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Income Tax - Case Laws
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2016 (12) TMI 1771 - ITAT MUMBAI
Accrual of income - income recognition - recognizing the notional interest income on outstanding debts when the interest is the subject matter of a decree before the Court - Addition on account of interest accrued on outstanding debt - assessee acquired the right of suit as per assignment deed and was entitled to recover the debt along with interest and cost of suit as per the deed of assignment of right - interest on debt which was receivable by Bank of Baroda, was now receivable to the assessee and as the assessee is following the mercantile system of accounting the assessee was required to offer interest income on debts on accrual basis - HELD THAT:- There is no dispute on the facts about the assessee acquiring the debts from the Bank of Baroda for a sum of ₹ 84,97,400/- with the borrowed funds, the loan creditors have not paid interest income to either bank or to the assessee, assessee has not recognised the income for all the assessment years under consideration etc. The legal issue i.e. to be decided on the right to recover the interest income by the assessee during the pendency of suit in Bombay City Civil Court.
As examined the interpretation of the said section and the relevant explanation is already incorporated in the above paras of this order. We have considered the cited judgment of the Hon‟ble jurisdictional High Court in the case of Maharashtra State Financial Corporation Ltd [2005 (7) TMI 80 - BOMBAY HIGH COURT] . Also considered the reasoning given by the CIT (A) in paras 4.1.4 and 4.1.5 of his order. Considering the above, we are of the opinion, the conclusion drawn by the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, relevant grounds raised by the Revenue in all the four appeals are dismissed.
Disallowance u/s 14A - as per CIT- A disallowance need to be limited to the dividend i.e. exempted income - HELD THAT:- CIT (A) discussed the issue at length and decided the issue. Therefore, in our view, the order of the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, relevant ground raised by the Revenue dismissed.
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2016 (12) TMI 1769 - ITAT INDORE
Assessment u/s 153A - order passed on a date beyond the prescribed limit u/s 153B(1)(a) - HELD THAT:- As per the assessment order, the date of the assessment order is 28.3.2013 but there is no evidence before us that the order has been passed by the Assessing Officer after expiry of limitation. We find that the Assessing Officer had passed the order in time but it was dispatched on later date but it does not mean that the order is passed after the period of limitation, therefore, we dismiss this ground.
Addition on account of share application money received by the assessee - whether incriminating material in respect of share application money was found or seized during the course of search under s.132? - HELD THAT:- We allow the present appeal filed by the assessee for the assessment year 2007-08 on the issue of section 153A r.w.s. section 143(3) of the I.T. Act wherein it has been held that in absence of any incriminating documents found and seized during the course of search, the Assessing Officer is not justified in making the additions in non-abated assessment while passing the order u/s 153A r.w.s. 143(3) of the Act. Thus, we hold the making of addition in non-abated assessment for the A.Y. 2007-08 as void ab initio. Consequently, the addition made in the present assessment order passed u/s 153A/143(3) for the assessment years 2007-08 is deleted.
Addition of share application money - HELD THAT:- Assessee has complied with all the information which was desired by the Assessing Officer to be submitted. Therefore, we are of the view that no addition is called for as we have already held in Anant Steel P. Ltd. vs. ACIT [2015 (11) TMI 1758 - ITAT INDORE] following the judgment of Lovely Export (SC), that if at all the Assessing Officer is not satisfied with the genuineness of transaction, then the Assessing Officer is at liberty to make the addition in hands of that co. In decision of Hon'ble Delhi High Court in the case of Principal CIT vs. Softline Creations P. Ltd. [2016 (9) TMI 255 - DELHI HIGH COURT] it has been held that assessee has duly discharged burden of proof by providing necessary information and inability to produce share applicants could not lead to an adverse inference - ground of the appeal of the assessee is allowed.
Rejection of books of account - excess stock found - HELD THAT:- Finding of excess stock during the course of search by itself suggest that books of accounts of the assessee were not correct and complete and these were not reliable. Moreover, we find that assessee co. and its directors have also surrendered ₹ 5 crores as additional income, therefore, it was the base for rejection of book results. Therefore, we are of the view that Assessing Officer and learned CIT(A) are justified in rejecting the book results for the assessment year 2011-12. The assessee has relied upon many decisions during the course of hearing but the facts of all these cases are altogether different. Therefore, we endorse the action of the Assessing Officer and learned CIT(A) regarding rejecting the book results u/s 145(3)
Estimating the G.P. @ 1.25% of the total turnover - CIT(A)’s action in reducing the g.p. addition on sale of gold bullion and silver bullion - HELD THAT:- In absence of any incriminating documents, there is absolutely no justification for making any estimation of g.p. in respect of assessment year 2010-11, for which, rejection of books of accounts has not been upheld by us. Accordingly, we hold that there was no justification in the AO’s action as well as in the learned CIT(A)’s action in estimating g.p. on sales for the assessment year 2010-11. However, for assessment year 2011-12, we have upheld the rejection of books of accounts and therefore, we hold that considering the facts and circumstances of the assessee’s case, it would be just and fair to estimate g.p. on sale of gold bullion and silver bullion @0.30% as against 0.29% shown by the assessee in its books of accounts.
