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2019 (1) TMI 2043
Deduction u/s. 80IA(4)(i) on storage tank MDI and storage tank EDA - AO's allegation is that storage tank is devoid of loading and unloading facility and same are not within the premises of Kandla Port Trust and held that MDI-storage tank, for which assessee has claimed deduction is not an enterprise as (a) it is incapable of doing independent business in absence of loading & unloading facility (b) no separate accounts has been maintained, as most of expenses are allocated on pro-rate basis - assessee stated that that there is difference in the nature of business in case of MDI storage tank and other tanks at the tank farm - HELD THAT:- Assessee stated that storage facility is for loading and unloading of chemical, a copy of storage and terminal agreement with M/s. Dow Chemical International Pvt. Ltd.,is also filed. And the storage tanks are connected with associated pumps, pipelines, connecting hoses, valves, metering and control devices and auxiliary equipment to carry out the loading and unloading functions. Thus, the MDI tanks are special tanks for specific liquid cargo hence has separate dedicated pipeline and pump for the same has been installed. The tanker vessels carrying on the specific chemicals come to Kandla Port for discharge of the cargo. The vessels are berthed at Oil Cargo Jetty and after necessary customs formalities; the cargo is unloaded in the storage tank through pipelines as per permission of Kandla Port Trust.
As we can see, that case of the assessee case is squarely falls under the clarification provided in Circular No. 10 of 2005. It is fact that storage tanks are an integral part of Port operations and it can't be utilized for any other non-port operations, Moreover, in AY 2013-14, the AO in his order u/s. 143(3) after physical verification of; the structure, categorically given his finding that the respondent qualified the condition of new infrastructural facility of having structures at the port for storage, loading and unloading.
Satellite image/map on the wikimapia.org clearly show the area/boundaries of Kandla Port, within which the Respondent has developed the structure, i.e., storage tanks. The AO's observation that the structure of Respondent is not part of port is incorrect and for Kandla port trust, commissioner of Custom has notified assessee as custodian and therefore the same is stipulated within the Custom Bonded Area i.e. port. Therefore, in our considered opinion, assessee is entitled for deduction u/s. 80IA(4)(i) being the profit from enterprise carrying on the business of developing/operating/maintaining infrastructure facilities i.e. port and also entitled for deduction. Thus, this ground of appeal is dismissed.
Addition u/s. 14A - assessee had investment in Shares for which no expenses have been allocated by the assessee - CIT(A) deleted addition - HELD THAT:- As seen assessee was having substantial interest free funds, it is fact that as per paper book interest free funds went into investment, which generated exempt income. Therefore, no disallowance can be made u/s. 14A as no interest bearing funds has been deployed to earn exempt income. A.O. had not demonstrated any nexus between the earning of exempt income for such income. Therefore, in our considered opinion, ld. CIT(A) has rightly granted relief to the assessee.
But disallowance made under Rule 8D(iii) are confirmed by lower authorities because assessee has not been able to prove one to one nexus of interest free funds as well as investment in securities because such investment require bank charges, clerical work and time of directors. Therefore, we are of the opinion that ld. CIT(A) has rightly confirmed the addition of Rs. 2,23,639/-.
Addition u/s. 40A(2)(a) r.w.s. 40A(2)(b) - Terminal Handling & Storage Charges paid to Shreeji Power & Insulator Pvt. Ltd.- HELD THAT:- Payment made to persons other than persons covered u/s. 40A(2)(b) were comparable and inter alia payment to the persons covered u/s. 40A(2)(b) was not excessive either in comparison to the other independent parties as well as to the market rate which can assumed as to nearer to the rates at which the said third parties are being paid. Therefore, in our considered opinion, ld. CIT(A) has rightly granted part relief to the assessee.
