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Income Tax - Case Laws
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2015 (12) TMI 1901
Exemption u/s 10(23C)(vi) - claim rejected as society was diverting its income to the members of the society and, therefore, the society was not acting as a non-profitable institution - Commissioner rejected the application holding that the purpose/objects of the society as per the memorandum of association does not indicate that the institution is running solely for educational purpose
HELD THAT:- As perusal of the impugned order that based on a survey, a show cause notice was given and, thereafter, a finding has been given that the profits of the institution are being diverted to the members of the society in the garb of payment of interest on the unsecured loans given by them. The genuineness of this transaction has been doubted. A specific finding has been given that at the time when the members gave the loan, no rate of interest was payable by the institution but subsequently, for the subsequent assessment years, the rate of interest of 12% was charged to obviate the profit by way of interest and divert the money to its members in the garb of payment of interest on the loan given.
For the assessment year 2005-06, the rate of interest was increased from 12% to 18% and in 2006-07 the rate of interest was increased to 21%. This increase in rate of interest was to ensure that the income of the society was diverted to its members in the garb of payment of interest. The increase in the rate of interest could be seen on account of the increase in the income of the society. There is also a specific finding that the bye-laws had no provision for taking loan on interest, though, subsequently, the amendment was made in its bye-laws during the financial year 2006-07, which will have no effect in so far as the present application of the petitioner is concerned.
Thus an irresistible inference can be drawn that the petitioner's society, even if it was running an educational institution solely for education purposes, yet it was with the intention of earning a profit and it was not for a non-profit purpose. On this short ground, we are of the opinion that the order of the Commissioner does not require any interference. Decided against petitioner/society registered.
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2015 (12) TMI 1897
Levy of penalty u/s 271(1)(c) - changing the heads of income due to difference of opinion - as per AO assessee has treated the Guest house as his business asset and accordingly, he was claiming depreciation thereon - assessee explained that the mistake has occurred due to wrong understanding of the accountant - CIT(A), deleted the penalty by holding that there was difference of opinion about the nature of Capital gain, i.e., whether it was long term capital gain or short term capital gain and it appears that the assessee was under bona fide belief that it was a long term asset as he was owning the property over a period of three year
HELD THAT:- The admitted facts are that the “Guest house” sold by the assessee is a business asset on which depreciation has been allowed. Hence, there is no dispute that the gain arising on sale of the same would be assessable as “Short term capital gain” as per the provisions of sec. 50 of the Act. However, the assessee has treated the same as non-business asset at the time of filing return of income and accordingly computed the long term capital gain.
The total income of an assessee for a particular assessment year is computed in accordance with the provisions of the Act by having regard to the accounts of the assessee. Hence, it is imperative on the part of the assessee to compute the total income in accordance with the provisions of the Act. In case of assessee, on which depreciation has been allowed, the provisions of sec. 50 mandate that the gain should be computed as “Short term capital gain” only.
The assessee has tried to defend his action by drawing support from the decisions rendered in the case of ACE Builders Pvt Ltd [2005 (3) TMI 36 - BOMBAY HIGH COURT] and Smita Conductors Ltd.[2013 (9) TMI 1056 - ITAT MUMBAI] In our view both the decisions cannot come to the support of the assessee, since they have been rendered in a different context.
It is not a case where the assessee has made a claim on some plausible basis, but the same became unacceptable in the eyes of law. It is also not simple case of changing the heads of income due to difference of opinion. On the contrary, the assessee himself has accepted that the gains arising on sale of guest house is assessable as Short term Capital gain. Hence, in our view, the facts of the case show that the assessee furnished inaccurate particulars of income and the explanations furnished by the assessee in that regard were not substantiated.
We are not able to agree with the view taken by the CIT(A). We notice that the assessing officer has levied penalty @ 200% of the tax sought to be evaded. In our view, the same appears to be on the higher side. Accordingly, we set aside the order of CIT(A) and direct the AO to sustain the penalty to the extent of 100% of the tax sought to be evaded. Decided in favour of revenue.
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2015 (12) TMI 1896
Levy of interest u/s 234(A) - Tribunal decided the issues in favour of the assessee which relates to levy of interest under Section 234(A) as the same has also been considered in earlier assessment years - Being aggrieved thereof, the instant appeal has been preferred.
