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Income Tax - Case Laws
Showing 1 to 20 of 773 Records
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2016 (6) TMI 1481
Nature of expenditure - Employee Stock Option Scheme Compensation - disallowance made treating it as capital in nature - HELD THAT:- Facts of the case for the present year being identical as in earlier years [2015 (8) TMI 319 - ITAT DELHI], for the same reasons and respectfully following the precedent, we set aside the impugned order of ld. CIT(A) and send the matter to the file of AO for deciding it in conformity with the decision taken in the case of Biocon Ltd. Vs. DCIT (2013 (8) TMI 629 - ITAT BANGALORE], wherein held that discount on issue of ESOP is allowable as deduction in computing income under the head 'Profits and gains of business or profession.' Since it is on account of an ascertained and not contingent liability, it cannot be treated as a short capital receipt. Thereafter, the Special Bench has laid down the mechanism for determining as to when and how much deduction should be allowed. It has been held that the liability to pay the discounted premium is incurred during the vesting period and the amount of such deduction is to be found out as per the terms of ESOP by considering the period and percentage of vesting during such period. Deduction of the discounted premium during the years of vesting should be allowed on straight line basis. Department’s appeal stands allowed for statistical purposes.
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2016 (6) TMI 1478
Cash deposits in bank account - CIT(A) deleted the addition - HELD THAT:- On perusal of the order of the CIT (Appeals), we do not find any infirmity in the same as his decision is based on Remand Report filed by the Assessing Officer. In the remand proceedings, the Assessing Officer had called for information from the bank and verified the contention raised by the assessee. In this view, we do not intend to interfere with the order of the CIT (Appeals).
Deposits in bank account - CIT (Appeals) decided the issue against the assessee stating that the stance of the assessee linking up the withdrawals from one account to the other account is not plausible because of the time gap as well as involvement of different bank accounts - HELD THAT:- We do not find any infirmity as it is a fact on record that the assessee did not furnish any of the bank accounts before the AO even when he kept on asking for the same. The Assessing Officer had requisitioned these accounts under section 133(6) of the Act from the bank itself. At the time of assessment proceedings, the assessee did not come out with the explanation which he offered before the CIT (Appeals) and even the evidence in the form of bank account No.6678 being filed before the CIT (Appeals) for the first time was not available readily. In the said circumstances, we do not find any infirmity in the order of the CIT (Appeals)
Investment made by the assessee in jewellery - CIT (Appeals) dismissed the ground of the assessee stating that investments were found at the residence of the assessee and the presumption was against him, which he had not been able to rebut - HELD THAT:- No infirmity in the order of the CIT (Appeals) as there is no dispute to the fact that three retail invoices of M/s Tanishq were found during the course of search from the residence of the assessee. The presumption of the documents found during the course of search is against the assessee. It is presumed that the document belong to the assessee though the presumption is a rebuttable one but we observe that nowhere during the proceedings before the Assessing Officer as well as the CIT (Appeals) the assessee had been able to rebut the same with the cogent evidence. Therefore, we do not find ourselves inclined to interfere in the order of the CIT (Appeals). The ground of the assessee is dismissed.
Cash deposits in the bank account in the name of the assessee - CIT(A) sustained addition only to the extent of peak credit - HELD THAT:- When we observe that the bank account is having frequent deposits and withdrawals, there is no justification in making the addition of all the deposits as the benefit of withdrawal also may be given to the assessee. The theory of peak credit is to be applied. Therefore, we do not intend to interfere in order of the CIT (Appeals).
Addition of expenses incurred on construction only on the ground that since the same was surrendered and not declared while filing of return - HELD THAT:- No infirmity as the assessee himself during the course of search has disclosed both the amounts - The stand was changed at the time of assessment proceedings. Furthermore, the behavior of the assessee during the course of search and changing stances before the Assessing Officer also casts aspersions in the submissions made by the assessee. Therefore, we are not inclined to interfere with the order of the CIT (Appeals). The ground of appeal is decided against the assessee.
