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Income Tax - Case Laws
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2014 (7) TMI 1387
Power of the TPO to determine ALP transaction as sham - HELD THAT:- By the impugned judgment and order of the learned Tribunal[2014 (2) TMI 673 - ITAT HYDERABAD] which is sought to be appealed against, the Tribunal held, following the ratio of the decision in the case of L.G. Polymers India (P) Ltd. v. A.C.I.T. [2011 (9) TMI 259 - ITAT VISAKHAPATNAM]Transfer Pricing Officer is not empowered to hold the transaction as sham transaction. Reading the provision of law, the aforesaid conclusion in our view is not erroneous.
We, therefore, dismiss the appeal.
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2014 (7) TMI 1385
Validity of proceeding u/s 153C - AO completed the assessment by disallowing the agricultural income declared by the assessee in the original return of income filed by him treating it as unexplained credit - HELD THAT:- As assessment made by the AO is not with reference to any incriminating material found as a result of search. Therefore, respectfully following the M/s. Avinash Estates & Resorts Ltd [2014 (10) TMI 668 - ITAT VISAKHAPATNAM] decision of the coordinate bench, we quash the assessment order passed for all these assessment years. Decided in favour of assessee.
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2014 (7) TMI 1384
Validity of proceeding u/s 153C - reference to any incriminating material found as a result of search - AO completed the assessment by disallowing the agricultural income declared by the assessee in the original return of income filed by him treating it as unexplained credit - CIT(A) sustained 50% of the addition made by the assessing officer as unexplained credit - HELD THAT:- We have dealt with identical issue in case of another group company viz. M/s. Avinash Estates & Resorts Ltd [2014 (10) TMI 668 - ITAT VISAKHAPATNAM] as held that assessment made by the assessing officer is on the basis of the entries made in the books of accounts and income disclosed in the return of income much prior to search and which has no reference to any incriminating material found as a result of search and seizure operation, we are of the view that the proceeding initiated u/s 153C of the Act is invalid in law.
The matter can also be looked into from another angle. As rightly been stated by the Ld. A.R., on the date notice was issued u/s 153C of the Act, there is no assessment proceeding pending before the assessing officer for the aforesaid assessment year. Therefore, in absence of any incriminating material showing concealed/undisclosed income of the assessee, the assessing officer could not have proceeded to assess income which has already been reflected in the books of accounts and disclosed in the return of income filed by the assessee.
Even otherwise also, conclusion drawn by the assessing officer in the assessment order that the agricultural income is unexplained also found to be not on cogent material, because of the fact that the CIT(A) has accepted 50% of the income shown as agricultural income against which the department is not in appeal. Also in the remand report, the assessing officer himself has accepted that the assessee has earned income from coconut trees and casurina plantation which can be considered as agricultural income. In aforesaid view of the matter, the proceeding initiated u/s 153C of the Act in absence of any incriminating material and only on the basis of the material already disclosed by the assessee is invalid and consequently the assessment orders passed are also unsustainable in law.
In present case also assessment made by the AO is not with reference to any incriminating material found as a result of search. Therefore, respectfully following the aforesaid decision of the coordinate bench, we quash the assessment order passed for all these assessment years. Decided in favour of assessee.
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2014 (7) TMI 1383
Unexplained credits - Peak balance of the credits - credit of surrendered income - suppression of gross profit - HELD THAT:- The first addition made in the hands of the assessee is on account of estimation of gross profit rate and we uphold the said addition. In view thereof, ground of appeal in Cross Objection filed by the assessee are dismissed. Similarly, as we have upheld the order of Commissioner of Income Tax (Appeals) in giving the benefit of surrendered amount after arriving at the total addition, we find no merit in the ground of appeal No. 2 raised by the revenue.
Bogus purchases - Investigation made by the AO that the concern M/s Glass Plastic Co. of India was a bogus party created by the assessee through whom no purchases or sales were made and was utilized for making bogus payments. The assessee was depositing cash in his bank account from which cheques were issued which in-turn were deposited in the bank of M/s Glass Plastic Co. of India, from which cash was withdrawn of exact amount of the cheque deposited. In view of the facts and circumstances of the case where the exercise was being carried out from day-to-day, there is no merit in treating the total deposits as unexplained and the theory of peak credit is to be applied to work out the addition in the hands of the assessee.
