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2019 (1) TMI 1963 - ITAT PUNE
Deduction u/s.80IA - manner of computation of deduction qua the set off of carry forward of losses - Disallowance of valid as there are no actual profits available with the assessee - Claim for second year - AO disallowed the claim of the assessee in the instant year too on the ground that the notional losses of the windmill undertaken must be first set off against the profits of the windmill - HELD THAT:- We find that there is no dispute on the fact that the assessment year 2009-10 is the initial assessment year in the hands of Kirloskar Oil Ltd. The dispute is only with respect to the manner of computation of deduction qua the set off of carry forward of losses. Further, we find there is no clarity as to the outcome of appeal by the Revenue for the A.Y. 2009-10 in the hands of Kirloskar Oil Ltd. who is the owner of the unit before demerger.
In this case, assessee acquired windmill undertaking from the Kirloskar Oil Ltd. A.Y. 2009-10 is the initial assessment year in the hands of Kirloskar Oil Ltd. Hence, the A.Y. 2010-11 is the 2nd year in the hands of the assessee. Otherwise, there is no clarity in the orders of the AO on the amount of loss validly quantified in the hands of undertaking at the time of demerger to the assessee. Therefore, there is requirement of basic details on the said issue qua the figures of losses and profits over the years of the undertaking.
Law is more or less settled on this issue on the issue of manner of set off of notional losses of earlier assessment years which was already set off against the profits of the other undertakings. The judgmental law does not permit the set off of notional losses by the AO for eating away the eligible profits for the year under consideration.
Case of CIT Vs. Hercules Hoists Ltd [2017 (6) TMI 1125 - BOMBAY HIGH COURT]is one such judgment which is required to be regarded and applied to the facts of the present case. In our considered opinion, this issue required fresh consideration at the level of CIT(A) for applying the binding judgments on the issue. Ld. Counsel for the assessee is also directed to supply necessary judgments on the specific issue of the manner of computation of deduction u/s.80IA(4) of the Act in the second year of the block of assessment years specified in the law. With these directions, we allow Ground No.3 for statistical purposes.
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2019 (1) TMI 1962 - ITAT AHMEDABAD
Depreciation @60% on the equipments connected to V-SAT (i.e. Transformer, UPS etc.) - HELD THAT:- As we can see, V-SAT cannot function in isolation without the help of computer. Therefore, as relying on BSES YAMUNA POWERS LLD / BSES RAJDHANI POWERS LTD.[2010 (8) TMI 58 - DELHI HIGH COURT] where in it is held that computer accessories and peripherals such as printers, scanners and server form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are part of the computer system, they are entitled to depreciation at the higher rate of 60%.Thus assessee is entitled for 60% depreciation. Thus, this ground of revenue is dismissed.
Disallowance of administrative expenses u/s. 14A - HELD THAT:- CIT(A) has rightly restricted as administrative expenses u/s. 14A and same does not require any kind of interference at our end. Thus, we dismiss this ground of appeal of the revenue.
Disallowance of amount paid in respect of provision for Employee Long-term Compensation Plan - HELD THAT:- As we can see, ld. A.O. had disallowed the provision for leave encashment as no payment has been made against the said provision during the year. In the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME COURT] has held if a liability has been ascertained with a reasonable certainty and the actual quantification is not material to claim the expenditure.Therefore, respectfully following the aforesaid Hon’ble Supreme Court judgment and in our considered opinion, the ld. CIT(A) has rightly granted relief to the assessee. Therefore, this ground of appeal is dismissed.
Disallowance of weighted deduction u/s. 35(2AB) of recurring expenses related to building municipal taxes and salary to Mr. C. Dutt. - HELD THAT:- In this case, ld. CIT(A) has followed assessment year 2005-06 [2012 (7) TMI 273 - ITAT AHMEDABAD] to allow the claim - Decided against revenue.