Jewellery found at the time of search - HELD THAT:- No infirmity as the CIT (Appeals) was fair enough to give the assessee relief of Rs. 5 lacs considering the fact that he has been married for a long time and his parents are also living with him. The jewellery may also form part of istri dhan of his wife and his mother. However, it is a fact on record that the assessee has made very general explanation with regard to the source of jewellery and has not given any specific source of acquiring the said jewellery. Therefore, we are not inclined to interfere with the order of the CIT (Appeals). The ground of appeal raised by the assessee is dismissed.
Cash found during the course of search - HELD THAT:- No infirmity since the assessee has given only bald submission to the effect that the cash was sourced out of the income generated by him as per the statement recorded at the time of search, while the fact is that the assessee has not been able to substantiate the source of cash before the AO even before the CIT (Appeals). Therefore, we are not inclined to interfere with the order of the CIT (Appeals). The ground of appeal raised by the assessee is dismissed.
Addition on the basis of seized documents on account of purchase of jewellery from the residence of assessee - HELD THAT:- We do not find any infirmity since the assessee has not been able to substantiate the source of acquisition of jewellery and in view of the presumption under section 292C of the Act being against the assessee as the documents were found during the course of search from the premises of the assessee, the addition is to be sustained. We are not inclined to interfere with the order of the CIT (Appeals). The ground of appeal raised by the assessee is dismissed.
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2016 (6) TMI 1477
Valuation of unquoted shares - deduction towards depreciation in the value of shares claimed - deduction for decline in the value of shares which it perceived to be stock-in-trade rather than investment - assessee submitted before the AO that the company had surplus funds which were used for purchasing 1,80,000 shares at par and company was about to come out with public issue, but, eventually, did not due to market conditions - Since the assessee invested all surplus funds as per the assessee’s own version, the AO treated the purchase of shares as 'Investment’ and, resultantly, disallowed the amount of loss on their valuation
HELD THAT:- It is evident from the assessee’s reply tendered before the AO that the company invested its surplus funds in purchase of unquoted shares. It can be seen that the assessee had never dealt with or traded in shares either in the past or in the future. Under these circumstances, it is difficult to accept the assessee’s contention of having held these shares as `stock-in-trade’. Once it is held that the shares were purchased as investment, there cannot be any deduction on account of decline in the value of `investment’ as at the year end. Therefore, approve the view taken by the authorities below.
Penalty u/s 271(1)(c) in respect of disallowance deduction towards depreciation in the value of shares - Facts narrated above evidently prove that the assessee claimed deduction for decline in the value of shares which it perceived to be stock-in-trade rather than investment. But, for that, all the necessary details were duly filed. Simply because the assessee’s contention of the shares having been purchased and held as stock-in-trade has not been accepted, it cannot be equated with concealment of income or furnishing of inaccurate particulars of income so as to attract the penalty. It is a case in which the assessee’s bona fide belief of these shares having been held as investment has not been accepted, which can be a good ground for making of disallowance, but, cannot lead to imposition of penalty. Therefore, order for the deletion of the penalty.
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2016 (6) TMI 1475
Levy of penalty u/s 271(1)(c) - deemed dividend addition u/s 2(22)(e) - Debatable issue - HELD THAT:- As decided in Trimurty Buildcon Pvt. Ltd. [2016 (4) TMI 71 - ITAT JAIPUR] assessee at the time of quantum addition as well as at the time of penalty proceedings has reiterated that these advances are in the course of regular business. It is a running account, said advances later on repaid.
This issue is debatable and various courts particularly in the case of Creative Dyeing & Printing (P) Ltd. [2009 (9) TMI 43 - DELHI HIGH COURT] wherein it has been held that business transaction is not covered u/s 2(22)(e) of the Act. Various other case laws cited by the assessee has also been made this issue debatable. The case relied on by the AO i.e Mak Data P. Ltd. [2013 (11) TMI 14 - SUPREME COURT] is not applicable as assessee at every stage had filed the explanation before the AO as well as CIT(A) i.e. these transactions were made for the purpose of business and commercial expediency is bonafide. Penalty imposed by the AO and confirmed by the CIT(A) are not justified. Accordingly we delete the penalty in all the cases.