Disallowance of depreciation on windmill - assessee has claimed depreciation in respect of the common power evacuation charges - As per AO charges were paid to the Suzlon Energy for common power Evacuation infrastructure facility on sharing basis and these charges were not refundable and clear from this bill that respondent has not acquired any asset by paying these charges on which it can claim depreciation - as per AO assessee cannot claim depreciation @ 80% on windmill but assessee stated that in respect of the entire windmill inclusive of civil, electrical items because a powerful thrust of air at any point of time - HELD THAT:- As we can see, the ld. A.O. has unnecessarily adopted a very restrictive view wherein he has resorted to dissect the purchase value of the entire windmill assembly in various sub components i.e. land, machinery, labour charges, right to access, etc. and has opined that 80% depreciation will be available only to the windmill proper mentioned in the Depreciation Schedule in the IT Rules. Erecting and operating windmill assembly is not limited to installing a windmill turbine only. Bringing windmill in existence and making it operational requires fulfillment of various sub components like installing and fabricating accessory machineries, electric fitting, civil constructions, hiring labours, getting permission, documentations, getting access to the land, getting power connecting, getting power output connection, getting access to pooling station.
As decided in case of CIT vs. Parry Engineering and Electronics Pvt. Ltd [2014 (12) TMI 752 - GUJARAT HIGH COURT] wherein it is held that windmill are entitled for depreciation and decided the matter on favour of the assessee.
Disallowance of expenditure incurred on consideration for lease land - business expenses or not? - HELD THAT:- Assessee has made this payment to Kandla Port Trust as Windmill land charges and same are for business purpose. Therefore, such amount cannot be disallowed and ld. CIT(A) has rightly allowed the claim of the assessee.
Addition u/s. 41(2) - amount shown outstanding for such a long period - HELD THAT:- As before lower authorities and before us, assessee could not submit any explanation that why these amounts had been shown outstanding for such a long period and what steps have been taken by the assessee to recover these amounts and even before us assessee could not explain about the list in details. Therefore, we dismiss this ground of appeal by the assessee.
Disallowance of staff welfare expenses and travelling expense on the alleged ground of personal element - HELD THAT:- Since assessee has not submitted any details with lower authorities and even before us, assessee has not submitted any plausible explanation for not submitting details of expenditure of this amount. Therefore, we dismiss this ground of appeal.
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2019 (1) TMI 2042
Rejection of Application u/s. 80G - assessee has been granted registration u/s. 12AA and the registration continues till date and the aforesaid registration has not been cancelled by the Commissioner of Income Tax - HELD THAT:- We find that the Agra Bench of the Tribunal in the case of Dr. Gyanendra Goel Foundation [2018 (3) TMI 1893 - ITAT AGRA] after relying on the decision of Hiralal Bhagwati [2000 (4) TMI 14 - GUJARAT HIGH COURT] in similar circumstance has held that when the CIT has granted registration u/s. 12AA after examining genuineness of activities of Trust, and the registration granted has not been revoked or cancelled then it is not proper for CIT to reject application of Trust for benefit of exemption u/s. 80G by holding that the activities of the Trust were not genuine.
Before us, the Revenue has not pointed out any contrary binding decision nor has placed any material on record to demonstrate that the aforesaid decision of Agra Bench of Tribunal has been set aside by the higher judicial forum - We therefore set aside the order of LD. CIT and direct the granting of approval to assessee u/s. 80G of the Act. Thus the grounds of the assessee are allowed.
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2019 (1) TMI 2041
Addition u/s 68 - bogus LTCG - penny stock transaction - HELD THAT:- As we find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall.
We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). The allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore consequently fail.
Assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus nor the AO had issued any notice to the brokers for confirmation.
The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence.
Thus we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition.
Commission @ 5% disallowed as unexplained expenses of commission u/s. 69C - As we after having held the purchase and sale of shares of LDPL is genuine the question of disallowance of commission expenses does not arise and, therefore, directed to be deleted.
Assessee appeal allowed.
