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Income Tax - Case Laws
Showing 1 to 20 of 9209 Records
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2016 (12) TMI 1903
Deemed dividend under section 2(22)(e) - assessee is registered and also beneficial shareholder and also Director of MCPL(a private limited company in which public are not substantially interested) holding 50% shares of MCPL, as well the assessee is partner in partnership firm MRED having 50% share in the profits of the afore-said partnership firm - HELD THAT:- As partners of MRED who are also the registered and beneficial shareholders of MCPL holding 50% shares each had not benefited out of the funds transferred by MCPL to MRED will be an fallacious argument and is hereby rejected keeping in view facts and circumstances of this case as set out above in preceding para’s. It is one of the direct case whereby the partners of the firm MRED has benefited out of the huge interest-free advances being given by MCPL to MRED and hence it is thus, the direct infringement / violation of the provisions of section 2(22)(e) of the Act. In our considered view , the AO has rightly invoked the provisions of Section 2(22)(e) of the Act and has brought to tax the said loans and advances granted by MCPL to MRED, within the deeming fiction of Section 2(22)(e) of the Act by terming the same as deemed dividend in the hands of the partners of the firm MRED i.e. Mr. Peter Vaz and Mr.Edgar Braz Afonso who are registered as well beneficial shareholder of MCPL and being beneficiaries of the amount advanced by MCPL to MRED as set out above , on substantive basis keeping in view the decision of Hon’ble Bombay High Court in the case of CIT v. Universal Medicare Private Limited [2010 (3) TMI 323 - BOMBAY HIGH COURT]
Assessee could not prove the business nexus and business purpose for advancing huge amount of loan and advances by MCPL to MRED to the tune of Rs. 50.99 crores from assessment year 2006-07 to assessment year 2012-13 and in any case the Assessing Officer has given set off / credit for all the inter-se transactions between MCPL and MRED wherein business nexus was established / proved by the assessee and also the AO has duly taken note of restricting the additions u/s 2(22)(e) of the Act keeping in view accumulated profits held by MCPL as per mandate of Section 2(22)(e) of the Act .
We are of the considered view that under S.2(22)(e) of the Act liability to tax attaches to any amount taken as loan and advance by the share holder from a controlled company to the extent it possesses accumulated profits at the moment the loan is borrowed and it is immaterial whether the loan is repaid before the end of the accounting year , as was held by Hon’ble Apex Court in the case of Smt Tanulata Shyam [1977 (4) TMI 3 - Supreme Court].Decided against assessee.
Additions have been made in the case of Model Real Estate Developers on the protective basis , while substantive additions have been made in the hands of Mr Peter Vaz and Mr Edgar Braz Afonso and their spouse, wherein we have confirmed the substantive additions made by Revenue in the hands of Mr Peter Vaz and Mr Edgar Braz Afonso and their spouse with respect to loans and advances granted by MCPL to MRED, as per detailed discussions and reasoning as set out in preceding paras’ of this orders. Since, we have confirmed substantive additions the protective additions made by Revenue on the identical issue in the hands of MRED shall not survive w.r.t. to loans and advances granted by MCPL to MRED. Thus, we order deletion of additions made on protective basis in the hands of MRED for the assessment years 2007-08 to 2012-13
Transfer of funds to the assessee by SIPL - As per AO huge amounts have been advanced by the said company SIPL to the assessee without any business purposes/nexus and hence is clearly hit by deeming fiction created u/s 2(22)(e) of the Act to be treated as deemed dividend - HELD THAT:- We do not find any infirmity in the order of the AO as the AO has rightly brought to the tax said advances which are in the nature of loan and advances being given out of the accumulated profits by the company SIPL for the individual benefit of its registered cum beneficial share holder Mr. Edgar Braz Afsono’ i.e. the assessee, which loans and advances were disbursed by SIPL to the assessee-shareholder instead of declaring dividends out of accumulated profits and hence dividend distribution tax is evaded to be paid to the Government had the said amount of advances would have been distributed by SIPL as dividend to its shareholders. We have also observed that the appellate order of the learned CIT(A) does not hold merit and hence cannot be upheld as learned CIT(A) merely accepted the contentions of the assessee without any evidences , which in-fact pained us after reading the appellate orders of the learned CIT(A). We, therefore , order that the appellate order of learned CIT(A) be set aside as the same is not sustainable at law as the learned CIT(A) merely accepted the contentions of the assessee without any evidences and has not brought on record material to disprove the contentions of the AO , while on the other hand the AO has elaborately explained with cogent reasons in his assessment order as to why the provisions of Section 2(22)(e) of the Act are applicable in this instant case of the assessee and how the said loans and the advances which were given without any business purposes by SIPL to the assessee out of its accumulated profits will be hit by the Section 2(22)(e) of the Act to be brought to tax as deemed dividend, and hence we set aside the order of the ld.CIT(A) and uphold/affirm the assessment order of the AO and since Mr. Edgar Braz Afonso is the registered and beneficial share holder of the company SIPL holding substantial interest in the said company SIPL holding 50% of shares of SIPL (a company in which public are not substantially interested) , the ratio of the decision of t.Universal Medicare Private Limited [2010 (3) TMI 323 - BOMBAY HIGH COURT] is directly applicable to the instant case and hence the AO has rightly brought to tax the said amount of loans and advances granted by SIPL in favour of the assessee without any business purposes and nexus, within the ambit of section 2(22)(e) of the Act by bringing to tax the same as deemed dividend , to the extent SIPL possessed accumulated profits, which assessment order of the Assessing Officer we confirm and sustain. Decided against assessee.