CIT(A) direction that the addition on account of peak credits be made in the hands of the assessee and the benefit of surrendered amount should be given after making total additions in the hands of the assessee upheld - no merit in ground of appeal No. 1 raised by the revenue.
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2014 (7) TMI 1381
Over valuation of the closing stock - computation of opening and closing balances - HELD THAT:- We do agree on the last bit of submission of ld. AR that whatever the value of the stock has been accepted by the AO as closing stock during the impugned assessment year, the same should have been taken as the opening stock in the succeeding assessment year i.e. in A.Y 2002-03. We noted that in the succeeding assessment year, the AO has taken the opening stock to be at Rs. 2,92,49,971/- instead of Rs.2,07,38,120/-.
To that extent the AO was bound to give effect in the succeeding assessment year. Whatever will be the closing stock of the impugned assessment year, the same will become the opening stock of the succeeding year. In view of this fact and in the absence of evidence being brought on record by the ld. AR, we confirm the action of the AO of reducing the closing stock by Rs.85,11,851/- during the impugned assessment year but direct the AO to reduce the opening stock in the succeeding assessment year 2002-03 and give the credit to the Assessee in accordance with law in the succeeding assessment year. We, accordingly, dismiss ground no. 2 taken by the Assessee.
Deduction u/s 80HHC(1A) as a supporting manufacturer - HELD THAT:- As the section allows the supporting manufacturers to claim deduction of the profit derived by it from the sale of the goods or merchandise to the export houses or trading houses in respect of which the certificate has been issued by the export or trading house. There is no compulsion whatsoever that the export house has to necessarily export the goods only in that year in which it has purchased the goods from the supporting manufacturers.
The fact that the certificate has been issued by the export houses prove that the goods purchased from the Assessee (supporting manufacturer) were ultimately exported and that should enable the supporting manufacturer to claim appropriate deduction under the section in the year of its supply to the export house. There cannot be any other interpretation of this provision. We, accordingly, set aside the order of CIT(A) and allow ground no. 3 taken by the Assessee and direct the AO to allow the claim of the Assessee u/s 80HHC(1A) during the impugned assessment year.
Cessation of liability u/s 41(1) - AO noted that the sundry creditors and loans and advances taken by the Assessee are being carried forward for many year - HELD THAT:- For the addition made u/s 41(1) the onus, in our opinion, lies on the Revenue to prove that the liability has ceased during the impugned assessment year. Merely liability has become barred by limitation will not prove that the liability of the Assessee has ceased.
The liability ceases when it has become barred by limitation and Assessee has unequivocally expressed its intention not to honour the liability even when demanded. Our aforesaid view is duly supported by the decision of Chase Bright Steel Ltd [1988 (12) TMI 80 - BOMBAY HIGH COURT] We, therefore, set aside the order of CIT(A) and delete the addition made by the AO as ultimately the addition which remains sustained by CIT(A) relates to the sundry creditors and the liability outstanding against the Assessee.
Unrecovered balance in respect of the advances the same has already been allowed by the AO while making the net addition even though these unrecovered debtors have to be allowed, as observed by us earlier, in the year in which they have been written off. We, therefore, set aside the order of CIT(A) and delete the addition respectfully - Ground taken by the Assessee stands allowed.
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2014 (7) TMI 1372
Denial of deduction in respect of amount of credit under DEPB Scheme - AO denied the same holding that the assessee has not actually utilized the credit before closing of the relevant previous year for payment of duty on the import of goods - HELD THAT:- As decided in M/s. Excel Industries Ltd [2013 (10) TMI 324 - SUPREME COURT] even if it is assumed that the assessee is entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialize ad its money value is therefore not the income of the assessee - thus we are of the opinion that the assessee is entitled to relief. Accordingly, ground no.1 raised by the assessee is allowed.
Addition u/s 14A - expenditure incurred for earning of the exempt income - HELD THAT:- Assessee mentioned that the said grounds require revisit to the file of the AO considering the fact that the assessee was not given a proper opportunity to clarify the allegations against the bogus purchases on one side and the Assessing Officer failed to record his dissatisfaction with regard to the claim of the assessee that no expenditure was incurred for earning of the exempt income and this is relevant for the issue raised in ground no.3.
