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Income Tax - Case Laws
Showing 241 to 260 of 9151 Records
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2015 (12) TMI 1504
Undisclosed receipts through post office - source of information - CIT(a) deleted the addition - Held that:- CIT (A) rightly observed that third party information is important for the purposes of assessment but it should be corroborated by relevant documentary evidences otherwise it cannot be acted upon to saddle the assessee with additions. Though the source of the information is a government organization, like in this case is a post office, the correctness of that information is countered by the assessee with by another piece of evidence emanating from the very same source, then the Post Master is duty bound to establish that the information supplied by him is correct by production of documents from where he has supplied the information to AO at the first place. In this regard, the ld. CIT (A) has noted that the information supplied by the post office to the AO was on monthly basis whereas it was supplied to the assessee on dayto- day basis. Thus, the contention of the assessee that there can be posting or compilation or totaling error cannot be ruled out unless the AO had called for the records from the post office and verified the same. Without doing the said exercise, the AO ought not to have made the addition simply by relying on the information given by the post office, when the assessee also has documentary evidence certified by the Post Master to support its claim. We further take note of the fact that the Post Master issued the certificates duly signed and stamped on day-to-day basis in the regular course of its business and which was the basis of audited books of accounts maintained by the assessee. We find force in the contention of the ld. AR that without rejecting the books of accounts maintained by the assessee company, the addition made simply on the basis of information from the post office without being corroborated or verified cannot be accepted. We further find that from a perusal of the statement of facts filed by the AO along with the appeal, vide letter dated 17.02.2005, the post office has brought to the notice of the AO that the documents for a period from 1999 to March 2002 has been weeded out. It was clearly mentioned that documents pertaining to period from April 2003 to July 2004 comprising of 1353 pages has been taken away by the Investigation Officer, C.O. Dalanwala, Dehradun on 04.09.2004. So, from the said letter, we can safely infer that records pertaining to the relevant assessment year i.e. 2003-04 (financial year 2002-03) was available with the concerned post office. We find that the AO has not taken any pains to call for the records before he passed the assessment order dated 31.03.2006 which he could have easily done.
Further, we find that pursuant to the ld. CIT (A)'s seeking remand report, the AO simply stated vide letter dated 24.11.2008 that records of FY 2002-03 are not available. When insisted by the ld. CIT (A) vide letter dated 27.02.2009 a copy of statement on oath of Shri Lalit Mohan Joshi, the Post Master was recorded on 25.02.2009 which has been incorporated verbatim at page 3 of the ld. CIT (A)'s order wherein he simply states that the information given by them must have been based on the basis of cash book and money order payment book and could not be based on wrong facts and the documents have been weeded out. So, we find that the AO, during the original assessment, could have summoned the documents and could have verified the veracity of the statement of the assessee qua the information supplied by the post office. Without doing so, the AO could not have made the addition. We find that though the documents for the next assessment year were taken away by the Investigation Officer, C.O., Dalanwala, Dehradun for the period April 2003 to July 2004 comprising of 1353 pages, we find that the AO in the next assessment year i.e. 2004-05 has not made any addition and has accepted the return filed by the assessee - Decided against revenue
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2015 (12) TMI 1503
Disallowance of excess depreciation claimed on Wind Mill plant - CIT(A) deleted the addition - Held that:- foundation of platform, erection, installation of plant and machinery, preparation of crane platform for wind mill and other civil work carried out for installation are internal part of wind mill, which have not independent use. Thus, we are of the considered view that the assessee is entitled for 80% of depreciation on composite wind mill project including other expenditure for put to use for wind mill.
TDS u/s 194H - Disallowance U/s 40(a)(ia) - assessee has not deducted TDS on payment of credit card service charges - Held that:- This issue has been considered by the Coordinate Bench in Gem Paradise Vs. ACIT [2012 (2) TMI 521 - ITAT JAIPUR] in which it has been held that the assessee sold its goods through credit card and on presentation of bill issued against credit card, the bank makes payment to the assessee after deducting agreed fees as per terms and conditions in case of credit card. This is not a commission payment but a fees deducted by the bank. There is no such relation between the bank and the shop keeper, which establishes the relationship of a principal and commission agent. Therefore, TDS is not liable to be deducted on payment made on the basis of credit card. The other case laws referred by the assessee is also squarely applicable. - Decided in favour of assessee.
Disallowance of Misc. supply expenses - CIT(A) deleted the addition - Held that:- The assessee is a Five Star hotel managed professionally. There is an agreement with multinational company in sharing receipts. The ld Assessing Officer made addition by making general observation. He is not deducted any specific bill vouchers that the assessee has made cash payments for expenses or made self made vouchers. The ld DR had not controverted the findings given by the ld CIT(A), therefore, we uphold the order of the ld CIT(A).- Decided in favour of assessee.
