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Income Tax - Case Laws
Showing 1 to 20 of 533 Records
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2017 (7) TMI 1478
Non grant of registration u/s 12A (a) - no charitable activity was ever carried out by the trust upto 31.3.2008 - ITAT allowed claim/registration - HELD THAT:- We are of the view that observations made by the Tribunal that Commissioner cannot comment about genuineness of its activity and he has not pointed out any defect in the clauses of the trust deed. The activity will be carried out only after the trust is registered.
We are in complete agreement with the view taken by the Tribunal. The issue is answered in favour of the assessee.
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2017 (7) TMI 1465
Addition u/s 40A - payments for purchase of the land in cash to related company of the assessee - HELD THAT:- The intention of the legislature for inserting section 40A(3) of the Act is to pluck the loophole of tax evasion by making the payments in cash. Once it is established that the payment is genuine and the recipient has admitted the payment in their income return, the purpose of 40A(3) of the Act is complied with. Therefore, the courts have held in such circumstances the rigor of the provisions needs to be interpreted liberally when the payment is genuine and the payee is identifiable. In this case, there is no doubt regarding the payee and payer and the CIT(A) also has given a finding that the payee in the case of Siri Constructions has admitted the amount in their returns.
As in the case of Sri Lakshmi Satyanarayana Oil Mill [2014 (8) TMI 486 - ANDHRA PRADESH HIGH COURT] held that the provision must be interpreted liberally and the assessees cannot be subjected to undue rigor. Therefore, in the instant case, the payments are said to be genuine and the payees are identifiable and the recipients have admitted the receipts in the income. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld and the appeal of the revenue is dismissed.
Correct head of income - Gain on sale of land - capital gain or business income - intention behind the transaction - HELD THAT:- It is evident that the assessee has meticulously planned the entire transaction as business transaction. It is evident from the fact that before registration of the land with the help of GPA and she had entered into an agreement for development of the land with M/s. Siri Constructions and immediately after the development she has sold the land to Reliance Industries. The entire transaction appears to be with an intention to do the business but not for the investment. Therefore, the CIT(A) rightly held the transaction as the venture in the nature of trade and not capital gains. We do not find any infirmity in the order of the Ld. CIT(A), therefore order of the CIT(A) is upheld.
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2017 (7) TMI 1463
Addition on account of transaction on sale and purchase of shares - capital gain or business income - aspect pertaining to the volume of transactions, the frequency of transactions and the continuity and regularity of the purchase and sale of the shares - whether the said shares were bought and sold as a part of trading activity or as a part of investments? - addition on account of legal expenses - HELD THAT:- The tribunal while examining the issue has referred to a decision of the Delhi High Court in the case of Commissioner of Income Tax v. Vinay Mittal [2012 (5) TMI 89 - DELHI HIGH COURT] referring to case of Rewashanker A. Kothari [2006 (1) TMI 80 - GUJARAT HIGH COURT] held that one of the most important tests outlined in that decision was as to whether the transactions in the shares were of a large volume and were frequent and whether there was continuity and regularity in such transactions of purchase and sale. It was noted that if there was repetition and continuity coupled with the magnitude of the transactions bearing a reasonable proportion to the holding then it would be an important circumstance in considering such activity to be in the nature of trade and business.
All the circumstances outlined in the decision of the Delhi High Court and that of the Gujarat High Court as also the guidelines of the Central Board of Direct Taxes referred to in the impugned order needed to be considered and then a view was required to be taken on the totality of circumstances.
Unfortunately, that has not been done. It is for this reason that we feel that the present appeal ought to be disposed of by setting aside the impugned order and by remitting the matter to the tribunal for a fresh consideration in the manner indicated above. It is ordered accordingly. Since we are in any event remitting the matter with regard to the nature of the transaction concerning the sale and purchase of shares, we also set-aside the finding with regard to legal expenses and that also ought to be considered afresh. Parties shall be entitled to raise all contentions available to them in law.