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2016 (12) TMI 1902
Levy of penalty u/s. 271(1)(c) - addition on account of purchase of NSC and saving bank interest - Defective notice u/s 274 - non specification of clear charge - HELD THAT:- A show cause notice u/s. 274 of the Act was issued. The Assessing officer has not stated specifically whether the show cause is for concealment of income by the assessee or furnishing of inaccurate particulars of income. Therefore, following case of Suvaprasanna Bhatracharya [2015 (12) TMI 43 - ITAT KOLKATA], thus hold that the order imposing penalty is invalid and consequently the imposition of penalty is deleted. Decided in favour of assessee.
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2016 (12) TMI 1901
Revision u/s 263 - validity of assessment was framed u/s 143(3) - HELD THAT:- As in Tribunals order [2016 (12) TMI 863 - ITAT MUMBAI] whereby the order of CIT-8, Mumbai for the A.Y. 2006-07 was quashed stating the record of proposal to take action by the AO u/s 154 of the Act was before the CIT before issuing notice u/s 263 and hence the order of the AO cannot be termed as erroneous so far as prejudicial to the interest of Revenue as the word ‘records’ used in Section 263 of the Act shall also contemplate including the record pertaining to proceedings u/s 154 arising subsequently out of the assessment order passed by the AO u/s 143(3) of the Act and such record was before ld CIT before he issued notice u/s 263 on 11.03.2011.
Thus, in our considered view, the assessment order dated 23.12.2008 passed by the A.O. u/s 143(3) of the Act is neither erroneous nor it is prejudicial to the interest of Revenue, and the CIT has not correctly invoked the provisions of section 263 hence, the order of the CIT in our considered view is not sustainable in law and is hereby ordered to be quashed.
Assessee stated that the consequential assessment framed u/s 143(3) r. w. s. 263 dated 30-08-2011 will not survive and accordingly, the order of CIT(A) will not survive. We find from the above that the Tribunal has quashed the revision order of CIT-8, Mumbai dated 30-03-2011 and once the basic order is quashed, the consequential orders will not survive. Accordingly, we set aside the orders of the lower authorities and allow the appeal of the assessee.
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2016 (12) TMI 1900
Income taxable in India - attributed 15% of the assessee’s income to India by Tribunal - applicability of the Galileo rule - Assessee, a Delaware, USA based limited partnership concern and a tax resident of the USA, provides online airline booking services - HELD THAT:- A reference was made to the observations of the ITAT recording that the parties were in broad agreement as to the applicability of the Galileo rule, both with respect to the PE question as well as the rule of attribution.
In the present case, the AO had based his conclusions and determined the income based upon figures furnished by the assessee, as is apparent from a plain reading of the order. In the circumstances, the ITAT, in our opinion, ought not to have disturbed that order, without a finding.
This Court has also in its order [2017 (1) TMI 1160 - DELHI HIGH COURT] between the same parties. Accordingly, the present appeal is disposed off with a direction to the ITAT to render specific findings on the questions urged after hearing both the parties.
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2016 (12) TMI 1899
Denial of benefit of House rent allowance (HRA) to both husband and wife - recovery from the leave encashment to be paid to the petitioner of house rent was for the period from February 1986 up to March 2014, when the petitioner retired - both the petitioner and his wife have been residing in the same house belonging to the late father of the petitioner, but house rent allowance has been paid to the wife of the petitioner from February 1986 as well as to the petitioner too - whether wife was an employee of Oriental Bank of Commerce and was receiving house rent allowance? - HELD THAT:- It is not in dispute that the wife of the petitioner was an employee of Oriental Bank of Commerce from February 1986 and that she has been receiving the house rent allowance - both the petitioner and his wife have been residing in the same accommodation.
Government Order specifically provides that if both the husband and wife are in government service and if they are residing in the same accommodation, then house rent allowance can be claimed only by one of them. Also provides that the same conditions would apply if the spouse was employed in Local Bodies, Educational Institutions, Universities, Public Enterprises, Corporations etc, etc. The same condition was reiterated in the Government Order dated 28 April 2000.
The wife of the petitioner was an employee of the Oriental Bank of Commerce. This is an enterprise of the Central Government. It cannot, therefore, be contended that the conditions set out in the Government Order dated 28 February 1984 would not apply to the petitioner. This is what has also been observed by the Appellate Authority.
The Government Order on which reliance has been placed by the learned counsel for the petitioner will not come to the aid of the petitioner. It is only in relation to the government servants and provides that house rent allowance will be payable to both husband and wife, even if they are government servants and reside in the same house. As clarifies that earlier cases will not be reopened. The wife of the petitioner was not in government service. The communication dated 11 February 2015 will not, therefore, help the petitioner in any manner. The case of the petitioner would be covered by the Government Order dated 28 February 1984.
