|
Advanced Search Options
Income Tax - Case Laws
Showing 361 to 380 of 585 Records
-
2013 (9) TMI 477
Adhoc disallowance of Expenditure - Loading and unloading expenses - CIT disallowed expenditure @ 20% - Held that:- it is a case of search assessment under section 153(A) of the Act. It is admitted fact that there is no incriminating material found pertaining to disallowance of expenses - in regular assessment additions on adhoc disallowance of 20% are not sustainable - Section 37 of the Act provides that if the assessee has laid out or expensed wholly and exclusively for the purpose of business, the expenses are allowable. In the case under consideration, there is no dispute about the fact that the expenditure was laid out and expended wholly and exclusively for the purpose of business. The A.O. did not find any contrary material to this fact. Once it is found that the expenditure has been laid out and expended wholly and exclusively for the purpose of business, such adhoc disallowance out of loading and unloading merely on the basis of presumption that the assessee has enhanced the expenses to reduce tax liability unless contrary material is available on record, such addition is not sustainable in law - Decided in favour of assessee.
Addition on account of DVO’s report - CIT confirmed disallowance - Held that:- there were no reasons to discard the books of account merely because the same were not found during the course of survey. The AO should have verified each and every entry from the books of account of the assessee on this issue before making reference to the DVO. However, no such findings have been given and the AO merely because the assessee did not produce bills and vouchers referred the matter to the DVO for estimating cost of construction. The findings of the AO are, therefore, not justified - It, therefore, appears that the matter requires reconsideration at the level of the AO - Decided in favour of assessee.
Addition of Rs.10,000/- on account of investment from undisclosed sources. - The assessee was asked to correlate the payments from books of accounts but the assessee failed to do so. When the register is found at the time of search and the assessee has failed to reconcile this entry in the register and books of account, the addition is warranted. The assessee has failed to reconcile this entry before us also and also failed to submit any material that this was accounted for in the regular books of account - Decided against Assessee.
-
2013 (9) TMI 476
Capital gain - Sale of property - defunct firm / dissolution of firm - Whether the property/plot of land in question was distributed or transferred by the assessee on 10-04-2000 when the deed of dissolution was executed - Held that:- The core issue before us is whether the property/plot of land in question was distributed or transferred by the assessee on 10-04-2000 when the deed of dissolution was executed and our answer is no as per the document on record. We find that the said property remained to be the property of the dissolved firm and it was sold by the assessee firm on 27-03-2003. The law is well settled that the firm in the eyes of law is not a separate legal entity but ultimately the rights or vested in the partners only. The Indian Partnership Act provides the effect on the dissolution of the firm by incorporating the different provisions like Sections 46, 47, 48, 49 and 50 etc. In fact the assessee’s case is supported by the sale deed of the said property dated 29-03-2003 in which the assessee firm is shown as seller no. 1 alongwith the partners.
It is seen that the Assessing Officer has wrongly applied Sec. 2(47) (v) of the Income-tax Act by observing that the partners by executing the deed of dissolution have become absolutely owners one of the share of the property.
Both the parties below have misinterpreted the provisions of law and by discarding the factual aspect taxed capital gain in A.Y. 2001-02. We therefore hold that the Assessing Officer was not justified to bring to tax the capital gain in hands of the assessee firm in the A.Y. 2001-02. We further hold that the property was sold by the assessee firm in the A.Y. 2003-04 and so far as the present property is concerned the said was not transferred to the partners at any time. As transfer contemplates the transferring the title and interest in the said property. - Decided in favor of assessee.