Denial of weighted deduction u/s 35(2AB) with regard to the expenditure incurred on scientific research - HELD THAT:- As gone through the cited judgment of CADILA HEALTHCARE LTD [2013 (3) TMI 539 - GUJARAT HIGH COURT] On hearing both the parties and on perusal of the said order of the High Court, we are of the opinion that the issues raised in ground no.4 should be set aside to the file of the AO to examine each of the expenses in detail and apply the cited judgment of the Hon’ble Gujarat High Court (supra) in connection with the claim of expenses relating to the clinical trials. Accordingly, we remand this part of the ground to the file of the AO and ground no.4 is partly allowed statistical purposes.
Deduction u/s 80IB admissible to the eligible units - HELD THAT:- The Tribunal in assessee own case after considering the departmental argument that the AO has correctly invoked the proviso to section 80IA(a) as well as in applying the “global profit percentage method”, while confirming the order of the CIT (A). We find that the facts for this year in question are no different. Therefore, we find no reason to interfere with the order of the CIT (A) for this year. Accordingly, ground raised by the Revenue is dismissed.
Deduction u/s 80IB in respect of receipts in sale of scrap - HELD THAT:- Representatives of both the parties mentioned this issue is required to revisit the file of the AO in view of the fact that the said scrap not only includes generated during manufacturing activity but also other general scrap such as packing material etc. It is a settled issue that the receipts received on sale of scrap during the manufacturing activity is entitled for deduction u/s 80IB and other scrap proceeds are not eligible in view of the principles laid down in the judgment of Liberty India [2009 (8) TMI 63 - SUPREME COURT] AO is required to examine the above issue afresh after affording a reasonable opportunity of being heard to the assessee. Accordingly, ground no.4 is allowed for statistical purposes.
Disallowance of provision of loss on forward contracts - HELD THAT:- The tests laid down by the Hon’ble Supreme Court in the case of Wodward Governor [2009 (4) TMI 4 - SUPREME COURT] are satisfied in the appellant’s case on the basis that the appellant is following mercantile system of accounting, the accounting policy in this behalf has been consistently followed by the appellant and the claim made by the appellant is bona fide.
Therefore, appellant has made correct claim for deductibility of provision for loss by marking to marking the outstanding forward cover contracts and the disallowance by the AO is not justified both on facts and in law. The disallowance is therefore directed to be deleted.
The loss quantified on revaluation of the forward contract is an allowable business loss. This is not the case of the Revenue that the impugned losses are earned on account of premature cancellation of forward contracts.
Appeal of the Revenue is partly allowed.
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2014 (7) TMI 1370
Disallowance u/s 11 - whether objects of the Societies are the general public utility as defined under Section 2(15)? - HELD THAT:- Assessee has been granted registration u/s 12A - The objects of the Societies are the general public utility as defined u/s 2(15) - No action was taken by the A.O. u/s 12-AA(3) before denied the benefit, but directly disallowed the exemption/benefit under Section 11 of the Act. From the order of the CIT (A), it appears that there is no instance of misuse of the funds by the trustees of the Society.
The grant of exemption under Section 11 is not automatic and the assessee shall have to meet out the requirements of Section 11 of the Act. Once, the registration is granted to the assessee under Section 12-A, then the A.O. cannot pass a contrary order without following the provisions of Section 12AA(3), but the same was not done in the instant case. When it is so, then by keeping mind the ratio laid down in the case of CIT Vs. Gujarat Maritime Board, [2007 (12) TMI 7 - SUPREME COURT] as well as C.M.S. Vs. Union of India [2009 (5) TMI 41 - ALLAHABAD HIGH COURT] we find no reason to interfere with the impugned orders passed by both the Appellate Authorities, the same are hereby sustained alongwith the reasons mentioned therein.
No substantial question of law is emerging from the impugned orders.
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2014 (7) TMI 1369
Exemption u/s 11 - AO has declined to extend the benefit of Section 11 of Income Tax Act, though the Society is registered under Section 12A - HELD THAT:- As undisputed fact that the assessee has been granted registration under Section 12A of the Act. The objects of the Societies are the general public utility as defined under Section 2(15) of the Act. No action was taken by the A.O. under Section 12-AA(3) of the Act, before denied the benefit, but directly disallowed the exemption/benefit under Section 11 of the Act. From the order of the CIT (A), it appears that there is no instance of misuse of the funds by the trustees of the Society.
