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2014 (8) TMI 724 - AT - Income TaxRestriction on expenses – Held that:- The assessee has debited ₹ 11,39,93,239/- to its profit and loss account - the assessee has Suo Moto made certain disallowance in respect of inadmissible items which include expenses inadmissible ₹ 10,00,000/- commission Rs..98.41 lakhs provision for doubtful debt Rs..43.09 lakhs, Statutory liability ₹ 53.17 lakhs, freight of Rs..6.90 lakhs, Site installation Rs..4.61 lakhs and Prior period expenses of ₹ 2.04 lakhs - The details of expenditure debited to profit & loss account also includes repairs to machineries, site expense, commission, bad debts and miscellaneous expenses and some other expenses - the AO seems unwarranted as the necessary details were much available before the CIT(A) which has not been considered by the CIT(A) and since the assessee itself has disallowed expenses a further disallowance is uncalled for – Decided in favour of Assessee. Estimation of interest towards work in progress – Held that:- Schedule ‘C’ and schedule ‘D’ of the balance sheet show the amount of secured loans and unsecured loans, secured loans contain term loan from bank, cash credit/working capital from bank and term loan for machinery - Unsecured loans refers to the optionally convertibility debentures and interest free loan under sales tax deferral scheme - on these borrowings, the assessee has paid interest amounting to ₹ 1.99 crores out of which interest on debentures is ₹ 1.44 cores and other interest is ₹ 54.83 lakhs - So far as, interest on debentures is concerned no attribution is required – the matter is remitted back to the AO for examination and fresh adjudication – Decided in favour of Assessee. Claim of deferred sales tax – Held that:- Assessee rightly claimed that a revised computation of income was filed during the course of assessment proceedings in which the deferred sales tax claim which was added back in the original computation of income, has been withdrawn – thus, the matter is remitted back to the Ao for fresh adjudication – Decided in favour of Assessee. Treatment of interest income - Income from other sources’ or profit & loss of business – Held that:- A perusal of schedule ‘G’ of current assets forming part of the balance sheet show that the fixed deposits are lodged with banks as margin for funding working capital facilities, which shows that the fixed deposits have a direct nexus with the working capital facilities availed from the bank - the interest earned from such deposits of the money kept apart for the purpose of business is to be taxed under the head income from the business and could be not taxed under ‘income from other sources’ – relying upon Commissioner of Income-Tax Versus Indo Swiss Jewels Limited And Another [2005 (9) TMI 47 - BOMBAY High Court] – the AO is directed to treat the interest income under the head ‘profit & gains of the business’ as declared by the assessee – Decided in favour of Assessee.
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