Undisputedly the facts pattern in the impugned matters are similar to the facts before Co-ordinate Bench in respect of assessee’s group companies wherein the penalty on addition on account of deemed dividend u/s 2(22)(e) was deleted. Decided in favour of assessee.
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2016 (6) TMI 1474
Addition u/s 14A r.w.r. 8D - computation or disallowance made of expenses incurred in earning exempt income - mandation of recording satisfaction before making addition - HELD THAT:- As decided in Joint Investment Pvt. Ltd [2015 (3) TMI 155 - DELHI HIGH COURT] By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. For the above reasons, the impugned order of the ITAT is set aside. The question of law is answered in favour of the assessee.
Thus we set aside the orders of the authorities below with the direction to the Assessing Officer to consider the above High Court judgments cited above and decide the issue in view thereof.
Appeal is allowed for statistical purposes only.
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2016 (6) TMI 1473
TP Adjustment - TP analysis based on the segmental results given by the assessee - HELD THAT:- As expenditure having been allocated based on turnover, the operating profit to operating cost ratio in the AE segment will under go substantial change if there is a change in the revenues shown in the AE segment. It is therefore fundamentally important that correct revenue is adopted for the AE as well as the non-AE segments for the TP study.
TPO had proceeded to make the TP analysis based on the segmental results given by the assessee originally. This, in our opinion could lead to functionally wrong results.
The issue regarding Transfer pricing requires a fresh look by the lower authorities so that the revenue stream is correctly bifurcated between AE and non-AE segment. This being a threshold bifurcation before proceeding with the TP study, we are of the opinion that additional evidence has to be admitted. We therefore admit the additional evidence and remit the matter back to the file of TPO/ AO for consideration afresh. All the issues raised by the assessee in relation to TP pricing are kept open. AO / TPO is directed to redo the TP analysis after correctly working out the revenue streams for AE and non-AE segments with regard to the software development services and proceed in accordance with law.
Deduction u/s.10A - By virtue of the definition of the term ‘export turnover’, given in explanation (iv) to Section 10A of the Act, the contention of the assessee that communication expenditure and telecommunication expenditure have to be included in export turnover cannot be accepted. Nevertheless as mentioned by us whatever is reduced from total turnover should also be deducted from export turnover for working out the deduction u/s.10A of the Act. AO is directed to do so. Ground is partly allowed.
Loss brought forward from the earlier years, were not allowed to be set off - assessee submitted that loss for the earlier years after giving effect to the appellate decisions had to be set off against the current business income of the assessee - HELD THAT:- We are of the opinion that the matter can be verified by the AO. If the assessee had not claimed set-off of brought forward loss in its return of income, then there is no question of allowing such set off. However, if the assessee had claimed such losses and if the losses were to be reworked based on orders of higher judicial forums then the loss that remains would have to be allowed to be set off. We direct the AO to verify this aspect and proceed in accordance with law. Ground is allowed for statistical purpose.
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2016 (6) TMI 1472
Assessment u/s 153A - mandation of recording satisfaction - unaccounted cash receipts - Whether the seized document does not belong to the assessee? - As primarily argued mandatory satisfaction note, which is to be recorded by the A.O. of the searched party during the course of the assessment proceedings of the search party for assuming jurisdiction u/s 153C by the A.O. of the assessee, was not recorded - HELD THAT:- As DR could not controvert the factual submissions of the assessee. He could not produce proof to demonstrate that the satisfaction has been recorded by the A.O. of the searched party.
A.O. who is having the jurisdiction of the searched party, has admittedly not recorded satisfaction note, as mandated by law enabling the A.O. of the assessee to assume jurisdiction u/s 153C - we quash the assessment orders for AY 2007-08 and 2008-09 and dismiss all the appeals filed by the Revenue. Decided in favour of assessee.
