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2014 (7) TMI 1028 - AT - Income TaxRejection of books of accounts – Held that:- The shareholders of the company appointed new auditors who submitted audit report on 01.09.2009 and the assessment was completed on 31.12.2010 without considering the same - it is mandatory to file return in time as prescribed in section 139 (1) of the Act as provided in Fourth Proviso to section 10 (B)(1) of the Act - This appears to be a reasonable cause to file return in haste and on the basis of unaudited results and statement of accounts - it is not a case of non-maintenance or not keeping stock register but it is case of not having stock register being maintained according to certain standard of compliance required by the auditors - the issue of rejection of books of accounts is remitted back to the AO with a direction that the qualifications mentioned in the audit report – Decided in favour of Assessee. Gross Profit rate to be applied @ 28.39% or 12.55% - Held that:- The AO has not properly verified and examined the explanation of assessee pertaining to decline in GP rates at Bhiwadi and Delhi unit - neither the AO nor the CIT (A) attempted to examine the veracity of reasons submitted by the assessee for decline in GP rate – AO as well as the CIT (A) made and confirmed the addition mainly on the reason that books of accounts stood rejected - As the issue of rejection of books to the file of the AO for fresh and de novo adjudication - the issue of GP rate is also remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Managerial remuneration and salary to director’s relatives – Held that:- The managerial remuneration which could be paid by the assessee per managerial person comes to ₹ 1,25,000/- monthly or say ₹ 15 lacs per annum - the amount paid is only ₹ 12,96,000 - this is well within the limit as prescribed in the Companies Act, 1956 - CIT (A) was not justified in sustaining the same - the salary can be paid to relative of the directors were up to ₹ 20,000/- per month or ₹ 2,40,000/- per annum - the salary paid was only ₹ 2,40,000/-, therefore, the payment was also within the limits of Companies Act, 1956 which does not require any approval from Board or Central Government – Decided in favour of Assessee. Foreign exchange fluctuation loss - Held that:- The issue is covered by the judgment CIT vs. Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT] - "Loss" suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance-sheet is an item of expenditure under section 37(1) of the Act - Under the mercantile system of accounting, what is due is brought into credit before it is actually received, it brings into debit an expenditure for which a legal liability has been incurred before it is actually disbursed – Decided in favour of Assessee. Disallowance of VAT written off – Profits chargeable to tax under s. 41(1) - Held that:- Following the decision in ITO vs. Binayak Hi Tech Engg. Ltd. [2012 (5) TMI 331 - ITAT, Kolkata] - Refund arises pursuant to the decision of the commercial tax authority who has to adjudicate the claim – After the claim of refund is made by the assessee in the prescribed form, the Commercial Tax Department has to accept or reject the claim – No benefit has accrued to the assessee during the relevant year as the claim was not adjudicated by the commercial tax authority – Therefore, refund receivable by the assessee is not chargeable to tax - the refund of VAT receivable by the assessee is not chargeable to tax u/s 41(1) until the claim of refund is adjudicated by the commercial tax authority – Decided in favour of Assessee. Exemption u/s 10B – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that, drawback received by the assessee under a scheme to encourage export was not profit and gains derived from industrial undertaking and therefore, not entitled for deduction u/s 80IB - the assessee has been allowed claim u/s 10B but with certain observations in the earlier orders - the claim of the assessee is allowed on the same conditions – Decided in favour of Assessee.
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