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2017 (7) TMI 1462
Transfer Pricing Adjustment - ALP determination - - international transaction of receipt of intra-group services with its Associated Enterprises ("AEs") - services received by the assessee should be considered to be arm’s length under TNMM - HELD THAT:- ITAT in the impugned order [2016 (9) TMI 1334 - ITAT DELHI] followed its earlier order in the Assessee’s own case for AY 2007 – 2008 and 2008 – 2009 [2015 (12) TMI 1620 - ITAT DELHI]. The Revenue’s appeal against that order of the ITAT was dismissed by this Court vide order [2016 (9) TMI 244 - DELHI HIGH COURT] - no substantial question of law arises for consideration.
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2017 (7) TMI 1449
Validity of re-opening of assessment - non-issue of notice u/s 143(3) - HELD THAT:- Notice u/s 143(2) of the Act is mandatory and in absence of such service, AO cannot proceed to make an inquiry on return filed in compliance with the notice issued u/s 148 - See ACIT vs. Geno Pharmaceuticals Ltd. [2013 (10) TMI 218 - BOMBAY HIGH COURT]
In the present case admittedly no notice u/s 143(2) was issued in the present case despite the fact that the assessee filed a letter in response to notice u/s 148 of the Act that the return originally filed u/s 139(1) can be treated as return filed u/s 148 - Decided against revenue.
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2017 (7) TMI 1447
Assessee non-representation on the date of hearing - TDS u/s 194A - non-compliance of TDS provisions - default as per Sec 201(1)/ 201(1A) - HELD THAT:- As it can be safely presumed that the assessee is not serious in pursuing the present appeal and hence the appeal is dismissed in limine. Support is drawn from the orde in the case of Multiplan India (P) Ltd[1991 (5) TMI 120 - ITAT DELHI-D] and case of Estate of Late Tukojirao Holkar vs. CWT [1996 (3) TMI 92 - MADHYA PRADESH HIGH COURT]
In case the assessee is able to show that there was a reasonable cause for non-representation on the date of hearing, it would be at liberty if so deemed fit to pray for a recall of this order. The said order was pronounced on the date of hearing itself in the open Court.
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2017 (7) TMI 1445
Disallowance of revenue expenses - assessee has claimed part of employees cost, office and administrative expenses, selling and marketing expenses and interest charges as revenue expenditure - assessee has capitalised major part of these expenses under the head “land, construction and development - HELD THAT:- Annual Report filed by the assessee would show that the assessee is also engaged in other activities such as relating to acquisition of agricultural land, entering into developing agreement etc. Besides, being a limited company, the assessee is required to incur certain expenses for maintenance of the company. Hence, it cannot be said that development of present project of the assessee is the only activity carried on by it.
Assessee has capitalised major part of the impugned expenses and it has claimed only a portion of the same as revenue expenditure, which was considered as relatable to the administrative and other activities carried on by the assessee. We notice that the tax authorities have not found fault with the segregation made by the assessee. However, they have taken the view that all expenses are required to be capitalized, since the project was under construction. We notice that the view taken by the tax authorities is not in accordance with the established accounting principles discussed above.
An identical issue relating to the claim of employees cost in the case of M/s. Lodha Palazzo[2014 (12) TMI 1272 - ITAT MUMBAI] and the same was decided in favour of the assessee - we are of the view that the assessee was justified in claiming the above said expenditure as revenue expenses. Decided in favour of assessee.
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2017 (7) TMI 1444
Deduction u/s 80IA(4) - conditions of IPS-2008 were not fulfilled by the assessee - assessee's project was not notified by the Govt. for claim of deduction u/s 80IA(4) for the A.Y. under consideration - HELD THAT:- We are making reliance on the said decision of Tribunal in assessee’s own case [2016 (8) TMI 1586 - ITAT PUNE] and M/s. Kolte Patil Developers [2015 (3) TMI 363 - ITAT PUNE] we uphold the order of CIT(A) in allowing the claim of deduction under section 80IA(4)(iii).