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2016 (6) TMI 1470
Assessee not interested in persuing appeal - HELD THAT:- Notice of hearing was sent by Registered Post with Acknowledgement Due to the assessee on 20.05.2016 fixing the date of hearing on 02.06.2016, which was returned by the Postal Authorities unserved with the remarks “left”. No change of address has been provided by the assessee. This shows that the assessee is not interested in pursuing with his appeal.
Therefore, in view of the decision of Estate of Late Tukojirao Holkar [1996 (3) TMI 92 - MADHYA PRADESH HIGH COURT] and Multiplan India (Pvt.) Ltd. [1991 (5) TMI 120 - ITAT DELHI-D] dismiss the appeal of the assessee in limine.
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2016 (6) TMI 1465
‘Mark to market’ loss arising on re-valuation of creditors outstanding on the closing date of accounting year - allowable notional loss - CIT-A deleted the addition - HELD THAT:- CIT(A) has rightly relied upon the decision of Woodward Governor India (P.) Ltd. [2009 (4) TMI 4 - SUPREME COURT] wherein, while dealing with the question as to whether the additional liability arising on account of fluctuation in the rate of exchange can be allowed to be adjusted pending actual payment of the varied, the Hon'ble Supreme Court has observed that "expenditure" as used in section 37 in Income Tax Act may in the circumstances of a particular case cover an amount which is a "loss" even though said amount has not been given from the pocket of the assessee.
CIT(A) has also rightly held that section 43A is not applicable to the trading assets. The issue is thus, squarely covered in favour of the assessee.
Revaluation of closing stock - Whether payment on account of foreign exchange ought to be added to the actual cost of purchase of diamonds and closing stock revalued accordingly? - CIT-A deleted the addition - HELD THAT:- As decided in “IBM Global Services India P. Ltd [2007 (5) TMI 554 - ITAT BANGALORE] held at the time of purchase of the inventory, if the item has been purchased from a foreign country and the amount is payable in foreign exchange and if, the payment is deferred and the liability increases in Indian Rupees, then such liability cannot be termed to have increased the cost of the material. The cost price would be the original cost price and it cannot be increased due to subsequent foreign exchange fluctuation and increased liability on that account. Also confirmed by HC [2014 (5) TMI 852 - KARNATAKA HIGH COURT]
Addition on account of sale of wastage and scrap value - Whether such scrap is valuable and used in various industries? - CIT-A deleted the addition - HELD THAT:- AO has made addition on certain assumptions that the scrap/wastage of the rough diamond must have fetched to the assessee an income. However, there is no evidence brought by him in this respect. He has just estimated the income at the rate of 5% of the purchase value of the rough diamonds. The Ld. CIT(A), however, has deleted the addition observing that there was no evidence of sale of scrap by the assessee. However, the Ld. CIT(A) has not given any finding as to what is done with the scrap and whether it has a nil value or it fetches some value to the assessee.
Contention of the Ld. A.R., before us, is that the value of the scrap is taken into consideration while settling the rates with the labour contractor. We find that these facts have not been thoroughly examined by the lower authorities. We accordingly restore this issue to the file of the AO to decide it afresh after considering the evidences and explanations that may be furnished by the assessee in this respect.
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2016 (6) TMI 1463
Recognition of provision - whether the stock has become obsolete or not? - only reason why the Assessing Officer has disallowed the claim of the assessee is on account that the provision is contingent liability, cannot be allowed, expenditure can be allowed only on payment basis - HELD THAT:- ITAT having considered the adequate material placed before it, thought it fit not to remit the matter to the AO. It is also noticed that the method of accounting followed by the assessee is mercantile wherein the income and expenditure is on accrual basis.
We have examined this issue in the light of the Judgment pronounced by the Apex Court in Rotork Controls Case [2009 (5) TMI 16 - SUPREME COURT] wherein the three tests are laid down to recognize a provision under the act. The ITAT being a last fact finding authority has held that all these ingredients which goes to the recognition of provision are satisfied and as such, there is no need to remit the matter back to the AO - No ground made out by the revenue to remand the matter back to the Assessing Officer. The claim of expenditure being consistent with the method of accounting followed and the provision has been made on concluded transactions, the order of the Assessing Officer is held to be incorrect. We do not see any reason to differ from this view, which is in accordance with Section 145 of the Act.