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2019 (1) TMI 1961 - MADRAS HIGH COURT
Entitlement to deduction of lease equalisation charge - whether the deduction on account of lease equalisation charges from lease rental income can be allowed under the Income Tax Act, 1961, on the basis of Guidance Note issued by the Institute of Chartered Accountants of India (ICAI)? - HELD THAT:- As decided in VIRTUAL SOFT SYSTEMS LTD. [2018 (4) TMI 1472 - SUPREME COURT] it is wrong to say that the Respondent claimed deduction by virtue of Guidance Note rather it only applied the method of bifurcation as prescribed by the expert team of ICAI. Further, a conjoint reading of Section 145 of the IT Act read with Section 211 (un-amended) of the Companies Actmake it clear that the Respondent is entitled to do such bifurcation and in our view there is no illegality in such bifurcation as it is according to the principles of law. Moreover, the rule of interpretation says that when internal aid is not available then for the proper interpretation of the Statute, the court may take the help of external aid. If a term is not defined in a Statute then its meaning can be taken as is prevalent in ordinary or commercial parlance. Hence, we do not find any force in the contentions of the Revenue that the accounting standards prescribed by the Guidance Note cannot be used to bifurcate the lease rental to reach the real income for the purpose of tax under the IT Act.
We are of the view that the Respondent is entitled for bifurcation of lease rental as per the accounting standards prescribed by the ICAI. Moreover, there is no express bar in the IT Act regarding the application of such accounting standards. - Decided against revenue.
Levy of interest u/s 234D - HELD THAT:- The issue is settled by the judgment of the Supreme Court in the case of Commissioner of Income Tax -I V. Reliance Energy Ltd. [2013 (10) TMI 280 - SUPREME COURT] wherein the Supreme Court holds that the provisions of section 234D would be attracted in the case of assessments made after the date of its insertion, being 01.06.2003.
In the instant case, the orders of assessment for Assessment Years 1999-2000 and 2002-03 are 18.03.2005 and 31.03.2005, both being subsequent to 01.06.2003. Accordingly, the provisions of section 234D would stand attracted in both cases. Decided against the assessee.
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2019 (1) TMI 1955 - CALCUTTA HIGH COURT
Exemption u/s 11 - assessee has given donation to a trust which is involved in the bogus transactions - HELD THAT:- We find that the activities of the trust in relation to its education activities have not been doubted and on the basis of same activities various registrations u/s 12A, 80G and 10(23C) were awarded to the assessee. Simply the assessee has given donation to a trust which is involved in the bogus transactions cannot be the basis for the denial of the registration certificates - Decided in favour of assessee.
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2019 (1) TMI 1954 - MADRAS HIGH COURT
Validity of Reopening of assessment u/s 147 - Petitioner having not filed the objections before the AO against the reasons stated for re-opening - HELD THAT:- Petitioner by way of their communication requested the Assessing Officer to provide the reasons for re-opening the assessment. Consequently, the AO furnished those reasons through their communication. Even though such communication intimating the reasons for re-opening was received by the assessee, admittedly, they have not chosen to file any objections before the Assessing Officer. Needless to say that when no objection is received from the assessee, on the reasons set out for re-opening the assessment, the Assessing Officer cannot be found fault with in passing the consequential assessment order dated 07.12.2018 under Section 143(3) r/w 147 of the IT Act,1961. This is what happened in the present case.
Therefore, the petitioner having not filed the objections before the Assessing Officer against the reasons stated for re-opening, is not entitled to question about the re-opening before this Court by way of filing the present writ petition. On the other hand, it is for the assessee/petitioner to file a regular statutory appeal before the First Appellate Authority, as this Court is not inclined to entertain this writ petition only on the above stated reasons. The other contentions raised on merits of the assessment are not considered by this Court by expressing any view.
Writ petitions are disposed of, by granting liberty to the petitioner to file a statutory appeal before the Appellate Authority by raising all the contentions within a period of four weeks from the date of receipt of a copy of this order.
