Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (11) TMI 13 - AT - Income TaxChit funds - Claim of deduction on bad debts on running and terminated groups – Bad debts allowable u/s 37(1) or business loss u/s 28 - Held that:- Following the decision in M/s. Shriram Chits (P) Ltd. Versus The Joint CIT (OSD), Hyderabad [2013 (5) TMI 227 - ITAT HYDERABAD] - The amount of loss incurred by the assessee has to be allowed on both running and terminated chits if irrecoverable if the prized chit amount has gone out of the hands of the assessee - bad debts can be allowed to the extent of instalments defaulted by the prized subscribers and written off as bad debt in the books of the assessee – thus, the order of CIT(A) is upheld in allowing the claim of the assessee for deduction on account of bad debts relating to running chits and terminated groups – Decided against revenue. Taxability of foreman’s dividend – Held that:- Following the decision in M/s. Shriram Chits (P) Ltd. Versus The Joint CIT (OSD), Hyderabad [2013 (5) TMI 227 - ITAT HYDERABAD] -in case of chit fund business, principle of mutuality will not apply. Accordingly, the claim of exemption of Foreman's dividend was rejected and addition under reference was made - there is no applicability of "mutuality" on this income – the order of the CIT(A) confirming the taxability of foreman’s dividend in the hands of the assessee upheld – Decided against assessee. Commission on cancelled chit funds – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that from out of the amount that is payable to the defaulting subscriber consequent to his replacement by another person the company is entitled to deduct 5% as commission - This has nothing to do with the regular commission Income of the assessee - the commission Income accrues when the accounts have been finally settled to the defaulting non subscriber to our mind appears to be the correct position - The commission/ remuneration to the foreman in that case was sought to be recognised on the completion of chit method and had nothing to do with the type of additional commission receivable in case of substitution of a subscriber - The natures of Income In both these cases are different - The further commission of 5% receivable from a defaulting subscriber consequent to his removal and substitution on a full and final settlement of a defaulting subscriber account is recognised as Income on the finalisation of the issues - the order of the CIT(A) is upheld in deleting the addition – Decided against revenue. Addition on payment of royalty – Held that:- As decided in assessee’s own case for thea earlier assessment year, it has been held that when the assessee commenced its operation, ails its employees were from holding company who had prior experience in this line - even the assessee looks for managerial support, from its holding company which is again provided - The holding company is also stated to have conducted periodical meetings with the executives of the assessee in order to monitor its meetings - the payment Is for, legitimate benefit taken in the course of business and from any standard, it cannot be said that payment of ₹ 1 lakh as royalty is sufficient to produce the business of the magnitude procured by the assessee over the years – the order of the CIT(A) is upheld in deleting the disallowance on payment of royalty – Decided against revenue.
|