HELD THAT:- We have gone through the orders passed by the authorities below as well as the ITAT and we are of the opinion that no substantial question of law arises out of the judgment rendered by the Income Tax Appellate Tribunal.
Thus, the appeal is hereby failed and dismissed accordingly.
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2015 (12) TMI 1894
PE in India - Scope of Article 5(2)(k) of DTAA between India and the UK - HELD THAT:- As in latest order passed by the Tribunal in [2015 (9) TMI 1532 - ITAT MUMBAI] in which identical issue has been decided while we agree with the learned counsel that art. 15 will not be applicable on the facts of the present case, this finding does not really come to the rescue of the assessee since, as we have already held, the assessee did have a PE in India under art. 5(2)(k) of the India-UK tax treaty, and, accordingly, profits attributable to the PE are taxable under art. 7 of the India-UK tax treaty. Decided against assessee.
Reimbursement of the expenses as part of the income of the assessee - As decided in assessee own case [2015 (9) TMI 1532 - ITAT MUMBAI] as held reimbursements received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any markup, there is reasonable control mechanism in place to ensure that these claims are not inflated, and the assessee has furnished sufficient evidence to demonstrate the incurring of expenses. There is thus no good reason to make any addition to income in respect of these reimbursements of expenses - Decided in favour of assessee.
Interest charged u/s 234B is to be deleted.
Income relatable to work performed in India in liable for taxation in India - HELD THAT:- We find that in assessee’s own case for A.Y.1998-99 to 2001-02 [2015 (9) TMI 1532 - ITAT MUMBAI], the Tribunal has held that the profit which is attributable to the PE, can only be assessed in India.
Respectfully following the aforesaid order and order of the Hon’ble Special Bench in the case of Clifford Chance [2013 (6) TMI 544 - ITAT MUMBAI] It is held that the only income in respect of services rendered in India, which are attributable to PE only, would be taxable in India. Thus, ground no. raised by the Revenue stands dismissed.
Allow 85% of disbursement claim proportionate to the fee related to the services rendered in India as compared to total fees - We direct the AO to follow the aforesaid order of the Tribunal [2015 (9) TMI 1532 - ITAT MUMBAI] and hold that no amount should be disallowed.
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2015 (12) TMI 1891
TDS u/s 194A - interest on deposits held by the Branch - assessee in default for not deducting tax at source on alleged deposits which were funds of the Central Government - CIT(A) has held that societies which are being wholly funded by Government would qualify for non deduction of tax u/s 194A in accordance with notification No. 3489 dated 22.10.1970 - HELD THAT:- As per the PMGSY [a scheme of the Ministry of Rural Development], any interest income accrued on surplus funds of the project parked in the bank would be of Ministry of Road Developments and State Rural Road Development Agency would not have any right over the interest income. Chapter X of the Accounting Manual of PMGSY Scheme is explicit in this regard and the AO erred in relying on Chapter XIII of the said Manual.
Chapter X of the Accounting Manual is specific with regard to the nature and state of interest income, stating the interest income as belonging to the Ministry of Rural Development. The State Rural Road Agency does not have any control whatsoever on the interest income. That being so, the contents of Chapter XIII of the Accounting Manual, as rightly held by the ld. CIT(A), cannot over ride those of Chapter X of the Manual.
J&K State Rural Road Agency is a body established by the Government of J & K, registered under the Societies Registration Act and is fully funded by the Government and it is not required to make TDS.
Then, in BRANCH MANAGER, STATE BANK OF BIKANER & JAIPUR [2012 (4) TMI 210 - ITAT JAIPUR] as held that for interest on such like deposits, TDS provisions of section 194A of the Act are not attracted. This decision was also taken note of by the ld. CIT(A) while deleting the demand raised. Also, no contrary decision has been pressed into service before us on behalf of the department. Decided in favour of assessee.
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2015 (12) TMI 1890
Additional disallowance of depreciation enhanced by CIT(A) - “assets” have already entered into the ‘block of assets’ - HELD THAT:- As “assets” in question were forming part of ‘block of assets’ which were used earlier for the purpose of business. The said asset were destroyed / lost in theft in the assessment year 2006-07 and no insurance claim has been received to the assessee. To the extent of the amount of claim made to the insurance company was reduced from the block of assets in the earlier years and accordingly, assessee has claimed depreciation on the reduced written down value.