Deduction u/s 80HHE - HELD THAT:- When no claim for deduction under Sec. 80HHE of the Act was made by the assessee, the issue for consideration thereof was an academic exercise. CIT(A) as well as the Tribunal ought not to have made any further observations thereafter, for giving treatment for the computation of the deduction under Sec. 80HHE. The observations can be said on hypothesis and surmises.
CIT (A) as well as the Tribunal could observe for consideration of the claim of deduction u/s 80HHE in accordance with law. Under the circumstances, we find that the observations made by the CIT (A) as well as the Tribunal for the deduction under Sec. 80HHE deserves to be expunged by observing to the extent that the claim, if any, can be made by the assessee for deduction under Sec. 80HHE is to be considered in accordance with law. Hence, to that extent, the order of the Tribunal is set aside. Question is answered accordingly to that extent in favour of the Revenue against the assessee.
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2016 (6) TMI 1462
Income taxable in India - income earned from short-term capital gain - to be treated as capital gain so as to give benefit under Article 13(6) or as a ‘business income’ to be taxed under Article 7 - HELD THAT:- As pointed out by the assessee, the brokers, the employees and the activities are entirely different. There is no active part by the Branch in negotiating, concluding or fulfilling the contracts of purchase and sale of securities carried out by the PE. Thus, Mumbai Branch cannot be held to be involved directly or indirectly of the activities carried out by the assessee in India, therefore, the FII activities have to be segregated from the activities carried out by the Branch.
Accordingly, we hold that the income of the FII is separate and distinct from the Branch and accordingly, the income has to be separately considered in the hands of the assessee as FII. As regards taxability of income of FII as capital gains, we find that, first of all, the gain from the transaction of securities has always been assessed as capital gains in the earlier years and as pointed out by the Ld. Senior Counsel by the DRP in AY 2011-12 also.
CIT(A) has clearly brought out as to why such an activity has to be reckoned as taxable under the head “capital gain” specifically in light of his finding given at paragraph 3.6. Accordingly, we affirmed the order of the CIT (A) and hold that, assessee’s income is chargeable under the head ‘capital gain’ and not business income and consequently, under Article 13(6) such a capital gain is exempt from tax in India. Thus, ground No.1 as raised by the revenue stands dismissed.
Taxability of interest income earned in respect of debt securities - whether under Article 11 or under Article 7 as held by the AO by treating it as a business income? - HELD THAT:- The assessee had shown interest income on debt securities as ‘income from other sources’ and had offered to tax @ 10% in terms of Article 11 of Indo-Swiss DTAA. Since the AO has held that the entire income from transaction of securities and the activities as FII is to treated as income from business directly or indirectly attributable to the PE, therefore, he has taxed the same under Article 7 as business income.
CIT(A) held that, mere existence of Mumbai Branch of the assessee does not result in automatic establishing a effective connection of such interest received earned in the status of the FII to the banking operations of the PE. Such a finding of the CIT(A) has to be upheld, because, firstly, we have already held above that income from FII activities and debt securities do not form part of the business asset of the PE and secondly, the Mumbai Branch did not felicitate or participate in any manner in the earning of interest income from debt securities, which is earned by the assessee in the capacity of FII only. Accordingly, the order of the CIT(A) on this score is affirmed and the grounds raised by the revenue is dismissed.
Claim of the additional expenses as deduction while computing the business income - HELD THAT:- Head Office of the assessee company had granted various employees, stock compensation awards to some of the employees of the Mumbai Branch under various employee share plans, wherein the shares of the assessee company were allotted to the credits of employees. The claim of ESOP cost relatable to the Mumbai Branch was identified and such quantification has also been certified by the independent Accountant which has not been disputed. This being the nature of direct expenses, it has been rightly allowed by the CIT(A) under section 37(1).