Deduction u/s 80IB(10) in respect of Kumar Puram project - Tribunal had noted the said issue as already decided the issue in assessment year 2001-02 and relying on the same held the issue to be identical and allowed the claim of assessee. AO in the present case has also disallowed the claim of assessee under section 80IB(10) of the Act in respect of Kumar Puram project, in turn, relying on the assessment orders in earlier years. Revenue has failed to point out any difference in the factual aspects and consequently, we find no merit in the ground of appeal No.2 raised by the Revenue and the same is rejected. The grounds of appeal raised by the Revenue are thus, dismissed.
Disallowance of interest expenditure under section 36(1)(iii) - availability of interest free funds - HELD THAT:- The issue arising in the present appeal is identical to the issue before the Tribunal in earlier years and even the advances were made in earlier years and following the same parity of reasoning, we remit this issue also back to the file of Assessing Officer to determine the availability of interest free funds and also to work out the disallowance of interest under section 36(1)(iii) of the Act, if any, in line with directions of Tribunal in earlier year. The Assessing Officer shall afford reasonable opportunity of being heard to the assessee. Accordingly, grounds of appeal No.6 to 6.3 raised by the assessee are allowed for statistical purpose. The grounds of appeal raised by the assessee are thus, partly allowed as indicated above.
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2017 (7) TMI 1442
Income deemed to accrue or arise in India - Business profit attributable to the PE of the assessee in India - Royalty received by the assessee from Warner Bros Picture India Ltd in pursuance to the agreement for distribution and exhibition of the films in India - Whether Respondent does not have PE in India because the Indian company that has obtained the right is acting independently - HELD THAT:- As decided in assessee own case [2016 (10) TMI 1372 - ITAT MUMBAI] very issue of existence of PE in India has been considered by the Hon‟ble ITAT. The income of the assessee company does not qualify for the definition of Royalty in term of income tax Act 1961. The AO himself has accepted in the assessment order that the income of the assessee cannot be taxed as Royalty. Once the income of the assessee company does not qualify under the definition of Royalty, the income has to be held as business income. The business income cannot be taxed in the absence of PE in India. We have seen that the Hon‟ble ITAT has categorically held that the WBPIPL is not the PE of the assessee company.
Thus, respectfully following the decision of the Hon‟ble ITAT in the assessee‟s own case, we are of the view that the income of the assessee is not taxable in India and we direct the AO to delete the addition proposed on this account - Appeal of the Revenue is dismissed.
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2017 (7) TMI 1441
Tribunal dismissing the appeal as unadmitted - Dismissal of appeal for appellant’s default etc. - Scope of Rule 24 after amendment - Whether ITAT seriously erred in passing the impugned order rejecting the application for recalling the said order and to hear and decide the appeal on merits filed under Rule 24 of Income Tax (Appellate Tribunal) Rules, 1963 by wrongly applying provisions of Section 254(2) of Income Tax Act, 1961? - HELD THAT:- Taking into consideration the language of the Rule 24 after amendment, it is clear that tribunal could not have dismissed the appeal for default and ought to have decided the same on merits.
We are of the opinion that tribunal is misconceived on the issue raised by the appellant as the application was filed for recalling the order and not for rectification. In that view of the matter, the first issue we have decided in favour of the assessee. The tribunal ought to have reconsidered Rule 24 after amendment and having failed to do so, both the orders are quashed and set aside. The tribunal will decide the merit afresh.
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2017 (7) TMI 1439
Addition of 'Mark to Market' Loss - disallowance of loss on foreign exchange forward contract loss - HELD THAT:- The question raised in the present appeal is covered by the judgment of this Court in M/S. D. CHETAN & CO. [2016 (10) TMI 629 - BOMBAY HIGH COURT] as decided Tribunal was justified in deleting the addition of 'Mark to Market' Loss made by the Assessing Officer on account of disallowance of loss on foreign exchange forward contract loss. - Decided in favour of assessee.