Since the assessee could not receive the insurance claim, the amount of insurance claim was added back and accordingly, depreciation was claimed on this amount.
CIT(A) has enhanced the disallowance of depreciation on the ground that the said asset has not been put to use for the business purpose. Such a reasoning given by the CIT(A) for the enhancement cannot be sustained, because now it is quite a settled proposition that if the “assets” have already entered into the ‘block of assets’ and is forming part of the gross block of assets, then deprecation has to be allowed even if the said assets has not been used in the relevant year.
This proposition now stands settled by the catena of decisions including that of case of CIT vs G.R. Shipping Ltd [2009 (7) TMI 1169 - BOMBAY HIGH COURT] Otherwise also, if the assessee’s claim for insurance has not been settled and amount has been added back, then the depreciation has to be allowed on such an amount. Accordingly, we direct the AO to grant deprecation in the previous year relevant to AY 2006-07, that is, when it was added back to the block of assets and secondly, rework the deprecation for the assessment year under appeal accordingly. Appeal of the assessee is allowed.
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2015 (12) TMI 1889
Nature of expenses - Corporate debt restructuring - replacement of remembraning cells - AO treated both these claims capital expenditure - HELD THAT:- Revenue’s argument seeking to treat assessee’s CDR claim as capital expenditure is rejected. We rely on co-ordinate bench decision in assessment year 2004-05 [2013 (11) TMI 773 - ITAT AHMEDABAD] and leave it for the AO to calculate this corporate restructuring expenditure as adopted in assessment year 2004-05.
Expenditure on replacement of remembraning cells - As assessee has already succeeded before the hon’ble jurisdictional high court in its own case [2015 (2) TMI 118 - GUJARAT HIGH COURT] rejecting the very substantial question framed in assessment year 1999-2000. There is no exception pointed out before us. We respectfully follow the same and uphold the lower appellate findings under challenge. Revenue’s appeal partly accepted for statistical purposes.
TDS u/s 192 - Default u/s 201(1) and (1A) - medical reimbursement - non deduction of tds - HELD THAT:- The assessee has acted fairly and honestly in computing its TDS liability qua salary and other allowances paid to its employees u/s. 192 - Nor it is the Revenue’s case that it has not acted in the above stated bonafide manner or that quantum of medical allowance question appears to be payment of salary in garb thereof. The case file does not reveal that these very sums stand assessed in individual employees’ hands.
Revenue fails in controverting all of the above stated findings. We accordingly reverse lower authorities’ action and accept assessee’s first substantive ground challenging section 201(1) and (1A) demand in question. This first substantive ground relating to medical reimbursement issue succeeds.
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2015 (12) TMI 1888
Penalty proceedings u/s 271(1)(c) - revised return showing higher income was filed on the basis of which notice for reopening was issued - undisclosed agricultural income - assessee in his statement recorded u/s 131 on oath by the ADIT (Investigation), Nashik had confessed that the agricultural income shown by him during the assessment year 2005-06 from sale of agricultural produce did not match with the agricultural crops shown in the 7/12 extracts - HELD THAT:- Assessee had no plausible explanation towards the source of Rs.3,00,000/- which he had introduced in his business as agricultural income. Although the assessee has filed the revised return by disclosing the additional income of Rs.3,00,000/- the same cannot be said to be voluntary because the return was filed only after the enquiries were conducted by the Department and the assessee was unable to substantiate the source of the same for which he declared the additional income.
As per the provisions of section 271(1)(c) of the Act, penalty is leviable if the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. In the instant case, the assessee by declaring business income as agricultural income in the return of income has concealed the particulars of his income and furnished inaccurate particulars of such income.
Provisions of section 271(1)(c) are clearly attracted. Various decisions relied upon by the assessee before the CIT(A) are distinguishable and are not applicable to the facts of the present case. Grounds raised by the assessee are dismissed.
