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2014 (9) TMI 389 - ITAT LUCKNOWValidity of notice u/s 143(2) – Held that:- The contention of the assessee if the case is selected for scrutiny with the aid of computer then there is no application of mind by the AO as required u/s 143(2)(i) of the Act cannot be accepted - the thrust is on voluntary compliance of the tax payer and by ensuring that some deterring measures are taken that too in a taxpayer friendly manner of promoting the assessee to file returns without attaching any paper and then selecting only very small number of cases for scrutiny with the aid of computer and certain generally formed guidelines - it cannot be said that the decision of the AO to select the case for scrutiny in this system is not an independent decision of the AO – Decided against assessee. Deduction u/s 80IA – Interest received from units - Whether the receipts of the assessee can be said to be income derived from this activity of the assessee company – Held that:- For the purpose of allowing deduction u/s 80IA, only those income are to be considered which are derived from the eligible activity and not those income which are in relation to the eligible activity - it includes Processing fees, Misc. receipt, Interest money & premium forfeiture, Use & occupation charges, Rent received, time extension fee, Interest on FDR, sub Letting charges, Interest on sewerage charges, sales of application forms/TEF etc, rent received on Flattered factory etc. - The deduction u/s 80IA has been claimed by the assessee in respect of developing infrastructure facility as per sub section (4) of section 80IA - it cannot be said that these receipts are derived from the activity of the assessee company regarding development of infrastructure facility - At the best, it can be said that these receipts are in relation to this activity of the assessee company but it cannot be accepted that these receipts are derived from this activity of the assessee company regarding development of infrastructure facility - Therefore, these receipts are not eligible for deduction u/s 80IA – the order of the CIT(A) is upheld – Decided against assessee. Prior paid expenses – Water charges paid – Held that:- CIT(A) rightly held that the interest income had accrued to the assessee in earlier years and had also been offered to tax in those years - the assessee has not established that it has written off alleged interest in the ledger account of the respective allottees - no evidence has been brought on record to establish that the interest receivable having been accrued in the earlier year has been written off in the books of account - Regarding the water charges payable to Jal Sansthan, CIT(A) has directed the AO to verify the demand raised by Jal Sansthan and in case it is found that such demand was raised during the year under reference, the amount would stand allowed as deduction – the order of the CIT(A) is upheld – Decided against assessee. Adhoc disallowance u/s 14A r.w. Rule 8D – Held that:- The AY involved is 2007-08 whereas Rule 8D has been made applicable from next year i.e. AY 2008-09 and therefore, Rule 8D is not applicable – CIT(A) rightly relied upon Godrej & Boyce Manufacturing Co. Ltd. vs DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D could not be invoked by the A.O. for the A.Y. 2007-08, however, there is no embargo on the A.O. in computing the disallowance under Sec. 14A on a reasonable and fair basis - ₹ 1 lac disallowance is reasonable because the disallowance worked out by the AO as per Rule 8D being 0.5% of average investment – Decided against assessee. Entitlement for deduction u/s 36(1)(viii) – Notice for enhancement issued – Held that:- In a paper book submitted by the assessee, only one sample lease deed executed by the assessee in favour of the allottees - The lease deed is dated 27/12/2004 and as per clause (1) of this lease deed, the outstanding premium was to be repaid by the allottee in 10 equal installments along with the interest @15% per annum - even if it is accepted that allowing installment facility to the allottee of lease by the assessee company is giving loans and advances then also, this is not a long term finance as per clause (h) of explanation to section 36(1)(viii) because as per this explanation, long term advance has been defined as any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years - the repayment is to be made in a period less than five years and this cannot be accepted as long term finance - Since only a sample copy of only one lease deed is made available to us, all other lease deeds are similar - the assessee is not eligible for deduction u/s 36(1)(viii) of the Act – Decided against assessee.
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