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2015 (12) TMI 1502
Validity of reopening of the case u/s 147 - AO treating the amount received on sale of shares which was claimed as Long-term-capital-gain, as income from other sources along with the commission paid for obtaining the alleged fictitious LTCG @ 0.15% - Held that:- From the analysis of the reasons recorded, it is evident that there is no specific information that the shares of N.E. Electronics Company purchased through M/s Goldstar Finvest Pvt Ltd. In April 2001 and sold through M/s Mahasagar Securities Pvt Ltd in June 2003 was a bogus transaction or was an accommodation entry. If the AO has received certain information from investigation wing then, it was incumbent upon him to apply his mind and peruse the assessee’s assessment record to see, whether the transactions undertaken by the assessee is also sham transaction or was only a accommodation entry taken from these companies of Mukesh Chokshi and there is any failure on the part of the assessee to disclose all material facts relating to such transaction.. More so, in this case the assessment sought to be reopened was beyond the period of 4 years. The ‘reason to believe’ entertained by the AO in such cases should be such that, whether there is any failure on the part of the assessee to disclose truly or full all material facts because that is a point of jurisdiction which AO has to acquire to reopen the competed assessment u/s 143(3). The information received from the Investigation wing was that assessee had also transacted with the said companies, i.e., it was also one of the beneficiary appearing in the list forwarded by the DDI(IT). There is no specific mention that, whether the particular transaction undertaken by the assessee of N.E. Electronics Pvt Ltd was a bogus transaction. From the perusal of the statement recorded of Shri Mukesh Chokshi it is evident that there is no mention or whisper about the assessee has taken accommodation entry to the assessee. The other most important fact here is that, the AO has not uttered a word about failure on the part of the assessee for disclosing the true and correct material facts. Such ascribing of failure of the assessee in the “reasons recorded” itself is mandatory, because from the reasons alone, it can be gathered whether there was any failure on the part of the assessee or not so as to acquire jurisdiction for reopening the case beyond the period of 4 years. There is not an iota of allegation of failure on the part of the assessee to disclose material facts.
Thus, without there being any failure on the part of the assessee, the reopening of the assessment u/s 147 beyond a period of 4 years is not permissible in the present case, as the assessee had completely disclosed all these material facts which has also been subjected to the scrutiny. - Decided in favour of assessee.
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2015 (12) TMI 1501
Computation of deduction under section 10B - enhanced profits by way of disallowance of an expenditure, in view of non-deduction of tax at source under section 40(a)(ia) - CIT(A) allowed the claim of the assessee - Held that:- As referred by the CIT(A), there is a provision by way of proviso under section 92C(4) of the Act that in case any addition is made on account of transfer pricing adjustment, no deduction under section 10A/10AA/10B of the Act or under Chapter VIA shall be allowed in respect of such amount of income by which the total income of the assessee is enhanced. However, there is no similar provision in respect of the disallowance made under section 40(a)(ia) of the Act. In the absence of specific provision of the Act, the income enhanced after the statutory disallowance under section 40(a)(ia) of the Act is to be considered as the eligible profits of the undertaking while computing deduction under section 10B of the Act. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by the Revenue.
Reduction of carried forward losses while computing the profits of the eligible undertaking under section 10B - Held that:- The facts arising in the present case are similar to the facts before the Tribunal in Vishay Components India Pvt. Ltd. Vs. Addl.CIT & Anr. (2015 (11) TMI 118 - ITAT PUNE ) and following the same parity of reasoning, we hold that the deduction under section 10B of the Act would be allowed to the assessee in the first instance before allowing the adjustment on account of brought forward depreciation losses, the deduction under section 10B of the Act is to be first allowed against the eligible profits and in case there are any leftover profits, then the same are to be adjusted against brought forward unabsorbed depreciation / loss as claimed by the assessee in its return of income. Accordingly, we direct the Assessing Officer to re-compute the deduction under section 10B of the Act in the hands of the assessee. - Decided in favour of assessee
Addition made on account of outward freight while computing the book profits under section 115JB - Held that:- We find merit in the claim of assessee with special reference to the calculation of book profits by applying provisions of section 115JB of the Act. The assessee has also filed a revised computation of eligible book profits under section 115JB of the Act, which is also placed on record. In case, the amount of unascertained liabilities of ₹ 2.65 crores is added back to the net profit shown in the Profit & Loss Account and the balance expenditure and income relatable to the deduction claimed under section 10B of the Act is added / reduced, then it cannot be held that the assessee had not added back the provision of ₹ 2.65 crores. However, in fairness, we are of the view that the matter needs to be looked at by the Assessing Officer in this regard. Accordingly, we direct the assessee to furnish the requisite calculation before the Assessing Officer, who in turn shall verify the same and compute the book profits under section 115JB of the Act in this regard, after affording reasonable opportunity of hearing to the assessee - Decided in favour of assessee for statistical purposes
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2015 (12) TMI 1500
Trading addition - CIT(A) deleted the addition - Held that:- Firstly, it is not under dispute that the assessee is in a line of business of petroleum trading wherein both purchase of petroleum products as well as subsequent sale thereof are governed by Oil Marketing Companies, in the instant case which is Indian Oil Corporation (IOC). Accordingly, the margin which is earned by the assessee is effectively governed by the IOC. It is also not under dispute that assessee has declared turnover of ₹ 33.11 cr and it is not the case of the revenue that there is a suppression of sales by the assessee during the year under consideration. Further, the assessee has demonstrated through the chart (reproduced above) that with the change in sale price of the petroleum products, the margin in the hands of the assessee remains the same. Further, we agree with the contention of the ld. A/R that since the revenue has not challenged the finding of the ld. CIT (A) wherein he has held that books of account cannot be rejected, revenue cannot be allowed to take the ground that ld. CIT (A) has erred in deleting the trading addition. In the light of above, we do not find any infirmity in the order of ld. CIT (A) - Decided against revenue.