As not possible for us to accept the contention advanced by petitioner that opportunity was not provided to the petitioner. In view of the complaint, a notice was sent to the petitioner to submit his reply and on consideration of the reply submitted by the petitioner, the order for recovery of the amount was passed against the petitioner. Even otherwise, it is an admitted fact that the wife of the petitioner was in service in the Oriental Bank of Commerce and she was receiving house rent allowance from February 1986 upto March 2014. Thus, no prejudice has been caused to the petitioner at all. WP dismissed.
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2016 (12) TMI 1898
Reassessment u/s. 148 - addition by estimating the income of the assessee @ 4% in place of 2.2% shown by the assessee - HELD THAT:- As find from the reassessment order framed by the AO that no addition was made by him on the ground of the above reasons recorded but the addition was made by the AO by estimating the income of the assessee @ 4% in place of 2.2% shown by the assessee. Therefore, the decision in the case of Mohd Juned Dadani [2013 (2) TMI 292 - GUJARAT HIGH COURT] & case of jet Airways (I) Ltd. [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] clearly apply to the facts of the assessee’s case.
Thus assuming jurisdiction to frame an assessment u/s. 147 of the Act, what is essential is a valid reopening of a previously closed assessment. If the very foundation of the reopening is knocked out, any further proceedings in respect to such assessment naturally would not survive. Decided in favour of assessee.
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2016 (12) TMI 1894
TP Adjustment - inclusion of reimbursed expenses in the cost base for the purpose of mark-up - Comparable - HELD THAT:- Comparable i.e. whether Lotus Labs's RPT is significant or not deserved to be examined properly for this ay and hence this issue needs to be remitted back to the TPO. As already mentioned, the assessee found that the TPO while recomputing the ALP has wrongly considered recovery of expenses as part of the cost base and hence it sought a rectification u/s 154 but did not get any response from the TPO/AO.
On its objections before the DRP, the DRP directed the TPO/AO to examine the factual position & if the assessee's averments are correct, then to re-compute the mark-up suitably and to dispose the petition u/s 154 within 15 days of receipt of its order. It appears that the TPO/AO has not given effect to the directions of the DRP. In the facts and circumstances, this issue also needs to be remitted back to the TPO for proper examination and due adjudication. Thus, both these issues remitted to the TPO who after affording due opportunity to the assessee would decide them in accordance with law. To this extent, the appeal grounds are treated as allowed.
Expenses by pharma companies - AO has disallowed the impugned claims in the light of the prohibition imposed by Medical Council of India (MCI)I the CBDT Circular dated 1st August 2012 and held that such expenses being prohibited by MCI is not an admissible deduction under section 37(1) - HELD THAT:- The CBDT circular is issued to clarify the allowability of expenses on medical freebies which are prohibited by MCI. Expenses incurred and claimed by an assessee but prohibited by law, cannot be allowed as deduction neither under section 37(1) nor under any other provisions of Act. The CBDT circular only reiterates and clarifies the allowability of expenses prohibited under MCI guidelines. Therefore, CSDT circular is clarificatory and hence it is retrospective in operation. however, the CBDT circular has no application for a period in which the MCI guidelines are not operative.
AO has not disputed the genuineness of the expenses claimed. The only reason for the disallowance is that the impugned expenses are prohibited by MCI guidelines and therefore they are illegitimate. Therefore, the deduction claimed by the assessee other than the cost of samples distributed for the period prior to MC! guidelines, is an admissible deduction and accordingly, the AO is directed to allow them. As held by the DRP in the assessee's own case for a y 2010-11 and ay 2011-12 , the cost of samples distributed is also an allowable claim based on the rationale of the decision of Eskayef [2000 (7) TMI 1 - SUPREME COURT] and accordingly the AO is directed to allow it too. In the result, the grounds of appeal on these issues are allowed.
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2016 (12) TMI 1891
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- The same rule is not retrospective as it was notified on 24/03/2008 and would be applicable only from AY 2008-09. In Godrej & Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] it has been held that Rule 8 D is not retrospective.
In CIT vs. M/s. Godrej Agrovet Ltd [2014 (8) TMI 457 - BOMBAY HIGH COURT] has held that percentage of the exempt income can constitute a reasonable estimate for making disallowance in the years earlier to the assessment year 2008-09. In the above case it upheld the disallowance to the extent to 2% of the total exempt income. Respectfully following the above decision, we direct the AO to restrict the disallowance to 2% of the total exempt income. Thus the first and second ground are partly allowed.
Treating advance / unearned revenues as the income of the year under consideration - Whether no right to receive the said revenues had accrued to the assessee during the year under consideration and also without appreciating that the method of accounting adopted by the assessee in recognizing revenues was in consonance with AS – 1 read with AS-9 issued by ICAI and notified by the Central Government? - HELD THAT:-There is no merit in the contention of the ld. counsel that the aforesaid advance/unearned revenue has been duly disclosed and offered to tax in the subsequent year. The assessee is free to take remedial measures permissible in law in the A.Y. 2008-09 where it has claimed to have offered the said income.
Hon'ble Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd [1997 (7) TMI 4 - SUPREME COURT] has held 'It is true that this court has very often referred to accounting practice for ascertainment of profit made by a company or value of the assets of a company. But when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice. Accounting practice cannot override section 56 or any other provision of the Act.
The order of the ld. CIT(A) upholding the addition made by the AO is confirmed. Therefore, the third ground of appeal filed by the assessee is dismissed.