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2019 (1) TMI 1953 - ITAT AHMEDABAD
Determination of income from Kalhar Project - AO has treated the assessee as owner of Kalhar Project whereas the case of the assessee is that it is a developer - HELD THAT:- Stand of the assessee before the AO was that being a developer, its rights were limited to receive development fees on completion of project. The society is owner and has right, title and interest on work-in-progress. This stand of the assessee has been accepted by the CIT(A) in both the assessment years. Contrary to this stand, nothing has been brought to our notice. The assessee has demonstrated that it was working only as a developer and alleged collection over expenditure cannot be treated as its business income, rather, it was a liability in the balance sheet. Therefore, we are of the view that the CIT(A) has rightly deleted this addition and, no interference is called for. Similarly, in A.Y.2009-10 and addition was made on account of excess of collection over expenses. It was deleted by CIT(A). We do not find any error in the order of the ld.CIT(A). Thus, this ground is rejected in both years.
Estimation of profit on WIP at 8% of the various projects - HELD THAT:- Assessee was working as a developer. It was not owner of work-in-progress. Moreover, on completion of project, it used to offer receipt received in the shape of development fees and such receipts have been recognized on completion of project. Consistently, this has been shown by the assessee.
AO has made an addition on hypothetical basis by treating the WIP belonged to the assessee. It has been contended before us that the AO has invoked Accounting Standard-7 which otherwise applicable on contractor. The assessee is a developer, and AS-7 is not applicable. After going through the finding of the ld.CIT(A) and relying upon the order of the ITAT in the assessee’s own case for the Asstt.Year 1997-98, we are of the view that 8% profit on alleged WIP cannot be estimated in the case of the assessee. Hence, the ld.CIT(A) has rightly deleted this addition in both the years. No other ground has been agitated by the Revenue in the Asstt.Year 2008-09. Hence, its appeal is rejected.
Accrual of receipts - HELD THAT:- Efforts at the end of the AO are to somehow to make the assessee the owner of the project and assess any type of receipts by the assessee. In his first attempt, he assessed gross collection over expenditure out of booking amount. In that effort also he treated the assessee as an owner of the project. Thereafter, the second outcome of his understanding is estimation of profit at 8% of the work-in-progress. In both these issues, the ld.CIT(A) has held that the assessee is not owner of the project nor WIP related to it. Hence, excess of collection over the expenditure or estimation of profit in the WIP cannot be assessed in the hands of the assessee. In the third set, he construed that if after signing memorandum of satisfaction between the ultimate buyer vis-à-vis the assessee, who developed the project, any receipt is being received, then it will be income of the assessee. The assessee again emphasised that whatever amount has been received, it was in fiduciary capacity of trustee of these co-operative societies for whom it has been worked out development activity. The ld.DR failed to bring any material to our mind which can demonstrate that these receipts were meant for the assessee, and income qua this receipt accrued to the assessee.
Reopening of assessment u/s 147 - HELD THAT:- AO harboured a belief that income has escaped assessment in the case of assessee on the basis of material found during the course of search at the premises of vendee who alleged to have purchased the plot from the assessee, and disclosed cash payment over and above one stated in the sale deed. Revenue was possessing statement of vendee recorded under section 132(4) and a diary showing details of payment. Thus, there was information possessed by the AO for harbouring a belief that income has not been rightly accounted for by the vendor. The AO has to only form a prima facie opinion which has formed on the basis of information came to the notice on account of search at the vendee’s premises. Therefore, this ground of appeal is rejected in both the years.
Disallowance u/s 14A - HELD THAT:- A perusal of the assessment order would indicate that the AO has worked out interest expenditure at ₹ 1,56,494/-. No doubt, this expenditure cannot be worked out, once the assessee has demonstrated the availability of more interest free funds, then investment made by it. But the ld.AO further worked out a sum of ₹ 1,36,936/- at the rate of 0.5% of the average value towards administrative expenditure under Rule 8D. CIT(A) has not given any justification for deleting this amount. AO has reproduced submissions made by the assessee, wherein it has submitted that interest expenditure was not incurred by the company for the purpose of deriving exempt income, but it has not given any explanation qua expenditure attributable towards administrative purpose. Considering the above aspects, we allow this ground of appeal partly and confirm addition of ₹ 1,36,936/- out of ₹ 2,93,430/- made by the AO. This ground of Revenue is partly allowed.