Disallowance of salary expenses made by AO u/s 40A(2)(b) - CIT(A) deleted the addition - Held that:- We believe that ld. CIT (A) has rightly stated that the salary which is derived by a person not only depends on experience but also depends on his qualification. In the instant case it is not under dispute that Shri Naresh Pareek was holding Post Graduate diploma in Management from Balaji Institute of Modern Management, Pune. Secondly, the appellant, considering the educational qualification, has contractually agreed to pay ₹ 15,000/- per month to Shri Naresh Pareek. It is a settled principle that it is the businessman who is the best judge to determine the services which are required for the purpose of his business and what should be reasonable compensation to avail the services. In the instant case the appellant in his wisdom has decided to appoint Shri Naresh Pareek to run its business more efficiently and have agreed to pay a salary of ₹ 15,000/- per month to him. We see no infirmity in the order of ld. CIT (A). - Decided against revenue.
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2015 (12) TMI 1499
Disallowance of the accumulation of income - rejection of Form 10 - Held that:- The assessee is a charitable trust and has been registered under section 12AA of the Act. During the relevant financial year, the assessee has excess of income over expenditure and has sought to set apart the said excess for the purposes of objects of the trust. Though in Form 10, the assessee has not mentioned specific purpose for which the accumulation is being done, we find that during the course of the assessment proceedings, the assessee has stated the specific purpose for which the accumulation is being done. The reason for the Assessing Officer's refusal to accept the subsequent letter of the assessee giving specific purpose of accumulation is that the assessee has not filed the resolution of the society for the specific purpose mentioned in the letter.
Thus particularly taking into consideration the assessee's contention that the funds set apart have been utilised for the purpose mentioned by the assessee in its letter filed before the Assessing Officer during the assessment proceedings, I am of the opinion that the assessee is eligible for accumulating the excess of income over the expenditure for the relevant assessment year. - Decided in favour of assessee
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2015 (12) TMI 1470
Computation for the income chargeable under the head 'capital gains' - whether the Tribunal after elaborately considering the clauses in the Settlement Agreement entered into between the parties, has rightly come to the conclusion that the 'capital gains' income is only towards the transfer of trademarks associated with the product 'SHARP' and not to the business of the assessee as a whole? - Held that:- The assessee has suffered a loss during the relevant assessment year as reflected in the assessment order and it is also submitted by the learned counsel appearing for the assessee that in the previous three assessment years also, the assessee had suffered loss. In such an event, it can be observed that the goodwill of a business of a company running under loss, may not have a potential value, profit would be sine qua non for the goodwill of a business. This factor also adds to hold that the goodwill of a business is not transferred. The goodwill of a trade mark associated with the business cannot be construed as a goodwill of a business, as already held, these are two distinct separate intangible assets, both cannot be intermixed.
We have perused the relevant clauses of the settlement deed entered into between the parties extracted supra, which clearly indicates, the assignment made by the assessee company to M/s Sharp Corporation, is only transfer of trademarks and the goodwill associated with the trade marks. It cannot be misconstrued to that of goodwill of a business. It is observed in the judgment of the ITAT, "it is common ground before us that the assessee did not sell its entire business undertaking to Sharp Corporation". This admitted fact itself proves that the assessee has transferred only the trade marks and not the goodwill of a business. Even assuming the goodwill related to the trade mark is transferred, it cannot be construed as the goodwill of a business. If the arguments of the revenue that the transfer of trade mark itself is goodwill of a business is accepted, then there was no necessity for the Legislature to amend Section 55(2)(a) of the Act inserting the words "trade mark" or "brand name" associated with the business by Finance Act, 2001.