The grant of exemption under Section 11 is not automatic and the assessee shall have to meet out the requirements of Section 11 - Once, the registration is granted to the assessee under Section 12-A, then the A.O. cannot pass a contrary order without following the provisions of Section 12AA(3), but the same was not done in the instant case. When it is so, then by keeping mind the ratio laid down in the case of CIT Vs. Gujarat Maritime Board [2007 (12) TMI 7 - SUPREME COURT] as well as C.M.S. Vs. Union of India, [2009 (5) TMI 41 - ALLAHABAD HIGH COURT] we find no reason to interfere with the impugned orders passed by both the Appellate Authorities, the same are hereby sustained alongwith the reasons mentioned therein.
No substantial question of law is emerging from the impugned orders.
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2014 (7) TMI 1366
Deduction u/s 80IB - project undertaken by the assessee was a mixed project of piece-meal sanctions - Whether residual project of development and construction undertaken by assessee complied with the requirements of section 80IB(10)? - assessee pointed out that obtaining of multiple building sanctions, does not result in the project being ineligible for section 80IB(10) benefits - CIT-A allowed the deduction - HELD THAT:- As some of the plots initially comprised in the layout were sold as such would not defeat assessee’s entitlement for deduction u/s 80IB(10) of the Act so long as the conditions stipulated in section 80IB(10) of the Act are satisfied qua the residual project undertaken by the assessee. Factually speaking, it is not in dispute that the profit/loss resulting on account of sale of certain plots as such has not entered assessee’s claim of deduction u/s 80IB(10) of the Act. Therefore, in our view, the CIT(A) made no mistake in rejecting the aforesaid stand of the Assessing Officer and proceeding to examine whether the residual project of development and construction undertaken by assessee complied with the requirements of section 80IB(10).
On obtaining of multiple building sanctions, in our view, the same cannot be held against the assessee. As clarified that the housing project shall be deemed to have been approved on the date of which the building plan of such housing project is first approved by the local authority. Therefore, to say that because assessee had obtained multiple approvals and thus is disentitled for section 80IB(10) benefits, is against the legislative mandate. Hence, existence of multiple building plan approvals cannot be held against the assessee. Furthermore, the requirement that the project is to be on a size of a plot of land of a minimum area of one acre is concerned, the same has also to be examined not with respect to each and every individual building plan approval but with respect to the housing project as a whole. Thus, in the present case, the Assessing Officer erred in considering the size of individual plots of land to examine as to whether it has area of one acre or more. On this aspect also, we find that the CIT(A) made no mistake in disregarding the objection of the Assessing Officer.
Period specified for complying the construction of the project - As evident that with regard to the development of the housing project undertaken by the assessee, last of the completion certificate is dated 31.03.2011. The claim of the Assessing Officer is that a completion certificate has also been issued by the local authority on 02.09.2011, which is the last certificate. Even if the said certificate is taken into consideration, yet it does not breach the outer limit of 31.03.2012 which is stipulated date in the present case for completion of project, as seen earlier. However, the claim of the assessee and which has been upheld by the CIT(A) is that the said completion certificate pertains to construction on a plot, which was undertaken by the purchaser himself. Assessee explained that the said plot was sold as such and the purchaser obtained the building sanction and the assessee had no role to play in the development and construction of the said plot. The aforesaid factual finding is not controverted by the Revenue before us. Accordingly, the stand of the CIT(A) on this aspect is also hereby affirmed.
As a result of the aforesaid discussion, we find that on all the aspects raised by the Assessing Officer, the CIT(A) made no mistake in upholding assessee’s plea for the claim of deduction u/s 80IB(10) of the Act with respect to its housing project, ‘Flora City’ undertaken at Talegaon Dabhade, Pune. Thus, the order of the CIT(A) is hereby affirmed. - Decided in favour of assessee.