Enhancing the income of the assessee by suo-mottu estimating the sales of the assessee 20% higher than that shown in the audited books of account - HELD THAT:- As during the course of the search proceedings, not a single incriminating document or loose paper was found from which the unaccounted trading of bullion by the assessee could get established. We have also observed that the assessee had maintained stock register and such stock register was duly produced before the Assessing Officer. We also observed that the Revenue Authorities have not brought on record any single instance of any sales having been made at a rate lower than the then prevailing market rate. If the sale is not found to have been made at the rate below than the market rate, any allegation regarding manipulation in the cash memos without any basis has no legs to stand. We thus find no substance in the action of the learned CIT(A) in enhancing the sales of the assessee on ad-hoc basis by 20% of the sales shown in the audited accounts
Suppression of commodity trading income - Excess claim of transaction charges - HELD THAT:- the transaction charges have no direct nexus with the commodity trading income for the reason that such charges are invariably required to be paid at a fixed rate by a dealer/broker in the forward commodity market to the respective commodity exchanges irrespective of the outcome of the transactions. So, even for losses, one would be required to pay the transaction charges. Further, the commodity forward transactions are speculative in the nature and net result of transactions for one year cannot be compared with that of the other year. We find that except making the guess work, the learned CIT(A) has not brought on record any material for his presumption of suppression of commodity trading income. In such circumstances, there was no reason for the learned CIT(A) to estimate the income of the assessee for the assessment year 2010-11 on the basis of transaction charges vis-a-vis commodity income shown by the assessee for the immediately preceding assessment year i.e. 2009-10. Thus, there was no justification for making an enhancement of ₹ 56,47,000/- in the assessee’s income on account of commodity trading income for the assessment year 2010-11 and of ₹ 1,92,52,243/- for assessment year 2011-12. We also find no justification in the learned CIT(A)’s action in making an enhancement of ₹ 47,47,254/- in the assessee’s income on account of excess claim of transaction charges.
Enhancement of the salary - addition based on loose paper found in search - HELD THAT:- Loose paper is in the form of P & L account of one of the several commodity divisions of the assessee i.e. of MCX division and that too, for the period from 01.4.2010 to the date of search i.e. 25.11.2010. Similarly, the loose paper inventorised was also in respect of monthly salary paid in one of the divisions. The learned CIT(A) misdirected himself that the salary stated was in respect of entire divisions whereas it was only one of the divisions. We find that the assessee has filed the complete details of salary paid to various staff members and the entire salary was paid through account payee cheques. DR could not controvert such fact by brining any contrary material on record. We also find that during the course of assessment proceedings, the assessee had produced all the books of account and other records before the Assessing Officer and the Assessing Officer had not found any discrepancy in the salary payments recorded by the assessee in its books of account. Subject enhancement is a result of misinterpretation of the documents found during the course of search without considering that such documents were pertaining only in respect of one of the divisions and were containing the details for the part of the year only and therefore, the same are not comparable with the consolidated details for the whole year. No addition to be made.
Addition disbelieving the loss incurred by the assessee on account of sale of surplus stock of gold bullion found during the course of search - HELD THAT:- AO, without bringing any concrete material on record, presumed that the sale of gold bullion was deliberately shown by the assessee on such date at which the gold rate was low as compared to the rate of previous couple of days and the assessee has shown to have sold the excess stock on 28-01-2011 for booking loss of ₹ 7,40,297/- on sale of unaccounted investment. We have already held that no evidence found as regard to suppression of any sale. In such circumstances, we are of the view that the ld. CIT(A) was justified in deleting the entire addition holding that the AO failed to prove that sale bills of bullion were bogus. Even before us, no contrary material has been brought on record by the Revenue to controvert the findings of the ld. CIT(A).
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2016 (12) TMI 1767 - ITAT CHANDIGARH
Benefit of substantial expansion u/s 80IC(2) denied - CIT(A) restricting deduction to 25% instead of 100% claimed by the appellant in the sixth year of operation of new industrial undertaking - HELD THAT:- In the present case, it is noticed that the CIT(A) denied the claim of the assessee by following the decision of M/s Hycron Electronics (2015 (6) TMI 725 - ITAT CHANDIGARH) where in held as s entitled to only 25% of deduction during the present year because the assessee has already availed the period of full deduction @ 100% in the earlier five years
The facts above are similar to the facts of the assessee’s case. No valid ground to interfere with the findings given by the ld. CIT(A) and accordingly, do not see any merit in this appeal of the assessee. - Decided in favour of revenue
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2016 (12) TMI 1766 - KERALA HIGH COURT
Best judgement adjustment - transactions noted in the bill-book seized - Held that:- Assessee has neither pleaded nor established any justifiable reason for his not entering in the accounts the transactions noted in the bill-book seized. In such a situation, it was not possible for the Sales Tax Officer to find out precisely the suppressed turnover; he could only estimate it based on the material before him.