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2019 (1) TMI 2040
Taxability of interest on income tax refund received - PE in India - whether should be taxed as per Article 11 of the India Switzerland DTAA @ 10% or payment of interest is inextricably connected with the company's permanent establishment in India and is therefore assessable as per Article 7 of the DTAA?” - HELD THAT:- Revenue very fairly states that this issue stands concluded against the Revenue and in favour of the Respondent Assessee by the decision of this Court in Director of Income Tax (International Taxation) v/s. Credit Agricole Indosuez [2015 (6) TMI 974 - BOMBAY HIGH COURT] and CIT v/s. Tech. Mahindra Ltd., [2016 (3) TMI 248 - BOMBAY HIGH COURT]
Thus the question as framed does not give rise to any substantial question of law. Thus, not entertained.
Appeal admitted on the substantial question of law at (a) - Whether on the facts and circumstances of the case and in law, the Tribunal is correct in upholding the decision of CIT (A) that international shipping profits are covered by Article 22 of the IndiaSwitzerland Treaty?
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2019 (1) TMI 2039
Validity of revision u/s 263 - Period of limitation - as per CIT provisions of sec. 115JB do not provide for reduction of Debenture Redemption Reserve from the Net Profit - Debenture Redemption Reserve was merely an appropriation from such net profit and was a transaction on Capital Account and hence the same is not allowable as deduction under the provisions of the Income tax Act - Whether revision order as barred by limitation? - HELD THAT:- There is merit in the contentions of Ld A.R, i.e., since the issue of DRR sought to be revised by CIT is covered by the original assessment order dated 30-12-2011, the time limit available to revise the original order is 31.3.2014, whereas the CIT has passed the impugned order on 26-03-2018. Hence we find merit in the contention of the assessee that the impugned revision order is barred by limitation.
Debenture Redemption Reserve deductibility in computation of book profit u/s 115JA - In the case of Raymond Ltd [2012 (4) TMI 127 - BOMBAY HIGH COURT] has held that the Debenture Redemption Reserve is an ascertained liability and is deductible from Net profit for the purpose of computing Book Profit u/s 115JA of the Act. The claim made by the assessee as well as allowed by the AO gets support from the decision rendered by the jurisdictional High Court. CIT has taken the view that the Hon’ble Bombay High Court has not considered the decision rendered by Hon’ble Supreme Court in the case of National Rayon corporation [1997 (7) TMI 113 - SUPREME COURT] in proper perspective and further observed that the Hon’ble Bombay High Court did not consider the fact that the Debenture Redemption Reserve operates in Capital field and hence appropriation of profit is not deductible for tax purposes.
Accordingly, the Ld Pr. CIT has taken the view that the decision rendered by Hon’ble Bombay High Court is per incurium. Whatever may be the reasoning given by Ld Pr. CIT, it cannot be denied that the Ld Pr. CIT has taken different view in the matter, without noticing that the decision rendered by jurisdictional High Court is binding on him also. On the contrary, the claim made by the assessee as well as allowed by the AO gets support from the decision rendered by the jurisdictional High Court, meaning thereby, the AO has followed binding decision of the jurisdictional High Court, which cannot be found fault with.
It is well settled proposition of law that merely because the Ld Pr. CIT is holding a different view in the matter, the assessment order cannot be termed as erroneous and prejudicial to the interests of revenue, unless it is shown by him that the view taken by the AO is not in accordance with the law or against the binding precedents. In this regard, we may refer to the decision rendered in the case of Grasim Industries Ltd. [2010 (2) TMI 4 - BOMBAY HIGH COURT] by taking into account the law laid down by the Hon'ble Supreme Court in the case of Malabar Industrial Co Ltd. [2000 (2) TMI 10 - SUPREME COURT] Decided in favour of assessee.