In such view of the matter, we are of the considered opinion that the ITAT, after elaborately examining the terms of the settlement deed, has arrived at a right conclusion and the same does not warrant any interference by this Court. - Decided in favour of the assessee and against the revenue
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2015 (12) TMI 1469
TDS u/s 194I - assessee in default - Whether the Tribunal was correct in holding that the order passed under Section 201(1) and 201(1A) for the assessment year 2002-03 is barred by limitation? - Held that:- In the memorandum explaining the provisions in the Finance (II) Bill, 2009, it was clearly stated that ‘to provide sufficient time for pending cases, it is proposed to provide that such proceedings for a financial year beginning from 1st April, 2007 and earlier years can be completed by the 31st March, 2011’. As such, the memorandum itself clarified that the proviso is for pending cases, and not decided cases. The Circular dated 3.6.2010, issued by the CBDT, also clearly specifies that the said proviso would be for pending cases and not decided cases. With regard to the applicability of the amendment made by the Finance Act, 2009 with effect from 1.4.2010, it was also clarified to be from the assessment year 2011-12 and subsequent years. As such, it is clear that proviso to sub-section (3) did not legalize the cases where action had already been taken, but was meant for only such cases which were pending at the time of insertion of sub-section (3) to Section 201 of the Act. Thus, for the reasons given above, we find that the Tribunal was correct in holding that the order passed under Sec.201 (1) and (1A) of the Act on 28.1.2008 for the assessment year 2002-03, would be barred by limitation as the period of limitation would be four years from the end of the financial year in question. - Decided in favour of the respondent assessee and against the Revenue.
Liability to interest under Section 201(1A) - ITAT held that the assessee was liable to pay interest under Section 201(1A) of the Act for not deducting TDS, from the date when the payment was made by the assessee to the Recipient, till the date the tax was deposited by the Recipient - Held that:- the provision for tax deduction at source is only a mechanism for collection of tax by the payer, even though the liability to pay tax is that of the Recipient. The provision for payment of interest under sub-section (1A) of Section 201 of the Act is only of compensatory nature. It cannot be a means to penalise the payer. The provision for payment of interest would arise from the date when it ought to have been deducted i.e., from the date of payment by the payer to the Recipient. The liability to pay interest would end on the date when such tax has been deposited by the Recipient, either by way of advance tax or along with the return of income. Interest, herein, being compensatory in nature, cannot be thus charged for the period beyond the date when such tax has already been deposited by the Recipient. If the Revenue is permitted to charge interest even after the Recipient has deposited the tax, the same would amount to undue enrichment of the Revenue, as even after receiving the tax, it would continue to get interest on the amount which has already been paid or deposited with it. As such, the liability of the assessee herein would not be for payment of interest after the period of deposit of tax by the Recipient.- Decided in favour of the respondent assessee and against the Revenue.
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2015 (12) TMI 1468
Reopening of assessment - Held that:- The facts as revealed from the original record relating to the proceedings as recorded hereinabove, make it amply clear that insofar as the first respondent - Assessing Officer is concerned, he has, in the communications referred to hereinabove, given a clear opinion that no case has been made out for reopening of the assessment and that the objection raised by the Audit was not acceptable. However, it is only on account of the persistence of the Audit Department, that the Assessing Officer has reopened the assessment for the assessment year under consideration by issuing notice under section 148 of the Act. Clearly, therefore, the Assessing Officer has not formed any belief that income chargeable to tax has escaped assessment and on the contrary, is of the opinion that there is no cause for reopening the assessment; however, he has sought to reopen assessment only upon the insistence of the Audit Department. Under the circumstances, the primary requirement for reopening the assessment under section 147 of the Act, namely that the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment has clearly not been satisfied. The assumption of jurisdiction on the part of the Assessing Officer by reopening assessment for the year under consideration by issuance of notice under section 148 of the Act is, therefore, without any authority of law. Resultantly, the impugned notice under section 148 of the Act cannot be sustained. - Decided in favour of assessee.
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2015 (12) TMI 1467
Disallowance u/s 40A(2)(b) - payment of sale value was in excess of the fair market value - related parties - Held that:- Section 40A(2)(a) of the Act provides that where the assessee incurs expenditure in respect of which payment has been made to any person referred to in clause (b) of that sub-section, and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefits derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. Therefore, for the purpose of disallowing a deduction, the Assessing Officer has to form an opinion not only that the expenditure is excessive or unreasonable, but that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made. As noticed hereinabove, the Commissioner (Appeals) has recorded a categorical finding of fact to the effect that the Assessing Officer has not brought any material on record to show that the payments in question exceeded the fair value of the services received. Insofar as the legitimate needs of such services etc. is concerned, the Commissioner (Appeals) has found as the matter of fact that as a result of utilising the employees of its sister concerns and on payment of service charges, the assessee company started making operational profits from assessment year 2001-02. Under the circumstances, it cannot be said that the services were not availed for any legitimate need. The Tribunal has concurred with the aforesaid findings of fact recorded by the Commissioner (Appeals). Essentially, therefore, the conclusion arrived at by the Tribunal is based upon findings of fact to the effect that there is no material to show that the payments made exceed the fair market value and that the services have been availed for legitimate needs of the assessee company. On behalf of the appellant nothing has been pointed out to show that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored. No contrary material has been brought to the notice of the court so as to dislodge the findings of fact recorded by the Tribunal. Under the circumstances, the conclusions arrived at by the Tribunal being based upon findings of facts recorded by it after appreciating the evidence on record.- Decided against revenue
