Amjay Medi-Max(India)Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 1950/AHD/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6205 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 22-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEEN
• Keywords: Capital asset; Depreciation; Earning of tax free income; Question of law; Avoidance of tax; Revenue expenditure; Capital expenditure
• Section: 14A; 194C

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD - BENCH D BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.1950/AHD/2012 / ASSTT. YEAR: 2009-2010 AMJAY MEDI-MAX (INDIA) P.LTD. MEDI-MAX, HOUSE 4 TH FLOOR OPP: KARNAVATI HOSPITAL ELLISBRIDGE, AHMEDABAD. PAN : AABCA 8241 R VS. DCIT, CIR.1 AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI ASEEM THAKKAR, AR REVENUE BY : SHRI OM PRAKASH MEEN, SR.DR ! / DATE OF HEARING : 22/02/2017 '#$ ! / DATE OF PRONOUNCEMENT: 18/04/2017 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.CIT(A)-6, AHMEDABAD PASSED FOR ASSTT.YEAR 2009-1 0. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF R S.18,40,543/- WHICH WAS ADDED BY THE AO WITH THE AID OF SECTION 14A OF THE INCOME TAX ACT, 1961. ITA NO.1950/AHD/2012 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY HAS FILED ITS RETURN OF INCOME ON 25.1.2010 DECLARING TOTAL INCOM E AT RS.2,63,31,960/-. THE CASE OF THE ASSESSEE WAS SEL ECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSU ED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS MADE INVESTMENT TO THE TUNE O F RS.6.50 CRORES AS ON 31.03.2009. HE, THEREFORE, PROCEEDED TO MAKE DI SALLOWANCE OF EXPENDITURE UNDER SECTION 14A R.W. RULE 8D OF THE I NCOME TAX ACT. THE LD.AO ULTIMATELY WORKED OUT DISALLOWANCE OF RS.18,4 0,543/-. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE . 4. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS RAI SED OTHER CONTENTIONS, BUT WE ARE NOT REQUIRED TO LOOK INTO A LL THESE ASPECTS. ONE OF THE CONTENTIONS OF THE ASSESSEE WAS THAT IT HAS NOT EARNED ANY INCOME WHICH IS EXEMPT IN NATURE, THEREFORE, NO DIS ALLOWANCE UNDER SECTION 14A CAN BE MADE. THIS PLEA HAS BEEN SPECIF ICALLY RAISED BEFORE THE LD.CIT(A), AND IT IS DISCERNIBLE FROM WRITTEN S UBMISSIONS OF THE ASSESSEE REPRODUCED BY THE LD.CIT(A) ON PAGE NO.6 O F THE IMPUGNED ORDER. SUBMISSION MADE IN SUB-PARA 1 TO THIS ASPE CT READS AS UNDER: 1. THE PERUSAL OF THE P&L ACCOUNT WOULD ALSO REVEA L THAT THE APPELLANT COMPANY HAS NOT EARNED ANY INCOME WHICH I S EXEMPT IN NATURE. AT THIS STAGE THE PROVISION OF SEC. 14A ARE REPRODUCED FOR EASY REFERENCE. ' 1) FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME U NDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT O F EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. 5. ACCORDING TO THE LD.COUNSEL FOR THE ASSESSEE, TH E ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E DECISION OF THE HONBLE HIGH COURT RENDERED IN THE CASE OF CORRECTE CH ENERGY REPORTED ITA NO.1950/AHD/2012 3 IN 372 ITR 97. THE HONBLE HIGH COURT HAS OBSERVED THAT IF NO TAX FREE INCOME WAS EARNED BY THE ASSESSEE, THEN NO EXPENSES CAN BE CONSTRUED AS INCURRED BY THE ASSESSEE, BECAUSE PLAI N READING OF SECTION 14A PROVIDES THAT IF AN ASSESSEE INCURRED EXPENDITU RE IN RELATION TO EARNING OF TAX FREE INCOME THEN SUCH EXPENDITURE WO ULD NOT BE ALLOWED. THE ASSESSEE DID NOT EARN TAX FREE INCOME, THEN WHE RE IS THE QUESTION OF