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2019 (1) TMI 2038
TP Adjustment - comparable selection - Info Edge (India) Ltd., Media Reserarch Users Council, MMTV LTD, Power Systems Operation Corpn. Ltd. and TSR Darashaw - HELD THAT:- From the annual reports of each of the comparables contested by the Revenue it can be seen that comparables are functionally dissimilar to the assessee company. These comparables are considered in case of Adobe Systems India Pvt. Ltd [2018 (7) TMI 741 - ITAT DELHI] for the same Assessment Year 2011-12 and from the perusal of the Tribunal’s order it can be seen that these comparables are functional different than assessee’s company.
The assessee company is engaged in provisions of marketing support services to Teijin-Japan and other group companies, while the comparables are functionally different from the assessee companies which can be seen from the Annual reports of each of the comparables. The DRP has given proper direction for excluding these comparables contested by the Revenue. The Ld. DR also was not able to demonstrate that the functional profile of these comparables is similar to that of assessee company. Therefore, the appeal filed by the Revenue is dismissed
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2019 (1) TMI 2037
Department appeals against relief given by CIT(A) - Addition u/s 69A - CIT(A) deleted the addition - Revenue is aggrieved by the order of ld. CIT(A) in respect of the relief given by him - HELD THAT:- As per the recent announcement of Central Board of Direct Taxes (CBDT) dated 11.07.2018 (Circular No. 3 of 2018), no Department appeals are to be filed against relief given by ld. CIT(A) before the Income Tax Appellate Tribunal unless the tax effect, excluding interest, exceeds Rs. 20 lakhs and it further states that the instructions will apply retrospectively to the pending appeals also.
In the present case, since it is an undisputed fact that on the additions which are in dispute, the tax effect is less than Rs. 20 lakhs and in the absence of any material placed on record by the Revenue to demonstrate that the issue in the present appeal is covered by exceptions provided in para 10 of the aforesaid CBDT Circular, monetary limit prescribed by the instructions of the aforesaid CBDT Circular would be applicable to the present appeal of the Department.
We therefore hold the present appeal of Revenue to be not maintainable on account of low tax effect - grounds of the Revenue are dismissed.
Additions have been made in the case of assessee on “protective basis” - HELD THAT:- When the assessment where substantive additions have been set aside, assessment in the case of assessee in whose hands the protective additions does not stand. Thus, the appeal assessee is allowed sans merit.
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2019 (1) TMI 2030
Apparent mistakes in the impugned Tribunal order - Disallowance of expenditure at 10% of total expenditure on an estimate basis - HELD THAT:- This disallowance was confirmed by CIT (A) on this basis that on the issue of estimated disallowance in the absence of complete details no being available, the estimated disallowance appears to be reasonable and not excessive. When the assessee carried the matter in appeal before the Tribunal, the Tribunal held that the AO has made disallowance of 10% of the total indirect expenses debited in P&L account only whereas as per the Tribunal, the expenses of Rs. 2 Lakhs on account of commission paid, Rs. 14,29,951/- being interest in respect of Sundaram Finance Housing Loan and Rs. 4,19,981/- being Processing Fee in respect of Loan from Sundaram Finance are not allowable at all but the Tribunal is not supposed to increase the disallowance while deciding the appeal of the assessee and therefore, it was held that no inference is called for in the order of CIT(A) on this issue.
Hence it is seen that this is the ultimate decision of Tribunal as per the impugned Tribunal order that no inference is called for in the order of CIT (A) and hence, these observations of the Tribunal that the assessee has no business income or that the interest and processing fees of loan are in respect of housing loan etc. do not affect the ultimate decision of the Tribunal that no inference is called for in the order of CIT (A).
We find that as per the P&L account of the assessee available assessee has declared income on account of Creditors Written Off, Director Remuneration, Dividend Received, Interest received from Banks, Interest Received – K.G. Enterprises and Profit on Sale of Shares. Hence from these six headings of income credited in the P&L account, it is clear that in the present year, no business income is there. Hence this observation of Tribunal that there is no business income in the present year is not incorrect.