TDS credit - HELD THAT:- We direct the AO to give TDS credit after proper verification and as per the provisions of the Act. The assessee is directed to furnish the details before the AO and the assessee shall be given a reasonable opportunity of being heard on this point. Thus ground number 5.1 is allowed for statistical purpose.
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2016 (12) TMI 1890
Addition u/s.68 - treating the STCG declared by the Assessee as being unexplained cash credits - purchase of the assessee is bogus - CIT-A deleted the addition - HELD THAT:- As gone through the relevant record and impugned order and we find that (a) assessee had purchased concerned shares through “off-market trade” however ISE, BSE and NSE informed AO that no transaction has taken place in the name of assessee. (b) Concerned shares were kept in pool account which shows that such shares were not purchased by assessee. (c) Shri Mukesh Cokshi, director of Mahasagar Securities Pvt. Ltd. (“MSPL”) had admitted in his statement recorded u/s.131 that MSPL is engaged in the business of providing bogus bills for capital gain.
When transactions are “off-market”, it is not possible for stock exchanges to provide details in respect of the same. Further, off-market transactions are not at all illegal at all and concerned share were duly purchased by assessee and it is an undisputed fact that such shares came to the demat a/c of assessee from IL&FS securities. In fact, such shares have been subsequently sold through broker “Krone Research and Brokerage Pvt.Ltd.” Therefore, question of raising doubt as to purchase of shares by assessee is not sustainable.
Shri Mukesh Chokshi stated in his statement that (MSPL) was engaged in providing accommodation entries for speculation/delivery profit. Assessee has only purchased shares from MSPL which has been doubted by AO whereas “sales” have been made through “Krone Research & Brokerage Pvt. Ltd.” which has been accepted. Had the assessee obtained accommodation entries from MSPL as to purchase of shares, concerned shares might have been even sold through MSPL which is not the case.
Assessee has neither been provided with the copy of statement of Shri Mukesh Chokshi based on which impugned addition has been made nor has the assessee been given an opportunity to cross examine Mukesh Chokshi. In absence of cross-examination, no addition could have been made based on statement of Mukesh Chokshi recorded behind assessee’s back.
Assessee has placed on record affidavit of Mukesh Chokshi so as to prove that assessee has genuinely purchased shares form MSPL which has not found to be incorrect by Ld.AO.In absence of cross-examination of deponent with reference to statement made in affidavit, it is not open to the revenue to challenge the correctness of the statement made by the deponent in the affidavit. Same has been held in the matter of “Glass Lines Equipment Co.Ltd [2001 (7) TMI 61 - GUJARAT HIGH COURT]
Shares have been purchased against payment duly supported by the contract notes and shares have been found to be credited in the assessee’s demat a/c and on sale of such shares, the same were debited from demat a/c of the assessee and assessee has received payment through banking channel and sale of shares on the floor of BSE has been found to be genuine and also found to be confirmed by the BSE.
There is nothing in record to even remotely suggest that such shares were never transferred in the name of the assessee. Had it been the case, assessee couldn’t have sold the same from his demat a/c.
Shri Mukesh Choksi himself admits in his affidavit that MSPL had acquired the concerned shares on behalf of the assessee which were later on transferred to assesse’s demat a/c and payment in respect of the same was received from the assessee and particularly the contents have not been controverter by AO, so it can be presumed that whatever have been stated therein in the affidavit of Mukesh Choksi is seems to be credited. So in our considered opinion that CIT(A) has rightly deleted the addition made by the Ld.AO.
Both the appeal of revenue are dismissed.
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2016 (12) TMI 1888
Revision u/s 263 - Deduction u/s 80IB(10) - as per CIT completion of construction of the project has not been done within the stipulated period and therefore, the deduction under section. 80IB (10) of the Act has been wrongly allowed - whether in the facts of the present case, the assessee firm is justified in considering the group of Buildings No.2 & 5 in the ‘Balaji Garden’ complex as a ‘project’ for the purposes of claim of deduction under section 80 IB (10) ? - HELD THAT:- A somewhat similar issue had come-up in the case of M/s. Vandana Propertiesobserved that the expression ‘housing project’ in common parlance would mean constructing building or group of buildings consisting of several residential units. According to the Hon'ble High Court, the provisions of section 80 IB (10) envisage that construction of even one building with several residential units of the size not exceeding 1000 sq.fts would constitute a ‘housing project’ for the purposes of availment of benefits under section 80 IB(10) of the Act.
In the spirit of what has been laid down supra in our considered opinion, assessee is fully justified in considering Buildings No. 2 & 5 in the complex of ‘Balaji Garden’ as a ‘housing project’ for the purposes of claiming deduction under section 80 IB (10) - Clearly on this aspect the CIT misdirected himself and, therefore, in this view of the matter the issue as to whether the other buildings have been completed within the time frame is not at all relevant to evaluate assessee’s claim for deduction under section 80IB (10) of the Act in the instant year.
