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2011 (7) TMI 588 - AT - Income TaxSundry credit balance written back in the post tonnage regime + prior period expenses written back + provisions for expenses written back - can these items be separately taxed under section 41(1)? - Held that:- AO has wrongly made an addition u/s 41(1) on the ground that these do not relate to core shipping activity as write back of these items is to be considered as income from core activity as in a going concern, such write backs and making of supplementary provisions takes place. AO cannot take recourse to sections 28 to 43C, when there is no other activity or business carried on by the company, other than business of operating qualifying ships. Period prior to pre-tonnage scheme resulting in reduction in taxable income then the write back those expenses in the current year when tonnage tax scheme applies, results in a miss-match is devoid of merit for the reason that there are other provisions such as section 43B - in favour of assessee. Interest on loan given to employees for vehicle and computers - "income from core activities" OR "income from other sources - Held that:- As decided in CIT v/s Lok Holdings [2008 (1) TMI 365 - BOMBAY HIGH COURT] the interest in question cannot be compared with the interest on surplus funds parked in a bank. Loans were advanced to the employees involved in the core activity of an organisation and when certain income is derived form such activity, the same is taxable under the head "Income From Business" as it is expected that the assessee does not have any other business other than business of operating qualifying ships - in favour of assessee. Container related costs and detention charges - income from incidental activity or from core activity - Held that:- When it is accepted that this receipt is nothing but recovery of cost, it would not be open for the Assessing Officer to bring to tax the gross receipt without eliminating the expenditure incurred for earning this income. If this receipt is to be treated as income from incidental activities, then the relatable cost is also to be excluded and only net income considered. As it is a mere reimbursement, there is no income element - in favour of assessee. Allocation of administrative expenditure to income - admittedly assessable under the head "Other Sources" - Held that:- As the expenditure being claim by the assessee cannot be said to have been laid down or expended wholly and exclusively for the purpose of making or earning such income, the finding of the Revenue authorities are upheld in this regard. AO has rightly held that the assessee would not have incurred the expenditure claimed for earning income & the estimation of Rs. 1,00,000 by AO is reasonable - against assessee.
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