Second alleged mistake that the interest paid to Sundaram Finance is not in respect of Housing Loan - We find that the assessee has himself stated in P&L account available on page no. 41 of the paper book that Interest-Sundaram Finance Housing Loan-Rs. 14,29,951/- and therefore, this observation of the Tribunal is also not incorrect when this interest of Rs. 14,29,951/- is in respect of Housing Loan even as per the nomenclature given to it by the assessee himself in P & L Account. Regarding the amount of Rs. 4,19,981/-, the assessee himself stated in the P&L account available on page no. 41 of the paper book that Processing Fee – Loan Sundaram Finance – Rs. 4,19,981/- and since, the only loan from Sundaram Finance is Housing Loan, this observation of the Tribunal is also not incorrect. Hence find no apparent mistake in the Tribunal order.
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2019 (1) TMI 2027
Addition u/s 68 - bogus transactions of purchase and sale of shares for the purpose of laundering his undisclosed income - Assessee’s contention is that he has purchased shares through broker via BSE and shares were part of Demat account and payments have been made through banking channel and he is merely an investor - HELD THAT:- A.O. has made detailed and comprehensive enquiry with regard to NCL Research Ltd. share, assessee has filed Contract Note and shares were purchased through broker via BSE, payments have been made through banking channel and held for around two years in the demat account of the assessee and long term capital gain was claimed by the assessee.
We consider that the assessee could not appear before the ld. Pr. CIT, Therefore in the interest of justice, we consider it to appropriate that one more opportunity of hearing should be granted to the assessee.
As before passing any order, ld. Pr. CIT may also be consider the order passed in case of Smt. Minu Gupta vs. [2018 (12) TMI 1962 - ITAT KOLKATA]
We restore this case to the file of Pr. CIT for deciding de novo after examination of details to be submitted by the assessee and after affording adequate opportunity of being heard. Appeal filed by the Assessee is allowed for statistical purpose.
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2019 (1) TMI 2025
Non prosecution of appeal - MA for recall of the order for erler AY dismissing the appeal of the Assessee owing to non prosecution - AR submitted that the arguing counsel had planned to travel to Chandigarh from Delhi to appear and argue the appeals before the Hon'ble ITAT but in the early morning he was suffering from mild fever and hence he could not travel to Chandigarh and due to paucity of time he could not instruct any of his junior at his Delhi office to travel to Chandigarh and seek adjournment - HELD THAT:- Having gone through the facts of the case, since a reasonable cause could be brought out by the Ld.AR, we here by recall the order fixing the regular hearing on 17/01/2019. It is here by clarified in the court that no separate notice of hearing would be issued.Misc. Applications are allowed.
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2019 (1) TMI 2023
Exemption u/s 11 & 12 - assessee activities are not within the purview of the section 2(15) - activity of charging fee against the barcode technology to the customers is purely in the nature of commercial and business activity - assessee has been granted registration under section 12AA(1) as well as approved under section 10(23C)(vi) - HELD THAT:- As decided in assessee own case [2017 (11) TMI 1049 - ITAT DELHI] activities of the assessee are covered u/s 2(15) of the Act under the sixth limb and that the assessee is eligible for exemption u/s 11(1) of the Act. There is no change of circumstances since the date of the order of the Hon' High Court and also from the facts relevant to the assessment years 2009-10 and 2010-11.
Allowing depreciation despite claiming benefit of application of the purchase of the assets Tribunal [2018 (6) TMI 443 - ITAT DELHI] following the decision of the Hon’ble Supreme Court in the case of CIT Vs. Rajasthan and Gujarat Charitable Foundation Poona [2017 (12) TMI 1067 - SUPREME COURT] allowed the claim of the assessee.
Claim of the accumulated funds was also allowed by the Tribunal as upheld that the activity of the assessee are charitable in nature and, thus, the claim of the assessee for carry forward under section 11(2) has been rightly allowed by the Ld. CIT(A) - Decided against revenue.