Addition on account of cessation of liability or non-genuineness of the liability available in the accounts - HELD THAT:- AO merely submitted that the assessee was requested to discharge its onus. All these details were already submitted to the AO during the appellate hearing also, when remand report was called for. The difficulty is that the AO does not want to apply his mind and does not want to carry out the exercise directed by the higher authority. He on lame excuse of assessee failing to give supporting evidence again made addition. The ld.CIT(A) again verified it and deleted. Before us, nothing has been produced by the AO as to how reconciliation, regrouping and reclassification of the liabilities in the accounts are wrong. No report from the AO has been called for by the CIT(Admn.) who authorizes for filing of appeal. Even before us, the ld.DR unable to demonstrate how the liability has ceased and this addition deserves to be made. Taking into consideration the details submitted by the assessee, discussion made by the ld.CIT(A) in the quantum order i.e. dated 23.3.2010 and re-appreciated again by the ld.CIT(A) in the impugned order, we do not find any merit in this appeal
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2019 (1) TMI 1952 - ITAT MUMBAI
GP estimation on bogus purchases - HELD THAT:- We found that assessee has already disclosed GP of 23%, 20% in the A.Y.2010-11 and 2011-12 under consideration. Assessee had also filed quantitative details of purchases and sales before the lower authorities. Considering the various judicial pronouncements placed on record, vis-à-vis GP rate declared by the assessee, we direct the AO to restrict the disallowance to the extent of 5% of alleged bogus purchases.
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2019 (1) TMI 1951 - ITAT, BANGALORE
TP Adjustment - applicability of MAP proceedings to non-US - applicability of percentage of same margin for remaining transaction - HELD THAT:- As considered MAP proceedings and resolutions and the judicial decision and working procedure are in agreement with the submissions made by the learned AR on this issue for applicability of some margin be applied for remaining 16% of the transactions of the assessee and accordingly this ground of appeal of the assessee is allowed for statistical purposes. We direct the TPO accordingly.
Lease on equipment being capital in nature - AR could not substantiate with any evidence that the transaction is non-financial lease and on perusal of the agreement as referred to by the assessee, it is in the nature of financial lease and even before us no evidence has been filed to substantiate that it is not a transfer of asset from the beginning to end of the period of lease. We found that the assessee, as per the financial lease agreement, has an option to purchase the asset on completion of term and on this aspect, AO has to consider. Therefore, we consider it appropriate to remit this issue to the AO for verification of financial lease agreement and also assessee shall file tripartite agreement in respect of lease.
Reimbursement of salary expenses on employees - Assessee, as per audit accounts for the said accounting year referred at page 528, the managing director has been a signatory and the assessee undertakes to file Form No. 32 and Board Resolution to that effect. Further, after hearing for a long time, the learned DR has brought to the notice of the bench that this issue was referred to Special Bench whereas we, accept the decision of the special Bench in particular to this case - CIT(A) also made observations that the assessee has not substantiated before lower authorities about appointment of managing director with any evidence and further we are of the substantive opinion that the matter was referred to Special Bench, But the facts have not been verified by the AO in respect of managing director. Therefore, both the parties have agreed for the same and there is no loss of revenue to the department, if the matter is restored to the file of the AO for verification and examination and by that time we are of the considerable hope that the decision of the special bench also be available to the AO - we are of the substantive opinion that the matter is restored to the file of the AO as agreed by both the parties for verification and examination and the assessee shall co-operate in submitting information as expeditiously as possible.
SAP implementation charges - We are of the opinion that when the project is not implemented and there is no expenditure claimed, such type of expenditure shall not be clubbed with revenue expenditure without matching concept of income and expenditure is applied. Therefore, the claim of the assessee on this aspect cannot be considered and we confirm the action of the CIT(A) on this ground and dismiss the ground of appeal.
Non-deduction of TDS u/s 194J - Fee for providing internet / broadband facility - HELD THAT:- Assessee has simply obtained broadband / Internet facility from the service provider M/s. Tata Indicom. It is not a case where a service contract has been entered into. The facility is open to all and sundry and any member of the public can avail of it. In such circumstances, the view of the AO that the nature of service rendered as an element of implicit contract is struck down and therefore, the addition cannot be sustained in first appeal.