Depreciation on goodwill - ITAT allowed claim - Held that:- Section 32 of the Act provides for the deductions to be allowed in respect of depreciation of - (a) buildings, machinery, plant or furniture, being tangible assets; and (b) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets being acquired on or after the 1st day of April, 1998. Explanation 3 to section 32 provides that for the purposes of that sub-section, the expressions “assets” and “block of assets” shall mean (a) tangible assets, being buildings, machinery, plant or furniture; (b)intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. (a) While goodwill has not been specifically mentioned in the category of intangible assets under clause (b), in the case of CIT v. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT ] has held that goodwill is an asset under Explanation 3(b) to section 32(1) of the Act. Under the circumstances, the controversy raised vide the second proposed question clearly stands concluded by the above decision. The Tribunal, therefore, did not commit any error in following the said decision. - Decided against revenue
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2015 (12) TMI 1466
Block assessment - Benefit of telescoping relating to cash actually found during the course of search - promissory note found during search - undisclosed income of the assessee - ITAT deleted addition - Held that:- All that has been done by the Commissioner (Appeals) is that the benefit of telescoping has been given to the assessee in relation to the cash that was actually found during the course of search, which view has been confirmed by the Tribunal. This court in the case of Commissioner of Income Tax, Gandhinagar v. Jagatkumar Satishbhai Patel (2012 (12) TMI 1017 - GUJARAT HIGH COURT) has held that applying the principles of telescoping does not give rise to a question of law. Under the circumstances, the impugned order passed by the Tribunal confirming the order of the Commissioner (Appeals) granting the benefit of telescoping to the assessee does not give rise to any question of law, much less, any substantial question warranting interference. - Decided against revenue.
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2015 (12) TMI 1465
Disallowance of interest paid to various parties invoking the provisions of section 40(a)(ia) - assessee had belatedly filed form 15G before the Ld.A.O and also before the Ld. CIT. - Held that:- From the facts of the case, it appears that the assessee had filed the Form 15G belatedly before the Ld. A.O except from two individuals. Since there were defect in the Form 15G because the same was undated, the Ld. Assessing Officer as well as the Ld. CIT disallowed the interest expenses claimed by the assessee by invoking the provisions of section 40(a)(ia) of the Act. The assessee has relied in the decision of the Jurisdictional High Court in the case of Vijay Hemant Finance & Estates Ltd.,[1999 (4) TMI 65 - MADRAS High Court ] which is identical to the case of the assessee wherein the Hon’ble High Court remitted the matter back to the file of Ld. Assessing Officer for providing an opportunity to the assessee to rectify the defects in the Form 15H.
Following the aforesaid decision of the Hon’ble Jurisdictional High Court, we also hereby remit the matter back to the file of Ld. Assessing Officer with similar direction. - Decided in favour of assessee for statistical purposes.
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2015 (12) TMI 1464
Transfer pricing adjustments - Working capital adjustment to be made while working out the Profit Level Indicator (PLI) - Held that:- To bring the uncontrolled transaction comparable to the transactions of an assessee, it is required to eliminate the material differences which are likely to affect the price or cost or profits arising from the transactions. Assessee had given a detailed working capital study of the twelve comparables selected by it and worked-out the average working capital and the ratio of the average working capital to sales of such comparables. There is no case for the Revenue that the comparables considered were not carrying debtors, inventories and creditors. When assessee was not having any debtors and was entirely funded by advance received from AE abroad against supplies, then in order to bring parity between the results of the selected comparables and that of the assessee it is essential that adjustment for the working capital is made on the results of such comparables. Only then can the uncontrolled transaction become comparable to the international transactions of the assessee. In such a situation we are of the view that DRP was correct in giving the direction to the AO to carry out the necessary working capital adjustment in working out the average PLI of the comparables. We do not find any reason to interfere with the order of the DRP. - Decided against revenue
Exchange loss / gain - treated as operating in nature for working out the PLI of the assessee - whether there was any nexus between foreign exchange loss / gain with the business activity of the assessee? - Held that:- Financial results of the assessee showed that its earnings from export on granite slabs to AE were ₹ 15,55,02,752/-. In our opinion, given this fact situation, foreign exchange gain / loss could have been considered as non-operational only if the AO could show that such gains / loss came out of hedging and transactions which were independent of the business revenue earning transaction of the assessee. The preponderance of probability will always weigh in favour of the assessee when its revenues are only from exports. In such a situation we cannot take a presumption that foreign exchange gain / loss were not having any nexus to the operations of the assessee - Decided against revenue
Adjustment for under utilisation of rated capacity not allowed while comparing its results with that of the comparables selected for the TP study - Held that:- Depreciation on fixed assets need not be directly proportional to utilisation of machinery. Assets can get depreciated by non usage as well. Hence attempt of the assessee to have a lesser charge of depreciation while working out its PLI in the guise of under utilisation of capacity, in our opinion, was not correct. No doubt, as mentioned by the Ld. AR, Rule 10B(1)(e) requires adjustment of differences between international transactions and the comparable uncontrolled transactions which would materially affect the net material margin. However, assessee here was unable to establish that the comparables had claimed depreciation after considering their capacity utilisation. Further assessee also could not establish the existence of a linear relationship between its depreciation cost and machine utilisation. - Decided against assessee
Addition for the working capital adjustment - Held that:- Assessee has produced before us a chart according to which the average working capital adjustment that was required to be done for working out the average PLI of the comparables was (-) 2.85%. TPO had however added 2.85% to the unadjusted average PLI of the comparables. We are of the opinion that this issue also requires a fresh look by the AO / TPO. If the working capital adjustment was negative, AO / TPO should rework the adjusted PLI of the comparables after reducing the quantum of such adjustment from the average PLI of the comparables. Ordered accordingly. - Decided in favour of assessee for statistical purpose.