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2017 (7) TMI 1438
TP Adjustment - comparable selection - HELD THAT:- Assessee company is engaged in the business of export of information technology enabled services, thus companies functinally dissimilar with that of assessee need to be deselected.
DRP excluded comparables, Viz., (a) Informed Technologies Ltd (b) Microgenetics Ltd (c) Cosmic Global Ltd. - The finding of DRP that Cosmic Global Ltd. has sub-contracted the ITES Services to the extent of 41% whereas assessee has not dealt with any of the sub-contract work of its ITES services and hence it cannot be compared with the assessee. With regard to Informed Technologies, DRP has noticed that sales and services income is only Rs. 1.75 crores to that of gross revenue of Rs. 4.08 crores of the company which fails the services revenue filter of 75% applied by the TPO. With regard to Microgenetics, the DRP noticed that total expenses of Rs. 1.08 crores debited to P&L A/c. The company has incurred Rs. 24.98 lakhs in outsourcing on medical transcription activity, which is 23% of the total expenditure.
Since the assessee has not entered into any sub-contracting business, this company also cannot be compared with the assessee. In our considered view, DRP has excluded all the above three companies as non-comparables with the proper justification that these companies cannot be considered as comparables to that of the assessee. Accordingly, we sustain the finding of the DRP for exclusion of above three companies.
As profit margin of the assessee is at arm's length as the same falls within tolerance band of 5% of arm's length margin of 21.46% of the comparable companies, it is observed that when the TPO arrives the ALP, if it falls within the range of +/- 5%, he has to give advantage to the assessee. Therefore, we direct the TPO/AO to extend this benefit to the assessee as per TP guidelines.
Disallowance of interest on unsecured loan taken from own 100% subsidiary and extending to its step down foreign subsidiary - HELD THAT:- It is observed that the assessee has taken loan from one of its subsidiary and invested the same funds in the step down foreign subsidiaries as investment in shares and in application money.
As decided the case of SA Builders [2006 (12) TMI 82 - SUPREME COURT] where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans. This case is squarely applicable to the facts of the case of the assessee, as the assessee has borrowed from the Indian sister concern and invested in foreign sister concern as in share capital and share application money. The money invested in the sister concerns are considered to be for the purpose of business as per the ratio of Hon'ble Supreme Court because the holding company has deep interest in the subsidiary company, and hence, borrowed funds invested by the assessee in the sister concern are to be considered to be for the purpose of business. Therefore, the AO cannot disallow any expenditure on the ground that the same is not related to business of the assessee company. Accordingly, this ground is allowed.
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2017 (7) TMI 1435
Nature of expenses - Expenses relates to application of software packages - revenue or capital expenditure - HELD THAT:- We find that this issue has been settled by Tribunal in all the earlier years and factually the expenses relates to application of software packages which get frequently outdated and have to be replaced. The expenditure is to be treated as Revenue in nature and we allow the same accordingly.
Disallowing the expenses of foreign travel - HELD THAT:- Tribunal in AY 1995-96 in [2013 (10) TMI 1039 - ITAT MUMBAI] allowed the claim of the assessee.
Deduction u/s 80HHC - holding that 90% of the net amount is machinery higher charges which required to be deducted from eligible profit for deduction under section 80HHC in term of explanation(baa) to section 80HHC - HELD THAT:- Hon’ble Bombay High Court in the case of CIT vs. Bangalore Clothing Co. [2003 (1) TMI 89 - BOMBAY HIGH COURT] held that explanation (baa) to section 80HHC of the Act requires that 90% of the receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature have to be reduced from the profits. The reason why the items like brokerage etc. have to be excluded is because they do not poses any nexus with export turnover and their inclusion in profits would result in a distortion of the figure of export profit. However, some expenditure incurred for earning these incomes, an adhoc deduction of 10% from such income is to be allowed under this provision.