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2015 (12) TMI 1886
Maintainability of appeal before Tribunal - low tax effect - HELD THAT:- In view of the latest CBDT Circular No.21/2015 dated 10th December, 2015, the appeals of the Department are not maintainable inview of the tax effect being less than the monetary limit prescribed by the said Circular. The tax effect in filing the appeal before the Tribunal should be above Rs.10 lakhs in view of the above said Circular. The above Circular has clearly mentioned to have retrospective effect and is to have application to the pending appeals. Accordingly, in view of the said Circular, all the appeals of the Revenue are dismissed as not maintainable.
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2015 (12) TMI 1883
Exemption u/s 11 - benefit of certificate u/s 12(A) - conditions stipulated under the provisions of sub-section (3) of section 12AA which empowers the authority to cancel the registration - HELD THAT:- As appellants has fairly stated that the questions of law raised in this appeal are covered by the decision of this Court in the case of ‘The Director of Income Tax Exemption Vs. M/s. Karnataka Badminton Assn. [2015 (1) TMI 1202 - KARNATAKA HIGH COURT] wherein the questions have been answered in favour of the Assessee and against the Revenue.
Accordingly, for the reasons given in the aforesaid Judgment in Karnataka Badminton Assn.’s case [supra], this appeal is dismissed and the questions of law raised are answered in favour of the Assessee and against the Revenue.
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2015 (12) TMI 1882
Validity of proceedings u/s 153A - as argued the premises which were searched u/s 132 were not of the Assessee - HELD THAT:- ITAT has noted as a matter of fact that the premises that was searched i.e. 3rd Floor, Global Arcade, M. G. Road, Gurgaon was not of the Assessee. There was nothing on record to connect the Assessee with the premises searched. Therefore, qua the Assessee, the proceedings u/s 153A was invalid. This being a factual aspect, no question of law arises.
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2015 (12) TMI 1881
Maintainability of appeal before HC - low tax effect - HELD THAT:- In the present case, the tax effect is Rs. 5.07 lakhs as mentioned in paragraph 10 of the Appeal Memo.
Revenue does not press the present Appeal.
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2015 (12) TMI 1879
Unexplained investment in undisclosed bank account - CIT-A applying the concept of peak theory and requirement of additional capital - HELD THAT:- We find that the assessee opened a bank account in ICICI Bank and deposited cash on various dates and also made withdrawals. The total deposits during the year and the same was treated by the A.O. as unexplained credit while framing the assessment.
We also note that the said account was not disclosed by the assessee in his balance sheet whereas all the withdrawals were made under his signatures. CIT(A) applied the theory of net peak balance and sustained the addition of peak balance of Rs.50,435/- and also sustained Rs.25,000/- as additional capital requirement as unexplained investments and treated the same as income of the assessee. No infirmity in the order of CIT(A) as he had rightly applied the theory of peak balance i.e. Rs.50,435/- and took additional capital at Rs.25,000/-. Appeal of Revenue is dismissed.
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2015 (12) TMI 1877
Nature of receipts - Income accrued on account of carbon credits - revenue or capital receipt - HELD THAT:- The issue is covered in favour of the assessee by order of DCIT Vs Kotla Hydro Power Pvt. Ltd. [2015 (4) TMI 1346 - ITAT CHANDIGARH] assessee was carrying on the business of power generation for the assessment year 2007-08. Carbon credit was not an offshoot of business of the assessee but an offshoot of environmental concerns. No asset was generated in the course of business but it was generated due to environmental concerns. There was no cost of acquisition or cost of production to get entitlement for the carbon credits. Therefore, the income from sale of carbon credits was to be considered as capital receipt and not liable to tax under any head of income under the Income-tax Act, 1961 - Decided against revenue.
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2015 (12) TMI 1875
Compounding of offences punishable u/s 276B r.w.s.278B - admitted default in deposit of TDS - HELD THAT:- Issue notice.
There shall be stay of initiation of prosecution. The prayer in respect of other interim reliefs stands rejected.
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2015 (12) TMI 1874
Penalty u/s 271(1)(c) - bogus purchases - AO treated the additional income as concealed income considering the fact that only after the finding of the bogus purchases by the department, assessee accepted and filed the revised return of income - HELD THAT:- In the present case, the assessee had accepted the bogus purchase as additional income voluntarily due to the fact that assessee was not in a position to substantiate the claim, even though, the transaction was made through banking channel. The assessee had declared the additional income voluntarily and filed return of income, which the AO accepted the revised return of income to complete the assessment u/s 143(3) r.w.s. 147.