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2015 (12) TMI 1463
Penalty under section 271(1)(c) - disallowance/expenditure, namely, (i) claim of depreciation under block "buildings" ; (ii) loss on sale of current assets ; (iii) claim of bad debts ; (iv) investments written off ; (v) irrecoverable project expenses written off, on the ground that the assessee has furnished inaccurate particulars of income - Held that:- Other than the claim made by the assessee with regard to five items of deduction, namely, claim of depreciation under block buildings, loss on sale of current assets, claim of bad debts, investments written off and irrecoverable project expenses written off, no fault has been found by the Assessing Officer in the particulars of income submitted by the assessee in its return. Therefore, this Tribunal is of the considered opinion that merely because the claim of the assessee was found to be not sustainable in law by the Assessing Officer, that cannot be a reason to say that the assessee has furnished any inaccurate particulars regarding its income. This Tribunal is of the considered opinion that the assessee has not furnished any inaccurate particulars regarding its income. In view of the judgment of the apex court in CIT v. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] the assessee cannot be by any stretch of imagination construed as to have furnished any inaccurate particulars of income. - Decided in favour of assessee
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2015 (12) TMI 1462
Unexplained share application money - Addition u/s 68 - What is burden of proof? - Held that:- CIT (A) has relied on the audited balance sheet for the FY 2007-08 i.e. AY 2008-09 and the copy of the ITR of AY 2009-10 to uphold that the share applicant / investor companies are existing companies and the audited balance sheet show that the share applicants companies had enough paid up capitals and reserves to subscribe for the shares from the assessee’s company. Though we find that cheque numbers which are dated between 10.08.2006 to 25.08.2006 have been mentioned by the ld. CIT (A) to uphold the genuineness of the transaction, however, we are unable to accept the said reasoning and finding of ld. CIT (A) because the assessee failed to prove the identity of the share applicants by adducing evidences of their existence at the addresses or by cogent materials before the AO.
The PAN details were wrong. The transactions from the bank which were claimed to have transacted the share application money has been found to be bogus and even during the remand proceedings, the assessee failed to produce even a single share applicant before the AO. In the said scenario, the ld. CIT (A) accepting the audited balance sheet for FY 2007-08 i.e. AY 2008- 09 which is subsequent assessment year is not acceptable. The assessee cannot say that it did not had sufficient time to discharge its burden in respect to the share capital money which has come to its account. We find that the AO had investigated the matter fairly and had given enough opportunities to the assessee to come clean with the identity, creditworthiness and genuineness of the transaction. We find that the AO had given sufficient notice and furnished the enquiry reports to the assessee at various stages to show that he was not satisfied with the documents filed by the assessee before the AO. The AO has disproved the evidences brought by the assessee to discharge its burden of proof, which show that the assessee failed to discharge its burden of proof in respect to share application money which has come into its account. The CIT (A) erred in taking the audited balance sheet of subsequent assessment year and documents to prove the creditworthiness which was filed before him to prove the existence of the said companies and individuals.
The case laws relied upon by the ld. AR as aforestated pertains to cases where public issue of shares are involved and the case laws regarding share subscription of Public Limited company stands on a different footing than the share application money in the context of private limited company and, therefore, the case laws relied on by the ld. AR does not apply to the case in hand.
