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2013 (9) TMI 491 - ITAT MUMBAIDeemed Dividend u/s 2(22)(e) - Weather the CIT(A) erred in deleting the addition made by the A. O. on account of deemed dividend uls. 2(22)(e) - Held that:- The amount involved was a pure and simple business transaction-it was neither loan nor advance - The assessee had informed the AO from time to time about the transaction entered by him with KSEPL - In the books of accounts of KSPEL there entry was about flat - We have also considered the agreement - From these papers it can safely be said that transactions in question were business advances - We find that the FAA had dealt the issue about the provisions of Company-Act in detail and there was no legal infirmity in his order - He had taken note of minutes of meeting of KESPL – Following Smt. Tarulata Shyam And Others Versus Commissioner of Income-Tax, West Bengal [1977 (4) TMI 3 - SUPREME Court] - there were four conditions that must be satisfied before section2(22)(e) could be invoked - trade advance which were in the nature of money transacted to give effect to a commercial transaction could not be treated as deemed dividend – Decided against Revenue. Disallowance of Labour Charges - Whether the CIT(A) erred in deleting the addition of made by the A. O. on account of disallowance of part of the labour charges claimed by the assessee and directing to estimate the net profit at the rate of 8% of turnover and make suitable addition - Held that:- The assessee had maintained regular books of accounts and same were audited, that audit report u/s. 44ABwas filed, that the AO had not pointed out any specific defects, that he only stated that the bills were prepared on the last day without pointing out as to how he reached to that conclusion, that the reason for high percentage of labour charges was, that the the assessee had undertaken de-sludging and cleaning of drainage lines which was mainly labour oriented, that the AO could have only rejected the books of accou -nts and estimated 8% of the contract value as income from this business as per the provisions of section 44AD of the Act. As the AR of the assessee did not object to said estimation of 8% profit on the contract value in respect of M/s. Appollo so he directed the to rework the addition. If FAA had tried to restrict the disallowance on percentage method no fault can be found with his decision - No addition can be made by the AO on ad-hoc basis without relying on some documentary or oral evidences-for fastening tax liability to an assessee some kind of material was required proving that he had higher income than shown in the books of accounts - Suspicion, however strong, cannot take place of evidence – Decided against Revenue. Deemed Rent - Whether the CIT(A) erred in deleting the addition made by the A. O. on account of deemed rent in respect of Vishwa Ganga Flat out of the total addition made - Held that:- Vishwa Ganga flat was used for the purpose of providing temporary accommodation to the tenant, that the assessee was in the business of redevelopment of the building, that the AO had summarily rejected the claim of the assessee on the ground that no documentary evidence was filed, that the AO had mentioned that as when and what type of documentary evidence he required from the assessee, that the AO did not prove that that the property was not used for giving accommodation to the tenant by conducting appropriate enquiry - the addition made by the AO was deleted under the head deemed rent in respect of Vishwa Ganga flat. Disallowance on Interest Expenses - Whether the CIT(A) erred in deleting the addition made by the A. O. on account of disallowance of part of interest expenses claimed by the assessee - Held that:- The assessee had claimed interest amount of only Rs. 1. 31lacs whereas the AO mistook the same as Rs. 1, 35, 950/- and made addition in the assessment order, that the assessee had contended before the AO that the borrowals were made in the earlier years and same were used for business of redevelopment, that the AO did not conduct further verification and disallowed the interest on the ground that the assessee had made Investment in fixed assets as seen from the balance-sheet, the AO did not examine the issue in right perspective, that the addition was made on the basis of assumption and suspicion without examining the facts thoroughly, that there were minimum borrowing during the year under consideration, that the funds were used for the business of redevelopment in the earlier year, that same were entitled to deduction while computing the business income - AO was directed to delete the addition made – Decided against Revenue.
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