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2014 (7) TMI 1365
Non prosecution of appeal by assessee - HELD THAT:- As on the date of hearing i.e. on 15-07-2014 none appeared on behalf of Assessee nor an adjournment application was filed on behalf of the Assessee which indicates that the Assessee is no more interested in prosecuting the appeal, therefore, following the decision in the case of CIT Vs Multiplan India (Pvt.) Ltd., [1991 (5) TMI 120 - ITAT DELHI-D] dismiss the appeal of the assessee. The assessee shall however be at liberty to approach the Tribunal for recalling of this order, if prevented by sufficient cause for non-appearance on the date of hearing. Assessee appeal dismissed.
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2014 (7) TMI 1363
Loss from purchase and sale of shares holding the same as speculative loss - Whether CIT(A) has erred in holding that the assessee company’s loss from purchase and sale of share to the tune was not covered by the explanation to provisions of section 73? - HELD THAT:- As it is clear that the deployment of funds is more in the business of money lending from where the interest was earned and further the income as noted above is also from sources other than share transactions. Hence, we find no reasons to interfere in the order of the CIT(A) and same is confirmed.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- We find that assessee has not spent any amount on interest on borrowing as at 01-04-2008 and borrowing taken this year was not utilized in investment. Assessee has earned big income from derivative transactions at Rs.5,42,61,231/- and suffered loss on investment at Rs.1,22,81,662/- i.e. total expenses claimed are only Rs.1,42,48,311/-. Dividend income being only 1.5% of gross income Rs.2,13,724/- being 1.5% of expenses can be attributed to dividend against which the company has offered Rs.241,126/-. Further, there are direct expenses at 56,023/- as calculated by A.O. will apply in view of the provisions of section 14A r.w,r 8D of the rules. In assessee’s case only Rule 8D(2)(i) is applicable and not 8D(2)(iii). Clause (ii), which clearly provides that formula giving therein is to be evoked only in a case where assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt. In this case Interest payment is only Rs.4,801/-. This interest is attributable to loans not utilized for investment but for giving loans to Shakti Sugar Ltd i.e. Rs. 3,00,000/- and Rs7,00,000/- paid as security deposit to SKP Securities. Rs.37,00,000/- taken from Parkview Properties Pvt. Ltd. and Rs. 3 Lacs and Rs. 7 Lacs from Bikanna Cornmercial Pvt. Ltd. and Shahjahanpure Electric Co. Ltd. respectively. In view of the above facts, we have no alternative except to confirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed.
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2014 (7) TMI 1361
Transaction of sale of stripes - genuine transaction or not? - addition made by AO under the head of ‘income from other sources’ - ITAT upholding the findings of the CIT(Appeals) that the transaction of sale of stripes by the respondent-assessee as a genuine transaction - HELD THAT:- The laws consistently say that initial burden to establish genuineness of the transaction lies on the assessee first. If the assessee discharges his/its onus, then the burden shifts to the Revenue to produce cogent material disproving the evidence adduced by the assessee. The learned Tribunal has taken note of the judgments on the issue, including an unreported one of High Court of Jharkhand, in Arun Kumar Agarwal (HUF) & Others, [2012 (8) TMI 398 - JHARKHAND HIGH COURT] and also in the case of C.I.T. v. Gobi Textiles Ltd. [2007 (9) TMI 226 - MADRAS HIGH COURT] wherein it has been stated the legal position as quoted by us above.
Here, on fact, the learned Tribunal found the assessee has discharged initial burden lies on it. We, therefore, do not find any element of law to interfere with the impugned judgment and order of the learned Tribunal.
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2014 (7) TMI 1353
Computation of taxable profits - Exclude from the taxable profits, the sales tax exemption benefit which is included in Sales and which is taxed in the assessment order as part of profits of the business - HELD THAT:- We find that an identical issue has been adjudicated by the Tribunal [2011 (8) TMI 1154 - ITAT MUMBAI] and the matter is restored to the record of the Assessing Officer to examine the additional evidence filed by the Assessee and then decide the issue as per law. Since the issue is identical for both the years, therefore, additional ground No.1 raised for the assessment year 1999-00 also stands disposed off in the same terms and directions to AO as given in para 27 to 27.2 of the impugned order. Accordingly the additional ground No.1 stands disposed off.e
Expenditure incurred on assets not owned - allowable revenue or capital expenses - HELD THAT:- As identical issue has been decided by the Tribunal for the assessment year 1995-96 and by following the order of this Tribunal the AO has allowed the claim of the Assessee while passing the order giving effect to the order of this Tribunal. We find that AO has already allowed the claim of the Assessee as raised in additional ground No.2 for the assessment year 1999-00 [2011 (8) TMI 1154 - ITAT MUMBAI] while passing the giving effect order dated 28/03/2013. Therefore, the additional ground No.2 raised for the assessment year 1999-00 becomes infructuous as AO has allowed the same being consequential to the assessment year 1995-96 in which the said claim was allowed by this Tribunal.
