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2014 (1) TMI 1352 - ITAT MUMBAISharing of common pool expenses - Held that:- Decision in Ahuja Platinum Properties(P) Ltd. Versus JCIT & ACIT [2014 (1) TMI 743 - ITAT MUMBAI] followed - It was accepted by the AO in that M/s. Jaygopal Consultancy Services Private Limited was functioning on 'no loss no profit basis' and no commercial activity was carried out by it except for incurring expenses on behalf of the group companies as a 'pool company' - The cost is recovered in proportion to the construction/development cost incurred by each of the group companies - No case for invocation of section 40A(2)(a) of the Act is made out - It cannot be said that the payment was not for purpose of business or was excessive or unreasonable - Decided against Revenue. Interest paid by the assessee to sister concern - Held that:- There has been no factual examination of the matter by the ld. CIT(A) for the current year - The rate of interest, is subject to market fluctuations over time - The rates in the instant case are increasing with reference to the rate of 19.5% for A.Y. 2003-04, being at 21.25% for A.Y. 2005-06, declining marginally to 20.50% for A.Y. 2007-08 - There is no basis to the finding of the brokerage rate at 3%, which again cannot be considered as constant in a free and competitive market - In the regime of declining interest rates, the same ought to be much lower - The reliance by the ld. CIT(A) on the order by his predecessor for A.Y. 2003-04 is thus completely misplaced - The interest rates are subject to variation over time, so that a finding in its respect would need to precede a factual examination and determination - The issue has been restored for fresh adjudication. Disallowance u/s. 40A(2)(a) in respect of purchase of building material from associate concerns - Held that:- No material had been brought on record by the Revenue to prove the claim by the Assessing Officer that the rate charged by the associate concern, M/s. Topaim Properties Pvt. Ltd., was on the higher side - Decision in Ahuja Platinum Properties(P) Ltd. Versus JCIT & ACIT [2014 (1) TMI 743 - ITAT MUMBAI] followed - Decided against Revenue. Disallowance u/s 36(1)(iii) of the Act – Relatable Interest – The CIT(A) has paased the order having been influenced by the year-end balances, also adopted by the A.O. in the instant case which may not be indicative of the correct fund availment obtaining during the year - It is the average outstanding during the year and not the year-end balance that is relevant - Interest, would depend on the resource actually utilized - The interest incurred, a part of which is disallowed for diversion for non-business purposes, is only in terms of its average utilization - As funds are generally raised only for business purposes, the assessee would need to establish non utilization of interest-free funds for business purposes as at the beginning of the year - The issue has been restored for fresh adjudication.
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