There is no obligation on the Branch to deduct TDS on such ESOP costs, therefore, qua this expenditure, the finding of the AO is not relevant, however, with regard to other expenses it has been confirmed by the CIT(A) that same has to be computed as per section 44C in view of Article 7(3), the same is not in dispute before us. Accordingly, the order of the CIT(A) is confirmed on this point.
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2016 (6) TMI 1460
Disallowance u/s 14A read with Rule 8D and 36 - assessee argued AO did not consider that the interest paid was in respect of specific loans taken as such as car loans and export packing credit loans, which were not considered for calculating proportionate interest - HELD THAT:- As decided in assessee own case [2013 (9) TMI 1297 - ITAT MUMBAI] we find merit in the prayer of the Ld Counsel to remit the matter to the files of the AO for examination of the issue afresh. Therefore, we remand the matter to the files of the AO to re-adjudicate the issue in accordance with the jurisdictional High Court judgment in the case of Godrej & Boyce [2010 (8) TMI 77 - BOMBAY HIGH COUR] after granting a reasonable opportunity of being heard to the assessee. It is the settled law that the AO is under obligation to reject the claim of the assessee by giving speaking order on this issue before he resort to thrust on the assessee the provisions of rule 8D r w section 14A of the Act. Accordingly, issue no.1 is remanded and relevant conclusions of the revenue authorities are set aside.
Disallowance u/s 36(1)(iii) of the Act in respect of the interest claim of the assessee - It is a fact that neither the AO nor the CIT (A) have really gone into the issue of existence of excess funds and have given categorical findings about this fact. Therefore, in our considered opinion, this issue should also be set aside to the files of the AO for fresh adjudication considering the judgment of the Supreme Court in the case of Reliance Petro-products [2010 (3) TMI 80 - SUPREME COURT] as well as the relevant law in force.
In the light of the foregoing discussion, we direct the ld. Assessing Officer to examine the case of the assessee and decide afresh in the light of the directions contained in the aforesaid order of the Tribunal - Appeals of the assessee are allowed for statistical purposes.
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2016 (6) TMI 1459
Validity of reopening of assessment u/s 147 - Reasons to believe or purposes of verification - As in Original return of income, the assessee has shown income of Rs. Nil after claiming deduction under chapter VI-A of business income and in revised return loss without claiming any deduction under chapter VI-A claimed - HELD THAT:- AO failed to make out any case for escapement of income. He sought to reopen the assessment merely for re-verification of certain documents, which is not contemplated in the Act.
No merit in the present appeal, because, the ld.CIT(A) has placed reliance upon the decision of tINDUCTOTHERM (INDIA) PVT. LTD. [2012 (9) TMI 16 - GUJARAT HIGH COURT] holding that notice under section 148 was not issued by the AO after lying his hand on any information which enable him to form a belief that the income has escaped assessment. The ld.AO merely sought to reopen the assessment for verification of the details, which is not contemplated under section 147 of the Act - Appeal of the Revenue is dismissed.
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2016 (6) TMI 1458
TDS u/s 194A - payment of interest on compensation of agricultural land - enhanced / additionalf compensation paid and recorded as interest in the “Award of Compensation” of the Punjab Government - assessee submitted that amount on which TDS has been proposed to be deducted is not interest but enhanced compensation as per Standing order No. 28 of Punjab Government under which land has been acquired, which has been paid to land owner @ 12% from the date of initial notification - Also submitted that as per record, no interest has been paid on account of delayed payment i.e. from date of award till date of payment - CIT-A held amount was additional compensation paid as per section 23(IA) of the Land Acquisition Act of 1894 and not liable to deduction of tax - HELD THAT:- We find that as per Provisions of clause (b) of section 145A of the Income Tax Act, 1961 interest received by an assessee on compensation or on enhanced compensation as the case may be, shall be deemed to be the income of the year in which it is received.
As per provisions of section 56 (viii) of the Income Tax Act, 1961, income by way of interest received on compensation or enhanced compensation referred to in clause (b) of section 145A shall be chargeable to income-tax under the head 'Income from other sources.'