-
2013 (9) TMI 475
Capital gain - Cost of acquisition - Additional floor space index (FSI) - Taxability in the hands of Co. Group housing society (CGHS) - DRA required the developer to pay a sum of Rs. 3.05 crore as corpus fund to the society, additional sum of Rs. 1.50 crore in lieu of additional FSI and Rs. 30 lakh as additional benefit on account of reduction in area for the reason of road widening, nallah etc. Thus, the society was to receive the total of 4.85 crore from the builder in terms of the agreement. - Assessee has argued that assessee retaining the complete control over the property and having not handed over the possession, there could not be any transfer u/s 2 (47) (v). - assessee has also argued that the capital gain that can be charged is only in respect of transfer of additional FSI to which the assessee was entitled. The assessee had not transferred nor was required to transfer the land of which the assessee was absolute owner and the building occupied by the members. The transfer could take place only in respect of additional FSI which the assessee had acquired as per the Government policy and there was no cost of acquisition involved. Therefore, it has been argued that no capital gain can be charged in such a case in view of the judgment of Maheshwar Prakash-2 Co-operative Housing Society Ltd. Versus Income-tax Officer, Ward 19(2)(4) [2008 (5) TMI 455 - ITAT MUMBAI]
Held that:- The argument of assessee is supported by the decision of Mumbai bench of Tribunal in case of Jetha Lal D Mehta (2005 (1) TMI 595 - ITAT MUMBAI) and ACIT Vs. Geeta Devi Pasari (2006 (6) TMI 138 - ITAT BOMBAY-F) - the assessee retained full control over the existing building as well as the additional FSI available which had not been parted with. The assessee had received only a sum of Rs. 1.10 lakh from the developer which is stated to be reimbursement of expenses incurred by the assessee. In these circumstances we are of the view that no transfer had taken place in the year under consideration and, therefore, no capital gain can be charged in this year.
The additional FSI became available to the assessee due to operation of development control regulation which did not involve any cost. - no capital gain could be charged on the ground that no cost of acquisition was involved in the additional FSI. - Decided in favor of assessee.
-
2013 (9) TMI 474
Adjustment of arm's length price - purchase of Edible Oil - Malaysian Palm Oil Board (MPOB) - reliance on the data / quotation of 'Oil World'. - price benefit of +/-5% - Held that:- CIT(A) by well reasoned order has given a finding that the Oil World is an independent organization established in 1958 in Germany and provides independent forecasting services for oil seeds, oils and meals and providing primary information and professional analysis. He has further noted that the quotation adopted by Assessee from oil world is for Malaysia and not for Germany. The quotation on is an independent authentic trade quotation which cannot be ignored without any valid reason. He has further noted that no adjustment under section 92 (C) was required as all the prices at which the purchases were made were less than 5% of the arithmetical mean of the quotation from MPOB and Oil World. He has further noted that the assessee had entered into contract with A.E on long term basis for continuous supply of constant quality as to ensure continuity in production which was also an important factor for considering the ALP. - Decided against the revenue.
Disallowance of expenditure - Prior period expenditure - Held that:- CIT(A) while upholding the disallowance the expenses has noted that the assessee has not submitted any evidence to prove the that the expenses crystallized during the year either before the Assessing Officer or before CIT(A). From the paper book placed on record it is seen that the statement of expenses very clearly indicates that the expenses relates to A.Y. 2000-01 - Decided in favour of Revenue.
-
2013 (9) TMI 473
Exemption u/s 10(38) - Assessee received Long Term Capital Gains - Whether the assessee’s share transactions are in ‘capital assets’, though of long term tenor, or of trading stock - Revenue assessed it as business income u/s. 28 - Held that:- It is only the assessee, therefore, who needs to establish the basis of his considering some shares, though purchased in the regular course of its business of share trading, as not for acquisition of trading stock, but only as capital assets.
All the shares have been bought by the assessee in the regular course of his business, employing common funds, depositing them in the same D-Mat account, and even through the same broker and infrastructure. New shares are purchased deploying funds realized on the sale of such shares. To contend, therefore, of some such shares as being capital assets on the premise that the same are sold beyond one year of their purchase, is, therefore, clearly untenable.
The categorization as to whether the scrip acquired is as an investment or as a part of the assessee’s trading stock is primarily one of intention with which the share is purchased/held and, accordingly, gets to be decided at the stage of or upon acquisition itself. That the scrip may eventually be sold, in whole or in part, within a period less than that envisaged earlier, or within a period less than a year, is, however, a different matter, as perceptions and, consequently, decisions, even qua capital acquisitions, may vary or change with time. This would, however, not make it any less an investment, where acquired as such in the first place, so that the gain or loss arising thus would be a short term capital gain or loss, as the case may be - Following decision of CIT vs. Sutlej Cotton Mills Supply Agency Limited [1975 (7) TMI 2 - SUPREME Court] - Decided against assessee.