We would like to deal with the plea of the ld. AR that in case of any doubt regarding the impugned order, the matter may be remanded, if necessary, back to the AO then the AO can satisfy himself about the identity, creditworthiness and genuineness of the transaction as found by the ld. CIT (A). This prayer cannot be granted for the simple reason that lot of water has flown the Ganges after the impugned assessment order. Lot of developments have taken place after the addition of ₹ 3.46 crores u/s 68 of the Act. We find that the defunct companies at the time of assessment, as pointed out by the AO, have resurrected back to life after statutory compliances were fulfilled; and the said documents were furnished before the ld. CIT (A) who has erred in relying upon it to delete the addition. So, therefore, we cannot allow such a prayer of the assessee for the simple reason that the AO had demolished the case of the assessee to prove the identity, creditworthiness and genuineness of the alleged shareholders. So we are not inclined to send the case back to the AO again for fresh adjudication - Decided against assessee
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2015 (12) TMI 1461
Penalty levied u/s 271(1)(c) - receipt of interest income - Held that:- So far as the offer of interest income under the head "business income" after netting the said income against the financial charged incurred for the purposes of business, nothing is brought on record that there is any furnishing of inaccurate particulars. It is a case of change of head of income and the CIT (A) attempted to tax it u/s 56 of the Act. In our opinion, the issue is debatable in nature, and there is no default of disclosure or furnishing of inaccurate particulars in this case relating to this issue. We have also perused the cited judgment of the Hon‟ble jurisdictional High Court in the case of Bennet Coleman & Co Ltd (supra) and find the said decision supports the arguments of the Ld Counsel for the assessee. Therefore, we are of the considered opinion that this particular addition does not invite levy of any penalty u/s 271(1)(c) of the Act. - Decided in favour of assessee
Pre-ponment of sales offered in next year - Held that:- The assessee offered the said income in the later assessment year basing on the principle "pay as you earn". This principle is upheld by the Hon‟ble Supreme Court in the case of Excel Industires (2013 (10) TMI 324 - SUPREME COURT ) wherein it is held that the income tax cannot be levied on hypothetical income. Income accrued when it becomes due at the same time, it must also be accompanied by corresponding liability of other party to pay the amount. Only then, it can be said for the purpose of taxability that the income is not hypothetical and it has really accrued to the assessee. In the instant case, the liability to pay by the other parties is crystallized in the AY 2010-2011 not in the AY 2009-2010. But the CIT (A) insists the same would be taxable in the year under consideration. In our opinion, such additions, in principle, are unsustainable in law considering the said binding judgment. If some of the reasons, such additions are accepted by the assessee, the same will not attract penalty u/s 271(1)(c) of the Act as the said amount was already offered to tax by the assessee. In our opinion, there is neither concealment of income nor furnishing of any inaccurate particulars in such matters.- Decided in favour of assessee
Addition based on the estimated total cost of construction for the project - Held that:- We find that there is no dispute on the fact that the total estimated cost of the project is 1628.02 Crs. There is no fact based reasons for the CIT (A) to adopt the sum of ₹ 1425.19 Crs as an actual expenditure spent on the project till the end of AY 2012-2013, the year of completion of project. Rest of the calculations made by the CIT (A) is directly related to the change in the method of accounting rejecting the assessee‟s figures and the methods in this regard. What is the better method of accounting is a matter of debate and no concealment of penalty should be attracted to such debatable issues. We find the addition of ₹ 28.62 Crs has the genesis in the estimations on one side and preponement on the other and also on the change of method of accounting. In our opinion, penalty cannot be levied on such additions as they constitute debatable issues. It is an undisputed fact that the said profits of the project are subject to tax in the AY 2009-2010 or in AY 2012-2013. It is a matter of dispute. The above citations were also perused and we find they are relevant for the proposition that change in the method of accounting involving the estimates do not attract the penalty u/s 271(1)(c) of the Act. Therefore, we are of the opinion that the penalty levied by the AO on the said addition of ₹ 28.62 Crs is unsustainable in law. - Decided in favour of assessee
Income of the project resultant of the calculations based on change of method of accounting - Held that:- Considering one of the methods of accounting for determining the profits of the project adopted by the CIT (A) is not free from the debate or dispute. It is also a settled issue that when debate is an integral part of any addition, the concealment penalties will not survive. The decisions relied upon by the Ld Counsel for the assessee were also perused and found supporting to his arguments. On such facts, whether the assessee appealed against the additions or not in quantum proceedings, we are of the opinion that the penalty levied by the AO is unsustainable and therefore, we order the AO to delete the penalty accordingly. - Decided in favour of assessee
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2015 (12) TMI 1460
Registration under section 12AA - CIT(A) refused to grant registration on the ground that the application of the assessee is not accompanied with the accounts of the society for the period ending March 31, 2014 - Held that:- We do not agree with the view of the learned Commissioner of Income-tax (Exemptions). As rightly argued by the learned authorised representative that at the time of registration the learned Commissioner of Income-tax (Exemptions) has to only look into the objects of the trust and if it found appropriate grant of registration under the provisions of the Act. Therefore in the case of the assessee, the learned Commissioner of Income-tax (Exemptions) ought to have examined the objects of the trust and decide the issue on its merits as per law. Moreover, the assessee-trust is in incubation stage and yet to commence its activities. At this juncture it is premature to determine the genuineness of the trust by seeking its statement of accounts. Therefore we hereby remit back the matter to the file of the learned Commissioner of Income-tax (Exemptions) to consider the objects of the trust and pass appropriate order as per merits and law. - Decided in favour of assessee for statistical purposes.