As in the present case, the machinery hire charges are not in connection with export turnover and hence cannot be included in the profit and this will squarely fall under the clause (baa) to section 80 HHC of the Act and CIT(A) rightly directed AO to reduce 90% of net amount. We find no infirmity in the order of CIT(A) and hence the same is confirmed. This issue of assessee’s appeal is dismissed.
Value of closing stock on account of MODVAT - HELD THAT:- Respectfully, following the Hon’ble Bombay High Court Decision in the case of Mahalakshmi Glass Works Private Limited [2009 (4) TMI 182 - BOMBAY HIGH COURT] and also upon the decision of co-ordinate Bench of the tribunal in the case of Sunshield Chemicals Private Limited [2015 (12) TMI 767 - ITAT MUMBAI] we hold that unutilized MODVAT credit shall be added to the closing stock of the assessee as at year end which will also necessitate similar adjustments to opening stock in light of the aforesaid decisions cited by us.
Depreciation on assets transfer to Ciba Specialty Chemicals (India) Ltd. pursuant to scheme of demerger - HELD THAT:- There is a newly inserted explanation 2A which is inserted by Finance Act 1999 with effect from 01-4-2000 to Section 43(6) of the 1961 Act which has not been considered by authorities below nor the assessee has brought the same to the notice of authorities below and hence we considered it appropriate to restore the issue to the file of the AO for de-novo adjudication of the issue in accordance with law in the light of newly inserted explanation as indicated above and also in the light of decision of the tribunal in assessee’s own case for preceding AYs 1997-98, 1998-99 and 1999-2000 as relied upon by the assessee.
Disallowance of advertisement expenses and assessee is against not allowing depreciation applicable to plant and machinery at the rate of 25% - HELD THAT:- As in assessee’s own case[2016 (1) TMI 1491 - ITAT MUMBAI]allowed the claim of the assessee.
Addition of estimated freight component in the closing stock - HELD THAT:- This issue is decided in earlier years, wherein the Tribunal has dealt with this issue in [2016 (1) TMI 1491 - ITAT MUMBAI] - Decided in favour of assessee.
Calculation of liability - incremental liability accrued on account of payment of pension under voluntary retirement scheme in respect of the orders of the assessee’s erstwhile Bhandup Unit - HELD THAT:- We have carefully gone through the orders of the lower authorities and the order of the Tribunal. We find that the Tribunal in its order has followed the findings given by the Tribunal in A.Y. 1993-94 and has restored this issue back to the file of AO to examine and verify the actuary valuation certificate and the agreement with the company and the employee and if he finds that the liability has been calculated on a scientific basis, may allow the claim of the assessee. Facts and circumstances being identical, respectfully following the afore stated direction of the Tribunal in assessee’s own case for A.Y. 1994-95, this issue is restored back to the file of AO.
Exclude sale tax and excise duty and scrap sale from the total turnover for the purpose of computing deduction under section 80HHC - HELD THAT:- Respectfully, following the Hon’ble Bombay High Court decision in the case of Sudarshan Chemicals Industries Ltd. [2000 (8) TMI 73 - BOMBAY HIGH COURT] and Hon’ble Supreme Court decision in the case of Punjab Stainless Steel Industries [2014 (5) TMI 238 - SUPREME COURT] We allow the claim of the assessee and confirm the order of CIT(A). This issue of Revenue’s appeal is dismissed.
Disallowance u/s 14A - expenditure in relation to exempt income under section 14A - HELD THAT:- In the instant year the end of justice will be met if the order of the AO is upheld as the disallowance u/s 14A made by the AO being 2% of exempt income (interest income and dividend income), falls within the arena of reasonability and Revenue’s appeal is allowed.
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2017 (7) TMI 1432
Revision u/s 263 by CIT - Deduction u/s 80IB(10) - HELD THAT:- There is a specific reference to the examination by the AO of deduction u/s 80IB(10) - Conclusion of CIT therefore that the AO failed to make proper enquiries before concluding the assessment, cannot be sustained. We are also of the view that the non issuance of notice u/s 133(6) in respect of advance received from the customers or not making any enquiries thereon by itself cannot be the basis to say that there was a failure on the part of AO to make proper and necessary enquiries.