ALLOCATING EXPENDITURE. THE OBSERVATION OF THE HONBLE HIGH COURT IN THIS REGARD READS AS UNDER: 4. COUNSEL FOR THE REVENUE SUBMITTED THAT THE ASSE SSING OFFICER AS WELL AS CIT(APPEALS) HAD APPLIED FORMULA OF RULE 8D OF THE INCOME TAX RULES, SINCE THIS CASE AROSE AFTER THE A SSESSMENT YEAR 2009-2010. SINCE IN THE PRESENT CASE, WE ARE CONCER NED WITH THE ASSESSMENT YEAR 2009-2010, SUCH FORMULA WAS CORRECT LY APPLIED BY THE REVENUE. WE HOWEVER, NOTICE THAT SUB-SECTION (L) OF SECTION 14A PROVIDES THAT FOR THE PURPOSE OF COMPUTING TOTA L INCOME UNDER CHAPTER IV OF THE ACT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE PRESENT CASE, THE TRIBUNAL HAS RECORDED THE FINDING OF FACT THAT THE ASSESSEE DID NOT IJNAKE ANY CLAIM FOR EXEMPTION OF ANY INCOME FROM PAYMENT OF TAX. IT WAS ON THIS BASI S THAT THE TRIBUNAL HELD THAT DISALLOWANCE UNDER SECTION 14A O F THE ACT COULD NOT BE MADE. IN THE PROCESS TRIBUNAL RELIED ON THE DECISION OF DIVISION BENCH OF PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT V WINSOME TEXTILE INDUSTRIES LTD. [2009] 319 ITR 204 IN WHICH ALSO THE COURT HAD OBSERVED AS UNDER : '7. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION. TH E JUDGEMENT OF THIS COURT IN ABHISHEK INDUSTRIES LTD (2006) 286 IT R 1 WAS ON THE ISSUE OF ALLOWABILITY OF INTEREST PAID ON LOANS GIV EN TO SISTER CONCERNS, WITHOUT INTEREST. IT WAS HELD THAT DEDUCT ION FOR INTEREST WAS PERMISSIBLE WHEN LOAN WAS TAKEN FOR BUSINESS PU RPOSE AND NOT FOR DIVERTING THE SAME TO SISTER CONCERN WITHOU T HAVING NEXUS WITH THE BUSINESS. THE OBSERVATIONS MADE THEREIN HA VE TO BE READ IN THAT CONTEXT. IN THE PRESENT CASE, ADMITTEDLY TH E ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION. IN SUCH A SITUATI ON SECTION 14A COULD HAVE NO APPLICATION.' 5. WE DO NOT FIND ANY QUESTION OF LAW ARISING, TAX APPEAL IS HEREFORE DISMISSED. ITA NO.1950/AHD/2012 4 6. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONB LE HIGH COURT, WE ARE OF THE VIEW THAT THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE. WE ALLOW THIS GROUND OF APPEAL AND D ELETE THE DISALLOWANCE OF RS.18,40,543/-. 7. GROUND NOS.2 AND 3 ARE INTER-CONNECTED WITH EACH OTHER. IN THESE GROUNDS, GRIEVANCE OF THE ASSESSEE IS THAT TH E LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.6,08,116/- AS INTE REST INCOME. IN GROUND NO.3, THE ASSESSEE HAS RAISED AN ALTERNATIVE PLEA WITH RESPECT TO GROUND NO.2 AND CONTENDED THAT IN CASE INTEREST INC OME IS BEING CONFIRMED IN THIS YEAR, THEN INCOME WHICH IS OFFERE D IN SUBSEQUENT YEAR BE EXCLUDED FROM THE TAXABILITY. 8. BRIEF FACTS OF THE CASE ARE THAT THE AO RECEIVED AN INFORMATION FROM ANNUAL INFORMATION WING (AIR) EXHIBITING THE F ACT THAT THE ASSESSEE HAS EARNED INTEREST INCOME OF RS.9,15,925/-. THE A SSESSEE HAS SHOWN INTEREST INCOME OF RS.3,07,914/-. THE ASSESSEE HAS REPRODUCED NAME AND ADDRESS OF THE PARTIES, GROSS PAYMENTS RECEIVED AS PER TDS CERTIFICATE, TDS AMOUNT AND SECTION UNDER WHICH TDS WAS DEDUCTED ETC. WHEN THE ASSESSEE WAS CONFRONTED, THEN IT COULD NOT GIVE ANY EXPLANATION AS TO WHY THIS AMOUNT OF RS.6,13,616/-W AS NOT OFFERED FOR TAXATION. IT TOOK AN ALTERNATIVE PLEA THAT THAT IN CASE OF INTEREST ALLEGED TO HAVE RECEIVED FROM SPARSH BUILDERS P.LTD IS CONC ERNED, IT HAS BEEN ACCOUNTED IN SUBSEQUENT YEAR. THUS, IT HAS BEEN O FFERED IN ASSTT.YEAR 2010-11 AND THEREFORE, A DIRECTION BE ISSUED TO THE AO TO EXCLUDE THIS AMOUNT FROM TAXATION IN ASSTT.YEAR 2011-12. THE LD .CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS BEEN FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTANCY. INTEREST INCOME HAS BEEN ACCRUED IN TH IS YEAR THEREFORE, IT OUGHT TO HAVE BEEN OFFERED BY THE ASSESSEE FOR TAXA TION IN THIS YEAR. THE LD.CIT(A) HAS CONFIRMED THE ADDITION MADE BY TH E AO. ITA NO.1950/AHD/2012 5 9. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE SUBMI TTED THAT ASSESSEE IS TAXABLE AT THE SAME RATE OF TAX IN THE ASSTT.YEA R 2009-10 AND 2010- 11. EVEN IF THIS AMOUNT HAS SUFFERED TAX IN A.Y.20 09-10, THEN IT SHOULD NOT BE TAXED IN ASSTT.YEAR 2010-11. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF PR.COMMISSIONER OF INCOME-TAX VS. GUJARAT GAS FINAN CIAL SERVICES LTD., 60 TAXMANN.COM 483 (GUJ). HE ALSO MADE REFERENCE T O THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. G UJARAT APOLLO INDUSTRIES LTD., 55 TAXMANN.COM 158 (GUJ). FOR HIS ALTERNATIVE CONTENTION, HE RELIED UPON THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. AJAY FORGINGS PVT. LTD ., 257 ITR 0572. HE FURTHER RELIED UPON THE ORDER OF THE ITAT IN CASE O F PERFECT EQUIPMENTS VS. DCIT, 85 ITD 50 (AHD). ON STRENGTH OF THESE DE CISIONS, HE CONTENDED THAT INTEREST INCOME SHOULD NOT BE SUFFER ED TAX TWICE I.E. 2009-10 AND AGAIN IN 2010-11. 10. ON THE OTHER HAND, THE LD.DR RELIED UPON THE OR DER OF THE AO. HE POINTED OUT THAT BEFORE THE AO, THE ASSESSEE DID NO T RAISE THIS ALTERNATIVE CONTENTION. IT WAS RAISED FOR THE FIRS T TIME BEFORE THE LD.CIT(A). HE ALSO CONTENDED THAT AT THIS STAGE FR OM THE RECORD, IT IS NOT DISCERNIBLE WHETHER THE ASSESSEE HAS OFFERED TH IS AMOUNT FOR TAXATION OR NOT. 11. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGARD TO THE PROPOSITION THAT TRUE INCOME OF AN ASSESSEE IS TO BE ASSESSED IN THE YEAR IN WHICH SUCH INCOME HAS ARISEN. SIMILARLY, IT IS ALSO NOT IN DI SPUTE THAT THE CORRECT INCOME IS TO BE ASSESSED IN THE HANDS OF THE CORREC T PERSON. THE ASSESSEE CANNOT BE PERMITTED TO SHIFT TAX LIABILITY IN ANY OTHER ASSESSMENT YEAR WHERE INCOME WAS NOT GENERATED. PA YMENT OF TAXES IN A PARTICULAR YEAR IS NOT BY CHOICE OF THE ASSESSEE, RATHER IT IS BY ITA NO.1950/AHD/2012 6 OPERATION OF LAW. NEITHER THE RATE OF PAYMENT OF T AX NOR OFFERING OF ANY INCOME IN A PARTICULAR YEAR CAN ABSOLVE ASSESSEE FR OM PAYMENT OF TAX BY OPERATION OF LAW. OTHERWISE, IT WILL BE DISCRET ION OF AN ASSESSEE TO OFFER AN INCOME IN A PARTICULAR YEAR. FOR EXAMPLE, AN ASSESSEE MIGHT HAVE HUGE LOSSES IN A PARTICULAR YEAR, AND HE WOULD LIKE TO SHIFT THE TAXABLE INCOME TO THAT YEAR. AS FAR AS DECISIONS R EFERRED BY THE ASSESSEE ARE CONCERNED, THESE ARE NOT STRICTLY APPL ICABLE IN THE PRESENT CASE. BECAUSE IN THE CASE OF GUJARAT GAS FINANCIAL SERVICES LTD. (SUPRA), DISALLOWANCE UNDER SECTION 40A(2) WAS MADE , WHICH IS TO BE MADE WHEN FACTS EXHIBITING NEXUS BETWEEN THE ASSESS EE AND A SPECIFIED PERSON WHO HAS CONTROL OVER OPERATION OF THE ASSESS EE SHOWING UNDUE BENEFITS IS BEING EXTENDED BY AN ASSESSEE TO SUCH P ERSON FOR AVAILING SERVICES OR PRODUCTS. IN THAT CASE, HONBLE COURT H AS OBSERVED THAT THE ASSESSEES ARE ASSESSED AT SAME RATE OF TAX, AND THE RE CANNOT BE ANY INTENTION FOR AVOIDANCE OF TAX. THUS, FACTS ARE QU ITE DISTINGUISHABLE. AS FAR AS HONBLE CALCUTTA HIGH COURTS DECISION IS CO NCERNED, IN THAT CASE THE TRIBUNAL HAS