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2015 (12) TMI 1459
Addition as undisclosed income in respect of commission expenses treated as non-genuine - Held that:- Assessing Officer has made addition purely on the basis of statement made during the course of survey under section 133A, which was later on retracted by the assessee, therefore, we are of the considered view that any addition made on the basis of these statements is without any basis and deserves to be deleted as there is no corroborative materials on record. It seems that addition has been made merely on the basis of statement/presumptive basis and no corroborative material has been brought on record. Presumption cannot take the shape of evidence, however, strong it may be. It is also noted that the statement on oath, claimed to be recorded from Shri Kiran Wasudeo Somalwar neither bears the signature of the deponent nor of any officer, thus, in our view, its evidentiary value is also under cloud - Decided in favour of assessee.
Disallowance of transportation expenses under section 40(a)(ia) - appellant has not deducted tax at source from such payments - Held that:- The transportation expenses on which no TDS has been stated to be deductible and also the transportation charges stands paid before March 31, 2006. However, the issue is being restored back to the file of the Assessing Officer to verify the claim of the assessee whether the amount was paid or payable at the end of the year and if the amount is found to be paid then it has to be allowed in the light of the aforesaid decision from hon'ble Allahabad High Court in the case of CIT v. Vector Shipping Services P. Ltd. [2013 (7) TMI 622 - ALLAHABAD HIGH COURT]. - Decided in favour of assessee for statistical purposes.
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2015 (12) TMI 1458
Unaccounted loan - Assessing Officer found that the gift portion of ₹ 5 lakhs is a separate one and it cannot be linked to the loan portion of ₹ 7 lakhs which was said to be given during the assessment year 2007-08 - Held that:- The fact remains that the total sum of money given by the assessee to his son is only ₹ 12 lakhs. ₹ 5 lakhs was given in the assessment year 2006-07 and another sum of ₹ 7 lakhs was given in assessment year 2007-08. The Assessing Officer appears to have accepted the gift of ₹ 5 lakhs. However, he confuses himself that the loan of ₹ 5 lakhs is a separate one and he made an addition with regard to loan and not with regard to gift. The fact remains is that for the assessment year 2006-07, what was given by the assessee is only a sum of ₹ 5 lakhs either as loan or gift to his son Shri R. Ganesan. Therefore, there is no necessity for the Assessing Officer to take the transaction as two independent transactions. This Tribunal is of the considered opinion that the transaction of ₹ 5 lakhs is only one transaction. Therefore, the Assessing Officer may not be justified in treating the transaction between the assessee and his son in the assessment year 2006-07 as two transactions and making an addition of ₹ 5 lakhs. Since the transaction is only one transaction, this Tribunal is of the considered opinion that the addition made by the Assessing Officer to the extent of ₹ 5 lakhs is not justified. Accordingly, the orders of the lower authorities are set aside and the addition made by the Assessing Officer stands deleted.
Coming to the assessment year 2007-08, reading of the assessment order clearly shows that the assessee and his son categorically admitted that payment and receipt of loan was to the extent of ₹ 7 lakhs. The Assessing Officer appears to have presumed that the sum of ₹ 7 lakhs would not have been repaid during the year under consideration, since neither the assessee nor the assessee’s son claimed before him that the same was repaid. This Tribunal is of the considered opinion that when the loan transaction was confirmed and they claimed that it is not reflected in the statement because the transaction was settled during the same financial year, the presumption of the Assessing Officer was that the loan transaction was not settled during the year under consideration. Therefore, the presumption of the Assessing Officer that there was no claim either by the assessee or by his son that the loan was repaid during the year under consideration is beyond imagination. This Tribunal is of the considered opinion that there is no justification in making addition of ₹ 7 lakhs. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition of ₹ 7 lakhs made for the assessment year 2007-08. - Decided in favour of assessee.
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2015 (12) TMI 1457
Penalty u/s. 271(1)(c) - as per revenue assessee had furnished inaccurate particulars with respect to sale of property at Igatpuri - AO invoked the provisions of section 50C for determining Long Term Capital Gain - Held that:- the addition has been made by invoking the provisions of section 50C. It is a well settled law that penalty cannot be levied on the additions based on assumptions, estimations and by invoking deeming provisions. It is an undisputed fact that the assessee has disclosed the sale transaction of land in his return of income and has even computed Long Term Capital Gain thereon. The assessee had computed Long Term Capital Gain on the basis of sale consideration stated in sale deed, whereas, the Assessing Officer has determined Long Term Capital Gain on the basis of valuation certificate submitted by the assessee for the year 2010. The addition has been made by invoking deeming provisions of section 50C. In our considered view in assessment proceedings the provisions u/s. 50C can be invoked for making addition, however penalty cannot be levied on the basis of such deeming provisions. The Department cannot presume that there is a concealment or inaccurate particulars are furnished. There must be independent finding. Once, the assessee has furnished the explanation, the onus shifts on the Revenue to prove that the explanation furnished by assessee is wrong. We observe that the Revenue has not discharged the onus in proving that the sale consideration stated in the sale deed is wrong. Therefore, in the facts of the case, we are of the view that penalty u/s. 271(1)(c) cannot be levied on such additions even if admitted by the assessee in quantum proceedings. - Decided in favour of assessee.
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