TMI Blog2018 (4) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... s 40A(3) on account of cash payments exceeding ₹ 20,000/- - Held that:- Having examined the issue in depth and after looking to the facts and circumstances and nature of purchases, we are of the view that assessee should be given one more opportunity to bring out and forth circumstances necessitating the cash payments for the purchase of sand/water and the issue should be decided denovo. Accordingly, we set aside the issue to the file of the AO with a direction to decide the matter - Decided in favour of assessee for statistical purposes. Expenditure on account of refundable deposit to BMC and MHADA - revenue or capital exp - Held that:- CIT(A) has examined the issue at great length and reached a conclusion that the said deposits were given wholly and exclusively for the purpose of business of the assessee and are not capital of nature and covered under the provision of section 37(1) of the Income Tax Act. Having perused and examined the materials on record, we are in complete agreement with the Ld. CIT(A) that the said finances/deposits are wholly and exclusively for the purpose of business and are admissible. Therefore, we are inclined to affirm the order of Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd proviso to section 40(a)(ia) of the Act, we are of the view that if the trust has shown the receipts in its income and dealt with this income as per the provision, then the assessee can not be treated as assessee in default as regards non deduction at source are reached and the payment has to be allowed to the assessee but the same requires verification at the end of AO. Accordingly, we restore the issue to the file of the AO with a direction to see whether the case is covered under 2nd proviso to section 40(a)(ia) of the Act and decide the issue afresh Addition of deemed ALV of vacant flats which are lying in the stock in trade of the assessee’s books of account - Held that:- The issue is squarely covered in favour of the Revenue by the decision of Hon’ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd. (2013 (7) TMI 776 - DELHI HIGH COURT) wherein it has been held that even in the case of unsold flats held in stock in trade the income has to be assessed by way of deemed rent. - ITA No.7642/M/2012, ITA No.819/M/2013, ITA No.1032/M/2017, ITA No.1033/M/2017, ITA No.2411/M/2017 And ITA No.2412/M/2017 - - - Dated:- 9-4-2018 - SHRI MAHAVIR SINGH, JUDIC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulls Hsg. Fin. Ltd., Indiabulls Hsg. Loans and Cholamanglam DBS Finance Ltd. which was debited under the head interest charges while no TDS was deducted on these payments. Upon an enquiry from the AO the assessee replied that the provisions of deduction of TDS at source as contained in section 194 of the Act are not applicable as NBFCs are carrying on banking business. The AO was not convinced with the reply of the assessee and added the said sum of ₹ 88,85,487/- on account of non deduction of TDS by applying the provision of section 40(a)(ia) of the Act which was also confirmed by the Ld. CIT(A) in the appellate proceedings by holding that the NBFCs are not exempted from the application of provisions of section 193 194 of the Act. 6. Having heard the Ld. D.R. and considering the facts on record, we find that the assessee has made payment of ₹ 88,85,487/- as per details extracted below which represented the payment of interest to non banking finance companies on which no TDS was deducted by the assessee. M/s. Religare Finvest Ltd. : Rs.11,27,176/- M/s. Reliance Capital Ltd. : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for purchase of products manufactured or processed without the aid of power in a cottage industry and thus added the same to the income of the assessee. 10. In the appellate proceedings, the Ld. CIT(A) also found that the purchase of sand/water is not exempt as that is not covered under the products manufactured or processed without the aid of power in a cottage industry and consequently confirmed the addition. 11. Having heard the Ld. D.R. and perusing the materials on record, we find that the cash payment to the tune of ₹ 7,98,000/- was made for purchase of river sand and water which was claimed to be exempt under rule 6DD(f) of the Rules on the ground that the same are the products manufactured or processed without the aid of power in a cottage industry. According to the Ld. CIT(A) the same is not covered in that category. The Ld. CIT(A) also referred to the definition of cottage industry which is not available in the Income Tax Rules and finally dismissed the appeal of the assessee. Having examined the issue in depth and after looking to the facts and circumstances and nature of purchases, we are of the view that assessee should be given one more opportunity to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit to BMC and MHADA. 15. The facts in brief are that on the examination of details furnished by the assessee the AO observed that the assessee has paid ₹ 12,25,600/- to BMC on 18.07.08 and ₹ 14,38,641/- to MHADA on 19.06.08 which were inclusive of deposits of ₹ 89,300/- and ₹ 50,000/- respectively. Accordingly, the AO issued show cause notice vide order sheet entry dated 23.11.11 as to why the deposit should not be disallowed to the tune of ₹ 1,39,300/- which remained unresponded by the assessee. 16. In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under: 4.3 I have carefully considered the above submissions of the appellant. The above deposits have been given to BMC to ensure that the basement of the building is not used for illegal purpose or for storage of hazardous chemicals. Part of the deposit has also taken by BMC for removal of debris. These deposits are never returned by the BMC and hence consistently the appellant had been claiming the deposits as revenue expenditure. The appellant had not brought any instance of the deposits paid in the previous year's being re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under: 5.3 l have careful ly considered the submi ssions made by the appel lant and the impugned assessment order on this issue. The appellant is running 3 restaurants viz. Paratha and More at Chembur and White and Zing Caf at Goregaon. The Restaurant 'Paratha and More' was set up by the appellant in the F.Y.2005-06 which provides various types of parathas to the customers. Since Indian cuisine is served in this restaurant the business is popular and it got reasonably established and hence the material consumption is also reasonable. 