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2019 (1) TMI 1948 - ITAT KOLKATA
Addition u/s 68 - Unexplained share capital along with the share premium - burden of proofs viz. identity of the creditor, his creditworthiness and genuineness of the transaction u/s.68 - CIT-A deleted the addition - HELD THAT:- As the net owned funds of each share applicant were several times more than the investment made in equity of the assessee. It is evident that each share applicant had substantial resources of their own compared with the total investible funds available with each share applicants and that investment made in the equity shares and the assessee company was not significant. We note that the AO did not point out any defect or infirmity in the documents placed on record by the assessee as well as the share subscribers. Thus the creditworthiness of the aforesaid share subscribers cannot be disputed.
Assessee had produced the aforesaid documents to explain the nature and source of the share capital along with share premium of the four corporate shareholders. We note that the AO had accepted the share capital subscribed by these four corporate entities. However, without pointing out any defects has arbitrarily without giving any reason by a cryptic order has added the entire share premium which was also given by the very same four corporate entities u/s 68 of the Act. The Ld. AR brought to our notice that the similar additions were made by the same very AO in five cases wherein the AO accepted the share capital but added the share premium which action of the AO was not upheld by the Tribunal.
As share premium cannot be added in the hands of the assessee u/s. 68 of the Act since the proviso was inserted u/s 68 of the Act only from AY 2013-14 and similar additions made only on share premium was directed to be deleted and which action has been upheld by the Hon’ble Bombay High Court in Pr. CIT Vs. Apeak Infotech [2017 (9) TMI 1590 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2019 (1) TMI 1946 - JHARKHAND HIGH COURT
Applicability of the provisions of Section 206C(1) in relation to certain instances of bulk sale of coal to other units - default in collection of TCS - HELD THAT:- Admitted position is that the entire shareholding of the writ petitioner is owned by the State of Jharkhand. Thus the writ petitioner comes within the ambit of the expression "public sector company".
Provisions of Section 206C(1) of the Act cannot apply to the writ petitioner irrespective of the fact as to whether the writ petitioner is the end user of the coal purchased or it is a trader of coal. The Income Tax authority has solely relied on the aspect that the writ petitioner was not the end-user of coal, ignoring the fact that a public sector company was kept outside the purview of the expression "buyer" as specified in Section 206C(1) of the Act. In such circumstances, we are unable to sustain the order of the Income Tax authorities in which liability to collect tax at source from the buyer has been made applicable in the case of the writ petitioner.
Writ petitioner being a wholly owned company of the State of Jharkhand cannot be subjected to the provisions of Section 206C(1) of the Act to the extent the said Section covers a buyer, having regard to the Explanation (aa) to the aforesaid provision read with Section 2(36A) of the Act. We accordingly direct the Income Tax authorities to refund the sum collected on account of TCS to CCL treating the writ petitioner as buyer under the aforesaid provision and CCL in turn shall refund the said sum to the writ petitioner.
For the purpose of determining the exact quantum of sum collected, the Deputy Commissioner of Income Tax, TDS Circle, Ranchi shall give a hearing to both the writ petitioner and the CCL and this quantification exercise shall be completed within a period of 10 weeks from the date of communication of this order. Learned counsel for the Income Tax authorities wanted the regular refund course to be followed in this case. We, however, do not think such a course ought to be followed as ex facie there has been collection of income tax without the authority of law in the present case and the Hon'ble Supreme Court in the case of Corporation Bank [2008 (11) TMI 387 - SUPREME COURT] had directed refund of the amount in a proceeding arising out of a writ petition. WP allowed.