-
2013 (9) TMI 451
Disallowance of interest - Interest due to part refund - Interest on Interest - Held that:- there are two components of the tax paid by the assessee for which the assessee was granted refund, namely TDS of Rs.45,73,528 and tax paid after original assessment of Rs.1,71,00,320. The Department contends that the words any amount will not include the interest which accrued to the respondent for not refunding Rs.45,73,528 for 57 months. We see no merit in this argument. The interest component will partake of the character of the amount due under Section 244A. It becomes an integral part of Rs.45,73,528 which is not paid for 57 months after the said amount became due and payable. As can be seen from the facts narrated above, this is the case of short payment by the Department and it is in this way that the assessee claims interest under Section 244A of the Income-Tax Act. Therefore, on both the afore-stated grounds, we are of the view that the assessee was entitled to interest for 57 months on Rs.45,73,528/-. The principal amount of Rs.45,73,528 has been paid on December 31, 1997 but net of interest which, as stated above, partook of the character of amount due‖ under Section 244A - Interest payable under Section 234B and 234C become part of the demand notice issued under Section 156 and it is on this amount, i.e., the tax payable plus interest payable under Sections 234B and 234C that interest under Section 220(2) is calculated from the date mentioned in the notice of demand till the date of actual payment.
Under Explanation to Section 140A(1), it is stipulated where the amount paid by an assessee under self-assessment falls short of the aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable. The interpretation given by us follows the same principle, when Revenue defaults and makes part payment of the amount refundable. The aforesaid interpretation also ensures that the Assessing Officer/Revenue refund the entire amount, which is due and payable, including interest payable under Section 244A. It discourages part payment. There is no other provision under the Act under which an Assessing Officer/Revenue can be made liable to pay interest when part payment is made and the entire amount, which is refundable is not paid to the assessee. Otherwise the Assessing Officer/Revenue can refund the principal amount and not pay the interest component under Section 244A for an unlimited period with impunity and without any sanction, which would amount to granting premium to a non-compliance of law. In the present case, the interest component was withheld for the period ranging between 9 to 13 years - Decided in favour of assessee.
-
2013 (9) TMI 450
Disallowance of depreciation - Finance lease - Held that:- It is an undisputed fact that the income from lease has been considered by Assessee as income It is an undisputed fact that the AO has considered the lease entered by the Assessee to be a Finance lease to arrive at the conclusion that the assessee is not entitled to depreciation - disallowance as assessee’s use of vehicles was only by way of leasing out to others and not as actual user of the vehicles in the business of running them on hire - assessee is a public limited company engaged in the business of hire purchase, leasing and real estate - High Court allowed the appeal of revenue - As long as the asset is utilized for the purpose of business of the assessee, the requirement of Section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assessee. In the present case the assessee is a leasing company which leases out trucks that it purchases. Therefore, on a combined reading of Section 2(13) and Section 2(24) the income derived from leasing of the trucks would be business income, or income derived in the course of business, and has been so assessed. Hence, it fulfills the second requirement of Section 32 viz. that the asset must be used in the course of business. See CIT Karnataka, Bangalore Vs. Shaan Finance (P) Ltd., Bangalore [1998 (3) TMI 8 - SUPREME COURT] and M/S I. C. D. S. LTD. VERSUS COMMISSIONER OF INCOME TAX. MYSORE & ANR. [2013 (1) TMI 344 - SUPREME COURT] and assessee's own case [2013 (9) TMI 273 - ITAT AHMEDABAD] - Decided in favour of assessee.
Disallowance u/s 14A - Interest on tax free bonds and debentures and dividend income - Held that:- It is an undisputed fact that the Assessee has earned ₹ 39.65 Crore on account of interest on tax free bonds, debentures and dividend income which has been claimed as exempt. It is also a fact that the Assessee while computing the total income has suo motu disallowed ₹ 6.32 Crore u/s 14A. AO worked out the disallowance under Section 14A at ₹ 36.68 Crore and after setting off disallowance made by the assessee, he disallowed ₹ 30.45 Crore. We find that before AO, Assessee has not raised the contention about no disallowance u/s 14A and therefore the AO had proceeded ahead on the basis of suo moto disallowance made by the Assessee. CIT(A) had deleted the addition to the extent of ₹ 25.35 Crore - matter with respect to Nil disallowance under 14A be remitted back to the file of AO for examining it afresh. Thus the matter is remitted to the file of AO and he is directed to admit the issue and decide the issue afresh on merits. as per law after considering the submissions made by the Assessee and after giving a reasonable opportunity of hearing to the Assessee. Assessee is also directed and furnish promptly the details called for by the AO to decide the issue - Decided in favour of assessee.
