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2022 (4) TMI 895 - AT - Income TaxRejection of books of account by applying the provisions of Sec. 145(3) - Computation of business income - applying n.p. rate of 8% on total receipts - HELD THAT:- We found that cost of raw material as % of turnover has increased by around 3% for the reasons stated above. Finance cost as % of turnover has increased by around 5% which is mainly on account of increase in interest payment on loan taken from bank. Other expenses as % of turnover has increased by around 5% which is on account of the fact that Central Excise Commissionerate, Jaipur vide order dated 30.08.2013 raised demand of ₹ 26,74,240/- which was paid during the year and because of applicability of Works Contract Tax in the state of Haryana, the assessee has to pay WCT of ₹ 40,18,047/- during the year. For all these reasons the assessee suffered loss during the year which is fully verifiable. Hence, addition made by the AO and confirmed by Ld. CIT(A) by applying n.p. rate of 8% subject to depreciation is unjustified. Considering the totality of the facts and circumstances of the case as well as judicial precedents followed in this regard, we found merit in the contention of the assessee and we direct to delete the addition made and confirmed by the lower authorities as well as set aside the action with regard to rejection of books of account u/s 145(3) of the Act.- Decided in favour of assessee. Addition of interest income and miscellaneous receipts under the head income from other sources - HELD THAT:- Assessee had shown interest income of ₹ 12,58,998/- on the FDR and miscellaneous receipts of ₹ 2,89,200/-. The AO assessed the same as income from other sources. The Ld. CIT(A) confirmed the action of AO. We found that the interest income earned on FDR is part of business income as FDRs’ were made for the purpose of business for giving bank guarantees to the awarder of contract. For this purpose assessee has to obtain the FDR from the bank which was pledged to it. From Note No.3.0 of the financial statements we noticed that the FDR of ₹ 1.98 crores has been pledged with the bank for obtaining the bank guarantee. Thus, interest on FDR is part of business income. Also, the FDR were made by utilizing the cash credit limit on which interest is paid to the bank and which forms part of the business expenditure. Thus, the interest income on such FDR which was earned out of the funds placed with the bank by utilizing the bank overdraft limit is to be considered as business income and not as income from other sources. Similarly, the miscellaneous receipts of ₹ 2,89,200/- is from sale of scrap and is part of business income. In earlier years also the same was considered as business income in the assessment made u/s 143(3) which are at page No. 18-25 of the paper book. Hence, the separate addition made by AO and confirmed by Ld. CIT(A) is unjustified. Decided in favour of assessee.
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