MADE OBSERVATION THAT A PARTICULAR ITEM WAS NOT TAXABLE IN A PARTICULAR YEAR. IT HAS NOT PASSED AN Y DIRECTION THAT IT SHOULD BE ALLOWED IN THE NEXT YEAR. THE TRIBUNAL H AS MADE OBSERVATION THAT DEBIT NOTE RECEIVED ON 15.7.1984 COULD NOT BE CLAIMED IN ASSTT.YEAR 1985-86. ACCORDING TO THE HONBLE HIGH COURT IN COMPLETENESS OF THE ORDER, TRIBUNAL HAS JUST MADE A N OBSERVATION. A PERUSAL OF THE RECORD WOULD SHOW THAT THE INTEREST INCOME HAS ACCRUED TO THE ASSESSEE IN THIS YEAR, AND ITS TAXABLE IN TH IS YEAR. THERE IS NO DISPUTE WITH REGARD TO THIS PROPOSITION. DISPUTE R ELATES TO THE ISSUE WHETHER THE TRIBUNAL CAN GIVE DIRECTION FOR EXCLUSI ON OF INTEREST INCOME OFFERED BY THE ASSESSEE IN ASSTT.YEAR 2010-11. ACC ORDING TO THE LD.DR, ASSESSMENT YEAR 2010-11 IS NOT OPEN BEFORE THE TRIB UNAL. IT IS FOR THE ASSESSEE TO CHALLENGE ANY INCLUSION OF THE INTEREST INCOME IN THAT YEAR. THAT PROCEEDINGS WILL BE AN INDEPENDENT PROCEEDINGS . ON THE OTHER ITA NO.1950/AHD/2012 7 HAND, THE CONTENTION OF THE ASSESSEE IS THAT TRIBUN AL HAS VAST POWER. IT CAN GIVE DIRECTION TO THE AO FOR TAKING UP THE ISSU E IN NEXT ASSESSMENT YEAR AND EXCLUDE IT FROM THE TAXABLE INCOME. FOR B UTTRESSING THIS CONTENTION, ORDER OF THE ITAT IN THE CASE OF PERFEC T EQUIPMENTS VS. DCIT (SUPRA) HAS BEEN PUT IN SERVICE. 12. ON DUE CONSIDERATIONS OF THE FACTS AND CIRCUMST ANCES, WE FIND THAT THE TRIBUNAL WAS CONFRONTED WITH ALMOST SIMILA R POSITION IN THE CASE OF PERFECT EQUIPMENTS (SUPRA). FINDING RECORDED BY THE TRIBUNAL PARA 7 TO 11 IS RELEVANT FINDING ON THIS ISSUE, AND WE DEE M IT APPROPRIATE TO TAKE NOTE ON THIS FINDING. 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE STRING OF JUD ICIAL AUTHORITIES CITED BEFORE US. THERE IS NO DISPUTE IN THE PROPOSITION THAT THE TRIBUNAL BY VIRTUE OF THE POWERS VESTED UP ON IT UNDER THE PROVISIONS OF SECTION 254(1) FOR DISPOSAL OF AN APP EAL MAY PASS SUCH ORDERS THEREON AS IT THINKS FIT. THE TRIBUNAL WOULD OBVIOUSLY PASS THE ORDERS WHICH HAVE A BEARING ON THE SUBJECT -MATTER OF APPEAL AND CANNOT POSSIBLY RECORD FINDING OR DIRECT ION ON INCIDENTAL ISSUES WHICH ARE NOT CONNECTED WITH THE SUBJECT-MATTER OF APPEAL. THE VARIOUS PROVISIONS ENACTED BY THE LE GISLATURE IN CHAPTER XIV OF THE INCOME-TAX ACT, 1961 VIZ. SECTIO NS 153(2A) AND 153(3) AS WELL AS THE TWO EXPLANATIONS APPENDED BELOW SUB- SECTION (3) OF SECTION 153, WHICH LIFT THE BAR OF T IME LIMITATION FOR GIVING EFFECT TO THE FINDING OR DIRECTION GIVEN BY THE TRIBUNAL, AMPLY BRING OUT THE LEGISLATIVE INTENTION FOR ENLAR GED AMBIT OF APPELLATE JURISDICTION OF THE TRIBUNAL CONFERRED UN DER SECTION 254(1). OBVIOUSLY IF SECTION 254(1) IS TO BE CONSTR UED AS PROHIBITING THE TRIBUNAL FROM GIVING ANY DIRECTION OR FINDING IN RELATION TO ANY ASSESSMENT YEAR OTHER THAN THE ASSE SSMENT YEAR UNDER APPEAL, THERE WAS OBVIOUSLY NO OCCASION FOR T HE LEGISLATURE TO INCLUDE VARIOUS SECTIONS IN CHAPTER XIV FOR LIFT ING THE BAR OF TIME LIMITATION TO INITIATE PROCEEDINGS FOR ASSESSM ENT IN CONSEQUENCE OF SUCH DIRECTIONS OR FINDINGS. THE ONL Y LIMITATION ON THE POWERS OF THE TRIBUNAL TO GIVE DIRECTIONS OR FI NDING IN RELATION TO ANOTHER ASSESSMENT YEAR WOULD BE THAT THESE ARE NECESSARY FOR THE DISPOSAL OF APPEAL AND ARE NOT MERELY INCIDENTA L. ITA NO.1950/AHD/2012 8 8. WITH REGARD TO SECTION 153(3) AND EXPLANATIONS A PPENDED THERETO, THE ID. D.R. PUT FORTH THE CONTENTION THAT THESE