TDS is deducted U/s 194A on the payment of interest other than "Interest on securities". Also, as per provisions of Section 194LA, TDS is deducted on payment of compensation on acquisition of certain immovable property other than agricultural land - competent authority in this regard has clearly clarified that word ‘interest’ has been wrongly used. It is in fact an enhanced compensation.
This statement of the competent authority is unambiguous and it has also been accepted by the Assessing officer in the remand report. It is undisputed that the payment in this regard does not relate to any award by the Court regarding payment of interest. The payment has been made as per section 23 (1A) of the Land Acquisition Act, 1894 which was erroneously mentioned as interest in the award of competent authority. The clarification in regard has been issued by the Special Secretary Revenue, Government of Punjab. Letter was also issued to the Chief Commissioner of Income Tax, Chandigarh clarifying the position.
We agree with the CIT(A) that impugned amount was additional compensation paid as per section 23(IA) of the Land Acquisition Act of 1894 and not liable to deduction of tax u/s 194A - It is settled law that it is the substance of the transaction which has to be taken into account in assessment proceedings and not the nomenclature to the same. The Revenue in grounds of appeal has referred to the decision of Manjit Singh (HUF) Vs. UOI and others [2015 (12) TMI 1123 - PUNJAB & HARYANA HIGH COURT] - DR was not at all in a position to explain us to how this decision helps the case of Revenue. Accordingly, we do not find any merit in the grounds raised by the Revenue. Accordingly, we uphold the order of Ld. CIT(A). Appeal filed by the Revenue stands dismissed.
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2016 (6) TMI 1457
Exemption u/s 11 - claim of depreciation - double deduction - assessee is a charitable trust with the object of promoting and developing sports, health and fitness awareness and also to impart coaching and training in various sports activities along with conducting sports competition, arranging tournaments, etc - HELD THAT:- As relying on case of Institute of Banking Personal [2003 (7) TMI 52 - BOMBAY HIGH COURT] income derived from the trust property also has to be computed on commercial principle and if “commercial principles” are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in earlier years against the income earned by the trust in subsequent years will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions, contained in section 11 and that such adjustment will have to be excluded from the income of the trust u/s 11(1)(a) therefore, respectfully following the decision from Hon’ble jurisdictional High Court, we find no infirmity in the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal). We affirm the same. - Decided against revenue.
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2016 (6) TMI 1456
Assessment passed upon a ‘non-existing’ person - HELD THAT:- As framing of the assessment order upon a non-existing person was a jurisdictional defect and not merely a curable procedural defect, and thus nullity in the eyes of law. See SPICE ENFOTAINMENT LTD. [2011 (8) TMI 544 - DELHI HIGH COURT]
In view of all these facts as have brought before us and the judgments brought before us and in the absence of any contrary judgment having been brought before us, we find that impugned assessment order is nullity in the eyes of law and the same is herby quashed, and thus additional grounds raised by the assessee are allowed.
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2016 (6) TMI 1455
Rectification of mistake - deduction on account of additional contribution - applicability of limitations placed under Rule 87 to the payment of additional contribution - HELD THAT:- As rightly pointed out by the assessee in the present Miscellaneous Application, the direction given by the Tribunal of its order to the Assessing Officer to verify as to whether the amount in question paid by the assessee to Donation Fund is within the limits specified in the relevant Rules is not in consonance with the conclusion drawn by the Tribunal that the issue under consideration is squarely covered in favour of the assessee by the decision in Glaxo Smithkline Pharmaceuticals [2011 (1) TMI 1530 - ITAT MUMBAI] wherein it was held that the limitations placed under Rule 87 are not applicable to the payment of additional contribution necessitated due to shortfall discovered in the course of actual valuation of the fund as the same is in the nature of one time exceptional payment to ensure that the superannuation fund is able to discharge its obligation.