In so far as the said project comprising of Buildings No.2 & 5 is concerned, the same has been completed on 19/03/2010, when assessee’s architect submitted application to the local authority for issuance of Occupancy Certificate. The aforesaid is clearly born out of the completion certificate issued by the concerned local authority i.e. Kalyan & Dombivali Municipal Corporation, Kalyan dated 17/09/2013 - assessee has referred to the decision of the Court of Joint Civil Judge, Kalyan dated 25/11/2010, wherein it is decreed that the Occupancy Certificate and Completion Certificate as per provisions of Rule-38 of the Kalyan–Dombivili Municipal Corporation Development Control Regulations is deemed to have been obtained in respect of Buildings No.2 & 5 on 19/03/2010, i.e. on the date when requisite application was made by the assessee. Considered in this light, it has to be understood that the completion of construction of the instant housing project is within the period stipulated in section 80 IB (10)(a)(iii) r.w. Explanation (ii) thereof. Thus, on this aspect, we find no reason to uphold the stand of the CIT.
Built-up area of some of the flats comprised in the housing project - The architect has enumerated the ‘built-up area’ of various flats comprised in the Buildings No.2 & 5. He has further certified that such built-up area is as per the sanctioned plan and also that the same is as per the definition of the expression ‘built-up area’ contained in section 80 IB (14) of the Act. Thus, as per the said certificate of the architect, it is quite clear that the area of balconies/projections, as required, has been taken into account in calculating the built-up area. It is also clear that built-up area of none of the flats is exceeding the limit of 1000 sq.fts prescribed in clause (c) of section 80IB (10) of the Act . We have perused the order of the CIT and find that he has merely proceeded on a presumption that the built-up area of some of the flats might exceed 1000 sq.fts., if the area of balcony is added. However, we find not even an iota of evidence with the CIT to suggest that the built-up area shown in the certificate of the architect is without including the area of balcony; whereas the certificate clearly mentions that the built-up area is inclusive of the requisite projections and balconies.
At the time of hearing, the Ld. Representative for the assessee has also made assertion that in the earlier assessment year of 2010-11, the site inspection was carried out by the Assessing Officer and that there was no adverse finding on this aspect. There is no negation to the aforesaid plea of the assessee and, therefore, considering the material on record, we find that the CIT has proceeded on mere doubt to hold that there is a violation of the provision of clause (c) of section 80 IB(10) of the Act.
AO has reproduced in the assessment order a chart which enumerates the various conditions prescribed in section 80 IB(10) of the Act and how the same are complied by the assessee firm. Clearly, it is not a case of any lack of enquiry. In fact, as our aforesaid discussion shows, the CIT has misdirected himself on both the counts namely non-consideration of Buildings No. 2 & 5 as a project for the purposes of section 80 IB(10) of the Act and regarding the built-up area of some of the units as prescribed in section 80IB(10(c) of the Act. Under these circumstances, in our view, there was no justification for the CIT to uphold that the assessment order dated 13/01/2014 is erroneous in so far as it is prejudicial to the interest of the Revenue within the meaning of section 263 of the Act, qua the claim of deduction under section 80IB(10) of the Act allowed by the Assessing Officer.
We hereby set-aside the order of the CIT and restore the assessment order passed by the Assessing Officer under section 143(3) - Decided in favour of assessee.
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2016 (12) TMI 1887
Deduction u/s 80JJAA - whether the new employees, being software engineers, were eligible for the said deduction as they did not come within the ambit of the term ‘workman’? - New workman employed for period of 300 days in relevant previous year are eligible for deduction u/s 80JJAA and no reference to new employees employed in the preceding year is made in the section - HELD THAT:- From the Para re-produced from the order of the Tribunal in assessee’s own case for assessment year 2010-11 [2016 (7) TMI 1012 - ITAT BANGALORE] we find that the Tribunal has followed the earlier Tribunal order in assessee’s own case for the assessment year 2007-08 to 2009-10 and thereafter, the Tribunal has restored the matter back to the file of the AO for fresh decision in accordance with law. Accordingly, in the present year also, we set aside the order of the ld. CIT(A) on this issue and restore this matter back to the file of the AO for fresh decision in accordance with law with same directions as were given by the tribunal in assessment year 2010-11.
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2016 (12) TMI 1885
Exemption u/s 11 - scope and amplitude of the definition “charitable purpose” - interpretation of the proviso to Section 2(15) “charitable purpose” includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility - HELD THAT:- It is admitted that the result in these appeals follows the result in Commissioner of Income Tax vs. Improvement Trust Moga [2017 (1) TMI 53 - PUNJAB AND HARYANA HIGH COURT] which was disposed of by a separate order and judgment passed today. Accordingly, for the reasons stated therein, these appeals filed by the revenue are dismissed.
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2016 (12) TMI 1884
None appeared on behalf of the assessee - HELD THAT:- Notice of hearing was sent by Registered Post with Acknowledgement Due to the assessee on 13.10.2016 fixing the date of hearing on 05.12.2016. The said notice has been served upon the assessee on 15.10.2016 as is evident from the postal acknowledgment slip which is placed on record. When the case was called for hearing, none appeared on behalf of the assessee and neither any adjournment application was filed. This shows that the assessee is not interested in pursuing with his appeal. Therefore, in view of the decision in the case of Estate of Late Tukojirao Holkar vs. CWT [1996 (3) TMI 92 - MADHYA PRADESH HIGH COURT] and of CIT vs. Multiplan India (Pvt.) Ltd. [1991 (5) TMI 120 - ITAT DELHI-D]. we dismiss the appeal of the assessee in limine.