Bad debts versus Provisions for bad and doubtful debts - rural banking - Scope and ambit of the proviso to Section 36(1)(vii) - whether deduction of the bad and doubtful debts actually written off in view of Section 36(1)(vii) limits the deduction allowable under the proviso to the excess over the credit balance made under clause (viia) of Section 36(1) – rural advances - Held that:- U/s 36(1)(vii), the assessee would be entitled to general deduction upon an account having become bad debt and being written off as irrecoverable in the accounts of the assessee for the previous year, while the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). The proviso to Section 36(1)(vii) will relate to cases covered under Section 36(1)(viia) and has to be read with Section 36(2)(v) of the Act. Thus, the proviso would not permit benefit of double deduction, operating with reference to rural loans. Therefore, we hold that provisions of Sections 36(1)(vii) and 36(1)(viia) are distinct and independent items of deduction and operate in their respective fields – Following decision of Catholic Syrian Bank Ltd. Versus Commissioner of Income Tax, Thrissur [2012 (2) TMI 262 - SUPREME COURT OF INDIA] - Decided in favor of assessee.
Penalty u/s 271(1)(c) - Held that:- assessee had disclosed all the material facts before the AO and CIT(A). When the assessee has made a particular claim in the return of income and has also furnished all the material facts relevant thereto, the disallowance of such claim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing inaccurate particulars thereof. This is a case of bona fide difference of opinion regarding the allowability of a claim of deduction between the Assessee and dept. What is to be seen is whether the said claim made by the assessee was bona fide and whether all the material facts relevant thereto have been furnished and once it is so established, the assessee cannot be held liable for concealment penalty under s. 271(1) (c) of the Act. In the present case all the necessary facts were furnished by Assessee. In the case of CIT Vs. Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT) the Hon. Apex Court has held that there making a claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of Assessee. In view of the totality of facts we are of the view that the addition does not call for levy of penalty under s. 271(1)(c) - Decided in favour of assessee.
-
2013 (9) TMI 449
Penalty u/s 271(1)(c) - Held that:- AO had levied penalty due to the additions made on estimate basis not relying on the Xerox copies of the vouchers and registers produced. Further it is evident from the submissions of the assessee that the assessee had produced substantial document to prove the genuineness of the transactions. The learned assessing officer was also convinced that the assessee had incurred expenditure considering the nature of business. The only dispute was with respect of quantum of allowable expenditure since the assessee had not produced all the relevant vouchers. Moreover the learned AO did not bring any materials on record that the assessee has claimed excess expenditure. In such circumstances the estimated addition does not necessarily indicate that there is concealment of income or furnishing of inaccurate particulars of income on the part of the assessee - Decided against Revenue.
-
2013 (9) TMI 448
Business income or capital gain - Sale and purchase of shares - Held that:- Assessee picked up the six common scrips for business of F&O as well as the STCG. This is the area of dispute between the parties and there is no issue on change of classification of STCG as LTCG or vice versa before us. There is no clarity on what basis certain transactions involving the same scrip are treated as business and others as STCG and the assessee has no explanation in this regard except relying on the book entries, which we rejected already for detailed reasons given above. In the process, the assessee got an unfair advantage of lower tax rates applicable to the STCG. Such advantage is allowable unless the onus cast on the assessee is demonstrated. Assessee could not demonstrate the reasons for such treatment, which turned out to be prejudicial to the interest of the revenue. Considering the failure of the assessee, we are of the opinion the decision of the AO becomes sustainable.
Quick realization of the profits - Held that:- Assessee maintains uniformly the closing stock worth Rs 17- Rs 18 lakhs in all recent AYs. The same is case with opening stocks of shares too. In fact, the opening and closing values are more or less equal. The number of scrips, transactions of purchase and sales also suggests the increasing trends for making quick business profits. Thus, the decision of the Tribunal in the case of Mukeshbhai Babulal Shah (2013 (9) TMI 151 - ITAT RAJKOT) which is relevant for the proposition that “where intention of the assessee behind purchase and sales of the shares was quickly to realize profits and not to earn dividend from them, the income would be assessable as business income”, helps the revenue.