A reading of notice issued u/s 142(1) by the AO before completing assessment u/s 143(3) of the Act and the details furnished by the assessee in response to this notice clearly shows that the AO was fully conscious of the details of advance received from the customers furnished by the assessee. There are no facts brought out on record to show that further enquiry was required to be made by the AO on the details of advance from the customers furnished by the assessee.
We are of the view that order of CIT is a non-speaking order and does not discuss how the order of AO passed u/s 143(3) of the Act was erroneous and prejudicial to the interest of the revenue. In these circumstances, we quash the order passed u/s 263 of the Act and allow the appeal of assessee.
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2017 (7) TMI 1431
Bogus purchases - Addition of hawala purchases - HELD THAT:- In the facts of the case, the assessee had tried to meet the case of AO and hence, the onus shifted upon the AO to disprove the claim of assessee. AO has failed to discharge the onus in this regard. AO has failed to complete the investigation in the case. In view of the affidavits / confirmation letters filed by the assessee, no further enquiries were made in the present set of facts.
In the absence of the same and where the assessee has tried to built upon its case and has also shown the trail of goods i.e. as against the booking of sales, it had made the purchases and in this regard has complete quantitative records available with him, then the onus cast upon the assessee stands discharged once the same is produced before the authorities below.
Where the assessee has discharged the onus of proving the factum of making purchases from the respective parties by way of filing affidavits and also establishing the trail of goods, in turn, relying on the stock details maintained by him, there is no merit in holding the said purchases to be bogus. The statements of bogus suppliers were relied upon without giving an opportunity to cross-examine the said parties to the assessee.
It is case of trader, where admittedly, the assessee was engaged in the sale of industrial oil and only against the confirmed orders, it was making said purchases; then the assessee has discharged the onus cast upon him and in the absence of any contrary evidence being brought on record, mere reliance on the investigation carried out by the Sales Tax Department does not warrant any addition in the hands of assessee.
Accordingly, we hold so. Thus, we direct the AO to delete the addition on account of bogus purchases. The grounds of appeal raised by the assessee are thus, allowed and the grounds of appeal raised by the Revenue are dismissed.
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2017 (7) TMI 1430
Penalty u/s 271(1)(c) - Income of the assessee was finally estimated by the Ld. AO @2% of total receipts as per the Bank statements which was confirmed by the Ld. CIT(A) - HELD THAT:- As decision of Tribunal rendered in associated concern of the group Jayesh K. Sampat [2016 (10) TMI 1127 - ITAT MUMBAI] where the Tribunal on identical set of facts and similar submissions / contentions has remitted the matter back to the file of AO for fresh adjudication in terms of respective submissions. Both representatives have agreed for similar directions in the present case.
Thus as facts of the instant case are identical in all respect and submissions of the representatives are also identical. Therefore, on similar lines, the matter is restored back to the file of Ld. Assessing Officer for fresh adjudication, which results into assessee’s quantum appeals being partly allowed for statistical purposes.
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2017 (7) TMI 1421
Exemption u/s 11 - registration granted u/s 12 A cannot cancelled by the CIT - Activities of the assessee were hit by the first and second proviso to section 2(15) of the I.T. Act w.e.f. 01.04.2009 - HELD THAT:- Parties at the outset could not dispute that issue raised in this appeal is squarely covered by this Court’s judgment in Commissioner of Income Tax, (Exemption), Lucknow Vs. M/s Yamuna Expressway Industrial Development Authority [2017 (4) TMI 1154 - ALLAHABAD HIGH COURT]
As the question raised in this appeal is answered against Revenue.
