Explanation 2 to Section 9 (1) (vi) of the Act observed
that an instrument for usage of rights of trade mark must be present. TheAssessing Officer completely ignored the documents filed during the course ofthe assessment proceedings thus grossly erred in observing that nodocumentary evidence regarding the uses have been furnished. The assesseehas duly deducted TDS on all royalty payments paid to Ms. C. E. Rai for theuse of trade mark. The same royalty income had been offered to tax inpersonal return of Ms. C. E. Rai. This aspect was brought to the notice of theAssessing Officer. The Ld. AR submitted that the payment made by theassessee for non exclusive use of logo based on turnover and not on lump sumpayment has been held to be allowable as revenue expenditure as held in caseof Shriram Transport Finance Company Ltd. (ITA No.1744/MDS/2012(Chennai Tribunal). The Assessing Officer as a basis todisallow the fee /royalty, has given a finding in the assessment order that the existence of Indian Inc. should have come to an end. The Ld. AR submittedthat Indian Inc. is proprietorship firm of Ms. Rai and has an existence till shewishes. The Ld. AR relied upon the decision of the Hon’ble Punjab & HaryanaHigh Court in case of Pr. CIT Vs. Mobisoft Tele Solutions Pvt. Ltd (2016) 65taxmann.com 214. The Ld. AR further submitted that the Assessing Officerobserved that the trade mark is unregistered and can be used by any otherentity. The Ld. AR submitted that such an argument is devoid of substancesand merit. It is well settled that in the absence of any definition of trade markin the Income Tax Act, reference should be taken for the definition fromTrademarks Act, 1999. The word ‘royalty’ is defined in Explanation 2 toSection 69(1) (vi) of the Income Tax Act, 1961. The word ‘trade mark’ includesregistered trademarks as well as unregistered trademarks. Unregistered marksare defined as marks which are not registered in relation to goods or services(i.e. names, marks or logos) used in relation to a business, under theTrademarks Act. Though u/s 27 of the Trademarks Act, 1999, no action for
infringement is allowed for unregistered trademarks it can still be protected bymeans of common laws of tort of passing off. Once it is established thatunregistered mark has comparable goodwill or reputation in connection withthe product, services or business with which it is used, one can availprotection. Thus, the finding of the Assessing Officer that trade mark beingunregistered can be easily used by any other person is not valid. Ms. C.E. Raihas assigned right to use her trademark for the use of the assessee company.Compensating her, as an owner/inventor of the logo, cannot be said to beproviding in monetary benefit to a Director. The fact that she also happens tobe director and share holder of the company cannot be the basis to deny herclaim of royalty for the use of tradename/logo. It is not the case of theAssessing Officer that the payments are excessive in terms of Section 40A (2b)of the Act. The Assessing Officer simplicitor disallowed the entire amountswithout establishing that fair value of use of logo/tradename was Nil. The Ld.AR relied upon the decision of the Delhi Tribunal in case of DCIT Vs. NestleIndia Ltd. (2011) 16 taxmann.com 218. Further, it is well settled that it is notopen to the Department to adopt a subjective standard of reasonableness anddisallow business expenditure as being unreasonably large or decide what typeof expenditure, the assessee should incur and in what circumstances as heldin the case of CIT vs. Oracle India (P) Ltd [2011] taxmann.com 139 (Delhi).Thus, the jurisdiction of the Assessing Officer is only confined to decide ‘profitsand gains of business or profession’, i.e. whether expenditure claimed wasactually and factually expended or not and whether it was wholly andexclusively for the purposes of business. Without prejudice to the aforesaidcontentions, the Ld. AR further submitted that the Assessing Officer ignoredthe fact that by payment of the royalty, there was no loss to the revenue since,the tax rate at which Ms. C. E. Rai has been charged (33.99%) is more thanthe rate at which the company would have been charged (32.45%). In light ofthese circumstances, the Ld. AR prayed that the entire disallowance of royaltyexpenditure deserves to be deleted.
was accepted by the ITAT also. Further nature of these expenses clearly shows that these might pertain to earlier years but crystallized only in current AY 2006- 07. Respectfully following the ITAT order on the same issue alongwith adjudication that these aren’t expenses pertaining to earlier year’s fully allowable u/s. 37(1) of the Act, the addition made by AO is deleted. This ground is therefore, allowed.”