The assessee may, if so advised, file an application before this Tribunal for restoration of his appeal and hearing on merits by showing reasonable cause for not appearing before the Tribunal on the date of hearing. The Bench, if so satisfied, may recall its order and restore the appeal to its original number for hearing on merits.
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2016 (12) TMI 1879
Disallowance u/s.36(1)(viii) in respect of the interest on mortgaged back security and interest from loans advanced to deposits holders - A.R submitted that only the net interest to be considered for disallowance u/s.36(1)(viii) of the Act and not the gross interest - HELD THAT:- As rightly pointed out by the ld.D.R, provisions of Sec. 36(1)(viii) are applicable only in respect of loans granted for construction or purchase of house in India for residential purpose, as such Ld.CIT(A) rightly confirmed the disallowance. However, while computing the disallowance u/s.36(1)(viii) of the Act, only net interest income to be considered from the activities of mortgaged back security and interest from loans advanced to deposit holders. This ground of appeal is partly allowed.
Disallowance u/s.36(1)(viii) in respect of the interest being the referral fee from insurance companies and other income - HELD THAT:- Getting properties and persons insured is not a mandatory requirement for carrying on the business of providing long term housing finance. Therefore, the income received by way of commission has no direct nexus or its not incidental to the long term housing finance. Accordingly, this issue was decided against the assessee.
CIT(A) had not admitted the additional grounds raised by the assessee - exclusion of income earned on the land loans which were extended by the assessee in the normal course of business, and exclusion of the entire interest income from the computation of eligible profits for the purpose of deduction u/s.36(1)(viii) - HELD THAT:- We have gone through the assessment order for assessment year 2006-07 wherein the AO reworked the deduction u/s.36(1)(viii) of the Act by segregating the profit on the basis of various activities carried on by the company. On the same manner we direct the AO to compute u/s.36(1)(viii) of the Act for this assessment year also.
Interest income on SLR investment is eligible for deduction u/s.36(1)(viii).
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2016 (12) TMI 1878
TDS u/s 195 - Disallowance of commission u/s 40(a)(ia) - HELD THAT:- As decided in own case [2016 (2) TMI 1339 - ITAT JAIPUR] CIT(A) has given a clear finding that the services rendered and expenditure incurred is in the nature of commission. Given the fact that the commission has been paid in relation to export of garments outside India and the fact that the no services have been rendered in India we are unable to accede to the arguments of the Ld. DR that the subject payments are taxable in India. Assessee paid commission in relation to export of garments as apparent from the agreement as well as working of the commission payments. Accordingly, provisions of section 195 are not attracted in the instant case - Decided in favour of assessee.
Addition made for depositing the employee’s contribution to PF &ESI beyond the prescribed time limit provided in the respective Acts - HELD THAT:- As employees contribution to ESI and PF has been paid before filing of the return of income u/s 139(1) of the IT Act. In view of the consistent stand taken by this Bench and respectfully following the decision of the Hon’ble Rajasthan High court in the case of State Bank of Bikaner and Jaipur [2014 (12) TMI 65 - RAJASTHAN HIGH COURT] and others, the ground taken by the Revenue is dismissed and assessee’s cross-objection is allowed.
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2016 (12) TMI 1876
Addition on account of unexplained investment u/s 69 - parties were alleged to be paper-company of M/s. M.D. Patel Group - HELD THAT:- Similar issues reached ITAT in various cases including Smt. Alkaben Amrutram Guru and Smt Kanchanlal Natwarlal Rana [2016 (8) TMI 1563 - ITAT AHMEDABAD] as observed that these assessees are connected to M/s. M.D. Patel Group thus facts about Settlement Commission owning up of the income by the kingpin M/s. M.D. Patel Group etc. are not on the record. In view thereof these appeals are set aside and restored back to the file of the Assessing Officer to call the assessees to demonstrate that the subject matter raised in these appeals is covered by the alleged settlement petition of M/s. M.D. Patel Group and the result thereof. It is made clear that the Assessing Officer will verify necessary records and the assessees will fully co-operate in this matter. In case of non-cooperation by the assessees, the ld. Assessing Officer will be at liberty to take appropriate view in accordance with law. Accordingly, both the appeals are allowed for statistical purposes.
Addition of additional grounds - addition made on unexplained gifts received by the assessee and on substantive basis on account of alleged unexplained capital/interest income/donation etc - HELD THAT:- All these issues involve Settlement Petition and income owned up by M/s. M.D. Patel Group in respect of all the constituents. It is not disputed that the assessee is connected to M D Patel Group and the fact that the additions in question are subject matter of reassessed income as well as impugned reframing of assessment u/s 143(3) r.w.s. 263 of the Act. The doubt of ld. DR that the additional grounds will require verification of fresh evidence and facts seems to be out of place inasmuch as the relevant record of the Settlement Petition and other relevant evidence is on the record of the AO in multiple proceedings. In any case, host of assessments are being set aside and restored back to the file of AO in view the Settlement Petition and owning up of income by M/s. M.D. Patel Group. Consequently the application for admission of additional grounds deserves merit.
In consideration of entirety of facts and circumstances, contentions and judicial precedents relying on the judgments of National Thermal Power Corporation & Jute Corporation of India Ltd (supra), the additional grounds as raised by the assessee are admitted.