There is thus a mistake in the order of the Tribunal in giving such direction to the Assessing Officer while deciding this issue vide paragraph no 44 and the same being apparent from record, we rectify the same by deleting last eight lines of the said para and substituting the same with the following:-
“We are unable to accept this contention of the ld. D.R. In our opinion, the issue involved in Ground No. 8 of the assessee’s appeal is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the case of Glaxo Smithkline Pharmaceuticals (supra) and respectfully following the same, we delete the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on this issue. Ground No 8 of the assessee’s appeal for A.Y. 200405 is accordingly allowed”.
Miscellaneous Application of the assessee is allowed.
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2016 (6) TMI 1451
LTCG - Scope and legislative intent of Section 2(47)(ii), (v) and (vi) - JDA entered - essential ingredients for applicability of Section 53A of 1882 Act - Meaning to be assigned to the term “possession” - whether no possession had been given by the transferor to the transferee of the entire land in part performance of JDA ? - HELD THAT:- As decided in the case of “Charanjit Singh Atwal [2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT] that since no possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.02.2007 so as to fall within the domain of section 53A of the Transfer Act and consequently, section 2(47)(v) of the I.T. Act, did not apply, that further, willingness to perform their part of the contract was absent on the part of the developers, or it could not be performed by them, which was one of the conditions precedent for applying section 53A of the transfer Act; that in clause 26 of the JDA dated 25.02.2007, the principle of force majeure had been provided for, which would be applicable with full vigour in the circumstances; that from the cumulative effect of the covenants contained in the JDA read with the registered special power of attorney dated 26.02.2007, it could not be held that the mandatory requirements of section 53A of the Transfer Act were complied with, which stood incorporated in section 2(47)(v) of the Act; that once that was so, it could not be said that the assessee were liable to capital gain tax in respect of the remaining land which was not transferred by them to the developer/builder because of supervising event and not on account of any volition on their part; and that viewed from another angle, it could not be said that any income chargeable to capital gains tax in respect of the remaining land had accrued or arisen to the assessee in the facts of the case. - Decided in favour of assessee.
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2016 (6) TMI 1450
Revision u/s 263 - AO find no fault in the payment of hire machinery charges as no specific addition has been made on this account and the AO only applied net profit rate to determine net income of the assessee - HELD THAT:- As in order to exercise power under section 263(1) there must be material before the Commissioner to consider that the order passed by the ITO was erroneous in so far as it is prejudicial to the interests of the revenue and that it must be an order which is not in accordance with the law or which has been passed by the ITO without making any enquiry in undue haste. An order can be said to be prejudicial to the interests of the revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise power.
It is well settled that when exercise of statutory power is dependent upon the exercise of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objectives were available will amount to arbitrary exercise of power.
ITO in his case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assessee.
This decision of the ITO could not be held to be ‘erroneous’ simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That was not permissible. Hence, the provisions of section 263 were not applicable to the instant case and, therefore, the Commissioner was not justified in setting aside the assessment order.
In view of the above facts and circumstances of the case and in view of the above judicial precedents, we allow the appeals filed by the assessee and set aside the order of the ld. CIT and restore the order passed by the A.O. - Decided against revenue.
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2016 (6) TMI 1449
Estimation of net profit of total purchases - rejection of books of accounts - AO. estimated net profit of 20% on stock put for sale as of the opinion that the assessee has not maintained proper books of accounts and vouchers in support of purchases and sales - A.O. further observed that the assessee has failed to maintain stock registers and books of accounts maintained by the assessee are not susceptible for verification, therefore rejected the books of accounts and estimated net profit of 20% - HELD THAT:- We are of the view that the net profit estimated by the A.O. by relying upon the decision of Hon’ble A.P. High Court (2011 (7) TMI 1274 - ANDHRA PRADESH HIGH COURT] which was rendered under different facts is quite high. On the other hand, the assessee relied upon the decision of coordinate bench and the coordinate bench under similar circumstances estimated the net profit of 5% on total purchases net of all deductions. No contrary decision is placed on record by the revenue to take any other view of the matter than the view so taken by the coordinate bench. Therefore, we direct the A.O. to estimate the net profit of 5% on total purchases net of all deductions. Ordered accordingly.
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