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2019 (1) TMI 1942 - BOMBAY HIGH COURT
Deduction u/s. 80IB (10) - denial of deduction as assessee has not completed the project within the stipulated time - requirement of obtaining completion certificate in terms of the amendment made in respect of Section 80IB(10) - ITAT allowed the claim - HELD THAT:- This issue now stands concluded against the revenue and in favour of the revenue-assessee by the decisions of this Court in case of Sai Krupa Developer [2014 (10) TMI 868 - BOMBAY HIGH COURT] and M/s Krish Enterprises [2018 (3) TMI 590 - BOMBAY HIGH COURT]. In the above cases this court upheld the view of the Tribunal that in cases where comment certificate has obtained before 31st March 2005, there was no requirement of obtaining completion certificate before a particular date. No substantial question of law.
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2019 (1) TMI 1939 - ITAT RAIPUR
GP Estimation of undisclosed sales - HELD THAT:- The Revenue has find out deposits made in the bank account was from unrecorded sales and this is not disputed. With regard to this proposition, the judicial pronouncements placed before us for consideration of various High Courts, the ruling of law is absolutely clear that whenever it is accepted that the deposits are from unrecorded sales or from sales which are not recorded in the books of account then the entire deposits cannot be brought to tax. It is only the profit element involved in those unrecorded sales which can be brought to tax.
As case of the assessee it is with regard to unrecorded sales for which the judicial view is absolutely clear that only profit to be taxed in these cases.
Therefore, taking entire facts into consideration and the judicial pronouncements placed herein above before us, we hold @10% GP of undisclosed sales to be added to the income of the assessee.
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2019 (1) TMI 1938 - ITAT RAIPUR
Disallowance u/s. 14A r.w.r. 8D - Income from shares is exempt from tax - assessee submitted that assessee has not earned any exempt income and therefore provisions of section 14A are not applicable - HELD THAT:- It is an undisputed fact that on the investment made by the assessee, no exempt income has been earned during the year. We find that Hon'ble Gujarat High Court in the case of CIT Vs. Cortech Energy P. Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] has held that when there is no claim for exempt income, Section 14A would have no application.
We also find that in the case of CIT Vs. Holcim India P. Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] has held that where no dividend income was earned by assessee, disallowance u/s. 14A is not warranted. Further the Balance Sheet of assessee reveals that the availability of interest free funds in the form of Share Capital and Reserves and Surplus is much more than the investment held by the assessee. On the issue of availability of free funds being more than investment, we find that Hon'ble Bombay High Court in the case of HDFC [2016 (3) TMI 755 - BOMBAY HIGH COURT]
Before us Revenue has not pointed any contrary binding decision nor has demonstrated that the aforesaid decision has been set aside or overruled by higher judicial authority. Considering the totality of aforesaid facts, we are of view that in the present case no disallowance u/s. 14A us caked for. Thus, the grounds of appeal of assessee is allowed
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2019 (1) TMI 1934 - ITAT KOLKATA
Allowable business expenses - allowing the expenses as revenue expenses incurred prior to setting up of the business - HELD THAT:- In the case on hand, the assessee has already set up the basic infrastructure required, in the form of an office having employees with necessary skills. It also obtained a contract from NTPC. On these facts, we uphold the finding of the ld. CIT(A) that the assessee has setup its business. In the result, this issue is adjudicated in favour of the assessee.
Intra head set off - Assessee earned interest income which has been assessed by the A.O. under the head income from other sources - A.O has mentioned that business loss of earlier years cannot be set off against the income from other sources of the current year - HELD THAT:- Perusal of the assessment order shows that the business losses are of current year which can be set off against income from other sources of the current year. After considering the relief given in the proceeding paras, A.O is directed to set off the remaining losses against income from other sources - Decided against revenue.