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2014 (7) TMI 1351
Validity of reopening of assessment u/s 147 - Non disposal of objection to the reasons filed by an assessee by a speaking order - HELD THAT:- A law laid down by the Supreme Court in the case “GKN Driveshrafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] has not been followed by the Assessing Officer. The aforesaid decision requires the Assessing Officer not only to furnish reasons for the proposed reopening of the assessment but also has to dispose of the objection to the reasons filed by an assessee by a speaking order.
We set aside the Assessment order passed in respect of Assessment year 2008-09. We note that the petitioner had, by diverse communications filed their objections to the grounds in support of the impugned notices furnished by the Assessing Officer. We permit the petitioner to file a consolidated objections to both the impugned notices within a period of two weeks from today before the Assessing Officer. The Assessing Officer, thereafter, will dispose of the objections filed by the petitioner in respect of both the impugned notices.
Assessing Officer would not commence re-assessment proceedings for a period of four weeks from the date of communication of the order disposing of the objections filed by the petitioner.
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2014 (7) TMI 1348
Claim for exemption u/s 10 - Agricultural income - processes undergone on hybrid seeds - whether the income derived by the assessee by sale of seeds constitutes agricultural income or business income? - HELD THAT:- Under the provisions of the Karnataka Land Reforms Act, lease of the agricultural land is totally prohibited, except to the extent provided in Section 5 of the Act. Though, each State has passed such Land Reforms Act, its provisions vary from State to State. The main policy before this agrarian reforms is to abolish absentee land lords and to confer tiller the ownership of the land. It is in this back ground, when we look at the provisions of the Income Tax Act and the exemption granted to agricultural income and the agricultural income having been defined specifically, the said provisions required to be interpreted in the light of the agrarian reforms. In case, where the assessee ploughs the land and in case, where the law permits taking agricultural leases of land and if the assessee cultivates the land, raises the crops and seeds and hence, income derived therefrom will fall within the definition of agricultural income and the assessee would be entitled to the benefit of Section 10(1)(a) of the Act.
If the assessee is not owning the land and in law, he cannot take the land on lease, but still he enters into contract with the land owners, gives them the monitory assistance and those land owners physically cultivate the land and grow the crops and when the assessee contends that crops grown belongs to him and he is selling them and therefore, it is an agricultural income, the question arises as to whether the exemption under Section 10(1) is attracted to such income?
Though, several judgments were cited contending that it is an agricultural income, we do not see in any of those judgments, they have taken note of this agrarian reforms. Most of the judgments are anterior to agrarian reforms. At any rate, the authorities have not applied their minds to these fundamental facts which are in the nature of jurisdictional facts before valid order is passed under the said Act. In the absence of the authorities applying their minds to these facts, it would be inappropriate for this Court to record any findings on the basis of the submissions made at the Bar or by looking into the documents, now being produced.
Therefore, we are of the view that the proper course would be to set-aside all the impugned orders, remit the matters back to the Assessing Authority, so that Assessing Authority would formulate proper points for consideration, give an opportunity to the assessee to produce evidence in support of their contention. The Assessing Authority would look into agrarian reforms passed in each State which is relevant for passing the assessment order and then, pass an order keeping in mind all the decisions relied by the parties. In our view, it would meet the ends of justice.