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2017 (7) TMI 1418
Interest due on ‘Non-Performing Assets’ - CIT deleting the addition made by the AO holding that the interest due on ‘Non-Performing Assets’ was taxable as the Co-op Bank was following mercantile system of Accounting except with regard to the interest pertaining to NPAs - HELD THAT:- As per CIT it is to taxed in the year of actual receipt even though it is following mercantile system of Accounting.at the assessee is a Co-operative Society which is engaged in the business of banking and has been following the directions of the Apex Bank and according to that interest due on NPAs had to be accounted for as income on actual receipts basis. Even otherwise, AS9 of ICAI on Revenue recognitions provide for, where there in uncertainty about the collection of Revenue, recognition of income or such Revenue is postponed to the extent of uncertainty involved, therefore, the assessee recognized Revenue on advances classified as NPAs on actual receipt basis and even the assessee consistently following the method of accounting in accordance with Section 145 of the Act. Therefore, on the aforesaid reasons and observations, we do not have any hesitation to uphold the action of the Ld. CIT(A) to dismiss the appeals of the Department. Hence, the instant appeals stand dismissed.
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2017 (7) TMI 1417
Exemption claimed u/s 80-P with regard to the interest income earned on fixed deposit with State Bank of India - CIT(A) noticed that the decision of the Mumbai Bench of Tribunal in the case of M/s. Jaoli Taluka Sahakari Patpedhi Maryadit [2015 (9) TMI 170 - ITAT MUMBAI] fully covered the controversy in favour of the assessee - HELD THAT:- At the time of hearing, the ld. DR reiterated the stand of the Assessing Officer, but quite fairly pointed out that the CIT(A) has followed the decision of the Mumbai Bench of the Tribunal in the case of M/s. Jaoli Taluka Sahakari Patpedhi Maryadit (supra), which continues to hold the field. In view of the aforesaid fact-situation, we find no reasons to interfere with the decision of the CIT(A), which we hereby affirm. Thus, appeal of the Revenue is dismissed.
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2017 (7) TMI 1416
Addition invoking the provisions of Section 41 being the amount received for installation of wind energy generators - HELD THAT:- If the assessee had declared the amount of ₹ 1 crore as its income, for the assessment year 2014-15 then obviously making addition once again in the hands of the assessee for the relevant assessment year 2010-11 would amount to double taxation. Further due to the various commercial relationships between the assessee and its clients, the assessee had treated the amount of ₹ 1 crore as its liability in the relevant assessment year, by not invoking the penalty clause in the agreement executed between them, thereby providing an opportunity to its client to comply with the terms and conditions of the agreement and hence the assessee had not appropriated the advance.
Only during the assessment year 2014-15, the assessee had invoked the penal provisions of the agreement and appropriated the advance received from its clients. This act of the assessee based on commercial prudence cannot be questioned by the Revenue. Therefore, if the assessee had declared the amount of ₹ 1 crore as its income, for the assessment year 2014-15 then there is no scope for the Revenue to make addition for the assessment year 2010-11 once again. Hence we hereby direct the Ld.AO to verify whether assessee had declared the amount of ₹ 1 crore as its income U/s.41(1) of the Act, for the assessment year 2014-15 and if found so, delete the addition made for the relevant assessment year and if found otherwise, reinstate his earlier order on this issue.
Addition being the claim of amortization of expenses u/s 35D - assessee had incurred expenditure towards commission for raising private equity share from M/s. Dubai Ventures LLC, Dubai UAE and had claimed the aforesaid amount as miscellaneous expenditure in the balance sheet and written off 1/5th as preliminary and pre-operative expenses in its profit & loss account - HELD THAT:- Hon’ble Apex Court BROOKE BOND INDIA [1997 (2) TMI 11 - SUPREME COURT] has held that any expenditure incurred directly related to the expansion of capital base of a company will fall in the capital field and not in the revenue field. In the case of the assessee, the expenditure is incurred for increasing its equity capital base. Therefore, as per the ratio laid down by the Hon’ble Apex court such expense will fall under the capital field. Further as per the provisions of Section 35D of the Act, there is no scope for the assessee to amortize such expense.