We are inclined to note that the assessee filed the revised return of income which was duly accepted by the AO. From the above observations, it is clear that the assessee had neither concealed the particulars of the income nor furnished inaccurate particulars of such income. Hence, this is not a fit case to attract penalty proceedings u/s 271(1)(c) - Appeal of assessee allowed.
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2015 (12) TMI 1873
Undisclosed income u/s 69A - undisclosed cash receipt on sale of stone quarry is handwritten loose paper termed ‘isar pawati’ signed by the partners and also signed on behalf of the buyers - addition assuming a piece of paper as constituting “Issar Pavati” i.e. advance receipt - piece of paper was found in survey action u/s 133 - as argued piece of paper i.e. ‘Isar Pavati’ has been wrongly presumed as agreement to sell - HELD THAT:- Since the concerned loose paper is found to be pertaining to the Appellants herein, seizure of the same in the hands of other corporate entity represented by one of the partners of the Appellant firms herein will not render it extraneous per se for assessment purposes. In our considered view, the Revenue is entitled to use the incriminating evidence against the assessee in the given facts.
It is also pertinent to notice the other limb of the argument on behalf of the Assessee that impugned loose paper found in survey under S. 133A do not constitute evidence and can not give rise to presumption against the Assessee in the absence of any actual cash found as alleged to be unaccounted income. We have already observed that contents of loosed paper i.e. isar pawati impounded is entitled to great weight due to its substantial corroboration of payments with registered document, naturally without cash. We are of the opinion that once it is concluded on facts that the contents of the document found are relevant and true which establishes ownership, non-detection of physical cash or other equivalent asset per se would not be a handicap to invoke section 69A of the Act. Hence, notwithstanding nondeduction of physical cash, deeming provision of section 69A of the Act will apply.
In the facts of the case, loose paper found in the drawer of the director of the company surveyed who is also the partner of the Assessee and contents found to have been vindicated, the presumption against the assessee is supportable in law. The loose paper or isar pawati in our opinion assumes the colour of valid evidence against the assessee on its corroboration by payment details of registered document. Thus, the plea of the Assessee in this regard does not hold water.
Addition u/s 69A No merit in assessee contention since no unaccounted cash were actually found, nor any investment was found, section 69A of the Act is not attracted - The word ‘owner’ employed has to be understood in the context. We have already observed that physical presence of cash or other corresponding unaccounted investment per se to support an entry found in the documents is not the pre requisite to support its ownership for assessment purposes under section 69A.
We are alive to the fact that the scope in respect of coverage of premises under section 133A of the Act are limited. Also, the circumstances have to be weighed to come to conclusion about the alleged unaccounted money for assessment purposes. In the instant case, in our view, money in the form of cash was found to be attributable to the assessee as per the incriminating document i.e. Isar Pavati, nature and source whereof has not been explained satisfactorily. AO has sought explanation on alleged cash not founded to be recorded in book and found the explanation offered by the assessee as unsatisfactory. Therefore, we do not find merit in the plea of the Assessee with regard to non applicability of S. 69A. - We endorse the essence of the findings of the CIT(A) that in view of the speaking facts narrated in the loose paper found at the time of survey which clearly matches on material particulars with the registered sale deed executed subsequently, there is no room left to disbelieve the contents of the loose paper. It is trite that when a part of the document has been accepted, other part of the same document cannot be ignored in the absence of any tangible proof to the contrary. In our considered view, assessee failed to rebut the contents of the loose paper satisfactorily and thus failed to discharge the onus which lay upon it to prove what is apparent as per loose paper is not real. - Decided against assessee.
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2015 (12) TMI 1872
Eligibility of Deduction u/s 80IB - HELD THAT:- We find that since the facts are identical and in assessee’s own case the Tribunal has decided the issue, judicial discipline mandates that we follow the order of the Tribunal. We further note that the Revenue has already filed appeal before the Hon’ble High Court in Income Tax Appeal - In this view of the matter since the Hon’ble jurisdictional High Court [2010 (4) TMI 1232 - BOMBAY HIGH COURT] has not reversed the decision of ITAT, we follow the above said order of ITAT in assessee’s own case - Hence we set aside the order of learned CIT(Appeals) and hold that the assessee is eligible for deduction u/s 80IB.