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2019 (1) TMI 1927 - ITAT VISAKHAPATNAM
Addition u/s 2(24)(x) r.w.s. 36(1)(va) - delayed employees’ contribution to provident fund - Contribution received from the employees paid before due date of filing of the return - HELD THAT:- As decided in M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD. AND VICA-VERSA [2016 (9) TMI 1040 - ITAT VISAKHAPATNAM] we are of the view that there is no distinction between employees’ and employer contribution to PF, and if the total contribution is deposited on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made towards employees’ contribution to provident fund. The CIT(A) after considering the relevant details rightly deleted the additions made by the A.O. We do not see any reasons to interfere with the order of the CIT(A). Hence, we inclined to uphold the CIT(A) order and dismiss the appeal filed by the revenue
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2019 (1) TMI 1926 - ITAT INDORE
Deduction u/s 80IB(10) denied - No ownership to land - permission from the Nagar Nigam not valid - when the permission was not validly issued, therefore completion certificate for the same would also not be validly given, therefore, the A.O. disallowed the claim of deduction - as per AO Assessee is not undertaking development and construction of housing projects. The assessee is not owner of the land of which project is claimed to have been undertaken - HELD THAT:- As in the case of CIT Vs. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] wherein the Hon'ble High Court was of the view that the ownership of the land is not sine-qua-non for claiming deduction u/s 80IB(10) of the Act. Therefore, in our considered view, this objection of the A.O. is contrary to the judicial pronouncements cannot be sustained.
A.O’s objection that the assessee is merely acting as a contractor to the customer to whom land is independently sold and there after construction is being done as per agreement. This issue was examined by the Tribunal in original proceedings, wherein it has been decided in favour of the assessee. There is no change into facts and circumstances. Hence, this objection is also not sustained.
No valid permission - A.O. of the view that when the permission from the Nagar Nigam is not valid since same has been taken before acquiring the land, since we have not sustained the objection of the A.O. that ownership of land on which project is claimed to have been undertaken, we therefore, do not find any merit into this objection of the A.O. This objection is also not sustainable. Hence, same is rejected.
Disallowance u/s 14A - contention of the assessee is that the judicial pronouncement wherein it has been held that if the assessee has not earned exempt income in a particular accounting year, the resort to section 14A of the Act cannot be adopted - HELD THAT:- Admittedly, the assessee had not pressed ground against invoking the provisions of section 14A of the Act. In the ordinary circumstances, the assessee would have not been given an opportunity, but in the present case where the judicial pronouncement came later to the assessee’s withdrawal of the ground, we deem it proper in the interest of justice that atleast an opportunity by the Ld. CIT(A) should be given. We therefore restore this ground of cross objection to the file of the Ld. CIT(A) for decision afresh. The cross objection filed by the assessee is allowed for statistical purposes.
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2019 (1) TMI 1922 - ITAT MUMBAI
Estimation of income - bogus purchases in case of a diamond trader - CIT(A) sustaining addition of 3% of bogus purchase as against 8% done by the A.O. - HELD THAT:- Sales have not been doubted. No defect in purchase documentation has been noted. In identical case, in the case of M/s. Choron Diamond (I) Pvt. Ltd. [2017 (11) TMI 184 - ITAT MUMBAI] Sales have not been doubted. No defect in purchase documentation has been noted.Coordinate Bench while sustaining the order of the Ld.CIT(A) also considered the report of Task Group for Diamond Sector submitted to Department of Commerce, wherein it was submitted that net profit in diamond manufacturing is in the range of 1.5% to 4.5% and in trading it is in the range of 1% to 3%
The Task Group for Diamond Sector submitted to Department of Commerce also suggests that the profit margin in trading of goods is in the range of 1% to 3%. In the circumstance we direct the Assessing Officer to estimate the profit element from the purchases treated as non-genuine at the rate of 2% uniformly for all the Assessment Years 2007-08, 2008-09, 2010-11, 2011-12 and 2013-14
As in the present case the ld. CIT(A) on similar reasoning has directed 3% disallowance. The A.O. himself has made similar disallowance in the subsequent years. In our considered opinion, there is no infirmity in the same. Accordingly, we uphold the same.
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2019 (1) TMI 1918 - ITAT MUMBAI
Addition being provision for enhanced compensation on land acquisition - court has not yet quantified the exact compensation and interest payable - CIT-A deleted the addition - HELD THAT:- We in agreement with the view taken by the CIT(A) that the A.O on the basis of misconceived facts had made an addition in the hands of the assessee. D.R had also not placed before us any such material or raised any such contention which could persuade us to conclude that the factual observations of the CIT(A) suffer from any infirmity - the aforesaid expenses viz. (i). interest on service tax on transport of goods; (ii). Interest on Kerala State General Tax and (iii). Interest on leasehold land acquisition payments being in the nature of a revenue expenditures were allowable as a deduction while computing the income of the assessee, thus finding no infirmity in the order of the CIT(A) who had rightly deleted the addition - Decided against revenue.