The intention of acquiring the shares as investment for capital appreciation is not translated and instead the symptoms of going for quick profits are evident. The stock: turnover ratio at 1:16 does against the claims of the assessee. Other data relating to opening stocks and closing stocks on one side and the assessee’s final exiting from the so called claim of STCG at the end of 2011-12 indicates the assessee’s conduct for quick profits and not for investment. Of course, the holding period particulars also confirm the AO’s conclusions. - Decided in favour of Revenue.
-
2013 (9) TMI 447
Estimation of income - Reassessment u/s 153A pursuant to search u/s 132 or 132A - AO rejected books of account by invoking sections 145 (3) - Held that:- The Tribunal compared G.P. rate with the cases of the business houses carrying on the same business of carpet manufacturing in the same area, furnished before the A.O. and formed an opinion that the assessee's Gross Profit rate of 28.48% could not be enhanced 32.75%. In comparable cases GP declared was very low i.e. 9% to 21%. Looking at the GP declared by the assessee in different years the Tribunal found that the assessee has shown natural GP on the basis of books of account from year to year. The revenue failed to point any special circumstances for estimation of such high profit particularly when during the course of search no incriminating material was found. - Decided against the revenue.
-
2013 (9) TMI 446
Deduction u/s 80IB(10) - Project wise deduction - Whether the assessee is entitled for deduction u/s 80IB - Held that:- that for determining the amount which qualifies for deduction u/s 80IB(1), one has to compute the income from eligible business as if the eligible business was the only source of income of the assessee. In other words, the income or loss from other business or other activities are to be ignored for the purpose of determining the amount which is eligible for deduction u/s 80IB(1) of the Act - gross total income of the assessee is ₹ 2,56,37,975/- after adjusting losses suffered by the assessee in the other two 'projects viz. 'Shreyas' and 'Coimbatore'. There are no brought forward losses or unabsorbed depreciation. The claim of deduction u/s 80IB in respect of the two eligible units viz. 'Spandhana' and 'Samruddhi' of ₹ 2,23,22,237/- is obviously less than the gross total income. In our considered opinion, the Assessing Officer as well as the ld. CIT(A) erred in interpreting the relevant provisions when they held that the losses suffered by the assessee from two projects, viz. 'Shreyas' and 'Coimbatore' be reduced from the profits of the other two units viz. 'Spandhana' and 'Samruddhi' for granting deduction u/s 80IB. Accordingly, the impugned orders of the lower authorities are set aside. The Assessing Officer is directed to allow deduction u/s 80IB on the profits derived by the assessee from two projects viz. 'Spandhana' and 'Samruddhi' of ₹ 2,23,22,237 - Following decision of CIT v. Canara Workshop (P.) Ltd. [1986 (7) TMI 5 - SUPREME Court] - Decided in favour of assessee.
Disallowance u/s 14A - Held that:- unless the Assessing Officer reaches a satisfaction after examination of accounts on the basis of reasons recorded in the assessment order that the claim of quantum expenditure of the assessee as incurred in relation to the exempt income is not acceptable then, the Assessing Officer has no jurisdiction to invoke the provisions of Rule 8D of the IT Rules. In the instant case, in the absence of any reason for considering the claim of the assessee as unsatisfactory, in our considered view, the invocation of Rule 8D by the Assessing Officer was without jurisdiction and consequently unsustainable. We, therefore, delete the disallowance of ₹ 9,12,875/- and direct the Assessing Officer to restrict the disallowance u/s 14A to ₹ 15,000/- only - Following decision of MAXOPP Investment Ltd. vs. CIT & Others [2011 (11) TMI 267 - Delhi High Court] - Decided in favour of assessee.