Abdulai disapproves of an approach that insists on the assessing authority's having material before him to prove the exact turnover suppressed. If it were insisted upon, there would be no "best-judgment" assessment. The assessee cannot be permitted to take advantage of his own illegal acts, for it is his duty to place all facts truthfully before the assessing authority. If he fails to do his duty, he cannot be allowed to call upon the assessing authority to prove what turnover he had suppressed, which fact is within his personal knowledge. AO's task in finding out the escaped turnover was by no means easy. In estimating any escaped turnover, Abdulai acknowledges, inevitably there is going to be some guess- work. The assessing authority while making the "best-judgment" assessment no doubt should conclude rationally and unbiased. If the AO's estimate is bona fide and rational, that there is no good proof to support that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation; it is his "best-judgment" and not of anyone else's.
No court could substitute its "best-judgment" for that of the assessing authority. The courts should first see, Abdulai asserts, whether the accounts maintained by the assessee were rightly rejected as unreliable. If they conclude that they were rightly rejected, the next question is whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. If the basis adopted is held to be relevant, even though the courts may think that it is not the most appropriate basis, the assessing authority's estimate cannot be disturbed.
Unexplained investment - Held that:- The Tribunal has found that, about this investment, the Department has failed to find any corroborative material under Section 69 of the Act. It has also held that the amount in the Registered Sale Deed should be accepted unless countervailing material establishes that the consideration in the Registered Deed is different. The un-signed computer print-out, held the Tribunal, has no evidentiary value. Convinced of the assessee's explanation, the Tribunal has held that the addition made by the Department regarding the alleged investment in Koothparamba property is not justified. This finding has attained finality.
Unexplained investment in 'Mahe' Property - Held that:- The bill-books found during the search pertain to the period from 01.04.2006 to 30.07.2007. From them AO found the total sales to be at ₹ 2.31 crores. Since the assessee had not included the sales in the trading account filed along with the return of income, the AO reassessed the sales backwards in the entire block-period from AY 2002-03.
Estimation of Turnover of Sales-Net Profit-Addition of 5% - Held that:- As has been rightly held by the Tribunal, the assessee could not establish that bill-books accord with the statements of account he submitted to the authorities. Nor has he sustained his defence that the bill-books contained commission transactions, given the tax difference between the State of Kerala and the Union Territory of Pondicherry. Further, important is that any accommodation by way of issuing bills at Mahe to the traders of Kerala for the transactions held only in Kerala is against public policy. The authorities-even if they were to believe the assessee's version-have rightly refused to recognise those illegal transactions. Indeed, emphatic is the judicial dictum of Abdulai that the AO's best-judgment did carry an element of speculation and approximation.
As against the initial turnover of ₹ 2.31 crore, the Tribunal has found it to be ₹ 1,95,49,077 based on the AO's Remand Report. As a result, the Tribunal has sustained the net profit rate at 5% of the turnover. We reckon that the method of calculation and the procedure adopted by the authorities arriving at the undisclosed income has accorded with the statutory mandate under sections 68 to 69C of the Act. We, therefore, find no reason to interfere with the Tribunal's confirming the AO's adopting the undisclosed income @5% on the revised suppressed turnover.
Agricultural income taken as income from other sources - Held that:- CIT (Appeals) has agreed with the AO's findings. The finding is that the assessee has claimed no agricultural income in the return, but showed it in the statement-of-account filed during assessment proceedings. Indeed, the assessee's claim seems to be against the established practice of reckoning income from agricultural activities. Excluding the house, whatever remains of 21 cents may not be, as has been concurrently held, sufficient to generate the income shown by the assessee from agriculture. We, therefore, find no reason to interfere with the concurrent findings entered by both the fora on this aspect - a question of fact.
Interest on Fixed Deposits the assessee had with Gokulam Chit Funds - Held that:- Indisputably, the assessee showed fixed deposits; but, correspondingly, failed to reveal in the returns any interest. Absent any explanation from the assessee, the AO adopted interest @10% per annum. To be more explicit, the assessee showed ₹ 10 lakh fixed deposit from 13-11-2002 to 31-03-2005, and ₹ 5 lakh from 21-01-2003 to 31-03-2009. As noted, he showed no income as interest on those deposits - Given the size of the deposits, it is but inevitable that the assessee ought to have earned some interest on the fixed deposits. As he has failed to show in his returns any income by way of interest, the concurrent finding entered by both the fora reckoning interest at 10% annually is eminently sustainable; so it calls for no interference.