PROVISIONS IN CHAPTER XIV OF THE INCOME-TAX ACT ARE INTENDED F OR BRINGING TO TAX ESCAPED INCOME FOR ANY ASSESSMENT YEAR AND COUL D NOT BE PRESSED INTO SERVICE FOR THE PURPOSE OF FINDING OR DIRECTION BY THE TRIBUNAL IN RESPECT OF CLAIM OF DEDUCTIONS FOR ASSE SSMENT YEARS OTHER THAN THE YEAR UNDER APPEAL BEFORE THE TRIBUNA L. WE FEEL THAT THE ARGUMENT OF THE ID. D.R. SUFFERS FROM AN INHERE NT INFIRMITY INASMUCH AS IT PROCEEDS ON THE FOOTING THAT THE POW ERS OF THE TRIBUNAL TO RECORD FINDING OR DIRECTION IN RESPECT OF OTHER ASSESSMENT YEAR ARE DERIVED FROM THE RELEVANT PROVI SIONS OF CHAPTER XIV OF THE ACT. THE AMBIT OF APPELLATE JURI ISDICTION OF THE TRIBUNAL IS GOVERNED BY THE PROVISIONS CONTAINED UN DER SECTION 254( 1) AND NOT BY THE PROVISIONS IN CHAPTER XIV OF THE ACT. AS WE HAVE ALREADY INDICATED HEREINBEFORE SECTION 153(3) AS WELL AS THE TWO EXPLANATIONS APPENDED THEREUNDER LIFT THE BAR O F TIME LIMITATION FOR GIVING EFFECT TO THE FINDING OR DIRE CTION CONTAINED IN THE ORDER OF THE TRIBUNAL REGARDING BRINGING TO TAX THE ESCAPED INCOME. THE SOURCE OF SUCH APPELLATE POWERS CONFERR ED ON THE TRIBUNAL WOULD ESSENTIALLY BE ATTRIBUTED TO THE PRO VISIONS CONTAINED UNDER SECTION 254(1). IF SECTION 254(1) I S CONSTRUED AS EXTENDING THE APPELLATE JURISDICTION OF THE TRIBUNA L TO RECORD FINDING OR DIRECTION TO INCLUDE INCOME FOR ASSESSME NT YEAR OTHER THAN THE ASSESSMENT YEAR UNDER APPEAL, WE ARE UNABL E TO UNDERSTAND AS TO WHY A SIMILAR FINDING OR DIRECTION IN RESPECT OF DEDUCTION OF ANY EXPENDITURE RELATING TO OTHER ASSE SSMENT YEAR CANNOT BE GIVEN BY THE TRIBUNAL. IT IS AN ADMITTED POSITION THAT SUCH FINDING OR DIRECTION, WITH RESPECT TO INCOME O R EXPENDITURE WOULD BE INEXTRICABLY LINKED WITH THE SUBJECT-MATTE R OF APPEAL AND WOULD BE NECESSARY FOR THE DISPOSAL OF THE APPEAL. IT MAY FURTHER BE NOTED THAT INSOFAR AS FINDING OR DIRECTION IN RE SPECT OF DEDUCTION OF CLAIM FOR ANY OTHER ASSESSMENT YEAR IS CONCERNED, THIS WOULD BE SUBJECT TO TIME LIMITATION AS CONTAIN ED IN THE SCHEME OF THE INCOME-TAX ACT. THE TIME LIMITATION H AS BEEN LIFTED ONLY WITH REGARD TO FINDING OR DIRECTION IN RESPECT OF INCLUSION OF INCOME FOR ANY OTHER ASSESSMENT YEAR AS SPECIFICALL Y PROVIDED IN THE VARIOUS PROVISIONS UNDER CHAPTER XIV OF THE INC OME-TAX ACT TO WHICH REFERENCE HAS ALREADY BEEN MADE BY US ABOVE. 9. THE ID. D.R. HAS CITED DECISION OF THE SUPREME C OURT IN MURLIDHAR BHAGWAN DAS'S CASE (SUPRA). THE SAID DECI SION HAS BEEN RENDERED IN THE CONTEXT OF THE SECOND PROVISO TO SE CTION 34(3) OF THE INDIAN INCOME-TAX ACT, 1922. WHILE CONSTRUING T HE EXPRESSIONS 'FINDING' AND 'DIRECTION' IN THE SECOND PROVISO TO SECTION 34(3), THE SUPREME COURT HELD THAT A FINDIN G COULD ONLY ITA NO.1950/AHD/2012 9 BE THAT WHICH WAS NECESSARY FOR THE DISPOSAL OF AN APPEAL IN RESPECT OF AN ASSESSMENT YEAR OF A PARTICULAR YEAR. EVEN THOUGH THE RELEVANT PROVISIONS FOR LIFTING THE BAR OF TIME LIMITATION FOR GIVING EFFECT TO THE FINDING OR DIRECTION AS CONTAI NED IN 1961 ACT ARE WORDED IN TERMS WHICH ARE UNEQUIVOCAL AND EXPLI CIT AS COMPARED WITH THE 1922 ACT, YET THE BASIC PROPOSITI ON, ENUNCIATED IN MURLIDHAR BHAGWAN DAS'S CASE (SUPRA) STILL HOLDS THE GROUND THAT A 'FINDING' CONTAINED IN THE ORDER OF THE TRIB UNAL COULD ONLY BE THAT WHICH WAS NECESSARY FOR THE DISPOSAL OF AN APPEAL IN RESPECT OF AN ASSESSMENT YEAR OF A PARTICULAR YEAR. SIMILAR PROPOSITION HAS BEEN LAID DOWN IN THE VARIOUS DECIS IONS CITED BY THE ID. D.R. TO WHICH REFERENCE HAS BEEN MADE ABOVE . 