-
2013 (9) TMI 445
Deemed dividend u/s 2(22)(e) - Disallowance u/s 56 rws 2(22)(e) - Commercial transaction versus loan or advances - Held that:- sub-clause (e) of Section 2(22) lays down that dividend includes any payment by a closely held company of any sum by way of advance or loan to a shareholder who comes in the category described in that sub-clause or to a concern in which such shareholder has a substantial interest. Dividend under the sub-clause also includes any payment by such company on behalf or for the individual benefit, of any such shareholder. Deemed dividend under this sub-clause would be to the extent to the company in either case possesses accumulated profits. The shareholder referred to here should be beneficial owner of shares holding not less than 10% of the voting power but those shares should not be shares entitled to a fixed rate of dividend with or without a right to participate in profits - For the purpose of Income-tax, one is to examine the nature of transaction in accordance with law. In the light of the facts, the same is to be decided in accordance with law. In the case under consideration as stated above, the assessee has demonstrated that the amount was received for the purpose of commercial transaction. As regards, the second objection, which is agreement and MOU as after thought, in this regard, we are of the view that these documents are already on record and the Revenue did not point out any contrary material to these documents. Therefore, merely by stating that this is after thought, such argument of the revenue without supporting material/evidence is not sustainable, therefore, the same is rejected - amount of Rs.1,00,00,000/- received to the assessee is on account of commercial transaction, therefore, the Section 2(22)(e) is not applicable - Decided in favour of assessee.
-
2013 (9) TMI 444
Transfer pricing adjustment - Method of computation of operating profit - Rejection of comparables - Held that:- TPO has totally rejected the assessee's claim on this account, the CIT (A) has allowed a deduction of 1% by accepting the fact that the assessee might be facing certain utilisation problems in its new unit and unutilised capacity might have adversely affected the overall profit for the year. However, the CIT (A) has given no reason as to why he considers 1% margin to be appropriate and on what basis he has adopted such margin. When it is accepted that assessee's overall profit is adversely affected due to idle capacities and idle facilities then the entire issue requires to be considered properly and in an objective manner taking into account all the datas available in this regard. Therefore, considering the facts and the circumstances of this case, we remit this issue to the file of the Assessing Officer who shall consider the assessee's claim with regard to idle capacities after due consideration of all materials available on record and affording a reasonable opportunity of being heard to the assessee - Decided in favour of assessee.
-
2013 (9) TMI 443
Deduction u/s 80IA - Whether Clauses (a), (b) and (c) of sec. 80IA(4)(iv) are mutually exclusive - distribution of power within the industrial park area. - CIT disallowed deduction holding that all clauses are mutually exclusive - Held that:- legislative intention was to afford the tax benefit to all undertakings which were engaged in any of the three activities - clauses (a) and (b) of sub. Sec. 4(iv) to sec. 80IA was introduced with effect from 1.4.2000 and clause (c) was introduced only with effect from 1.4.2005, i.e., they were not introduced in one go - These three types of undertakings referred to in the said sub-clauses (a), (b) and (c) are different and independent of each other. Thus while dealing with one sub-clause, inference need not and cannot be drawn from the other sub- clause - Following decision of DCIT Vs. Maharaja Shree Umaid Mills Ltd. [2008 (6) TMI 255 - ITAT JAIPUR-B] - Decided against assessee.
Interpretation of clause (b) of sec. 80IA(4)(iv) - CIT(A) has taken the view that the said clause provides exemption only to the profit derived from laying a network of new transmission or distribution lines - Held that:- the harmonious construction of clause (b) and the proviso there under, would be that the deduction u/s 80IA of the Act shall be allowed in respect of the profits derived from transmission or distribution of power through the new network. Had the intention of the parliament was to give deduction only to the undertaking which undertakes the work of laying network of new transmission or distribution lines and not to the undertaking which transmits or distributes the power, then clause (b) would have been worded accordingly and there would have been no necessity to insert a proviso for the said purpose. - Decided in favor of assessee.
Deduction u/s 80IA - Interest income - Held that:- There is a difference between "income from business" and "Profits and gains derived from the eligible undertaking". Not all the business income can be classified as "Profits and gains derived from the eligible undertaking" - for application of the words "derived from", there must be a direct nexus between the profits and gains and the undertaking - the nexus of interest income with the business of the undertaking is not direct but incidental. The source of interest income is only bank deposits and security deposits - Following decision of CIT Vs. Sterling foods [1999 (4) TMI 1 - SUPREME Court] - Decided against assessee.
-
2013 (9) TMI 442
Profit under head "profits or gains of business or professions" for computation of deduction under section 80HHC of the Income Tax Act, 1961 - AO had made an addition of Rs.1,06,09,194/- because these expenses were unverifiable – Held that:- Learned AO disregarded the expenditure to be genuine and added to the income of the assessee - When the profits are recomputed by the learned AO, obviously, it shall be considered as business profits of the assessee unless there is some materials to establish that they are nor arising out of the regular business activity of the assessee and accordingly the relevant provisions of the Act has to be applied either for granting any deduction or computation of tax liability - Revenue has not produced before us any contrary decisions on this issue. Therefore, in the present case, the revenue is directed to adopt under the head "profits or gains of business or professions" the profits declared by the assessee as well as the addition made by the revenue for Rs.1,06,09,194/- being unverifiable expenses and accordingly compute the deduction u/s 80 HHC of the Act – Decided in favor of Assessee.