Addition of Interest - Addition of amounts the assessee allegedly lent to other people - Held that:- The assessee lent the money to Mr. Nanu Vaidyar before 01-04-2001. As for the lending to others, too, exact dates are unavailable. So the AO treated the entire ₹ 25,63,500/- as the assessee's unexplained investment during the AY 2004-05. Leaving aside the minor discrepancies in the assessee's explanation about his lending the amounts to various persons, presumably his friends, we may bear in mind that the assessee is a businessman with considerable turnover. For a businessman, having a turnover of a couple of crores, short-term lending to friends- without interest at that-is neither uncommon nor abnormal.
True, the AO's assessment and the adjudicatory authorities' findings are, perhaps, matters of fact. But the facts to fructify into findings need the application of law. If that application of law is flawed, this court can interfere, without causing violence to the established principle of law that there needs no interference on the questions of fact.
Even going by the ratio of Abdulai, we reckon that the AO's findings on this issue are on unsure foundations. The speculative aspect overshadows the aspect of the established business practices. Given the assessee's explanation, we hold that he ought to have been given the benefit of doubt. In other words, there can be no quarrel on the AO's conclusion that ₹ 25,63,500/- is an unexplained investment, but on his calculating interest, we feel that it is without basis. We, therefore, set aside the Tribunal's findings for AY 2004-05 concerning addition of interest; as a result, we allow the assessee's appeal for AY 2004-05. Similarly, the AO's conjecture on the interest component for the AYs 2005-06, 2006-07, and 2007-08- ₹ 2,34,000/-, ₹ 2,34,000/-, and ₹ 1,36,500 respectively-cannot be sustained.
Addition of Interest - Held that:- On the above mentioned amounts, the AO has estimated interest component at ₹ 1,48,000/-. For the reasons weighed with us in disallowing the AO's best-judgment the addition of ₹ 25,63,500/-, we also hold that the addition of interest on those deposits cannot be sustained.
Fishing Boats - Held that:- We may focus on the additions made by the AO because of estimated income from fishing boats for the AYs 2005-06, 2006-07 2007-08, and 2008-09. Undeniably the seized diary revealed income from fishing boats amounting to ₹ 38,750/-, ₹ 43,900/-, ₹ 32,100/-, and ₹ 8000/- for the years mentioned above. As has been rightly and concurrently observed by the adjudicatory authorities, there was precious little explanation from the assessee. We, therefore, uphold the Tribunal's findings and dismiss the appeal for the AYs 2007-08 & 2008-09.
All issues against the assessee save the addition of amounts the assessee allegedly lent to other people, totaling to ₹ 25,63,500/- and the interest component thereon.
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2016 (12) TMI 1765 - ITAT DELHI
Dismissal of appeal by not providing sufficient opportunities to the assessee - denial of principle of natural justice - non speaking order - Held that:- CIT(A) has passed a non-speaking and exparte order, which is not sustainable in the eyes of law. Therefore, in the interest of justice, we set aside the issues in dispute to the file of the CIT(A) to decide the issues in dispute afresh, in accordance with law, after giving adequate opportunity of being heard to the parties and pass a speaking order. However, the Assessee is also directed to fully cooperate with the CIT(A) and produce all the documents before him to substantiate his claim and not to take any unnecessary adjournment. -Assessee appeal stands allowed for statistical purpose.
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2016 (12) TMI 1764 - ITAT CHANDIGARH
Disallowance of deduction u/s 80IC on the manufacturing activity undertaken by it - Held that:- No change in the fact situation has been brought to our notice by the revenue we are an agreement with the order of the CIT( appeal) in this regard, and uphold the assessee’s claim to deduction under section 80 IC on the manufacturing activity carried out by it in this year also. This ground of appeal raised by the revenue is therefore dismissed.
Deduction u/s 80IC on income from job work more so when the activity been carried out by the assessee was nothing but packaging - Held that:- As decided in 2005-2006, 2007-2008, 2008-2009 and 2011-2012 allowed the claim of deduction under section 80IC of the Act on job work charges. Further deduction u/s 80IC was also allowed on insurance claim received and scrap sale, holding the same to be directly attributable to the activities of the business unit. Appeal filed by the revenue allowed the claim of deduction under section 80IC of the Act both on manufacturing, job work charges, insurance claim and scrap sale.
Deduction u/s 80IC on other income such as scrap sale, insurance claim, foreign exchange fluctuation and credit balance when these incomes were not derived in true sense from the business of the eligible undertaking - Held that:- The assessee’s claim having been allowed from year to year there is no merit in the present ground raised by the revenue vis a vis claim of deduction under section 80IC on scrap sales and insurance claim received by the assessee - the amount received on scrap sale, the credit balance written off of parties, insurance claim received towards material damage during transit is directly attributable to the activities of the industrial unit and hence eligible for deduction under section 80IC of the Act. However, the assessee is not entitled to the deduction claimed under section 80IC of the Act on the misc. income received being refund of security deposit and the insurance claim on machinery repairs. In view thereof we direct the Assessing Officer to recompute the deduction allowable under section 80IC of the Act.