10. WE MAY NOW CONSIDER THE FACTS OF THE INSTANT CA SE IN THE CONTEXT OF THE AFOREMENTIONED LEGAL POSITION. THE B ASIC ISSUE WHICH ARISES BEFORE US IS REGARDING THE YEAR IN WHI CH THE AFOREMENTIONED COMMISSION OF RS. 1,91,611 IS LIABLE TO BE DEDUCTED. THE ADMITTED FACTS ARE THAT THE DEBIT NOT ES HAVE BEEN ISSUED BY THE SELLING AGENT AND RECEIVED BY THE ASS ESSEE DURING THE PERIOD RELEVANT FOR ASSESSMENT YEAR 1991-92 WHE REAS THE ASSESSEE HAS CLAIMED DEDUCTION FOR THE COMMISSION F OR ASSESSMENT YEAR 1992-93 WHICH IS THE SUBJECT-MATTER OF THE PRESENT APPEAL ON THE GROUND THAT CLAIM HAS BEEN SE TTLED DURING THIS YEAR. NO EVIDENCE WHATSOEVER AT ANY STAGE HAS HOWEVER BEEN PRODUCED IN SUPPORT OF THE CLAIM THAT THERE WERE AN Y DIFFERENCES AND SUCH DIFFERENCES WERE SETTLED IN THE PRESENT AS SESSMENT YEAR. IN THESE CIRCUMSTANCES THE CONCLUSION OF THE ID. CI T(A) THAT THE AMOUNT OF COMMISSION DOES NOT FALL FOR DEDUCTION FO R THE ASSESSMENT YEAR 1992-93 SINCE THE DEBIT NOTES HAVE BEEN RECEIVED IN THE EARLIER ASSESSMENT YEAR IS LIABLE T O BE UPHELD. 11. REGARDING THE ALTERNATIVE CONTENTION OF THE ASS ESSEE THAT DEDUCTION MAY BE ALLOWED IN THE PRECEDING ASSESSMEN T YEAR 1991-92, IT IS RELEVANT TO NOTE THAT SUCH AN ALTERN ATIVE CONTENTION HAS BEEN MADE EVEN AT THE ASSESSMENT STAGE BY THE A SSESSEE AS EVIDENT FROM THE ASSESSEE'S LETTER DATED 21-12-1994 PLACED IN THE PAPER BOOK AT PAGE 45. THE REVENUE AUTHORITIES HAVE HOWEVER DISALLOWED THE CLAIM OF DEDUCTION FOR ASSESSMENT YE AR 1992-93 WITHOUT CONSIDERING THE ALTERNATIVE CONTENTION OF T HE ASSESSEE THAT CLAIM MAY OTHERWISE BE ALLOWED FOR 1991-92. IN OUR VIEW FOR DECIDING THE CONTROVERSY BEFORE US, IT WOULD BE NEC ESSARY TO REACH A FINDING AS TO WHICH ASSESSMENT YEAR THE COMMISSIO N HAS FALLEN DUE FOR PAYMENT. THE CLAIM OF THE ASSESSEE IS THAT COMMISSION HAS FALLEN DUE ON SETTLEMENT OF DISPUTES IN ASSESSM ENT YEAR 1992-93 WHEREAS REVENUE'S CLAIM IS THAT THE COMMISS ION HAS ITA NO.1950/AHD/2012 10 FALLEN DUE WHEN DEBIT NOTES HAVE BEEN RECEIVED IN A SSESSMENT YEAR 1991-92. FOR RESOLVING THE ENTIRE ISSUE IT IS APPARENTLY NECESSARY TO RECORD A FINDING AS TO WHICH ASSESSMEN T YEAR THE COMMISSION RELATES. SINCE WE HOLD THE VIEW THAT DEB IT NOTES HAVE BEEN RECEIVED IN ASSESSMENT YEAR 1991-92 AND THERE IS NO EVIDENCE THAT ANY DISPUTE OR CONTROVERSY HAS BEEN R AISED BY THE ASSESSEE, THE COMMISSION IN QUESTIONS HAS FALLEN DU E IN ASSESSMENT YEAR 1991-92 AND NO SUCH COMMISSION IS D EDUCTIBLE FOR ASSESSMENT YEAR 1992-93. WE HOLD ACCORDINGLY. T HE CLAIM OF DEDUCTION OF RS. 1,91,611 IS THEREFORE ALLOWABLE FO R ASSESSMENT YEAR 1991-92 AND NOT FOR ASSESSMENT YEAR 1992-93. W ITH THESE OBSERVATIONS THE APPEAL OF THE ASSESSEE FOR ASSESSM ENT YEAR 1992-93 UNDER REFERENCE IS THEREFORE DISPOSED OF AS ABOVE. 