The decisions of the Hon’ble Apex Court supra and the provisions of Section 35D of the Act cited herein above was lost sight off by the Tribunal while passing orders in the earlier instance. Since, we are bound to follow the decision of the Hon’ble Apex Court, respectfully following the same, we hereby hold that, in the case of the assessee the commission expenses incurred towards increasing its equity capital base, can neither be amortized U/s.35D of the Act, nor it can be claimed as Revenue expenditure as it falls in the Capital field.
It has been also categorically held by the Hon’ble Apex Court in the case Punjab State Industrial Development Corporation [1996 (12) TMI 6 - SUPREME COURT] that expenses incurred in relation to increase in capital base is capital expenditure incurred by the assessee company, even though its certainty helps the company in profit making but yet it retains the characteristics of capital expenditure. In the case CIT vs. Motor Industries Limited [1997 (8) TMI 70 - KARNATAKA HIGH COURT] held that the expenses incurred in relation to right issue where of capital in nature and therefore cannot be claimed as revenue expenditure. Hence we find the order of the Ld.AO to be appropriate in the given circumstance. Accordingly, we hereby set aside the order of the Ld.CIT(A) and reinstate the order of the Ld.AO on this issue.
Disallowance of additional depreciation U/s. 32(1)(iia) on windmill - AO disallowed the claim of additional depreciation because the business of generation, transmission or distribution of power which was made eligible for additional depreciation U/s.32(1)(iia) of the Act, came in to effect from the assessment year 2013-14 as per Finance Act, 2012 - HELD THAT:- From the facts of the case, it is evident that the assessee had claimed additional depreciation on the windmill erected by it for generating and distribution of power in order to earn revenue. In this situation, we do not find any infirmity in the order of the Ld. Revenue Authorities on this issue. As held by the Ld.AO the business of generation, transmission or distribution of power was brought within the ambit of Section 32(1)(iia) of the Act, by the Finance Act, 2012 w.e.f. 01.04.2013 i.e., from the assessment year 2013-14. Since the case of the assessee is for the assessment year 2011-12, obviously the assessee will not be eligible for the benefit of additional depreciation during the relevant assessment year. Further it is not the case of the assessee that the assessee is claiming the additional depreciation with respect to its manufacturing activities.Therefore this issue raised by the assessee does not have any merits.
Disallowance of service tax element attributable to the 1/5th portion of preliminary expenses U/s.35D - HELD THAT:- Since the expenses was related to assessment year 2009-10, the Ld.AO disallowed the claim of expenditure and even denied the benefit of amortization of expenses U/s. 35D - On appeal, the Ld.CIT(A) confirmed the order of the Ld.AO. Since, we have held hereinabove that the expenses incurred in the form of commission for private placement of the equity shares of the assessee company, is not allowable for deduction U/s.35D of the Act, any expenses connected with it such as service tax also will not be entitled for the benefit of deduction U/s.35D of the Act to the assessee. Therefore, the appeal filed by the assessee does not have any merit.
Disallowance of the advance written-off by the assessee as revenue expenditure - HELD THAT:- From the facts of the case, it is apparent that the assessee had advanced money for buying cranes which were to be deployed in the manufacturing activity of the assessee. However, the assessee could neither acquire the cranes nor recover the amount advanced from the company who has promised to deliver the cranes. In this situation, it is nothing but a loss which the assessee had incurred during the course of its business. The assessee had no other reason to give advance to M/s. MIC MiddleEast FZE other than for purchase of cranes, which is to be used in the assessee’s manufacturing activities. Therefore the reliance placed by the assessee in the decision of the Hon’ble Jurisdictional Madras High Court in the case of CIT vs. Indian Biselers [1989 (9) TMI 57 - MADRAS HIGH COURT] will hold good and accordingly the assessee deserves the benefit of deduction under the Act because it is a loss incurred during the course of the business of the assessee. - Decided against assessee.
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