Deduction under section 80 IC on foreign exchange fluctuation received - Held that:- It is not disputed that the foreign exchange fluctuations relate to the export activity carried out by the assessee, the foreign exchange fluctuation earned by the assessee is to be treated as its trading receipts/receipts from the manufacturing activity carried out by it and thereby entitling the assessee to claim deduction under section 80IC on the same. In view of the above we find no infirmity in the order of the CIT(A)allowing the assessee’s claim of deduction under section 80IC on the foreign exchange fluctuation received. In view of the above we hold that the assessee is entitled to claim deduction under section 80IC on scrap sales, insurance claim, credit balances written back and foreign exchange fluctuations earned.
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2016 (12) TMI 1761 - BOMBAY HIGH COURT
Application of income u/s. 11(1)(a) - corpus donation u/s. 11(1)(d) - carry forward of deficit on account of excess expenditure and directed the assessing officer to allow carry forward of deficit on account of excess expenditure - corpus donation u/s. 11(1)(d) - Held that:- Issues arising herein stands concluded against the Revenue and in favour of the Assessee by the decision of this Court in CIT v/s. Institute of Banking [2003 (7) TMI 52 - BOMBAY HIGH COURT]. The questions as proposed do not give rise to any substantial questions of law.
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2016 (12) TMI 1760 - ITAT VISAKHAPATNAM
Disallowing the amortization of premium on Government Securities - Held that:- We find that the very same issued has been considered by the Coordinate Bench of this Tribunal in assessee’s own case (supra) for the Assessment Year 2008-09. Therefore, we set aside the order of the Commissioner of Income Tax (Appeals) and remit the matter back to the file of the AO for fresh adjudication keeping in view the decision of the Coordinate Bench of this Tribunal for the Assessment Year 2008-09. Hence, this ground of appeal raised by the assessee is allowed for statistical purpose.
Disallowing the amortization of loss on account of merger - Held that:- CIT(A) correctly by considering the provisions of the Act disallowed the claim made by the assessee. So far as RBI guidelines with regard to the amortization of losses is concerned, in view of the specific provision provided by section 72AB of the Act, in our opinion, RBI guidelines cannot prevail over the Income Tax Act. We further observed that business losses and unabsorbed depreciation of amalgamating co-operative bank i.e. Bobbili Co-operative bank can be set off against the income of successor co-operative bank i.e. amalgamated co-operative bank (assessee) if the amalgamation is within the meaning of section 72AB. In the present case, the amalgamating company i.e. Bobbili Co-operative bank not filed return of income as required u/s 72AB. Therefore, the claim of the assessee cannot be allowed. We find that the CIT(A) has correctly decided the issue and disallowed the claim of the assessee. The issue involved in this appeal i.e. loss on account of merger has been considered by the Coordinate Bench of this Tribunal in assessee’s own case for the Assessment Year 2008-09 and held that the assessee is not eligible for claim.
Allowance of depreciation by treating the transaction of merger as one of goodwill acquired by the appellant - Held that:- Goodwill means it is an intangible asset that arises as a result of acquisition of one company by another for a premium value. In this case, the assessee has not paid any amount to amalgamating company. The assessee has only taken losses of amalgamating company i.e. Bobbili Co-operative bank. Therefore, the assessee has not acquired any goodwill. The Ld. CIT(A) by considering the entire facts of the case has passed a detailed order by considering the provisions of law.
TDS u/s 194A - Non-deduction of TDS under section 40(a)(ia) - Held that:- no TDS needs to be deducted on interest paid by any cooperative society too members. In this regard, the Bench observed that the provisions of section 2(19) or section 194A(3) of the I.T. Act do not make any distinction between the cooperative societies carrying on banking business or other cooperative societies. Respectfully following the decision of Hon'ble ITAT in assessee's case for Assessment Year 2007-08, the Assessing Officer is directed to delete the impugned disallowance.
Disallowance of provision for deduction in Government securities - Held that:- AO as well as Commissioner of Income Tax (Appeals) gave a categorical finding that the assessee has made a mere provision as per the accounting practice followed by the assessee and that the reliability is not yet crystallized during the assessment year under consideration, therefore, both the authorities below have disallowed the claim of the assessee. Even before us, the assessee is not able to establish that the claim made by the assessee is based on actual payment for the assessment year under consideration. It is also a mere provision made for the purpose of accounting practice followed by the assessee. Under these facts and circumstances of the case, we are of the opinion that the Commissioner of Income Tax (Appeals) has decided the issue correctly, hence, we find no infirmity in the order of the Commissioner of Income Tax (Appeals), which is hereby confirmed and the ground of appeal raised is dismissed.