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2019 (1) TMI 2018
TP Adjustment - payment of corporate management charges - HELD THAT:- We find that the TPO has verbatim lifted the findings given in A.Y 2009-10 in so far as this issue is concerned and nowhere has he whispered about any distinguishing fact. Therefore, we do not find any force in the contention of the ld. DR. We find that the Tribunal in assessee’s own case on identical issue held that what the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/ brand fee, because it has been suffering losses continuously. So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable adjustment but a wholesale disallowance of the expenditure, particularly on the grounds which have been given by the TPO is not contemplated or authorised - Thus we are of the considered opinion that corporate management charges should be allowed as such - we direct the AO to delete the adjustment.
Adjustment made in business support segment - Comparable selection - HELD THAT:- Rejection of companies as functionally different from the assessee business.
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2019 (1) TMI 2017
Deduction u/s 80IA - HELD THAT:- The first substantial question of law is covered by the earlier orders of this Court in the assessees' own case [2012 (8) TMI 809 - MADRAS HIGH COURT].
Deduction of Bad debts - claim was disallowed on the ground that the debts have been taken over from the sister concerns voluntarily only as a measure of support to it and knowing fully well that the same was irrecoverable - HELD THAT:- We find, as a matter of fact, that the Tribunal has taken note of the position that the Memorandum and Articles of Association permitted the assessee to carry on the business of money lending and the transactions in question have been held to be in the realm of business activity.
There is no dispute raised before us on this factual position. In the light of the same, the second substantial question of law is also answered in favour of the assessee and against the Revenue.
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2019 (1) TMI 2010
Revision u/s 263 - As per CIT assessee was allowed deduction u/s 35AD by the AO without proper verification whether orders passed u/s 143(3) are erroneous in so far as it is prejudicial to the interest of the Revenue? - HELD THAT:- It is settled law that to revise an assessment order, the CIT should be satisfied that the order of the A.O. is erroneous in so far as it is prejudicial to the interest of the Revenue. We find that during the proceedings u/s 263 of the Act, the assessee has filed all the details before the CIT, but he has failed to consider the same. Without bringing on record as to how the non-consideration of the claim u/s 35AD has caused prejudice to the interest of revenue, he has remitted the matter to the file of the A.O with a direction to re-do the assessment after examining the claim u/s 35AD in detail. Therefore, according to us, the CIT has failed to fulfil the twin conditions u/s 263 of the Act for making the revision.
The Hon’ble Madras High Court in the case of CIT vs. G.R. Tangamaligai [2002 (10) TMI 73 - MADRAS HIGH COURT] has held that in the absence of any finding that there is loss of revenue, interference u/s 263 is not justified.
Hon’ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd [2012 (3) TMI 227 - DELHI HIGH COURT] has held that the Commissioner cannot remand the matter to the Assessing Officer to decide whether the finding recorded are erroneous without a finding that the order is erroneous and how that is so.
Commissioner has not examined and decided as to how the order is prejudicial to the interest of revenue but has directed the Assessing Officer to decide the aspect, which is not permissible. Decided in favour of assessee.
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2019 (1) TMI 2008
Assessment of trust - Exemption u/s 11 - non deduction of tds - Tribunal held that 40% of professional charges paid to doctors through bearer cheques (60% paid by A/c. payee cheques) without deducting TDS cannot be disallowed u/s. 40(a)(ia) of the Act as the provisions of Section 11 of the Act was applicable to the assessee - HELD THAT:-. Section 40(a)(ia) of the Income Tax Act would be applicable to the amount chargeable under the head “Profit and gain of the business or profession”. Section 11 is with regard to the income from property held for charitable or religious purpose.
Subsequently, an explanation was inserted which would come into effect from 01.04.2019 by the Finance Act, 2018 which would clearly indicate that the application under Clause(a) or Clause(b), the provisions of sub-clause(ia) of clause (a) of Section 40 and sub-sections (3) and (3A) of Section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”. Therefore it clearly indicates that the same would stand applicable only from 01.04.2019. Therefore, the contention of the Revenue cannot be accepted. Hence, we hold that the Tribunal was justified in holding the said issue in favour of the Assessee and against the revenue.
Whether the Tribunal was correct in holding that professional fee paid to Apollo Hospital for managing and running BGS Medical Foundation would not attract Section 194J and Section 40(a)(ia) of the Act as the provisions of Section 11 of the Act was applicable to the assessee? - On the same analogy, with reference to the amendment in Section 11(6) of the Act amended by Finance Act No.2 of 2014, the amendment was made and deducted from the assessment year 2015-16. In the instant case, the assessment would be with effect from 1st April 2019. Therefore, on this ground also, we do not find any material to interfere in the Order passed by the Tribunal. Consequently, the second substantial question of law is answered in favour of the Assessee and against the Revenue.
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2019 (1) TMI 2005
Disallowance of interest expenses - unsecured loans are raised for the purpose of making investments in the capital work in progress - HELD THAT:- Unsecured loans are raised for the purpose of making investments in the capital work in progress. This presumption clearly contradicts with CIT(A)’s own finding, as reproduced above, to the effect that “the appellant’s funds are mixed and from the common funds investments are made in CWIP as well as inventory and debtors etc”. If the funds are mixed funds, as is the finding of the CIT(A), there cannot be any basis for the conclusion, as has been eventually adopted by him, that entire unsecured loans are used for the purpose of investment in CWIP (i.e. capital work in progress).
It is also not in dispute, and the financial statements filed by the assessee clearly re-establish that, that the investments in CWIP are far in excess of the interest free funds available to the assessee.
In such circumstances, in the light of judgment in the case of CIT Vs Raghuvir Synthetics Ltd [2013 (7) TMI 806 - GUJARAT HIGH COURT] and Reliance Utilities & Power Ltd (2009 (1) TMI 4 - BOMBAY HIGH COURT), the presumption has to be that the investments are made out of interest free funds. That is the approach consistently taken by various coordinate benches of this Tribunal. Clearly therefore, whichever way one looks at it, there is no legally sustainable foundation for the presumption that borrowed funds were used in the capital work in progress.
CIT(A) himself admits that the funds are mixed and that the only basis is the nature of loan i.e. secured loan vs unsecured loan. In view of these discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee and delete the impugned disallowance on the admitted presumption that the secured loans were used in the capital work in progress. The assessee succeeds on this point.
Disallowance being repairs and maintenance expenses of Plant and Machinery,repairs and maintenance expenses to factory building AND vehicle expenses, telephone expenses and office expenses - HELD THAT:- We are of the considered view that the impugned disallowance, which are purely adhoc in nature, are simply based on surmises and conjectures and cannot, therefore, meet any judicial approval. The stand of the assessee that all the details were duly produced before the Assessing Officer, and that there is no requisition which remains to be complied with, has simply been brushed aside. In any case, in the case of a corporate assessee, there is no question of personal expenses. We have also noted that similar disallowances have been deleted in the earlier years as well. In view of these discussions, as also bearing in mind entirety of the case, we uphold these grievances of the assessee and delete the impugned disallowances.
Disallowance out of labour charges - CIT-A reducing the same to 10% instead of 20% disallowed by the Assessing Officer instead of deleting the same in toto - HELD THAT:- The reasons for upholding the disallowance are rather vague and proceed on sweeping generalizations. The allowances are purely adhoc in nature and no specific legally sustainable defects have been pointed out and the stand of the assessee that all the details were duly produced before the Assessing Officer, and that there is no requisition which remains to be complied with, has simply been brushed aside. We have also noted that similar disallowances have been deleted in the earlier years as well. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and delete the impugned disallowance in entirety.