13. A PERUSAL OF THE ABOVE WOULD INDICATE THAT DEBI T NOTE WAS REQUIRED TO BE CONSIDERED IN THE ASSTT.YEAR 1991-92, BUT IT WAS CONSIDERED IN ASSTT.YEAR 1992-93. THE ASSESSEE HAS CLAIMED COMMI SSION EXPENDITURE FOR ASSTT.YEAR 1992-93 AND ULTIMATELY IT REVEALED T HAT IT WAS TO BE CLAIMED ASSTT.YEAR 1991-92. THE ASSESSEE HAS RAISE D ALTERNATIVE PLEA BEFORE THE AO AND CONTENDED THAT IN CASE IT IS NOT ADMISSIBLE IN ASSTT.YEAR 1992-93, THEN IT WOULD BE ALLOWED IN THE ASSTT.YEAR 1991-92. THE TRIBUNAL HAS CONSIDERED POSITION OF LAW ON THIS ASPECT AND HELD THAT FINDING CAN BE RECORDED FOR PERMITTING THE ASSESSEE TO CLAIM AN EXPENDITURE WHICH WAS RELATED TO SOME OTHER YEAR, T HAN THE YEAR IN WHICH IT WAS CLAIMED AND DISPUTED BEFORE THE TRIBUN AL. IN OTHER WORDS, IN THE CASE OF PERFECT EQUIPMENTS(SUPRA), CLAIM WAS MADE FOR THE ASSTT.YEAR 1992-93, WHEREAS IT WAS MEANT FOR ASSTT. YEAR 1991-92. THE TRIBUNAL HAS DECIDED THE ISSUE BY OBSERVING ALTERNA TIVE PLEA THAT CLAIM WAS ALLOWABLE IN THE ASSTT.YEAR 1991-92 AND NOT IN THE ASSTT.YEAR 1992- 93. CONSIDERING THIS ASPECT, AND ON THE STRENGTH O F VARIOUS AUTHORITATIVE JUDGMENTS, WE ARE OF THE VIEW THAT IN TEREST INCOME IS TAXABLE IN THE YEAR 2009-10, AND IF THE ASSESSEE HA S OFFERED THE SAME INCOME FOR TAXATION FOR THE ASSTT.YEAR 2010-09, TH E APPROPRIATE ACTION BE TAKEN BY THE LD.AO, IN CASE AN APPLICATION IS BE ING MOVED BY AN ITA NO.1950/AHD/2012 11 ASSESSEE. WE OBSERVE THAT SAME INCOME SHOULD NOT S UFFER TAX TWICE. LD.AO SHALL TAKE ACTION IN ACCORDANCE WITH LAW. 14. FOR TAKING NOTE OF THE GRIEVANCE OF THE ASSESSE E IN THE NEXT GROUND, WE DEEM IT APPROPRIATE TO TAKE NOTE OF BRIE F FACTS FIRST. THE LD.AO HAS DISALLOWED A SUM OF RS.7,19,385/- UNDER S ECTION 40(A)(IA) OF THE ACT. OUT OF WHICH ONE AMOUNT RELATES TO PAYMEN T OF RS.6,25,000/- TO HARSHA ELECTRICALS. THIS AMOUNT WAS DISALLOWED BY THE AO FOR THE REASON THAT THE ASSESSEE FAILED TO MAKE TDS DEDUCTI ON WHILE MAKING PAYMENT. ON APPEAL, THE LD.CIT(A) OBSERVED THAT SI NCE IT WAS A PAYMENT FOR PURCHASE OF ELECTRICAL ITEMS, THE ASSES SEE WAS NOT SUPPOSED TO DEDUCT TDS. THUS IN A WAY, LD.CIT(A) D ID NOT APPROVE THE ACTION OF THE AO FOR MAKING DISALLOWANCE, BUT ALTER NATIVELY GIVEN DIRECTION TO THE AO TO CONSIDER IT AS CAPITAL EXPEN DITURE, BECAUSE IT RELATES TO ELECTRICAL FITTINGS AND ALLOW DEPRECIATI ON ON THIS AMOUNT. 16. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT WITHOUT GIVING ANY NOTICE TO THE ASSESSEE, THE LD.CIT(A) HAS CHANGED T HE CHARACTER OF THE ADDITION MADE BY THE AO WHO FAILED TO RECORD ANY FI NDINGS AS TO WHY IT TO BE CONSIDERED AS CAPITAL ASSETS. THE LD.DR ON T HE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(A). 17. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. THE AO HAS CULLED OUT FOUR PAYME NTS MADE BY THE ASSESSEE AND APPEARING IN ANNEXURE-H WITH AUDIT REP ORT. HE OBSERVED THAT IN ALL THESE FOUR PAYMENTS, ASSESSEE FAILED TO DEDUCT TDS, THEREFORE HE APPLIED SECTION 40(A)(IA) OF THE ACT F OR MAKING THE DISALLOWANCE. THE ASSESSEE HAS GIVEN ITS EXPLANATI ON AS TO WHY ON THESE PAYMENTS, IT WAS NOT REQUIRED TO BE DEDUCT TD S. THE EXPLANATION OF THE ASSESSEE HAS BEEN APPEARING IN THE WRITTEN S UBMISSIONS REPRODUCED BY THE AO ON PAGE NO.12. IT READS AS UN DER: ITA NO.1950/AHD/2012 12 IN VIEW OF THE ABOVE, THE ASSESSEE WAS ASKED TO SH OW CAUSE WHY THE ABOVE AMOUNT SHOULD NOT BE DISALLOWED. .IN RESP ONSE, THE ASSESSEE VIDE SUBMISSION DTD. 10/10/2011 SUBMITTED AS UNDER: '4) THE AUDITOR IN HIS REPORT IN FORM NO. 3CD ANNEX URE H HAS OBSERVED THAT NO TAX HAS BEEN DEDUCTED AT SOURCE. F OLLOWING STATEMENT GIVES THE DETAILS OF PAYMENTS MADE WITHOU T DEDUCTION OF TAX AT SOURCE: SR NO. NAME OF PARTY NATURE OF WORK AMOUNT (RS.) REASONS FOR NON DEDUCTION OF TAX AT SOURCE 1 DALKIN AIR CONDITIONING AC REPAIRING WORK 18540 PAYMENT HAS BEEN MADE FOR REPAIRING WHICH IS NOT IN THE NATURE OF CONTRACT. HENCE THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE. 2 HARSHA ELECTRICLAS ELECTRICAL & FITTING A/C 625000 PAYMENT HAS BEEN MADE FOR SUPPLY OF MATERIAL. THERE WAS NO CONTRACT WITH THE PARTY FOR SUCH SUPPLY. HENCE, THERE WAS NO LEGAL OBLIGATION TO DEDUCT TAX AT SOURCE. 