Amortization of premium paid for acquisition of HTM securities - Held that:- We find in the Assessment Year 2008-09, amortization of premium on government securities has been dissolved by the Assessing Officer on the ground that it is a contingent liability. The Commissioner of Income Tax (Appeals) has confirmed the order of the Assessing Officer. On appeal, ITAT remanded the matter back to the Assessing Officer for fresh consideration. In the year under consideration, the CIT (Appeals) allowed the ground raised by the assessee by following the CBDT instruction No. 17/2008 dated 26/09/2008 and also the decision of the in the case of Rajkot District Co-operative Bank [2014 (3) TMI 110 - GUJARAT HIGH COURT] directed the Assessing Officer to allow this claim. In our opinion, to maintain a consistency, the issue has to be remitted back to the Assessing Officer to consider the factual matrix of the case and decide in accordance with law. We therefore, set aside the order passed by the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to consider the issue afresh
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2016 (12) TMI 1759 - ALLAHABAD HIGH COURT
Nature of receipt - receipt of grants - Subsidy - capital or revenue receipt - Held that:- The Tribunal has examined the matter at length and has given reasons for reaching conclusions that the subsidy, which was received by the assessee was in the nature of capital subsidy and has been used towards development of capital expenditure as the business of the assessee was to set up waterways.
The Tribunal categorically comes to the conclusion that there was no income to the assessee, which was of revenue in nature and in the absence any accrual of income to the assessee on account of the subsidy grants it could not be said that the assessee was liable to pay any taxes on the same. The other finding recorded by the Tribunal is that the project has not commenced and was incomplete and the money was being utilized towards capital expenses. - Decided in favour of assessee.
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2016 (12) TMI 1758 - ITAT MUMBAI
Transfer pricing adjustment on provisions of ITES - selection/rejection of comparables which we propose to deal with at the outset - computation of RPT - Held that:- Having considered the submissions of the parties, we find that the Tribunal in PTC Software India (P.) Ltd. [2012 (1) TMI 343 - ITAT PUNE] observed the ratio of RPT to total transactions have to be worked out by dividing RPT sales and RPT expenses with total sales and total costs. The aforesaid view expressed by the Tribunal, Pune Bench, was approved by the Hon'ble Jurisdictional High Court in PTC (I) (P.) Ltd. (supra) while holding that RPT has to be considered in the context of total transactions - we restore the issue relating to comparability of the aforesaid company to the Assessing Officer/Transfer Pricing Officer for deciding afresh after working out the RPT.
Companies functionally dissimilar with that of assessee as BPO service provider need to be deselected from final list.
Denial of claim of deduction u/s 10A in respect of Unit-II and Unit-III on the reasoning that they are not new Units, but expansion of earlier Units - Held that:- Tribunal for assessment year 2005-06 [2015 (4) TMI 589 - ITAT MUMBAI], have allowed assessee's claim of deduction under section 10A in respect of Unit-II and Unit-III. The same view was again reiterated by the Tribunal in assessee's own case for assessment year 2010-11. Therefore, respectfully following the consistent view of the Tribunal on the issue in assessee's case as aforesaid, we allow assessee's claim of deduction under section 10A of the Act for the impugned assessment year. - Decided in favour of assessee
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2016 (12) TMI 1756 - ITAT JAIPUR
Bogus unsecured loan - incriminating documentary evidence found from the search and seizure carried out by Investigation Wing - statement recorded u/s 132(4) - Held that:- In the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013.
It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed. - Decided against revenue.
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2016 (12) TMI 1755 - ITAT BANGALORE
TPA - Comparable selection - Held that:- Assessee is engaged in the business of rendering software development services to its Associated Enterprises ("AE"). Capco IT is remunerated on a cost plus basis for the services rendered thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Negative Working capital adjustment - Held that:- There is no need for making any negative working capital adjustment when assessee dos not carry any capital risk. In fact, TPO should have done necessary working capital adjustment to the profits of the selected comparables so as to make them comparable. We direct the TPO not make negative working capital adjustment. See Adaptec (India) (P.) Ltd. v. Asstt. CIT [2015 (6) TMI 288 - ITAT HYDERABAD].
Deductions u/s 10A computation - Held that:- Direct the A.O. to re-work deduction u/s 10(A) on the principle that what is excluded form 'Export Turnover' must necessarily be excluded from 'total turnover.'
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2016 (12) TMI 1752 - ITAT MUMBAI
TDS u/s 194J - Demand u/s 201(1) - relationship between the assessee and shipping company - Held that:- The nature of relationship between the assessee and shipping company, between the shipping company and seafarers and between the assessee and seafarers have to be determined first, which will in turn would help in determining the nature of liability under the Income tax Act. The nature of relationship could be determined by examining whole gamut of activities along with the agreements and other documents.
A perusal of the orders passed by the tax authorities would show that they have not determined the nature of relationship/contract, as stated above. Hence the view of the tax authorities that the provisions of sec. 194J would apply to the facts and circumstances of the case, in our opinion, is not substantiated. We are of the view that this issue requires fresh examination. Accordingly we set aside the order passed by CIT(A) and restore the issue to the file of the AO for examining the same afresh. We also direct the AO to give the benefit of 3rd proviso to sec. 201(1)
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2016 (12) TMI 1751 - ITAT CHANDIGARH
Addition u/s 69A - cash deposits in the bank account - Held that:- The assessee failed to submit any document in support and did not file copy of the VAT return before the Assessing Officer. No evidence was submitted with regard to sales or purchases made. The assessee made cash deposit of ₹ 37,73,695/- in his SB account, however, assessee failed to explain any source of such deposit in the bank account.