Valuation of closing stock - Closing stock valuation, when changed, the opening stock ought to be revalued on the same basis as adopted for closing stock – Held that:- Relying upon the various cases, one of which is CIT Vs Dalmia Cement (Bharat) Ltd., [1995 (5) TMI 22 - DELHI High Court], wherein it was held that two principles applicable with regard to the valuation of sock are that the assessee is entitled to value the closing stock either at cost price or market value, whichever is lower, and that the closing stock must be the value of the opening stock in the succeeding year. It is, thus, clear that irrespective of the basis adopted for valuation in the earlier years, the assessee has the option to change the method of valuation of the closing stock at cost or market price, whichever is lower, provided the change is bona fide and followed regularly thereafter.
Further, in the present case no any merit in the argument of the learned AR - The learned AO had rejected the valuation of closing stock of the assessee, and in a scientific method as far as possible based on the information furnished by the assessee, had worked out the value of closing stock and made additions thereon. The valuation of the opening stock is not in dispute because the valuation of the closing stock of the preceding year is accepted to be genuine by the assessee as well as by the revenue. Further, even if, there is any error, only at that point of time when such discrepancy which is not deliberate is unearthed, such error needs a correction because only at that point of time when such discrepancy is unearthed the resultant consequence of profit and loss crystallizes. Therefore, the ground raised by Assessee is dismissed – Decided against the Assessee.
-
2013 (9) TMI 441
Deduction of expenditure u/s 40(b) of salary and interest to partners - Net profit rate of 2% of the total turnover in computing the income from contract business applied after rejection of books of accounts – Held that:- Relying upon the decision in the case of M/s. A.R. enterprises by Hon'ble ITAT, Agra , wherein it was held that applying a flat rate of 2% for both the contract would meet the interest of justice - No further deduction in the form of salaries & interest to partner of depreciation would be available to the assessee as the books of accounts have been rejected and the estimate of net profit rate of 2% shall be deemed to take into consideration all allowable deductions available to the assessee in the form of depreciation interest and remuneration to the partners and all other expenditures claimed in the P & L account – Also, it is not in dispute that the books of account were not maintained by the assessee in proper manner and the same were also not supported with proper bills and vouchers – It is also noted that rejection of books of account have not been challenged – Appeal of the Assessee is dismissed – Decided against the Assessee.
-
2013 (9) TMI 440
Product development cost as revenue expenditure - Assessee company was engaged in the business of manufacturing and selling of writing instruments - Assessee had claimed an amount of Rs. 2,55,481/- as product development cost under the head 'other direct expenses' – Held that:- Assessee pointed out that these expenses were incurred on the development of dyes and jigs, which were developed for a particular type of packaging for good customers and had limited life - Not accepted the assessee's contention, inter alia, observing that these dyes brought an advantage of an enduring nature to the assessee - Allowed depreciation @ 25% being 63,870/- and made an addition of Rs. 1,91,611/.
Allowability of expenditure under section 80IB on account of delay in submission of filing of the audit report – Held that:- Assessee had filed the audit report in form No. 10CCB and, therefore, the provisions of section 80IA(7) being directory in nature, therefore held that the assessee was entitled for deduction under section 80IB.
Quantification of deduction under section 80IB – Held that:- Assessee was not entitled for deduction under section 80IB in respect of job work charges and profit on purchase and sales of trading goods - While quantifying deduction, under section 80IB, it was computed the profit of job work in the same ratio as net profit ratio (2.63) divided by sales – Also, Assessee had claimed deduction, under section, 80IB in respect of the other income amounting to Rs. 10,33,913/- - Being, not clear whether the entire sum of Rs. 10,33,913/- was required to be reduced or only profit element of job work charges had to be reduced – issue restored to the file of the Assessing Officer to verify the computation with reference to financial statements and form No. 10CCB submitted by assessee.