6. After going through the aforesaid finding, we are of the view that Ld. CIT(A) has deleted the addition by respectfully following the order of the ITAT in assessee’s own case. No contrary decision has been brought to our notice by the Ld. DR. Therefore, the issue involved in ground no. 1 is decided in favour of the assessee and against the revenue by dismissing the ground no. 1 raised by the Revenue.
7. As regards the second issue i.e. the Bond Issue Expenses. After hearing both the parties and going through the written submissions filed by the assessee which the assessee has attached at page no. 75 of the Paper Book, we are of the view that this issue is also covered in favour of the assessee by the order of the Ld. CIT(A)-XVI, New Delhi in which Ld. CIT(A) has deleted the similar addition for assessment year 2007-08. The order is placed on record. No contrary decision has been brought to our notice by the Ld. DR. The nature of these expenses are that these are expenses incurred every year to meet the statutory requirements of issue of bonds and are Trustee Annual Fees, Rating Agencies Annual Fees, NSDL/CDSL Annual Fees, C/o stamp papers, Registrar and Transfer agents fees etc. Exactly similar expenses has been allowed by the Department in the Assessment year 2007-08 of Rs. 20.05 L; AY 2008-09 of Rs. 14.18 L; AY 2009-10 of Rs. 10.85 L and AY 2010-11 of Rs. 3.79 L. No contrary decision has been brought to our notice. Therefore, respectfully following the same, the ground no. 2 of Revenue is dismissed.
Honda Motorcycle and Scooter India Pvt. Limited V. DCIT in ITA No. 7714/Del/2017, dated 31-08-2020 (Delhi ITAT)
Held, we have heard the rival contentions and perused the record. The issuewhich arises vide Ground of appeal Nos. 2 to 2.2 is against the disallowance ofRs.53,05,919/-. The aforesaid sum of Rs.53,05,919/- is the foreign exchangegain against the Capital Work in Progress (in short “CWIP”). The assessee haddisclosed foreign exchange loss on acquisition of fixed assets at Rs.2.16 crores(approx.) against which the foreign exchange gain of Rs.53,05,919/- againstCWIP was adjusted and the balance of Rs.1.63 crores (approx.) was added backin the computation of income. Admittedly the foreign exchange loss onacquisition of fixed assets totaling to Rs.1.63 crores (approx.) is not allowableas an expenditure in view of the section 43A of the Act. Further, foreignexchange gain of Rs.53,05,919/- is to be adjusted against the aforesaid loanand net amount of Rs.1.63 crores (approx.) having been offered to tax,warrants no further disallowance in the hands of the assessee. Accordingly, wehold so and the issue raised in Ground of appeal Nos. 2 to 2.2 is thus allowed[Para 8]
Held, we have heard the rival contentions and perused the record. The issue which arises in the present appeal is against the allowability of expenditure incurred by the assessee under the head CSR expenditure. The assessee claimed that the expenditure has been incurred towards maintenance charges of GSS, Gurgaon for the benefit of the children of the employees of the assessee company. The assessee has placed on record the list of the expenditure before us. The perusal of the same reflects the expenditure on certain renovationwork at Mohindergarh including providing chairs and tables by the assessee.Further expenses are debited on account of Tools for Honda Training CenterLab- Mohindergarh. All the said expenses are incurred for efficiently carryingout the business of the assessee and thus fulfill the condition of wholly andexclusively for the purpose of business. Further, the donation to BrahmaKumaris merits to be disallowed in the hands of the assessee, as it is case ofcharity. The same may be looked into as per the provision of section 80G ofthe Act. Further, expenditure incurred towards display of name/logo of theassessee on various items is undoubtedly for the promotion of the business ofthe assessee as it promotes goodwill. Hence, the expenditure is to be allowedas revenue expenditure.Before parting, we may also refer to the alternate observations of the Assessing Officer that the Explanation (2) to section 37(1) which has been introduced w.e.f. 01.04.2015 is to be applied retrospectively. We find that the Raipur Bench of Tribunal in Jindal Power Ltd. (supra) and Delhi Tribunal inNational Small Industries Corpn. Ltd. vs DCIT (supra) have held that the saidexplanation is prospective in nature. Consequently, we find no merit in thestand of the Assessing Officer in this regard except expenditure ofRs.50,000/-, the balance expenditure is allowed in the hands of the assessee.