Whatever contention was raised by assessee, were found to be false and fabricated. The claim of the assessee of estimated sales of ₹ 29 lacs was not supported by any evidence or material on record. The assessee in the IT Return and in the VAT returns, have not disclosed gross sales of ₹ 29 lacs. No evidence was filed before the authorities below in support of any of the explanation, therefore, source of the cash deposited in the bank account remained unexplained. Even before me, no evidence of any source of bank deposit has been furnished. In the absence of any evidence or material on record to explain the cash deposits in the bank account of the assessee - Decided against assessee.
Addition on account of lesser closing stock declared in income tax return as against declared in VAT return which is arbitrary & unjustified - Held that:- The assessee did not submit any evidence before authorities below therefore, addition of ₹ 4,30,000/- was made. The assessee did not explain the discrepancy found visà-vis VAT return therefore, CIT(Appeals) dismissed this ground of appeal of the assessee. The assessee did not point out any infirmity in the order of the authorities below in making this addition. In the absence of any specific argument or material to point out any error in the orders of authorities below, not inclined to interfere with the orders of authorities below. This ground of appeal of the assessee is dismissed.
Addition on account of alleged lesser labour job declared - Held that:- Assessee did not point out any error in the orders of authorities below therefore, in the absence of any argument or material on record, we are not inclined to interfere with the orders of authorities below - Decided against assessee.
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2016 (12) TMI 1750 - ITAT AHMEDABAD
Validity of reopening of assessment - addition u/s 2(22)(e) of deemed dividend - Held that:- The impugned addition as advanced by M/s.Varindavan to M/s.AIA never found reason of re-opening since the reopening notice sought to add loans received from M/s.Keyur Financial Services Pvt. Ltd. Learned departmental representative fails to rebut this factual position.
We notice in this background that in case of CIT Vs. Mohamed Juned Dadani [2013 (2) TMI 292 - GUJARAT HIGH COURT] upholds tribunal’s order quashing a similar reopening on the ground that when the Assessing Officer had not made any addition qua the reason recorded in reopening of the assessment, he could not make additions on some other grounds not forming part of the re-opening reasons recorded. - Decided in favour of assessee.
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2016 (12) TMI 1749 - ITAT MUMBAI
Disallowance u/s 14A - Held that:- From the Schedule of investments we noticed that entire amount of investments made in equity shares (subsidiary companies and other companies) have been brought forward from earlier year, meaning thereby, no movement in these investment found was during the year under consideration. Other investments made by the assessee consisted of investments made in various schemes of different mutual funds only.
According to Ld A.R, one of the staffs was assigned for this job and hence a portion of his salary has been considered for making disallowance u/s 14A - We notice that the assessee has not made disallowance out of other administrative expenses, even though there was fresh investments in Mutual funds and further there has been activities of purchase and sale of mutual fund units. Considering the activity involved in the investment portfolio of the assessee, we are of the view that a portion of other administrative expenses should also be allocated towards the investment activities. We are of the view that the disallowance u/s 14A may be reasonably estimated at ₹ 50,000/- and the same would take care of other administrative expenses and would meet the requirements of sec. 14A. We set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to restrict the addition to ₹ 50,000/- (including the amount disallowed by the assessee).
Higher rate of depreciation on moulds - @ 30% OR 15% - Held that:- AO to allow depreciation on moulds at 30% as claimed b it. Since there is no change in the facts of the case on this issue, it is held that the appellant is entitled to claim depreciation on moulds @30%. AO is, therefore, directed to allow depreciation on moulds @30% as claimed by the appellant. Ground No 2 of the present appeal is accordingly allowed.
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2016 (12) TMI 1748 - ITAT AHMEDABAD
Disallowance under Rule 8D r.w.s. 14A - Held that:- As learned counsel for the assessee rightly points out, the disallowance under section 14A cannot exceed the related tax exempt income during the relevant previous year. This is what co-ordinate benches have consistently held to be the correct legal position. See AUSOM INTERNATIONAL P. LTD. VERSUS ITO, WD-1 (3) , AHMEDABAD [2016 (5) TMI 531 - ITAT AHMEDABAD]
We hold that the disallowance under section 14A must stand restricted to ₹ 8,01,136/-. To this extent, the Cross Objection is allowed, and the relief granted by the CIT(A) is confirmed.
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2016 (12) TMI 1746 - ITAT HYDERABAD
Estimation of income from running of a wine shop at 5% of the goods put to sale - Held that:- As the assessee relied upon the decision of the Coordinate Bench of this Tribunal in the case of Secunderabad Wines vs. ITO [2016 (7) TMI 1449 - ITAT HYDERABAD] wherein the Tribunal has upheld the estimation of income at 3% of the cost of goods sold. Both of us are signatories to the said order. Respectfully following the same, we direct the AO to estimate the income of the assessee also at 3% of the cost of goods put to sale.