-
2013 (9) TMI 439
Reassessment pursuant to Search u/s 132 or 132A - Condition for invocation of section 153A of the Income Tax Act - Relying upon the judgment in the case of All Cargo Global Logistics Ltd [2012 (7) TMI 222 - ITAT MUMBAI(SB)], it was held that completed assessments falling within six year can only be reopened if some incriminating material is found during search – Similar views were expressed in the case CIT vs Anil Kumar Bhatia [2012 (8) TMI 368 - DELHI HIGH COURT].
In the present case the assessments for assessment year 2004-05 & 2005-06 were already completed - There was no incriminating material found during search for these years - There was no incriminating material found during search for these years as is apparent from arguments of Ld. AR and from records and Ld. Departmental Representative did not bring to our notice regarding any incriminating material having been found during search – Decided in favor of Assessee.
-
2013 (9) TMI 438
Exemption u/s 80G of the Income Tax Act – Registration u/s 12AA - Charitable purpose - Person u/s 2(31) - Applicant, a trust or a society – Held that:- Be it a Trust or a Society, the legal status of either is that of a body of individuals and the benefit in either case inures to the same indeterminate public - Moreover, there is nothing on record to show that the management of the Trust has been taken over by the Society, or that the property of the Trust, post registration as Society, belongs to the Society. Undisputedly, the Board of Trustees are the same. The property, as earlier, continues to be held under Trust for pro bono publico or for the benefit of the public. As such, there is no transfer of ownership of property and the assessee continues to be the indeterminate beneficiary and not the Trust. And due to this reason, the ld. CIT has fallen into error in holding that the approval u/s 12A of the Act was granted to the Trust and not to the Society, the Society is not eligible for grant of certificate u/s 80G (5) of the Act - Change over to the status of Society makes no difference in this position and implementation of the objects of the Trust is still a legal obligation to be discharged - Merely registration as a Society does not disentitle the applicant from the exemption claimed - The ld. CIT is directed to grant exemption u/s 80G of the Act to the assessee in accordance with law – Decided in favor of Assessee.
-
2013 (9) TMI 437
Business loss or Bad Debts - written off of advances – advances given for material supply – Held that:- Losses incidental to business are allowable as deduction despite there being no specific provision for the same. If there is a direct and proximate nexus between the business operation and the loss or it is incidental to it, then the loss is deductible, as without the business operation and all that is incidental to it, no profit can be earned [Remachandar Shivnarayan v. CIT [1977 (11) TMI 2 - SUPREME Court] - Case of the appellant falls under the business loss and not under the bad debts - The parameters for claim of business loss and the bad debts are different. - Decided in favor of assessee.
Disallowance of interest expenditure u/s 36(1)(iii) of the Income Tax Act – Held that:- No interest bearing funds were utilized for advancing the sum to the subsidiary company or its related company on account of share application money - It was also noticed by the CIT(A) that the assessee has sufficient reserves i.e. Rs. 62.23 crore with the assessee - The finding of the CIT(A) remained uncontroverted that the Assessing Officer failed to prove the nexus between borrowings and subsequent advancing of loan to subsidiary company – Therefore relying upon the decision in the case of S.A.Builders [2006 (12) TMI 82 - SUPREME COURT ], the expenditure of interest has not been allowed – Decided against the Assessee.
Depreciation on leased assets u/s 32(1) of the Income Tax Act – Held that:- Relying upon the decision of Supreme Court of India in the case of Shaan Finance (P) Ltd. v. CIT [1998 (3) TMI 8 - SUPREME Court], it was held that the ownership of the machines remained with the assessee and there is no scope for transferring the machines to the parties - Assessee-company fulfilled all the conditions laid down u/s 32 of the Act, therefore, the claim for depreciation is to be allowed – Decided in favor of Assessee.
Interest income against bank guarantee or letter of credit – Held that:- Interests had been directly linked with the commercial activity of the assessee. When there is a commercial activity established, then, earning of interest or incurring of expenditure for earning the interest is to be treated as for business expediency – Therefore, the interest expenditure or interest income is treated for the purpose of business.
Depreciation in respect of Time Sharing Unit – Held that:- Time sharing unit is intangible asset or an asset which make the assessee entitled for deduction on account of depreciation - If it is found that this is a capital asset then depreciation is allowable u/s 32 - Accordingly, issue is remanded back to the file of A.O. to examine the issue afresh.
............
|