5.3.1. The Restaurants White and Zing Cafes were serving continental food and it did not appeal to the local customers and the appellant was struggling to achieve the break even because of higher material consumption. The Assessing Officer had failed to appreciate that consumption of material depends upon the recipe and the kind of cuisine. He has also not brought any material on record to show that the average 35% of the material consumption would be same to all kinds of cuisines. As far as 'Parathas and More' is concerned, the appellant had shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... job is just to account for the sales and purchase transactions . The above clearly reveals that the accountant do not posses any knowledge in the hotel industry and the consumption ratio. In view of the above, the action of the Assessing Officer in rejecting the account invoking the provisions of section 145(3) cannot be accepted. As brought out in the submissions, the entire purchases were well documented with purchase invoices and the entire payments were made only way of cash and hence genuineness of the expenditure incurred and the material consumed cannot be doubted. In view of the above, the addition made is hereby deleted. This ground of appeal is allowed. 21. We have heard the Ld. D.R. and perused the relevant material on record. The ld DR contended that the assessee has not maintained the stock records as consumption of materials in the restaurants and it was not possible for the AO calculate the income correctly and the ld CIT(A) has erred in not affirming the AOs reworking of loss which should be reversed. Perusal of assessment order reveals that AO has not pointed out any specific defect in the consumption but made a general observation that in absence of consumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that AO should be given an opportunity to examine these records and documents as filed before the Ld. CIT(A). Accordingly the issue is restored to the file of the AO with the direction to decide the issue after affording a reasonable opportunity to the assessee as per facts and law.This ground of Revenue is allowed for statistical purpose. 26. The issue raised in ground No.4 is against the deletion of ₹ 8,52,725/- by Ld. CIT(A) as made by the AO on adhoc basis in respect of various expenses incurred in cash when the assessee failed to produce the necessary supporting evidences. During the assessment proceedings, the AO noticed that assessee has not maintained the bills and vouchers of expenses incurred in cash as regards miscellaneous expenses, telephone expenses, advertisement, sale promotion expenses and travelling expenses and thus disallowed 20% of the miscellaneous expenses, telephone expenses, advertisement and sale promotion expenses and 15% of travelling expenses and staff welfare expenses which worked out to ₹ 8,52,725/-in aggregate. 27. In the appellate proceedings, the Ld. CIT(A) deleted the addition by observing and holding as under: 72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. The issue raised in ground No.3 is against the confirmation of ₹ 18,00,000/- paid to Prabodhan Goregaon, a Public Charitable Trust registered u/s 12A of the Act under an agreement entered into between the assessee and the said trust without deduction of tax at source as disallowed by the AO u/s 40(a)(ia) of the Act. 32. The brief facts of the case are that in the assessment proceedings the AO noticed that assessee has debited ₹ 18,00,000/- as care taking charges in his business M/s. S.D. Hospitality which were paid to Prabodhan Goregaon, a Public Charitable Trust registered with the Charity Commissioner and the Director of Income Tax (Exemption) u/s 12AA and 80G. It was submitted before the AO that the said payment was made under an agreement which provided for subletting of area in Ozone Club House for running the ancillary activities on care taker basis to the assessee. However, no TDS was deducted under section 194I of the Act as the payment was made to a trust which is registered under section 12AA of the Act. The assessee submitted before the AO that since the trust was registered under section 12A of the Act, the provisions of section 194I were not applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground No.1 in ITA No.7642/M/2012 would, mutatis mutandis, apply to this ground of the present appeal also. Accordingly, the issue is restored to the file of the AO. The ground Nos.1 2 are allowed for statistical purposes. 38. The issue raised in ground No.3 is identical to issue in ground No.3 in ITA No.1032/M/2017 for A.Y. 2010-11 and therefore, our findings on the said issue would, mutatis mutandis, apply to ground No.3 as well. Accordingly, the issue is set aside to the file of AO. 39. The issue raised in ground No.4 is against the confirmation of addition of ₹ 11,98,862/- by Ld. CIT(A) towards deemed ALV of vacant flats which are lying in the stock in trade of the assessee s books of accounts. The facts in brief are that the assessee has some unsold flats in the project as on 31.03.12 as per details given in para 6 of the assessment order. Accordingly, a show cause notice was issued to the assessee as to why the deemed rent should not be assessed qua these unsold flats which was replied by the assessee vide written submission dated 20.03.15 by submitting that these unsold flats were not let out during the year and therefore, no question of estimating deemed renta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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