Following the ITAT judgment in the case of Smt. Alkaben Amrutram Guru and Kanchanlal Natwarlal Rana (supra) to which the undersigned is a party, the assessments are set aside which will include the admitted additional grounds as above
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2016 (12) TMI 1875
Penalty u/s.271E - violation of Section 269T - assessee has repaid a loan in cash - assessee explained that he is a partner in the said firm and it is a payment between partner and his firm and pleaded that Section 269T is not applicable - HELD THAT:- As decision in the case of CIT vs Lokhpat Film Exchange (cinema) [2007 (1) TMI 165 - RAJASTHAN HIGH COURT] held under the general provision relating to Partnership Act that partnership firm is not a juristic person and for inter relationship different remedies are provided to enforce the rights arising out of their inter se transactions, the issue about separate entities apart, it cannot be doubted that the assessee has acted bona fide and his plea that inter se transactions between the partners and the firm are not governed by the provisions of ss. 269SS.
We find that the CIT-A found examined and satisfied that the assesse is a partner in a firm i.e M/s.C.M.Roy & Sons and the AO also during the course of assessment proceedings on perusal of the ledger account in respect of advance receipt and payment found that the Assessee credited as advance from customers with an endorsement “To advance memo no- to- from customers” and also found the entire sale to M/s.C.M.Roy & Sons.
The assessee takes advances from its customers and makes payment to its firm time to time for meeting the business needs. We hold that the money received or paid in the above circumstances specially between the partners and its firm can be treated in the nature of advance and not loan or deposit as contemplated in sec.269SS of the Act and that the payments between the partnership firm and its partner and vice versa are payment to self. As discussed above the advances received by the assessee were from proper source and there is no doubt the genuineness of the transactions. In such circumstances, the penalty imposed u/s.271E of the Act is not maintainable - we cancel the penalty levied by the A.O. u/sec.271E - Decided against revenue.
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2016 (12) TMI 1874
Disallowance of expenses deducted as cost of Employees Stock Auction Plan (ESOP) - Revenue contends that the assessee/Revenue fell into error inasmuch as even though took note of the decision of this Court for the previous year as relied on CIT Vs. Oswal Agro Mills Limited [2015 (11) TMI 301 - DELHI HIGH COURT] has not applied the law correctly - HELD THAT:- The judgment in Commissioner of Income Tax Vs. Havells India Limited [2012 (5) TMI 449 - DELHI HIGH COURT] was considered specifically in Oswal Agro’s case [2015 (11) TMI 301 - DELHI HIGH COURT] i.e. decided on 04.08.2015. Havells’case (supra) had taken note of the various judgments including Punjab State’s case [1996 (12) TMI 6 - SUPREME COURT]. Moreover, this Court notices that the question of law arose only for two years i.e. Assessment Years 2008-09 and 2009-10. There were previous orders which cover Assessment Year 2008-09. In the circumstances, having regard to the overall circumstances and the fact that the previous orders took note of the relevant judgments, it is held that no substantial question of law arises. Appeal dismissed.
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2016 (12) TMI 1873
Disallowance u/s 14A - Assessee had received dividend income and claimed it as exempt - HELD THAT:- AO has clearly stated in the assessment order that from the books of account of the assessee it was not possible to work out the exact amount of expenses incurred by it in earning the exempt income. Under these circumstances, it would be difficult to hold that the aforesaid rule has been invoked by the AO without recording any satisfaction. Thus, this argument of the assessee is rejected.
We find force in argument of assessee that investment in the subsidiary / group companies should be excluded while working out the average amount of investments since investment in these companies have been made not for the purpose of earning exempt income but for acquiring control and for strategic reasons. As relying on Cheminvest Ltd [2015 (9) TMI 238 - DELHI HIGH COURT], CIT vs Oriental Structural Engineers Pvt Ltd [2015 (3) TMI 102 - DELHI HIGH COURT], Garware Wall Ropes Ltd [2015 (2) TMI 628 - ITAT MUMBAI] and JM Financial Ltd [2014 (4) TMI 752 - ITAT MUMBAI]. Therefore, the AO is directed to exclude the amount of investment made in the group companies for strategic reasons. For this limited purpose, this issue is sent back to the file of the AO, who shall decide this issue afresh s a result, ground 1 is partly allowed.
Disallowance applying provisions of section 40A(2) with regard to the goods purchased from M/s Ganesh Polychem Ltd. - HELD THAT:- AO has rightly brought out the facts that the rates charged by the sister concerns were exorbitant in comparison to other independent concerns. It is noted that the rates charged by M/s.Ganesh Polychem Ltd were almost double the uncontrolled rates. Therefore, under these circumstances, there was heavy burden upon the shoulder of the assessee to show that when the purchases were made from M/s.Ganesh Polychem Ltd in March / April, 2007, then at that time, the rates in the open market were equivalent to the price charged by the sister concern. No such evidence was brought on record by the assessee. Under these circumstances, it would be very difficult to believe that within two months period, the rates were reduced to half in the open market. In any case, no such evidence was brought on record by the assessee. It is also noted that the Ld. CIT(A) has already given appropriate relief by re-working the amount of disallowance at correct rates. We do not find any need for making any further interference in the order of the Ld. CIT(A) on this issue and, therefore, the same is hereby upheld. This ground is dismissed.