3 SURYA OFFSET ADVT A/C 50000 EXPENDITURE BEING IN THE NATURE OF ADVERTISEMENT DID NOT ATTRACT TDS LIABILITY. 4\ HARILAL M VYAS REPAIRS & MAINTENANCE ''-_''',- 50000 TDS OF RS.1030/- HAS ALREADY BEEN DEDUCTED AND DEPOSITED TO THE CREDIT OF THE GOVERNMENT ACCOUNT. COPY OF THE CHALLAN IS ENCLOSED. THE AUDITOR HAS BY MISTAKE MENTIONED THAT NO TDS HAS BEEN MADE IN RESPECT OF THIS PAYMENT. ITA NO.1950/AHD/2012 13 18. ON APPEAL, IN PRINCIPLE, THE LD.CIT(A) HAS CONC URRED WITH THE ASSESSEE THAT THE TDS WAS NOT TO BE DEDUCTED ON THE PAYMENTS MADE TO HARSHA ELECTRICALS, BECAUSE IT WAS FOR THE PURCH ASE OF ELECTRICAL FITTINGS, BUT ULTIMATELY, THE LD.CIT(A) HAS CONSIDE RED IT AS CAPITAL EXPENDITURE AND DIRECTED THE AO TO ALLOW DEPRECIATI ON ON IT. 19. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD. HE DISALLOWED CLAIM OF THE ASSE SSEE ON ACCOUNT OF NON-DEDUCTION OF TDS. THUS, THE LD.CIT(A) HAS CHAN GED THE COLOUR OF THE DISPUTE. THE LD.CIT(A) THEREAFTER DID NOT CONF RONT THE ASSESSEE AS TO WHY THIS EXPENDITURE SHOULD NOT BE TREATED AS CA PITAL EXPENDITURE. SIMILARLY, THE LD.CIT(A) HIMSELF HAS ALSO NOT TALLI ED WITH ITEMS PURCHASED BY THE ASSESSEE WHETHER THESE ELECTRICAL FITTINGS W ERE MEANT FOR REPAIRING WORK OR THEY ARE RELATED TO SOME NEW PROD UCTS/ITEMS. CONSIDERING THIS ASPECT, WE VACATE THE FINDINGS OF THE LD.CIT(A). THE EXPENDITURE CANNOT BE DISALLOWED TO THE ASSESSEE, B ECAUSE IT WAS NOT REQUIRED TO DEDUCT TDS ON THE PURCHASES. IN CASE T HE AO HAS GRANTED DEPRECATION, THEN, HE WILL WITHDRAW DEPRECIATION AN D ALLOW THE EXPENDITURE AS REVENUE EXPENDITURE. THUS, THIS GRO UND OF APPEAL IS ALLOWED. 20. IN THE GROUND NO.5, DISPUTE IS WITH REGARD TO D ISALLOWANCE OF RS.94,385/- UNDER SECTION 40(A)(IA) OF THE ACT. 21. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. AS OBSERVED EARLIER, THE ASSESSEE MADE PAYMENT TO FOUR PARTIES ON WHICH IT HAS NOT DEDUCTE D TDS. THE LD.AO WAS OF THE OPINION THAT THE ASSESSEE SHOULD DEDUCT TDS ON THESE PAYMENTS. IN THIS GROUND PAYMENTS TO HEMAL SHAH AS SOCIATE AND SURYA OFFSET ARE BEING DISPUTED. WITH REGARD TO SU RYA OFFSET, IT WAS CONTENDED THAT IT WAS AN EXPENDITURE IN THE NATURE OF ADVERTISEMENT ITA NO.1950/AHD/2012 14 AND DID NOT ATTRACT TDS LIABILITY. WE FIND THAT SO LITARY ARGUMENT RAISED BY THE ASSESSEE WAS THAT PAYMENT DID NOT EXCEED RS. 50,000/- AND THEREFORE, LIABILITY FOR TDS DEDUCTION DOES NOT ARI SE. THE LD.CIT(A) HAS CONSIDERED THIS ASPECT AND OBSERVED THAT THE ASSESS EE WAS REQUIRED TO DEDUCT TDS UNDER SECTION 194C WHERE THE LIMIT IS RS .20,000/-. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE FAILED TO CONTR OVERT THIS FINDING OF THE CIT(A). SIMILAR ARGUMENT WAS RAISED WITH REGAR D TO THE PAYMENT MADE TO HEMAL SHAH AND ASSOCIATES. THE LD.CIT OBSE RVED THAT LIMIT WAS OF RS.20,000/- WHICH HAS BEEN EXCEEDED BY THE A SSESSEE. IN VIEW OF THIS FINDING OF CIT(A), WE DO NOT SEE ANY REASON TO INTERFERE IN IT. THIS GROUND OF APPEAL IS REJECTED. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 18 TH APRIL, 2017 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER