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Income Tax - Case Laws
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2016 (6) TMI 1445
Assessment u/s 153C OR 148 - Whether reasons recorded by the AO do not make mention of any search or of any appraisal report and that the assessment, as made by the AO under the provisions of section 148, is fully justified, not calling for any interference? - HELD THAT:- As decided in ARUN KUMAR KAPOOR [2012 (6) TMI 403 - ITAT AMRITSAR] only the provision in which any assessment could be made against the assessee in the Income Tax Act was section 153C r.w.s. 153; that it was also apparent from the record that that the Officer at Delhi had mentioned in his letter that necessary action may be taken as per law under sections 153C/148; that the provisions of section 153C were clearly applicable when section 153 supersedes the applicability of sections 147 & 148 of the Act; that therefore, the notice u/s 148 and the proceedings u/s 147 were illegal and void ab initio, since in view of the provisions of section 153C, sections 147/148 stand ousted; and that since the procedure provided u/s 153C had not been followed by the AO, the assessment had become invalid and the ld. CIT(A) was fully justified in quashing the reassessment order.
As it is evidence from the Appraisal Report in the case of Sh. Neeraj Puri, as noted hereinabove, that the sale deed of the assessee was found only during the search in the case of Sh. Neeraj Puri. That being so, the provisions of section 153C of the Act are directly applicable. To reiterate, the Hon’ble Supreme Court, in the case of ‘Manish Maheshwari’ [2007 (2) TMI 148 - SUPREME COURT] has laid down that if the procedure in section 158BD is not followed, block assessment proceedings would be illegal. It is irrefutable that the provisions of section 153C of the Act are in pari materia with those of section 158BD. Therefore, as taken note of, if the procedure laid down in section 153C is not followed and recourse is not taken to section 158BD, the same would be bad in law. ‘Arun Kumar Kapoor’ [2012 (6) TMI 403 - ITAT AMRITSAR] is also to the same effect. In accordance therewith, we hold that the proceedings u/s 148 of the Act, as rightly contended on behalf of the assessee, are not sustainable, in view of the presence of section 153C, which obliterate to the operation of the provisions of sections 147/148 of the Act, in given circumstances, which exist in the case of the present assessee also.
Thus finding the grievance of the assessee to be justified, the same is accepted. The assessment framed u/s 148 of the Act is quashed.
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2016 (6) TMI 1443
Disallowance for provision of bad and doubtful debts on standard assets - CIT-A allowed deduction holding that the claim of the assessee fall into the main provisions of section 36(1)(viia) - as per DR CIT(A) has wrongly allowed relief to the assessee as the provisions for bad and doubtful debts was on standard assets and as per the proviso to section 36(1)(viia) only the provisions for bad and doubtful debts was allowable - AO was of the opinion that the provisions made by the assessee against standard assets was a contingent liability and which was not allowable as business expenditure - HELD THAT:- Deduction u/s 36(1)(viia) of the Act is allowed in respect of provisions for bad and doubtful debts This section does not differentiate between provision on bad assets and provision on standard assets. This deduction exclusively allows deduction in respect of provision for bad and doubtful debts to the extent mentioned in the various clauses of sub-section(1) of section 36 of the Act. The deduction under section 36(1)(viia) of the Act is allowed only in respect of certain specific categories of assessee mentioned in the clause like banks, financial institutions, etc. who are in business of lending money. It is not allowed even to non-banking financial institutions since they are not included in this clause.
As seen that though section 36(1)(vii) states that deduction for provision is allowable in respect of provision for bad and doubtful debts, the computation of such deduction is made with reference to total income of the specified Banks based upon quantum of average advances. The deduction of the provisions is neither limited to the quantum of bad debts in the books nor is computed with reference to the quantum of standard assets. The deduction in this clause refers to allowable provisions of anticipated default on the loans and advances made in respect of total assets including standard assets and the claim of the assessee does not fall into the proviso to section 36(1)(viia) as the proviso deals with further deduction for provisions on bad and doubtful debts. The claim of the assessee is covered in the main provisions of section 36(1)(viia) of the Act. The learned CIT(A) has passed a very exhaustive and speaking order and we do not find any infirmity in the same - Decided against revenue.
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2016 (6) TMI 1441
Income deemed to accrue or arise in India - PE in India - taxability of income earned by the assessee in respect of the contract entered into with ONGC - assessee is a tax resident of UAE and is eligible to opt for taxability of its income under the Indo-UAE Tax treaty (“the treaty”) as per the provisions of section 90 (2) - According to the revenue, the income from the said contract is liable to be taxed in India as the assessee is stated to have a PE in India - as per the assessee the income from the contract in question is not taxable under the act by virtue of double taxation avoidance agreement (DTAA) between India and UAE - HELD THAT:- As decided in own case [2016 (2) TMI 47 - DELHI HIGH COURT] agreed to the contention of the assessee that it does not have a PE in India. Further the Hon’ble High Court has held that since there is no PE in India the receipts from the contract with ONGC is also not taxable in India – the question of attribution does not arise.
As AR submitted that there exist identical facts for the year under consideration. Respectfully following the decision of Hon’ble Jurisdictional High Court, we are of the considered view that the assessee does not have a PE in India and the revenue from the contract cannot be taxed accordingly the ground numbers raised by the assessee stand allowed.
Levying the interest u/s 234B of the Act while computing the total demand - HELD THAT:- This issue has been dealt by Hon'ble High Court in the case of DIT VS. GE Packaged Power Inc[2015 (1) TMI 1168 - DELHI HIGH COURT] holds that the view taken by ITAT was correct; the primary liability of deducting tax (for the period concerned, since the law has undergone a change after the Finance Act, 2012) is that of the payer. The payer will be an assessee in default, on failure to discharge the obligation to deduct tax, under Section 201 of the Act. 8.1 Respectfully following the decision of this tribunal in GE packaged power Inc. (Supra), we are inclined to allow the ground of appeal raised by the assessee.
Non grant of TDS credit - AO did not give credit to the TDS paid. - AR has submitted that the AO may be directed to grant appropriate credit of TDS as claimed by the assessee in its return - HELD THAT:- We accordingly direct the AO to grant credit of TDS in accordance with law. Accordingly this ground raised by the assessee stands statistically allowed.
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2016 (6) TMI 1439
Exemption u/s 10(34) - Assessment of Income of the life Insurance Business - Dividend income of the assessee as exempt u/s 10(34) - income of the assessee engaged in the Life Insurance Business is computed under the non obstante clause of Section 44 of the Act ? - HELD THAT:- We find that in allowing the respondent – assessee's appeal the impugned order of the Tribunal followed its own decision in Life Insurance Corporation of India [2013 (6) TMI 377 - ITAT MUMBAI] for Assessment Years 2007-08 to 2009-10 on an identical issue. Mr. Chhotaray fairly states that being aggrieved by the orders of the Tribunal passed in Life Insurance Corporation of India (supra) the revenue preferred three appeals to this Court [2015 (9) TMI 1718 - BOMBAY HIGH COURT] - All three appeals raising an identical issue as herein were dismissed by this Court on 15th September, 2015. In the above view, as the issue stands settled against the revenue by a decision of this Court the question as proposed does not give rise to any substantial question of law.
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2016 (6) TMI 1438
Nature of receipt - treatment to the compensation received by the assessee on termination of Joint Venture Agreement - revenue or capital receipt - HELD THAT:- Firstly, the compensation received by the assessee which is attributable to negative/ restrictive covenant is a capital receipt; and secondly, the provision of section 28(va) brought w.e.f. 01.04.2003 in the Act will apply only from AY 2003-04. Thus, the aforesaid decision of the Hon’ble Apex Court in GUFFIC CHEM PVT LTD [2009 (10) TMI 966 - HIGH COURT OF KARNATAKA CIRCUIT BENCH AT DHARWAD] clearly clinches the issue in hand and respectively following the aforesaid principles, we hold that the amount of receipt of compensation received by the assessee on termination of an agreement and for consideration attributable to negative and restrictive covenants is to be treated as capital receipt and not business income or revenue receipt. Thus, ground no.1 is allowed in favour of the assessee.
Addition on account of forfeiture of advance share application money by treating it as a capital receipt - HELD THAT:- In the case of Solid Containers [2008 (8) TMI 156 - BOMBAY HIGH COURT] the relevant fact was that the money was received by the assessee in course of carrying on his business. Although it was treated as deposit and was of capital nature at the point of time it was received, however by efflux of time the money has become the assessee's own money, because of unclaimed by the customers.
What remains after adjustment of the deposits has not been claimed by the customers; hence the claims of the customers have become barred by limitation. The assessee itself has treated the money as its own money and taken the amount to its profit and loss account. There was no explanation from the assessee why the surplus money was taken to its profit and loss account even if it was somebody else's money. It was in light of these facts and background the Hon’ble Bombay High Court held that it was the income of the assessee. Here in present case no deposits have received from customers nor it is a loan taken for trading activity and neither has it been transferred to P&L Account, albeit here the share application money has been forfeited due to settlement by the share applicant and the assessee and the money has been transferred to capital reserve fund. Thus, such an amount cannot be taxed in either way under section 41(1). Accordingly, the finding of the Ld. CIT(A) on this score is confirmed and impugned issue raised by the revenue in ground no. 2 is treated as dismissed.
Addition as legal expenses to defend itself in legal suits filed - AO held that the dispute was between the two promoters of the company and not with the assessee company - HELD THAT:- The true test in respect of allowing the litigation/legal expenses is, whether the litigation was initiated while carrying on the business or during the conduct of the business or not. If litigation in any manner affects the working of the company or the source of its income or its dayto- day running or management, then such expenses has to be reckoned as incurred or expended for the purpose of the business. The test of immediate benefit or revenue is not criteria for allowing expenditure under section 37(1), albeit it has to seen, whether it has been incurred for the purposes of the assessee’s business or not. The expression “for the purpose of business” has a very wide import and covers a situation where it affects the overall business of the assessee and commercial expediency. It has to be seen from this angle also, if the assessee would not have been dragged into such litigation and proceedings before the Company Law Board, then there would not have been any requirement for the assessee to incur such expenditure. Assessee got involved only because it was made one of the respondent and defendant in the suit and in order to save its business from possible liquidation the assessee had to incur the legal expenses. Thus, in our opinion, such expenditure on legal expenses is wholly and exclusively incurred for the purpose of the business and accordingly, same needs to be allowed. Accordingly, ground no.3 of the revenue’s appeal stands dismissed.
Disallowance of interest of attributable to the interest free advance to the associated concern - CIT(A) deleted the said disallowance on the ground that, now the VCCL Ltd. has paid the amount to the LML, therefore, the entire basis of making disallowance by the AO no longer stands - HELD THAT:- If this amount would have been given to the LML then due amount could have been reduced and also the consequent interest to LML. On this premise he has made the disallowance of interest on the amount of ₹ 13.55 crores. Now, admittedly, it has been shown by the assessee before the CIT(A), which has not been disputed by the revenue before us that, VCCL Ltd has paid the amount of ₹ 13.55 crores to the assessee for which the necessary evidences were also filed before the CIT(A) and Xerox copy of the cheque is also appearing in the paper book. Thus, the entire premise on which the disallowance was made by the AO has no legs to stand. Hence, the ground raised by the revenue has been rendered baseless and without any basis or support from any material on record and accordingly, the same is dismissed.
Disallowance of interest on dues - HELD THAT:- As brought out by the assessee before the CIT(A), ₹ 17.59 crores represent the surplus on sale of undertaking which was credited to the P&L Account and was offered as long-term-capital gain/loss whereas, the part of the amount was credited to the various block-of-assets and thereby reduce the WDV of those assets. Thus, there was no occasion for disallowance of any interest on the amount of ₹ 17.51 crores.
A disallowance of interest in such cases can only be when the department/revenue makes out a case that interest bearing funds have been diverted to the sister concerns without any business purpose and without charging any interest. Ostensibly it is not the case here that any interest bearing funds have been diverted to the sister concern albeit certain sum was to be received by the assessee as part of sale consideration and in such a case how the interest component can be imputed for making any disallowance is not understandable. Not only that, it has been brought on record that ESL has been ordered to be wound up by the Hon’ble Allahabad High Court and once the amount itself is doubtful of recovery then how any amount of interest and that to be on the notional basis can be imputed for making the disallowance. The entire exercise done by the AO is very arbitrarily and we do not find any reason to deviate from the conclusion of the CIT(A) in deleting the said disallowance. Accordingly, the ground No.5 as raised by the revenue is dismissed.
Disallowance u/s 40(a)(i) on account of technical know-how fees paid to M/s AVL Austria - disallowance had been made by the AO on the ground and on the footing that the payment of technical know-how fees to AVL Austria is taxable in India even if it has been rendered outside India and since, assessee has not deducted TDS on such payments, therefore, disallowance under section 40(a)(i) should be made - HELD THAT:- If the amount is paid by an Indian enterprise for technical services furnished by enterprise in Austria then same shall not be subject to tax in India except in so far as such amount is attributable to the activities actually performed in India. This article is different from the new Article 7 applicable post September 2001 and, therefore, the benefit of old article has to be given to the assessee in the AY 2000-01. Here in this case admittedly, the activity of rendering of technical services has been performed by the Austrian Company in Austria and the amount has been paid by the Indian enterprise in Austria, therefore, by virtue of Article 7 of DTAA (as was prevalent prior to September, 2001), the amount was not taxable in India and consequently the assessee was not required to deduct TDS on payment. Thus, no disallowance under section 40(a)(i) can be made in the present case. In the result, ground No.6 as raised by the revenue is dismissed.
Disallowance u/s 40A(9) - AO has disallowed the said amounts on the ground that, similar disallowance was made in the earlier years - HELD THAT:- Before us, it has been admitted by both the parties that the Tribunal in assessee’s own case for the AYs 1997-98, 1998-99 and 1999-00 in the appeal filed by the revenue has confirmed the similar disallowance made under section 40A(9). Accordingly, following the earlier year precedence which is applicable in this year also, this issue is decided against the assessee and in favour of the revenue. Thus, ground No.7 raised by the Department is allowed.
Disallowance on account of pre-operative expenses claimed as revenue expenditure - HELD THAT:- We need not to go into merits of the issue, because already assessee had reduced the said amount of ₹ 376.18 lakhs from the pre-operative expenditure which has been added by the AO separately. This is evident from the fact that total pre-operative expenditure was ₹ 1038.20 lakhs, out of which interest and other income of ₹ 376.81 lakhs has already been reduced and only ₹ 661.39 lakhs have been claimed in the P&L A/c. Thus, there was no requirement by the AO to disallow once again the interest and other income of ₹ 376.81 lakhs. AO is accordingly is directed to rectify this mistake after verification that if the assessee has already reduced the said amount from the total pre-operative expenditure as stated before us, then no addition should be made. In the result, ground No.8 is treated as allowed in the manner indicated above.
Nature of expenditure - Expenditure incurred on obtaining “ISO 9002” and “World Class Manufacture Certificate” - Revenue or capital expenditure - HELD THAT:- We do not find any merits in the contention of the AO that payment for getting such certificates for quality products or World Class Manufacturing Facility is in the nature of trademark and hence is capital in nature. We, thus, confirm the order of the CIT(A) that such an expenditure is revenue expenditure and is allowable under section 37(1). Accordingly we dismiss the ground raised by the revenue
Disallowance of bad debt - HELD THAT:- AO himself had admitted that, it is a sundry debt which is outstanding since 1987. Lastly, it is also not disputed that the said amount was receivable and was treated as loans and advances in the books of account which has been written off in the aforesaid manner. Thus, it has rightly been held that the same will be allowable as bad debt. Once the provision for doubtful debt has been debited to the P&L Account and the corresponding provision has been reduced from the debtors account in the Balance-sheet then this would amount to writing off the debt and thus all the conditions laid down in section 36(1)(vii) r.w.s. 36(2) clearly gets fulfilled. This issue has been settled by the Hon’ble Supreme Court in the case of Vijaya Bank Ltd [2010 (4) TMI 46 - SUPREME COURT] - Thus the said amount would be allowed as a bad debt written off by the assessee and not as a long-term capital loss. Accordingly, we affirm the order of CIT(A) on this score.
Addition on account of assessable value of goods imported for job work and re-export - assessee used to import certain components free of cost from M/s Piaggio BV, the collaborator for performing job work and thereafter such components were exported - HELD THAT:- We are unable to appreciate as to how such a value of component can be brought to tax in the hands of the assessee, because to the extent assessee gets the benefit on the cost, it will be reflected in the price of the manufactured product and thereby giving a higher profit on the sale of the said product. There is no liability towards Piaggio and accordingly, it cannot be held that there is any extinguishment of any liability which needs to be taxed in this year.
CIT(A) has held that the components received without any purchase price constitutes the income cannot be upheld, because the income or profit will result only if the said component is used in the manufacturing of the product and when the product is ultimately sold. The profit imbedded on account of such free component would only be determined at the time of sale of the product and then profit would be taxed and not when the said component (free of cost) has been used, that is, at the time of the purchase itself. Thus, in our opinion, such an addition is not called and same is directed to be deleted. Resultantly ground No. 1 as raised by the assessee is treated as allowed.
Disallowance of provision for doubtful debts and provision for Doubtful Advance - HELD THAT:- We agree with the contention of the Ld. Counsel that if a provision for doubtful debt is debited to the P&L account and simultaneous reduction from the debtors account is made, then same amounts to writing off in the books of account and should be allowed as deduction under section 36(1)(vii). This principle has been reiterated by the Hon’ble Bombay Court in the case Tainwalla Chemicals and Plastics[2013 (4) TMI 211 - BOMBAY HIGH COURT] - However neither the AO nor the CIT(A) has discussed this issue in detail, accordingly, we direct the AO to examine the issue on merits - Assessee in ground No.3 is treated as allowed for statistical purposes.
Addition of bad debts written off - HELD THAT:- The assessee could not establish or bring any proof, under what circumstances, the assessee could not use the license and for what purpose it was purchased and why the desired import on these licenses could not be affected. For any claim of business expenditure or claim of write off or a business loss, the onus is on the assessee as to how it related to his business and also has to give genuine reasons with evidence for incurring the expenses and why it has been written off. In our opinion, without there being any material on record and any satisfactory explanation, we agree with the finding of the lower authorities that to the extent of amount written off there is no material to substantiate the assessee’s claim and onus cast upon the assessee has not been discharged therefore, it has rightly been disallowed.
As regards the various debit balances we find that assessee could not establish the reason for writing off and could not establish the genuineness of the entire transaction. Thus, on this score also, the order of the CIT(A) is confirmed.
Custom duty written off on export of certain scooters for exhibiting the same in Indian market - We find that assessee could not reexport the scooters as it was used in the Indian market and as such excise duty could not be recovered. Thus, custom duty which was paid by the assessee in the course of its business and once it was not recovered; then the same has to be allowed as deduction or loss while computing the income from profits and gains under section 28. The assessee had taken a business decision for importing of certain scooters for exhibiting the same in the Indian market for which it had to pay the custom duty. Thus, the said amount incurred was during the course of the business and write off of such amount which was not recoverable is to be allowed as deductible expense. Thus, the claim is clearly allowable and we order accordingly. Thus, ground no.4 is partly allowed.
Disallowance of payment made towards ‘Royalty’ and ‘Technical Know-how’ - HELD THAT:- Both the conditions have to be satisfied, that is, the services that the source of income should be in India and services have been rendered in India. However, if the services have been rendered outside India then same was held to be outside the purview of taxable in India. Once this is the admitted position, then it is very difficult to hold that, assessee should have deducted TDS on such a payment when there was no law that the payment is taxable in India. Here, the maxim of “lex non cogit ad impossplia, that is, the law of the possibly compelling a person to do something which is impossible, that is, when there is no provision for taxing an amount in India then how it can be expected that a tax should be deducted on such a payment. This view has been upheld by in catena of decisions wherein, it has been held that, assessee cannot held to be liable for deducting TDS in view of the retrospective amendment which has come at a much later date. Thus, without going into the aspect of ‘FTS’ clause in DTAAs, we hold that, at the relevant time while making the payment, assessee was not liable to deduct TDS under the domestic law. Accordingly, disallowance under section 40(a)(i) could not have been made by the AO.
Disallowance of prior period expenses - HELD THAT:- The assessee has given the reasons as to why these liabilities have been crystallized in this year. However, neither the AO nor the CIT(A) have discussed this issue in proper perspective, therefore, we are of the opinion that matter should be restored back to the AO to examine this issue afresh after considering assessee’s submission and also in the light of the decision laid down by the Hon’ble Supreme Court in the case of Taparia Tools Ltd [2015 (3) TMI 853 - SUPREME COURT]. Accordingly, ground No.8 is allowed for statistical purposes.
Addition on account of gift to various employees on various occasions - AO has disallowed 10% of the expenses which has been confirmed by the AO on ad-hoc basis - HELD THAT:- There is some degree of adhocism in such a disallowance, however, the onus was on the assessee to show that entire expenditure debited is wholly and exclusively for the purpose of business and there is no element of nonbusiness- purpose or for any personal nature expenditure. In case of the company though there cannot be any expenses of personal nature, however, in the present case assessee has mainly stated that the gifts have been given to the guests but why such an expensive gifts were given to the guests has not been specified. Thus, the element of non-business purpose is inherent in such an explanation, therefore, we do not find any reason to deviate from the disallowance as confirmed by the CIT(A). Accordingly, ground no.11 is dismissed.
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2016 (6) TMI 1437
Validity of Assessment u/s 153C - absence of any material seized during search - additions made by the Assessing Officer and confirmed by Ld. Commissioner of Income Tax (Appeal) are whether bad in law as the assessment for the impugned assessment year were not awaited at the time of issuance of notice u/s 153C - HELD THAT:- Unless and until any material/document or information is gathered/unearthed at the time of search, we find merit in the contention of the assessee. Our view finds support by the decision from Hon’ble jurisdictional High Court in Allcargo Global Logistic Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT] thus, on this preliminary ground alone, the additions made by the Assessing Officer/confirmed by the Ld. Commissioner of Income Tax (Appeal) stands deleted.
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2016 (6) TMI 1436
Levy of penalty u/s. 271(1)(c) - Addition made to the capital gains - HELD THAT:- Parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated to reduce its tax liability - merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Before us, l.d AR has given the reasons and the facts which had resulted into addition. These submissions have not been controverted by the Revenue - there is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income.
We also get support from the judgement of CIT vs. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] wherein as held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.
We are of the view that in the present case no case for levy of penalty u/s. 271(1)(c) of the Act has been made out. We thus direct the deletion of penalty u/s. 271(1)(c) of the Act. Thus, the ground of assessee is allowed.
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2016 (6) TMI 1433
Allowability of expenditure on project abandoned - expenditure claimed to be representing cost of labour and other revenue expenditure on putting up structure for installation of spinning machines - project was stated to be abandoned due to its non-viability and the expenditure had been written off to the P&L Account and added back in the computation of total income - HELD THAT:- As decided in PRIYA VILLAGE ROADSHOWS LTD. [2009 (8) TMI 765 - DELHI HIGH COURT] any expense incurred for a project which has been abandoned due to its non-viability, expense is an allowable revenue expense especially when all the items of expenditure are of revenue in nature. In this case certain expenses on salaries etc. were incurred on a Hotel project, which was later on abandoned due to its non-viability. ITAT following the Delhi High Court decision in the case of Modi Industries held that there was unity of control / command / management and also the expenses of the revenue nature, and as such, the expense; written off and claimed as deduction is property allowable
Accordingly, setting aside the finding the issue is restored back to the Ld.CIT(A) to decide the same in accordance with law after giving the assessee a reasonable opportunity of being heard.
Disallowance u/s 14A - AR submitted assessee has made investment of share out of its fund in Mid 1990 and no dividend has been earned in the year - HELD THAT:- On a perusal of the assessment order, it is seen that the assessee has consistently made a claim that the investments have been from its own funds. Before the CIT(A), it has also been stated that these investment in shares were made in early 1990s out of its own funds. It has been argued that in the year under consideration, no dividend has been earned thereon which is established from page 19-20 which is an extract of the P&L Account of the assessee - AR considering the request of the Revenue stated that he had no objection if the issue is verified. Accordingly in the light of the submissions of the parties and considering the material available on record and the judicial precedent cited, we set aside the issue back to the file to the CIT(A) with the direction to verify the claim of the assessee and allow necessary relief if so warranted on facts considering the judicial precedent cited.
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2016 (6) TMI 1432
Reopening of assessment post annulling proceeding under Section 153C - time limit for completion of the assessment - period of limitation - Argument of the assessee was that time limit for making the reassessments expired on 31.12.2011. Assessments having been completed after the said date, contention of the assessee was that assessments were barred by lapse of time and invalid - HELD THAT:- There is no dispute that first notice u/s.148 of the Act, was issued and served on the assessee on 25.03.2011. However it is also not disputed by the assessee that one more notice u/s.148 of the Act, was served on the assessee on 06.04.2011 for very same assessment years. Both the notices were dated 22.03.2011. There is nothing in law which would bar an AO from issuing two notices u/s.148 of the Act. If both the notices are dated even the second notice can only be considered as a replica of the original notice. Hence in our opinion, the time limit for completion of the assessments can be reckoned only from the date of service of notice on 06.04.2011.
If we reckon one year period from the end of the financial year in which the notice was served, the last date would be 31.03.2013. Limitation under second proviso will not apply since the notice was served on 06.04.2011. Impugned assessment orders were passed on 28.03.2013 before such last date. Hence we cannot say that the assessment orders were time barred - No infirmity in the finding of CIT (A) in this regard. As find that CIT (A) had not adjudicated on the grounds taken by the assessee on merits assailing the additions made for unexplained investment. Appeals are remitted back to the file of CIT (A) for considering the grounds of assessee on merits of the additions made. Appeals are partly allowed for statistical purpose.
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2016 (6) TMI 1431
Reopening of assessment u/s 147 - addition on account of commission payment which was provision in nature during the year and same was also not reflected in the return of income of the Directors - reopening has been done after expiry of four years from the end of the impugned assessment year - HELD THAT:- This is a case where AO is trying to put the Cart before the Horse’’. The approach of the AO has been highly irresponsible and casual in reopening this case. The constitution of our country has attached great sanctity to the concept of finality of litigation. No reopening of an already concluded assessment can be done except as provided by the legislature. Any casual and irresponsible reopening of an already concluded assessment is misuse of process of law and pierces the faith of the taxpayers upon the incometax department. If the directors have not shown the commission income in their individual returns and if these facts are true, then first of all, the individual cases of the directors should have been reopened, that too, after verification of primary facts. It is further noticed by us that on facts also, the Assessing Officer has gone wrong. It is shown to us that commission was paid as part of salary to the directors. Therefore, the assessee was liable to deduct TDS u/s 192 and not u/s 194H.
The company provided for the commission as part of salary in the impugned year. The TDS was deducted at the time of payment of the same in the subsequent financial year but before the due date of filing of the return u/s 139 - the same was not disallowable, in view of the clear provisions of law as has emerged after various amendments and legal precedents. Even otherwise, payments made on account of salary is not covered u/s 40(a)(ia)- where the payment was duly made by the assessee, expenses were properly booked and claimed in the return of income and due compliance was made with regard to the provisions of TDS also. No case of escapement has been made out by the Assessing Officer, at all. It is not a case where any belief could have been formed about the escapement of income. The reopening has been done in an absolutely illegal manner and is a by-product of casual approach of the Assessing Officer, who had recorded the reasons. The ld.CIT(A) has rightly held that the reopening was not valid and has rightly quashed the same. - Decided against revenue.
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2016 (6) TMI 1428
Disallowance u/s 14A r.w. Rule 8D - disallowance towards expenditure for earning exempt income - HELD THAT:- In view of the decision of Joint Investments Pvt. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] we held that the Assessing Officer cannot make excessive disallowance under section 14A of the Act over and above the exempt income earned by the assessee and directed the Assessing Officer to restrict the disallowance to the extent of exempt income earned by the assessee. Thus, the ground raised by the Revenue is liable to be dismissed and dismissed accordingly.
Application of second proviso to section 40(a)(ia) - Retrospective or prospective effect - Scope of legislative amendments - Diversified views - HELD THAT:- As per Ansal Landmark Township Pvt. Ltd. v. Addl. CIT [2014 (9) TMI 194 - ITAT DELHI] as subsequently confirmed by the Hon’ble Delhi High Court in [2015 (9) TMI 79 - DELHI HIGH COURT]second proviso to section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005. During the course of hearing, the ld. DR has relied on the decision in the case of Prudential Logistics and Transports [2015 (2) TMI 847 - KERALA HIGH COURT] wherein the Hon’ble Kerala High Court has taken a view that the application of second proviso to section 40(a)(ia) of the Act is only prospective. Since there exists two contradictory decisions, we are of the considered opinion that the Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME COURT] has held that the decision favourable to the assessee have to be acted upon.
Thus, respectfully following the decision of the Agra Benches of the Tribunal in the case of Rajeev Kumar Agarwal [2014 (6) TMI 79 - ITAT AGRA] which was duly affirmed by the Delhi Benches of the Tribunal in the case of Ansal Landmark Township Pvt. Ltd. v. Addl.CIT(supra) and subsequently confirmed by the Hon’ble Delhi High Court, we find no infirmity in the order passed by the ld. CIT(A) on this issue and the ground raised by the Revenue is dismissed.
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2016 (6) TMI 1426
Deduction u/s 80IB - manufacture or producing an article or thing - HELD THAT:- AO noticed that though in the assessee’s own case, the Hon'ble Bombay High Court had allowed the claim of the assessee in earlier year in the case reported in [2011 (11) TMI 32 - BOMBAY HIGH COURT], but he disallowed the claim in this year also because the SLP filed by the Department before the Hon'ble Supreme Court is pending. CIT(A) did not find it justifiable to sustain the disallowance in view of the prevailing judgement of the Hon'ble Bombay High Court in the assessee’s own case.
Before us, the Ld. Representative for the respondent assessee pointed out that subsequent to the decision of the CIT(A), the Hon'ble Supreme Court has since dismissed the SLP filed by the Department [2015 (4) TMI 1322 - SUPREME COURT OF INDIA] a copy of which has been placed on record. Appeal of the Revenue is dismissed.
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2016 (6) TMI 1425
Character of the land sold by the assessee - lands covered under Hyderabad Airport Development Authority [HADA] - agricultural land OR capital asset u/s 2(14)(iii) - AO has considered HADA as a govt. notified local authority and concluded that it is a Municipality within the meaning of section 2(14)(iii)(a) - HELD THAT:- AO consideration HADA as a govt. notified local authority and concluded that it is a Municipality within the meaning of section 2(14)(iii)(a) which is not justified as the lands covered under HADA continue to be Gram Panchayats land.
It is in record that the land sold by the assessee also does not fall within such distance of not being more than 8 kms from the local limit of any municipality or cantonment rather lands covered under HADA are more than 21 Kms from the municipal areas i.e. GHMC of Hyderabad.
As in the case of T. Urmila [2012 (12) TMI 610 - ITAT HYDERABAD] wherein in a similar issue the Tribunal held on facts that HADA is not a local body and lands within HADA is not capital asset u/s 2(14)(iii) of the Act. This decision of the Coordinate Bench was upheld by the Hon'ble Hyderabad High Court when on an appeal by the Revenue in T. Urmila’s case was dismissed. That in the instant case, the land sold by the assessee is within the HADA and therefore, the character of the land is agricultural land - Decided against revenue.
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2016 (6) TMI 1424
Unabsorbed depreciation set off against the long term capital gain - HELD THAT:- We find that the issue is squarely covered by the decision of the Mumbai Special Bench in the case of DCIT Vs. Times Guaranty Ltd.[2010 (6) TMI 516 - ITAT, MUMBAI], the Hon’ble High Court of Gujarat in the case of General Motors India Ltd.[2012 (8) TMI 714 - GUJARAT HIGH COURT]and the Chennai Bench of the Tribunal [2013 (8) TMI 1149 - ITAT CHENNAI] for the assessment year 2008-09. As pointed out by the learned assessee’s Representative before the learned Assessing Officer which is extracted hereinabove.
Assessing Officer had made the addition only on the ground that the aforesaid decisions were not accepted by the Department and they are in appeal before higher judicial forum. This view of the learned Assessing Officer is not appreciable. Therefore, following the above mentioned decisions and taking note of section 71(2) of the Act, we hereby direct the learned Assessing Officer to allow the claim of set off & carry forward of depreciation against the long term capital gain of the assessee in the relevant assessment year. - Decided in favour of assessee.
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2016 (6) TMI 1422
Refund of the TDS amount along with interest - failure to deduct tax at source in respect of perquisite value of stock options allotted to its employees who were covered by the Employees Stock Option, otherwise, known as ESOP scheme of the company - respective tax was recovered from the salary of the respondent by his employer and the respondent/assessee was also issued Form 16 by the employer on 25.4.2010 certifying the further deduction and remittance towards tax - HELD THAT:- Writ Appeal is allowed. The appellants are directed to refund the amount to the assessee/respondent with interest payable as per the provisions of the Act within a period of four weeks from the date of receipt of a copy of this order. See S. THIGARAJAN & U. RAMADAS KAMATH & K. SURESH KAMATH VERSUS ASSISTANT CIT AND OTHERS [2009 (8) TMI 531 - KARNATAKA HIGH COURT]
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2016 (6) TMI 1421
Disallowance of expenditure on loose toolls etc.- AO made addition on the ground that the assessee-company has not brought any evidence that these tools were used in the production - HELD THAT:- As decided in own case for assessment year 2008-09 we find that the Revenue has not disputed the incurring of expenditure by the assessee in purchase of the tools. The only reason for the disallowance is that it is not revenue in nature but is of capital in nature. It is also not disputed that the assessee is following the said method of accounting for the past 14 years and no disallowance has been made in the previous years. As rightly pointed out by the learned counsel for the assessee, the Revenue effect would be very minimal whether the expenditure is treated as revenue in nature or treated as capital in nature and depreciation allowed thereon. Therefore, taking the totality of the facts into consideration, we hold that revenue ought to have allowed the revenue expenditure claimed by the assessee.
Disallowance of interest - interest-free loan was granted to sister concerns - CIT(A) deleted the addition following the order of the Tribunal in the assessee’s own case for assessment year 2008-09 wherein it was held that in absence of nexus between interest-bearing funds and advance-free advance, no disallowance was called for - HELD THAT:- No finding by the AO that there is nexus between the interest bearing funds of the assessee and the interest-free advances of the sister concerns. The only reason for the disallowance is that the assessee is paying interest on the loans taken by it, while it has given interest free advances to sister concerns, when there is no nexus between the interest bearing funds and the interest free advances, the presumption to be drawn is that the advances are out of the non interest bearing funds of the assessee as held by the Hon'ble supreme Court in the case of Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] therefore, it has to be presumed that the interest free advances are out of the own funds of the assessee and, therefore, no disallowance of interest is called for.
The assessee's contention of the commercial expediency of advancing the loans is not accepted for the reason that the sister concerns have not carried out any activities during the relevant previous year and the assessee also has not established the commercial expediency for the said advances. This ground of appeal is accordingly allowed.
Disallowance of salary expenses of R&D activity - AO disallowed the same holding them to be capital in nature and allowed depreciation - CIT(A) after considering details of salary expenses found to be revenue in nature allowed the same - revenue had not brought any evidence controverting the findings of the CIT(A) - HELD THAT:- The reasoning of the AO that on account of negative balance in work-in-progress, the addition of double of negative balance has to be made cannot be accepted. Therefore, the finding of the CIT(A) restricting to 50% of the addition is hereby upheld. In the circumstances, ground of appeal raised by the revenue is dismissed.
Addition on account of work-in-progress - HELD THAT:- The reasoning of the AO that on account of negative balance in work-in-progress, the addition of double of negative balance has to be made cannot be accepted. Therefore, the finding of the CIT(A) restricting to 50% of the addition is hereby upheld. In the circumstances, ground of appeal raised by the revenue is dismissed.
Disallowance of provision for erection charges - HELD THAT:- As the provisions are allowable as deduction while computing income under profits and gains of business provided the liability can be estimated with reasonable accuracy and the liability has accrued even though payment of the liability is postponed to a future date. But in the present case, the assessee had failed to demonstrate either before the lower authorities or before us that the liability has accrued during the year and the fact that the substantial provision was reversed in subsequent years goes to prove that the liability was not estimated with reasonable accuracy.
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2016 (6) TMI 1417
Penalty u/s 271(1)(b) - non-cooperative to the various scrutiny notices - HELD THAT:- There is no dispute about the facts narrated in the preceding paragraphs. The Assessing Officer as well as the CIT(A) for having committed default in responding to above stated scrutiny notices. We find from the lower appellate order that the assessee has duly explained its non appearance/adjournment applications.
Assessing Officer completed assessment on basis thereof on 29-12-2010 assessing total loss at ₹ 1,80,60,440/- raising nil tax demand. This is not the Revenue’s case that the Assessing Officer had not framed a regular assessment u/s 143(3) of the Act on the basis of assessee’s documents placed on record. We conclude that the assessee’s act cannot be treated as to have non-cooperative to the various scrutiny notices. We delete the impugned section 271(1)(b) penalty. Assessee’s appeal is allowed.
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2016 (6) TMI 1416
Exemption u/s 11 - Exemption denied by AO because assessee society is set up for religious activities while claiming charitable status which is clear violation of section 13(1)(b) - HELD THAT:- We find the issue to be covered in favour of the assessee by the decision of ITAT in assessee’s own case for assessment year 2009-10 [2012 (9) TMI 1198 - ITAT DELHI] allowing the claim for exemption u/s 11 - Decided in favour of assessee.
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2016 (6) TMI 1415
Assessment u/s 153A - as per assessee since no assessment proceedings was pending on the date of the search on 18.2.2009, the completed assessment on the date of search cannot be reopened for the purpose of making addition for the block period - HELD THAT:- In the case before us, the assessee has filed the return of income in the regular course before the date of search and the Assessing Officer completed the assessment u/s 143(3) of the Act by determining the total income - on the date of search on 18.2.2009, no assessment proceeding was pending for the assessment year 2006-07. The question arises for consideration is when no assessment proceeding was pending on the date of search, can the Assessing Officer frame the assessment u/s 153A of the Act in the absence of any material found during the course of search operation? This Tribunal is of the considered opinion that in the absence of any search material, no assessment can be made for the block period in respect of the income disclosed before the date of search and the assessment was already completed.
Therefore, in view of the language employed by the Parliament in sec. 153A of the Act, the Assessing Officer has to confine himself only to the material found during the course of search operation. Therefore, when the assessment proceeding was completed before the date of search, the Assessing Officer has no jurisdiction to frame block assessment u/s 153A of the Act in the absence of any material found during the course of search operation. Thus the orders of the lower authorities are set aside and the entire addition made by the Assessing Officer is deleted.
Valuation of closing stock - method of valuation of closing stock - assessee is valuing the closing stock depending upon the stock which remains unsold - HELD THAT:- The assessee is engaged in the business of readymade garments and other textile products. It is not in dispute that the fashion is changing very fast and the assessee has to stock the latest fashion textiles so as to meet the expectation of the customers. The only objection of the Revenue appears to be that the assessee is valuing the silk sarees at Rs. 100/-. The lower authorities have not classified the nature of the silk sarees. The silk product contains various varieties. Some of the silk sarees may contain pure zari and some of the silk sarees may contain artificial zari. Apart from pure silk, art silk also available in the market, hence, the valuation may differ from product to product. The silk sarees manufactured in one particular year may not be liked by the people after three or four years. Therefore, the assessee has to necessarily value the stock if it remains unsold for more than three years at the net realizable value or a value which could be estimated on adhoc basis. In this case, the assessee has estimated the same at Rs. 100/- or net realizable value in respect of the stocks which remains to be unsold for more than three years. The Assessing Officer has also found that it is not possible to identify the goods remained unsold in the showroom of the assessee. The fact remains that each and every product of the assessee was allotted by-number and it can be identified with reference to the by-number. Therefore, if the Revenue authorities wanted to identify the goods remained unsold for more than one year, two years or three years as the case may be, it can be verified and identified by referring to by-numbers. Hence, the Assessing Officer cannot doubt the valuation made by the assessee
This Tribunal is of the considered opinion that in view of the nature of business undertaken by the assessee and the change of fashion year by year, the goods remain unsold needs to be valued either at cost or net realizable value whichever is lower. Since the assessee has taken the net realizable value for valuing the closing stock, the Assessing Officer is not justified in making the addition. It is also not in dispute that the assessee has offered for taxation the difference between the actual sale price and the net realizable value estimated by the assessee for valuation of closing stock. Therefore, the Revenue cannot have any grievance on the method of valuation adopted by the assessee. In view of the above, we are unable to uphold the orders of the lower authorities and accordingly, the same are set aside. The Assessing Officer is directed to delete the disallowance.
Disallowance u/s 40A(2)(a) - assessee submitted that the assessee claimed payment of interest @ 18% to the specified persons provided u/s 40A(2)(b) assessee has also made advances to partners and collected interest only @ 13% - AO after considering the above facts, found that the payment of interest at 18% to the specified persons are excessive. Accordingly, he restricted the interest payment to 13% - HELD THAT:- This claim of the assessee is not in dispute. The assessee admittedly paid interest only @ 18%. Therefore, this Tribunal is of the considered opinion that when the assessee has paid interest less than the market rate of interest for the unsecured loan, the Assessing Officer is not justified in restricting the interest to 13%. Assessing Officer is not justified in restricting the payment of interest to 13%. Therefore, this Tribunal is unable to uphold the orders of the lower authorities and accordingly the same are set aside. The Assessing Officer is directed to delete the disallowance of interest u/s 40A(2)(a).
Disallowance of contribution to LIC Gratuity Fund - assessee has contributed towards LIC Gratuity Fund of the employees - Assessing Officer disallowed the claim of the assessee on the ground that the fund was not approved by the prescribed authority - HELD THAT:- As the assessee has made contribution to LIC Gratuity Fund. It is also not in dispute that the assessee has already paid the money and the payment has gone out of the hands of the assessee. Therefore, this Tribunal is of the considered opinion that the judgment of the Apex Court in Textool Company Ltd.. [2009 (9) TMI 66 - SUPREME COURT] is squarely applicable to the facts of the case. When the money has gone out of the hands of the assessee, this Tribunal is of the considered opinion that the same has to be allowed even though the LIC Gratuity Fund was not approved by the concerned CIT in view of the judgment of the Apex Court in Textool Company Ltd.(supra). In view of the above discussion, we set aside the orders of the lower authorities and the Assessing Officer is directed to delete the addition towards contribution to LIC Gratuity Funds.
Disallowance of donation - HELD THAT:- Admittedly, the assessee has not produced the original receipts before the Assessing Officer for scrutiny. When the assessee has not produced the original receipts for making claim u/s 80G of the Act, this Tribunal is of the considered opinion that the Assessing Officer has rightly disallowed part of the claim. This Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the same is confirmed.
Disallowance of pooja expenses - HELD THAT:- The expenditure incurred by the assessee is not in dispute. It is the belief of each individual to garland God Almighty and start his business. If the assessee incurred expenditure for flowers, incense sticks, decorative items etc. for doing pooja, this Tribunal is of the considered opinion that the same is for business purpose. Hence, the Assessing Officer is not justified in disallowing the claim of the assessee. When the assessee starts its business by performing pooja, this Tribunal is of the considered opinion that the expenditure incurred for performing pooja is for business purpose, therefore, the same has to be allowed while computing the total income. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition made.
Disallowance towards repairs - HELD THAT:- It appears from the assessment order that the assessee has not produced any material to support the claim of expenditure towards repair. However, the assessee filed certain bills and vouchers before the CIT(A) and the CIT(A) called for the remand report from the Assessing Officer - AO after verifying the material filed by the assessee, found that the claim made by the assessee is correct except to the extent of Rs. 64,54,309/-. When the Assessing Officer found that the claim made by the assessee is correct, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the order of the Assessing Officer. In the absence of any other material available on record to prove the genuineness of the claim to the extent of Rs. 64,54,309/-, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the order of the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the CIT(A)
Expenditure claimed by the assessee for renovation of the showroom - whether the assessee can claim the expenditure as revenue in nature? - HELD THAT:- This issue was specifically considered by this Tribunal in the assessee’s own case for assessment year 2002-03 when the assessee challenged the order of the Administrative Commissioner u/s 263 of the Act. This Tribunal found that the similar expenditure can be allowed as revenue in nature. Since the Co-ordinate Bench has already opined that the expenditure is revenue expenditure and merely because the Revenue’s appeal against the order of this Tribunal is pending before the High Court, this Bench cannot take a different view. Moreover, the Kerala High Court in the case of Joy Alukkas India Pvt. Ltd [2014 (6) TMI 80 - KERALA HIGH COURT] had an occasion to consider an identical issue. In the case before the Kerala High Court the assessee took a premises on lease and incurred expenditure for renovation. The object of the assessee was to establish a showroom in the course of its business activity. The Kerala High Court, after considering the relevant case laws on the subject, found that the similar expenditure is revenue in nature.
Disallowance of lease commitment charges and donations - HELD THAT:- donations were paid from the account of the assessee-firm and after receiving donation by the respective temples, the Executive Officer executed the lease deed in favour of Shri K. Mahesh. Therefore, it is obvious that the assessee-firm made the payments in the form of donation as per the direction of HR&CE for obtaining the lease hold lands. Even though initially the lease deed was executed by Shri K. Mahesh and the legal heirs of the erstwhile tenants, the lease was subsequently taken from the temples directly consequent to the order of the HR&CE Department. Therefore, this Tribunal is of the considered opinion that the lease commitment charges which was disclosed as donation in the books of account is for the purpose of obtaining lease holding interest of the land in question. Since the donation was made as per the direction of HR&CE for the purpose of obtaining lease of the land for business purpose, this Tribunal is of the considered opinion that the payment is revenue in nature. Therefore, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition made towards lease commitment charges
Addition towards stock discrepancy - HELD THAT:- Assessing Officer himself admits that he could not identify the stock with reference to by-number provided by the assessee. If the Assessing Officer could not identify the stock with reference to by-number allotted by the assessee, this Tribunal is of the considered opinion that the method of taking inventory by the Revenue may not reflect the correct position of closing stock. When the assessee is maintaining stocks systematically by allocating by-number and also providing a system of tracking through the computer, this Tribunal is of the considered opinion that the authorities below ought to have examined the method adopted by the assessee in a detailed manner and an opportunity shall be given to the assessee to explain how the method works. However, without considering all these factors, the Assessing Officer simply came to the conclusion that there was a discrepancy. This Tribunal is of the considered opinion that the discrepancy was due to stocks remain unsold for more than one year and the assessee valued the same at the net realizable value or cost whichever is less, therefore, the CIT(A) is not justified in confirming the addition made by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition.
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2016 (6) TMI 1413
Disallowance of expenditure - only objection of the Revenue before this Tribunal is that the Assessing Officer has not said anything in the remand report about the other expenditure even though he has objected about the professional and consultancy charges, customs duty penalty, discarded assets written off, ROC filing fees and financial expenses - HELD THAT:- This Tribunal is of the considered opinion that when the CIT(A) has called for a specific remand report on the basis of the material on record in respect of the expenditure and the Assessing Officer found that only the expenditure relating to rent charges, professional and consultancy charges, customs duty penalty, discarded assets written off, ROC filing fees and financial expenses cannot be allowed which comes to the extent of ₹ 3,66,23,924/-. In respect of other expenditure, he has not made any comments. Therefore, the presumption is that the Assessing Officer has nothing to comment on the remaining expenditure. In other words, the Assessing Officer has satisfied about the expenditure claimed by the assessee.
Share capital advance - assessee has not filed the names and addresses of the persons who paid the capital advance, therefore, the AO made addition - HELD THAT:- As rightly submitted by the ld. Counsel for the assessee, there is no allegation that the share application money was emanated from the corpus of the assessee. The assessee has filed the names and addresses of the share applicants. Therefore, it was for the Assessing Officer to examine further. Merely because the share applicants are from Andhra Pradesh, that cannot be a reason to disallow the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the same is confirmed.
Reopening of assessment u/s. 147 - HELD THAT:- It is an admitted fact that the assessee has not filed the return of income in the regular course. Therefore, the Assessing Officer issued a notice u/s. 148 on 8.2.2010. Subsequently a notice u/s. 142(1) of the Act was also issued. Consequent to the notices issued by the Assessing Officer u/s. 148 and 142(1) of the Act, the assessee has filed the return of income on 7.12.2010 disclosing a loss. In those circumstances, this Tribunal is of the considered opinion that the Assessing Officer has rightly reopened the assessment.
Addition u/s 40(a)(ia) - rent and professional and consultancy charges paid by the assessee - HELD THAT:- As rightly found by the CIT(A), rent and professional and consultancy charges paid by the assessee was not subjected to TDS, therefore, the same has to be disallowed u/s. 40(a)(ia) - The assessee has not filed any material either before the Assessing Officer or before this Tribunal the nature of the penalty paid by the assessee to the customs Department.
Penalty for contravention/violation of law cannot be allowed as business expenditure. The discarded assets to the extent was also disallowed by the AO. The details of discarded assets are not available on record. It is not known whether the discarded assets are stock-in-trade or capital asset used as tool for carrying on the business.
In the absence of any supporting material and the details of the machinery/assets discarded, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside in respect of disallowance of discarded assets and remand back to the file of the Assessing Officer for reconsideration. The Assessing Officer shall reexamine the issue and bring on record the nature of the assets discarded and thereafter decide the issue in accordance with law after giving reasonable opportunity to the assessee.
No material is available on record with regard to the claim of financial expenses. Therefore, the CIT(A) has rightly confirmed the financial expenses. This Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed.
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