Addition on account of difference in the balance shown in the account of Rashtriya Chemicals & Fertilizers Ltd (RCF, hereinafter) and M/s. Amarjyot Chemicals Pvt Ltd (ACP) - HELD THAT:- As noted by us that the assessee had submitted before the Ld. CIT(A) appropriate reconciliation wherein the reason was given for the difference and the same was duly reconciled. But, Ld. CIT(A) simply rejected the submission of the assessee by stating that he was not convinced with the submissions of the assessee. Thus, order passed by Ld. CIT(A) is neither properly speaking nor well reasoned. Under these circumstances, we find it appropriate to send this issue back to the file of the AO where the assessee shall get adequate opportunity of hearing to submit the reconciliation statement and other required details and evidences. The AO shall also consider all the arguments of the assessee including the arguments that the impugned difference is not leading to suppression of income, and therefore, no addition could be made on account of impugned difference. With these directions, this ground is send back to the file of the AO for deciding it afresh after giving adequate opportunity of hearing to the assessee. As a result, this ground may be treated as allowed, for statistical purposes.
Depreciation claimed on the basis of letter of approval dated 10-10-2010 - In the appeal before Ld. CIT(A), the assessee submitted in detail that required approval from DSIR was received by the assessee and the same was produced before Ld. CIT(A) - HELD THAT:- As stated by the Ld. Counsel that since required certificate has been provided by the assessee which has been examined by the Ld. CIT(A), and only thereafter relief has been provided by him in line with earlier years’ orders which have been confirmed by the Tribunal. Ld. DR could not point out anything incorrect or wrong in the factual finding of the Ld. CIT(A). Under these circumstances, we do not find any justification to interfere in the order of the Ld. CIT(A) on this issue. Thus, ground 1 raised by the Revenue is hereby dismissed.
Disallowance made of claim of weighted deduction u/s 35(2AB)(3) of the Act - HELD THAT:- We find that the relief has been granted by the Ld. CIT(A) after verifying the requisite approval in proper form. Nothing wrong or contradictory has been brought before us by the Ld. DR. Thus, we do not find any need or justification to interfere in the order of the Ld. CIT(A). Therefore, the order of the Ld. CIT(A) is upheld. Thus, ground of the Revenue is dismissed.
Disallowance made by the AO on account of interest u/s 36(1)(iii) on loans advanced to subsidiary companies - as submitted by the Ld. Counsel of the assessee that this issue has been decided in favour of the assessee by the Ld. CIT(A) following the order of the Tribunal for A.Y. 2007-08 .HELD THAT:- DR could not point out any distinction between the facts of A.Y. 2007-08 and the impugned year. Thus, in view of the order of the Tribunal for AY 2007-08, we find that the order of Ld. CIT(A) deserves to be upheld. Therefore, this ground is dismissed.
Deduction u/s 10B - interest and finance charges should be allocated on the basis of CWIP as against on the basis turnover as was done by the AO - HELD THAT:- It will not be appropriate to apportion the interest entirely on the basis of fixed assets. Similarly allocation on the basis of turnover may also not be a proper criteria for the purpose of allocation of interest keeping in view the peculiar facts and circumstances of the case. Therefore, in our considered opinion, as far as interest on unsecured loans (i.e. ₹ 3,60,32,974) and term loans (i.e. ₹ 7,05,53,202) is concerned, the same should be apportioned on the basis of fixed assets held under the gross block, i.e. 5.60% of such interest cost should be allocated to 10B unit and 94.40% should be allocated to non 10B unit. However, interest paid on working capital loans amounting to ₹ 25,61,18,560 should be apportioned in the ratio of net current assets, i.e. 5.81% of such interest should be allocated to 10B unit and 94.19% should be allocated to non- 10B units. The disallowance should be recomputed by the AO accordingly. As a result, this ground is partly allowed.
Addition of expenditure was not debited to the P & L Account by the assessee - HELD THAT:- Since the impugned amount was not debited by the assessee in the P&L Account, the disallowance made by the AO has been rightly deleted by Ld. CIT(A). No interference is called for in his order.
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2016 (12) TMI 1868
Revision u/s 263 by CIT - order passed by the AO u/s 153A r.w.s 143(3) - Assessment u/s 153A of the Act after obtaining approval of Additional CIT u/s 153D - HELD THAT:- In the present appeals for six assessment years, it is seen that except for AY 2010-11 where the assessment was framed u/s 143(3), for all the other five years, the assessments were framed u/s 153A r.w.s. 143(3) meaning thereby that while framing the assessments in those respective years, the necessary approval of Addl.CIT was obtained and that apart from AO the Addl.CIT had also applied his mind to the facts before passing the assessment orders - we find force in the submission of ld.A.R. that it cannot be said that the necessary inquiries were not made while passing the assessment orders u/s 143(3) r.w.s. 153A - it is a settled position that the assessment orders cannot be set aside or revised for inadequate inquiry by ld. CIT u/s 263 of the Act. We therefore find force in the submission of ld.A.R. that revisionary proceedings u/s 263 cannot be initiated in the present cases and for which we also find support from the following decisions. - Decided in favour of assessee.
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