FROM MY ARCHIVES-ITAT, KOLKATA UNREPORTED DECISIONS ( Part 5)

 1) MANAS KUMAR GIRI

ITA No.1578/Kol /2016 dtd 31.07.2018

SECTION 40A (3) :

Whether where genuineness of payments made to the party is not doubted by the Revenue, the provisions of section 40A(3) could be made applicable ?

Held,

“We note that in the assessee`s case under consideration, the identity of the payee is not in doubt and it is proved in a positive way by getting reply u/s 133(6) of the Act and reasonableness of the payment is also self- evidenced. The Assessing Officer in the assessment has accepted the genuineness of the payments. Therefore, since the genuineness of the payments made to the party is not doubted by the Revenue, the provisions of section 40A(3) could not be made applicable to the facts of the assessee’s case. The assessee had taken enough precautions from his side to ensure that the payee also does not escape from the ambit of taxation on these receipts by directly depositing the cash in the bank account of the payee and this fact also not disputed by the Revenue.”

 (relied on: 1- Rampada Panda vs ITO, Haldia, ITA No. 67(Kol.) of 2013 wherein it was held that since the genuinity of the payments made to the party cannot be doubted, the provision of sec. 40A(3) cannot be made applicable. The said section was inserted with the object of curbing expenditure in cash and to counter tax evasion. The CBDT circular reiterates this view (No. 6P dated 06.07.1968) that “this provision is designed to counter evasion of tax through claims for expenditure shown to have been incurred in cash with a view to frustrating proper investigation by the department as to the identity of the payee and the reasonableness of the payment.”

2- CIT vs Crescent Export Syndicate, ITA No. 202 of 2008, dated 30.07.2008 (Calcutta HC) held that since the transactions were genuine, section 40A(3) would not apply)

Note : Following further decisions are worth noting-

a)  M/s J A Daga Royal Arts vs ITO, ITA No. 1065/Jaipur/2016:

- the intent and the purpose for which section 40A(3) has been brought on the statute book has been satisfied in the instant case. Therefore, being a case of genuine business transaction and it being free from any vice of any device of evasion of tax, no disallowance is called for by invoking the provisions of section 40A(3) of the Act. (relied on Rajasthan HC’s decision in the case of Harshila Chordia vs ITO (2007) 208 CTR (Raj.) held that the exceptions contained in rule 6DD are not exhaustive and that the said rule must be interpreted liberally.)

b) M/s Bhattar Silver & Jewels (P) Limited vs ITO, ITA No. 2033/ Kol/ 2014:

   -  Amount of Rs. 35,500/- deposited by the assessee directly in the Bank account of the concerned vendor, no disallowance u/s 40A(3) can be made in view of the decision of Gujarat HC in the case of Anupam Tele Services vs ITO ( Appeal No. 556 of 2013 dated 22.01.2014) [ squarely covered in favour of the assessee] . Appeal of the assessee allowed 

2)   KHADIM INDIA LIMITED:

        [ITA NO. 108/Kol/2017 dtd 4.04.2018 ]

Issue 1:

Whether stamp duty and registration charges paid on acquiring leasehold premises for showrooms are allowable as revenue expenditure ?

Held,

Following co-ordinate Bench of Tribunal in assessee’s own case in ITA No.954/Kol/2012 for AY 2008-09 dated 10.07.2014, which decided the issue in favour of assessee and against the Revenue, it was held as under-

“9. We have heard both the counsel and perused the records. We find that the issue is covered in favour of the assessee by various decisions of the higher courts. In this regard we note the decision of Hon'ble Bombay High Court in the case of CIT vs Bombay Cycle & Motor Agency 118 ITR 42 (Bom) where the matter pertains to treatment of brokerage of stamp duty paid for acquisition of leasehold properties. The Hon'ble High Court held that the period of the lease was one of ten years, it does not constitute startling difference as would appeal to us to apply a different test than the one which we applied in Hoechst Pharmaceuticals Ltd. case 113 ITR 877 (Bom). It was held that in their view the expenses were rightly considered by the Tribunal as being of revenue in nature. Similarly the Hon'ble Bombay High Court in the case of CIT v. Cinceita Private Limited 137 ITR 652 considered the issue where the period of lease was 20 years. The Hon'ble Bombay High Court held that it must also be noted that the expenditure was in respect of stamp duty, registration charges and professional fee. There was no element of the premium in the amount claimed as expenditure. Moreover, this expenditure would have been the same even if the lease had been of a shorter duration provided the period of lease was more than one year.”

Issue 2:

Whether depreciation of scanner and router is to be charged at the reate applicable to computers i.e @60% .

Held - Yes

(relied on Delhi HC’s decision in the case of CIT vs BSES Rajdhani Powers Ltd. [ITA No. 1266 of 2010] which held that computer accessories and peripherals such as printers, scanners etc form an integral part of  the computer system and the same cannot be used without it. Since they formed a part of the computer system, depreciation @ 60% is to be charged. )

Further favourable decisions are-

i)                 ITO vs Omni Globe Information Technologies India (P.) Ltd.  [ 131 ITD 280   (Del)] ,

ii)               ITO vs Samiran Majumdar (2006) [98 ITD 119](Kol)

iii)              Container Corporation of India Ltd. Vs ACIT (2009)[30 SOT 284( Del) ]

iv)             Expeditors International India (P.) Ltd.  Vs ACIT , 118 TTJ 652

v)               Delhi HC’s decision in the case of CIT vs Citycorp Maruti Finance Ltd. In ITA No. 1712 & 1714/2010

vi)             vi) Mumbai Special Bench’s decision in the case of DCIT vs Datacraft India Ltd., in ITA No. 7462 & 754/Mum/2007.