Addition of electricity expenditure - AO while making the disallowance relied on the statement of Smt. Anju Saraf recorded on 07-12-2009 before the ACIT, Circle-1, Nagpur wherein it has been stated that crushing and screening machines are run on generator and there is no electricity connection is available for running crushing and screening machines - HELD THAT:- It is clear that the assessee has paid the expenditure on account of electricity to its associate concern. The expenditure is duly supported by bills and vouchers. Such expenditure were claimed in earlier years and were allowed. Merely because the expenditure was paid to sister concern, the same cannot be disallowed. Accordingly we uphold the order of learned CIT(Appeals) on this issue.
Addition on account of wind mill maintenance expenses - CIT-A deleted the addition - HELD THAT:- We find that the AO’s main plank of argument is that the expenditure incurred was excessive. For this he has compared some agreements entered into with other concerns with the payee. We agree with the learned CIT(Appeals) that no case has been made out as to whether the maintenance charges paid by others were comparable to the one paid by the assessee. Hence in our considered opinion the AO is trying to enter into shoes of the businessman to decide as to how he should enter into an agreement. No case has been made out that the payments are bogus or the services were not rendered. In these circumstances, we do not find any infirmity in the order of learned CIT(Appeals). Accordingly we uphold the same. The appeal of the Revenue is dismissed.
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2015 (12) TMI 1871
Gain on sale of agricultural lands - Nature of land sold - taxable as business income OR was exempt from tax - Whether CIT(A) failed to appreciate that the lands sold in this year were capital asset of the firm and since the said lands were agricultural lands and beyond 8 kms from the municipal limits, the gain arising on sale of lands was exempt from tax? - HELD THAT:- The assessee is a partnership firm and the main activity in which the assessee is engaged is in dealing the lands. The factual finding of the CIT(A) in this regard is that the assessee had owned various lands, which have been declared in the balance sheet under the ‘list of Sundry Debtors related with land transactions – Scheme – VII’ starting from assessment year 2003-04 and then in assessment year 2004-05.
During the year under consideration, there is certain movement in the lands and two of the lands have been sold by the assessee. In view of the large number of transactions carried out by the assessee in lands reflect the nature of assessee to carry on the business of sale and purchase of lands, where the lands purchased by it were shown as stock-in-trade. The nature of the lands purchased by the assessee is claimed to be agricultural lands.
No iota of evidence has been filed by the assessee to establish that any agricultural activity was carried on the aforesaid lands. Further, even 7/12 extract filed by the assessee reflects no agricultural activity. In view of the above said facts and circumstances, where the assessee is admittedly engaged in the business of purchase and sale of lands and in view of the assessee having declared the said lands as part of its current assets, we find no merit in the plea of the assessee in this regard and dismissing the same, we uphold the orders of authorities below in treating the profit on sale of land as business income in the hands of the assessee. The grounds of appeal raised by the assessee are thus, dismissed.
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2015 (12) TMI 1870
Disallowance u/s 40A(7)(b) - HELD THAT:- The co-ordinate Bench of this Tribunal in the immediately preceding assessment year in assessee’s own case restored this issue to the file of the Assessing Officer for adjudication afresh. Following the said order of this Tribunal, we restore this issue to the file of the Assessing Officer, who shall decide the issue afresh following the direction of the co-ordinate Bench [2013 (3) TMI 869 - ITAT CHENNAI]
Deduction u/s 10B - CIT-A directed recompute the deduction by excluding freight and clearing expenses and business development fee from export turnover and total turnover also - HELD THAT:- CIT-A correctly following the Special Bench decision in the case of ITO Vs. Sak Soft Ltd. (2009 (3) TMI 243 - ITAT MADRAS-D] directed the Assessing Officer to reduce the said amounts from the total turnover also for the purpose of computation of deduction under section 10A.
Disallowance u/s 14A r.w.r. 8D - As argued assessee has not earned any dividend income - HELD THAT:- On going through the decision of the co-ordinate Bench of this Tribunal in the case of M.Baskaran [2015 (3) TMI 192 - ITAT CHENNAI] we find that the issue in appeal is squarely covered by the said decision wherein the Tribunal held that when the assessee has not earned dividend income, disallowance under section 14A is not warranted.
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