Thus, Ground of appeal Nos. 3 to 3.3 are partly allowed. [Para 13 and 14]
Held, further, the Hon’ble Delhi High Court in CIT vs Lokenath& Co. 147 ITR
624 (Del.) on similar facts held that “on similar facts wherein the assessee has
constructed a multi-storeyed building and in view of excess construction on oneof the floor, it submitted a fresh plan and where the revised plan was approved,13 ITA No.7714/Del/2017Assessment Year 2012-13subject to payment on adhoc composition fee, the Hon’ble High Court held that“the mandate of the Legislature is that on the acceptance of the compensation,there is condonation of the disobedience of a procedural requirement. Thiscompensation was not a penalty payment, to save the assessee from criminal
liability or criminal prosecution or to compound any offence committed by theassessee. Thus, the Tribunal was justified, and the impugned sum wasadmissible as business expenditure under section 37(1) of the Act.” Following the said dictate of the Hon’ble High Court, we hold that thecomposition fee of Rs.22,36,130/- paid by the assessee merits to be allowed asbusiness expenditure. Thus, Ground of appeal No.4 raised by the assessee isallowed.composition fee of Rs.22,36,130/- paid by the assessee merits to be allowed asbusiness expenditure. Thus, Ground of appeal No.4 raised by the assessee is allowed.[Para 17 & 18]
Held, we have heard the rival contentions and perused the record. Theissue which arises in the present appeal is whether the expenditure which hasbeen incurred by the assessee on the repair/replacement of existing assets,can the same be allowed in the hands of the assessee. The Hon’ble SupremeCourt in CIT vs Saravana Spinning Mills (P.) Ltd. (Supra) has laid down that incase the expenditure is incurred for current repairs, then it replaces part of theexisting plant & machinery and the same is to be allowed as businessexpenditure in the hands of the assessee u/s 31(1) of the Act. We haveperused the details filed by the assessee. The list at page 596 of the15 ITA No.7714/Del/2017Assessment Year 2012-13Paperbook is in respect of repair and maintenance of existing structure and isto be allowed as an expenditure in the hands of the assessee. However, theexpenditure incurred on acquisition of chairs, which are detailed at page 597 of the Paperbook is capital in nature and amount totaling to Rs.10,97,122/-needs to be capitalized in the hands of the assessee. The said expenditure isbooked under the head furnishing furniture. Accordingly, we uphold the orderof the Assessing Officer in this regard but direct the Assessing Officer to allowthe expenditure incurred on repairs of plant & machinery in entirety. Thus,Ground of appeal No.5 raised by the assessee is partly allowed.[Para 22]
Raj Kumar Bhardwaj Vs. Income Tax Officer, Ward-2(2), Meerut vide ITA No. 2108/Del/2018 (Delhi)
We have heard the rival contentions and perused the relevant materials available on record. It is an undisputed fact that the assessment order has been framed by the AO u/s 144 of ITA No.2108/Del/2018 Raj Kumar Bhardwaj vs. ITO A.Y. 2013-14 5 the Act. Before us, Learned AR has submitted that the assessee could not appear before the AO as he being the president of the Vyapar Sangh was on Dharna along with other businessmen. The submissions made by the AR has not controverted by the Revenue. It is an established principle of natural justice that a litigant should be heard before a decision is taken. In view of the principles of natural justice, we are of the view that the assessee deserves one more opportunity to present his case. Considering the totality of the aforesaid facts, we restore the entire issue back to the file of the AO and direct him to examine the evidences filed by the assessee and examine the same and thereafter decide the issue afresh. The AO is free to call for any other evidence required by him for deciding the issue afresh. The assessee is also directed to co-operate with AO by promptly filing the relevant details called by him. Needless to state, that the AO shall grant adequate opportunity of hearing to the assessee. Since we have restored the issue to the AO, the other grounds raised by the assessee are not adjudicated. Thus the appeal of the assessee is allowed for statistical purposes.
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