2016 (5) TMI 1598 - AT - Income Tax

Additional income offered in survey conducted - whether this cash is relatable to the business of the assessee in accordance with Kim Pharma P. Limited ( 2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT and if so whether it is not a business income? - HELD THAT - As rightly contended AO has accepted this income of the assessee as business income. The profit loss account of the assessee for the period from 04.02.2011 to 31.03.2011. shown Palace income the details of which are given. Therefore the grievance of the assessee in this regard is correct and the same is accepted. In keeping with Kim Pharma P. Limited (supra) as relied on in Gaurish Steels P. Limited ( 2015 (11) TMI 631 - ITAT CHANDIGARH this income has been considered as the assessee s business income and not as deemed income u/s 69A of the Act. As such the business losses incurred by the assessee during the year can be set off against the income surrendered. As per the requirement of section 71 of the Act the AO is directed to act accordingly. Thus Ground Nos. 1 to 3 are accepted.

Summary

Issues:
1. Assessment of voluntary surrendered income under various heads
2. Set off of business loss and depreciation allowance
3. Applicability of new section 115BBB for assessment year 2011-12
4. Charging of interest u/s 234A, 234B, and 234D

Analysis:

Issue 1: Assessment of voluntary surrendered income under various heads
The appellant contested the assessment of voluntary surrendered income of Rs. 10 lakhs under different heads by the ld. CIT(A). The appellant argued that the voluntary surrendered income was duly accounted for in the books of account as business income and reflected as part of fixed assets, thus should be considered under the head of business income. The ld. CIT(A) upheld the assessment of surrendered income as deemed income under section 69 of the Income Tax Act, without allowing set off with business losses. The appellant relied on precedents like 'Kim Pharma (P) Limited' and 'Liberty Plywood' to support their case. The Tribunal, considering the facts and legal precedents, allowed the appeal and directed the AO to set off business losses against the surrendered income.

Issue 2: Set off of business loss and depreciation allowance
The appellant raised concerns regarding the disallowance of set off of business loss and depreciation allowance by the ld. CIT(A). The Tribunal analyzed the case in light of 'Kim Pharma P. Limited' and 'Gaurish Steels Pvt. Ltd.' judgments. The Tribunal concluded that the surrendered income was to be treated as business income, and thus, the business losses could be set off against the surrendered income. The Tribunal directed the AO to allow the set off as per section 71 of the Act, thereby accepting the grounds raised by the appellant.

Issue 3: Applicability of new section 115BBB for assessment year 2011-12
The appellant contested the application of the newly inserted section 115BBB by Finance Act, 2012, arguing that it was not applicable to the assessment year 2011-12. The Tribunal examined the retrospective effect of the section and held that it did not apply to the relevant assessment year. The Tribunal emphasized that the chargeability of income is governed by section 14 of the Income Tax Act, and the new section only provides tax rates for specific income, not creating chargeability.

Issue 4: Charging of interest u/s 234A, 234B, and 234D
The appellant challenged the charging of interest under sections 234A, 234B, and 234D, claiming it was not in accordance with the law. The Tribunal did not provide detailed analysis in the summary but noted the contention raised by the appellant.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the AO to set off business losses against the surrendered income and addressed the issues related to the assessment of voluntary surrendered income, set off of business loss and depreciation, and the applicability of new section 115BBB for the relevant assessment year. The Tribunal's decision provided clarity on the treatment of surrendered income and its impact on business losses, ensuring a fair assessment under the Income Tax Act.