Assessing Authority shall record a finding on facts as What is the extent of land these assessees hold in the States where they are growing seeds and then looking into the relevant Land Reforms Act to find out whether they are entitled to hold such land or if so, under what provisions of the Act. Consequently, what would be the legal effect in respect of excess land held by them and in cases where there is a total prohibition of taking the land on lease, if the assessee has entered into an arrangement with the land owners irrespective of the nomenclature given, whether the income derived from such agricultural operation would be construed as an agricultural income as defined under Section 2(1)(A) of the Act to be eligible for exemption under Section 10(1) of the Act? - Also whether the processes undergone by hybrid seeds before it is sold in the market would in any way take away the character of an agricultural produce of the seeds to be kept away from the application of the provision of Section 2(1)(A) of the Act?
Entitled to deduction u/s.43B - belated remittance of employees contribution towards ESI - employees contribution is income of the assessee u/s.2(24)(x) of the Act and allowable as deduction u/s.36(1)(va) of the Act, if remitted within the due date prescribed under the ESI Act, and recorded a perverse finding - HELD THAT:- Issue decided in favour of assessee as relying on M/S ESSAE TERAOKA PVT LTD [2014 (3) TMI 386 - KARNATAKA HIGH COURT].
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2014 (7) TMI 1344
Taxability of non occupancy charges - contribution to common amenity fund/repairs and welfare fund being the first contribution made by the existing/new member - Principle of mutuality - HELD THAT:- Appeals do not raise any substantial question of law. The findings rendered by the Tribunal are in consonance with the functioning and administration of a cooperative housing society that has been recognized by a Division Bench of this Court and the decision to that effect in Mittal Court Premises Cooperative Housing Society Ltd. V/s. Income Tax Officer [2009 (7) TMI 689 - BOMBAY HIGH COURT] concludes the issue. In the light of this Division Bench order and which has been followed in the cases of Jai Hind Cooperative Housing Society Ltd., Suprabhat Cooperative Housing Society Ltd. that we are of the opinion that the appeals deserves to be dismissed. They are accordingly dismissed
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2014 (7) TMI 1343
Bogus LTCG - Addition u/s 68 - exemption u/s 10(38) denied - denial of LTCG computed on sale of shares, treating the same as penny stocks - HELD THAT:- Share transactions of the appellant are genuine.Appeal dismissed.
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2014 (7) TMI 1339
Exemption u/s 11 denied - AO felt that the assessee was engaged in the business of running cafeteria and coffee shop with profit motive - HELD THAT:- The assessee is registered as a charitable institution u/s 12A with the Commissioner of Income tax.
It is not in dispute that the aims and objects of the society are objects of general public utility inasmuch as they attempt to promote better understanding amongst various sections of the society. Establishing communal harmony and better understanding between various sections of the society are purely in the nature of objects of general public utility.
The assessee had generated profit from cafeteria and coffee shop but the fact of the matter is that these facilities were created for the members of the assessee-society. The profit so generated from cafeteria and coffee shop was utilized for achieving the aims and objects of the society. The society had no overall profit in the year under appeal. Profits so generated from cafeteria and coffee shop were ultimately used for achieving aims and objects of the institution. Therefore, such profits generated from a few activities of the institution cannot be used to convert a purely charitable institution into non-charitable institution. The view that we are taking in the matter is supported by the order passed by a Coordinate Bench of this tribunal referred to by the ld. AR for the assessee at the time of hearing. Appeal filed by the Revenue is dismissed.
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2014 (7) TMI 1338
Disallowance of prior period expenses - difference between the Members - Third member nominated u/s. 255(4) - HELD THAT:- The deductibility of expenses needs to be tested on the touchstone of the principle laid down by the Tribunal in its order for the A.Y. 1995-96 in respect of each item of expenditure claimed under the head 'prior period expenses'. As the Assessing Officer has failed to examine the details of expenses, in my considered opinion, the view taken by the learned J.M. needs to be upheld with a direction to the AO to consider the deductibility of expenses as per the view taken by the Tribunal for A.Y. 1995-96. Therefore, answer the question in negative by holding that the learned CIT(A) was not justified in sustaining the disallowance of prior period expenses. As such agree with the view taken by the learned J.M. in restoring the matter to the file of the Assessing Officer instead of the ld. AM upholding the disallowance.