Agricultural income OR income from other sources - nature of receipt - Held that:- Assessee owns 4.33 acres of agricultural land and his parents also owned more than 16 acres of agricultural land at Gurajala, near Guntur District. Though the assessee has not given the details of the crops grown and the yield of such crops, earning of agricultural income cannot be ruled out. At the time of hearing, the learned Counsel for the assessee agreed for restricting the agricultural income to 50% of the agricultural income claimed by the assessee. Taking into consideration the extent of land held by the assessee, we are inclined to accept the assessee’s contention and we restrict the agricultural income to ₹ 1.00 lakh for the relevant A.Y and the ground of appeal No.3 is accordingly treated as partly allowed for statistical purposes. The balance amount of ₹ 1,35,200 shall be treated as “income from other sources” and brought to tax accordingly
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2016 (12) TMI 1745 - ITAT BANGALORE
TPA - Comparable selection criteria - functinal dissimilarity - Held that:- Appellant is purely engaged in the business of providing software development services to its parent company. Therefore, the companies functionally dissimilar shall be excluded from the list of comparables to determine the arm's length price in the appellant's case. TPO shall re-work the PLI after incorporating our findings with respect to comparables.
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2016 (12) TMI 1741 - ITAT MUMBAI
Assessment of income - Assessee carrying on two independent activities, - one of insurance business which was reflected in Policyholders’ Account by the assessee and the other, being an independent activity depicted in Shareholders’ Account, as per the detailed findings given in the assessment order - Held that:- Assessee has time and again brought to the notice of the AO that assessee is engaged only in the business of life insurance. It has been brought to the notice of the AO that no other business has been carried out. The investments were made in line with the requirement of applicable regulations. It is further noted that nothing has been brought out by the AO in the assessment order to show if any other business has been done by the assessee. Shareholders’ Account and Policyholders’ Account have been separately maintained for the purpose of meeting the requirement of law as mentioned above also. There was no justification to artificially disintegrate the business by separately assessing the amount transferred from one account to the other by the assessee for the purpose of maintenance of accounts as per requirement of law. As relying on Tribunal order wherein it has been held that assessee was engaged in only one business, i.e. business of life insurance - recomputation of income made by the AO was rightly rejected by the Ld. CIT(A). As a result, Grounds 1(i) & 1(ii) raised by the Revenue are hereby dismissed.
Disallowance of stamp duty charges - treating expenses as capital expenditure as against revenue expenditure claimed by the assessee - Held that:- This issue stands decided by the AO in favour of the assessee on the basis of legal principle by relying upon the orders of the Tribunal in the case of HDFC Standard Life Insurance Co Ltd [2013 (10) TMI 1072 - ITAT MUMBAI]. In this year also, there would be no point in sending the issue back for futile exercise as the decision has already been taken, which can be applied here also. We have considered the request of the Ld. Counsel. No objection or any contrary argument was made by the Ld. CIT-DR in this regard. - Decided against revenue
Addition on account of Negative Reserve - Held that:- AO has himself took a decision that the Negative Reserves cannot be added back while computing the income of life insurance assessee company u/s 44 read with rules 1 & 2 of First Schedule of the Income-tax Act, 1961. Under these circumstances, we find that no dispute is left on this issue. Therefore, we find that addition has been rightly deleted by the Ld. CIT(A) on the basis of his well reasoned findings. - decided against revenue
Grant of benefit of exemption u/s 10(32) on dividend income received - Held that:- We have gone through the order passed by Ld. CIT(A) also and find that the benefit of exemption was granted by the Ld. CIT(A) relying upon the judgement in the case of Life Insurance Corporation of India vs CIT (1977 (11) TMI 25 - BOMBAY HIGH COURT) as well as ICICI Prudential Insurance Co Ltd vs ACIT (2012 (11) TMI 13 - ITAT MUMBAI). AO in Order Giving Effect has also granted relief to the assessee by relying upon these judgements. Under these circumstances, we do not find it necessary to interfere in the finding of Ld. CIT(A) and, therefore, the order of the Ld.CIT(A) is upheld. These Grounds raised by the Revenue are dismissed.
Addition u/s 14A on the basis of Rule 8D - Held that:- In view of the special provisions applicable to the insurance companies, we are of the opinion that the provisions of section 14A r.w.r. 8D were held not applicable to the insurance companies i.e., lCICI Prudential Insurance, HDFC Standard Life Insurance Company. Therefore, the SSI Life Insurance Company Limited (assessee in the present case should not be any exception.
Exemption u/s 10(23AAB) in regard to income of pension fund to be allowed as relying on ICICI Prudential Insurance Co Ltd vs ACIT (2012 (11) TMI 13 - ITAT MUMBAI).
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