Deduction u/s. 80HHC - reduction of 90% of interest income and misc. income from the profit of eligible business income and by rejecting the claim of deduction in respect of export incentives - HELD THAT:- As fairly agree that this issue is required to be restored to the file of the Assessing Officer for fresh adjudication with the benefit of direct decisions from Hon’ble Supreme Court in the case of ACG Associated Capsules Ltd [2012 (2) TMI 101 - SUPREME COURT] and Topman Exports [2012 (2) TMI 100 - SUPREME COURT] That is precisely what was done by the Tribunal in the earlier assessment years. We accept the plea and remit the matter to the file of the AO for fresh adjudication as such.
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2019 (1) TMI 2004
Disallowance of claim u/s 80IB(10) - rectification petition u/s 154 filed before the CIT(A) has been addressed by passing an order allowing the claim - HELD THAT:- On perusal of the assessee's letter and having no objection from the side of Ld. DR, we allow the request of the assessee to withdraw the appeal. Accordingly, the grounds raised by the assessee are dismissed as "withdrawn".
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2019 (1) TMI 2003
Condoning the delay in filing of appeal - late filing of appeal before Ld. CIT(A) - late filing fee demand mandated by section 234E through an intimation processed u/s 200A - HELD THAT:- We are of the considered view that the reasons given for delay by the assessee are not persuasive enough to permit its condonation. The assessee had no "sufficient cause" in terms of section 249(3) of the Act, for not presenting the appeal within the prescribed period before Ld. CIT(A). Hence the same were rightly dismissed. Therefore, we see no reasons to interfere into or deviate from the findings recorded by the Ld.CIT(A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these grounds raised by the assessee stands dismissed.
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2019 (1) TMI 2001
Benefit/perquisite u/s. 2(24)(iv) - additions as on account of notional interest - As argued assessee has neither received any interest income nor any interest income has accrued to it. It is only a real income that can be brought to tax. In the absence of any real income, there could be no taxability. The addition made by the A.O. are of hypothetical income and not of any real income - HELD THAT:- The matter requires reconsideration at the level of the A.O. The Ld. CIT(A) in this case following his Order for the A.Y. 2010-2011 allowed the appeal of assessee. The Ld. D.R. however filed copy of the Order of the Tribunal [2018 (3) TMI 1575 - ITAT DELHI] Dated 26.03.2018 in the case of same assessee in which for A.Y. 2009-2010 [2018 (3) TMI 1575 - ITAT DELHI], the Tribunal has considered the similar issue in Departmental Appeal on Ground No.3 - “On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the A.O. on account of benefit of perquisite under section 2(24)(iv) of the I.T. Act, 1961
Following the reasons for decision of the Coordinate Bench of the Tribunal, we set aside the Orders of the authorities below and restore the matter in issue to the file of A.O. for reconsideration as is directed by the Tribunal vide Order dated 26.03.2018 [2018 (3) TMI 1575 - ITAT DELHI] Appeal of the Department is Allowed for statistical purposes.
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2019 (1) TMI 1999
TP Adjustment - international transaction of revenue nature between the assessee and the AE in the relevant financial year - submissions made by the assessee and evidences filed to justify its claim that there is no international transaction of revenue nature and also objecting to the transfer pricing adjustment made by the Transfer Pricing Officer were not considered by the DRP - HELD THAT:- In our considered opinion, if for justifying its claim that no transfer pricing adjustment was required to be made in the given facts and circumstances of the case, the assessee makes certain submissions and furnishes evidences to support such claim, the Departmental authorities are duty bound to not only consider the submissions of the assessee but examine the evidences submitted.
Non–consideration of the submissions and evidences furnished by the assessee amounts to violation of rules of natural justice. We are inclined to restore all the issues raised in the present appeal to the DRP for de novo adjudication after due opportunity of being heard to the assessee. Grounds raised are allowed for statistical purposes.
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