Disallowance of extra ordinary items - HELD THAT:- As both the learned Members have agreed on the point than there can be no bar on allowing deduction of expenses in respect of a closed business against the income of other businesses, when it is a case of composite business Both the learned Members have also agreed that it was a case of composite business and hence the deductibility of expenses could not be marred by such considerations. It is observed that the Assessing Officer has based the disallowance of expenditure simply on the ground that it was in respect of written off amounts of a closed business and hence not deductible. In view of the above decision of the tribunal, the foundation for the AO's view, does not stand. The AO did not examine the details of such expenses as to whether these were capital or revenue.
Since the stand taken by the Assessing Officer has been rejected by both the learned Members, in my considered opinion, the proper course should be to restore the matter to the file of the Assessing Officer for considering the deductibility or otherwise of such amounts as per law. It is simple and plain that the Appellate Authorities are required to adjudicate upon the orders of the authorities having original jurisdiction which appreciate the material and then decide about the point. Adverting to the facts of the instant case, I find that since the Assessing Officer did not have any occasion to apply his mind from the perspective as discussed above, it would be more appropriate to send the matter back to the file of the Assessing Officer for considering deductibility of expenses or otherwise as per law, instead of taking up the details of such expenses and rendering decision at the Tribunal's end. therefore, agree with the view taken by the learned J.M. on this point and hold that the learned CIT(A) was not justified in confirming the disallowance on account of disallowance of extraordinary items.
Disallowance on account of mine development expenses - HELD THAT:- On perusal of the Tribunal order for A.Y. 1996-97, it is seen that the Tribunal did not delete the disallowance as made by the Assessing Officer but restored the matter to the file of the Assessing Officer for taking a fresh decision in conformity with the directions given by it. As the learned A.M. has also restored the matter to the file of learned CIT(A)/Assessing Officer, I find myself in agreement with the view taken by the learned A.M. in restoring the matter to the authorities below. The obvious reason is that for the immediately preceding two years, the Tribunal has restored the matter and the ld. AM has followed such view. There can be no question of deviating from the opinion expressed by the Tribunal on this issue in earlier years. As the orders of the tribunal for earlier two years have not been modified by the Hon'ble High Court, would prefer to go with the wisdom of the Division bench for the earlier two years.
In the final analysis, we agree with the view taken by the learned A.M. and hold that the learned CIT(A) was not justified in deleting the disallowance on account of mine development expenses.
Addition of welfare expenses u/s. 40A(9) - HELD THAT:- Tribunal for the immediately two preceding assessment years has restored the matter with the necessary direction. It is also seen that such disallowance came up for consideration by the Hon'ble High Court in assessee's own case for A.Y. 1994-95. The Hon'ble High Court also remitted the matter for fresh consideration. In view of the fact, that the Hon'ble High Court for the A.Y. 1994-95 and the Tribunal for the A.Ys. 1996-97 and 1997-98 have sent the matter back the learned A.M. was justified in following the precedents by remitting the matter for fresh decision to be decided in conformity with the view expressed by the Tribunal for immediately two preceding assessment years.
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2014 (7) TMI 1335
Rectification of mistake u/s 254 - applicability of provisions of s. 50C in determining the deemed full value of consideration received - AO was directed to recompute the capital gains applying the provisions of s. 50C and the assessee is objecting to the same - HELD THAT:- We wish to point out that it is well settled that the Tribunal is the final fact finding body. The findings of the Tribunal are not liable to be interfered with, unless the Tribunal has taken into consideration any irrelevant material or has failed to take into consideration any relevant material or the conclusion arrived at by the Tribunal is perverse in the sense that no reasonable person, on the basis of the facts before the Tribunal, could have come to the conclusion to which it has come. In the present case, we have to point out that in the absence of both the lower authorities not considering the provisions of s. 50C, Tribunal in its inherent powers was right in setting aside the issue to the file of the Assessing Officer to follow the procedure prescribed u/s. 50C of the Act.
The legal principal that while giving effect to the order of the Tribunal assessed income cannot be enhanced is implicit in each order of the Tribunal. However, since the same has not been explicitly stated in the order of the Tribunal dated 4.4.2014 at para 13, now we amend para 13 of the Tribunal order dated 4.4.2014 and the following sentence is added to para 13 which reads as under:
"Further, the Assessing Officer while giving effect to the order of the Tribunal shall compute the capital gains by applying the provisions of s. 50C and ensure that the finally decided capital gain does not exceed the capital gains originally assessed in the assessment order." MAs are partly allowed.
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