Nature of expenditure - Addition on account of acquisition of land expenses - expense is related to the acquisition of land and cannot be revenue expenditure - CIT-A deleted the addition - HELD THAT:- Expenditure incurred by the assessee pursuant to an understanding with the State government of Kerala was in the course of its business of mining, hence the same being clearly in the nature of a revenue expenditure was to be allowed as a deduction while computing its income for the year under consideration. Apart therefrom, we find that the issue under consideration as regards the allowability of the aforesaid expenditure is squarely covered by the order passed in the assesses own case - We thus finding ourselves to be in agreement with the view taken by the Tribunal, thus are of the considered view that the amount incurred by the assessee was rightly claimed as a revenue expenditure. We thus not finding any infirmity in the order of the CIT(A) wherein the latter had ordered deletion of the addition - Decided against revenue
Addition on account of school expenses at Orissa - expense is related to the running of the school and not wholly and exclusively for the purpose of business - CIT-A deleted the addition - HELD THAT:- The aforesaid expense which had strictly been incurred by the assessee pursuant to government directive since 1990 onwards, as rightly observed by the CIT(A) was in the nature of a revenue expenditure which was to be allowed while computing the income of the assessee for the year under consideration. We thus finding ourselves to be in agreement with the view taken by the CIT(A) in context of the issue under consideration, uphold the his order. The Ground of appeal raised by the revenue is dismissed.
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2019 (1) TMI 1917 - ITAT AHMEDABAD
Characterisation of income - addition as locker rent from the depositors - income from business or other sources - HELD THAT:- As i Mehsana District Central Co-operative Bank Ltd. [2001 (8) TMI 15 - SUPREME COURT] as held that locker rent derived by assessee was income from business of banking - no merit in levying locker rent on notional basis therefore, we are not inclined with the decision of the Ld. CIT(A). Appeal of the assessee is allowed.
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2019 (1) TMI 1913 - ITAT AHMEDABAD
Liability for damaged goods under the head other expenses - HELD THAT:- Issue decided in favour of assessee in its own case [2016 (7) TMI 1465 - GUJARAT HIGH COURT] provision is a liability which can be measured only by using a substantial degree of estimation and that a provision is recognized when (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation and (c ) reliable estimate can be made of the amount of the obligation - if these conditions are not met, no provision can be recognized. Therefore, we are of the view that the CIT(A) and the Tribunal have rightly disallowed the addition made by the Assessing Officer. We do not find any error in the same.
Depreciation on account of non-compete territory rights i.e. goodwill @ 25% - HELD THAT:- As decided in own case [2013 (5) TMI 610 - ITAT AHMEDABAD] issue decided in favour of assessee.
Written off advances in its P & L a/c related to advances to suppliers for purchase of material, staff advances, security deposit etc. - AO observed that only bad debt incurred due to sale of produce were allowable as an expense and in the instant case of the assessee the nature of expenses do not fall within the purview of section 36(1)(Viii), therefore, he has disallowed these expenses and added to the total income of the assessee - HELD THAT:- As observed that as per the ledger account of the assessee in the case of M/s Sellora Enterptise it had purchased finish goods on principle to principal basis and also paid to the supplier on their behalf. The assessee was purchasing the goods since April 2006 from the said party and also paid to the supplier on their behalf, however, the balance turned to debit which was not paid by the said party therefore it was written off in the books.
In respect of staff loan the assessee has advanced loan during the period of services of the employees and monthly recovery of loan was also made from the salary paid but the company could not recovered final settlement amount against due to resignation of its employees. Therefore, the company has written off of the unrecovered amount. The assessee has also given security deposit relating to the house for the staff which could not be recovered as the employees have not paid the maintenance and electricity therefore security deposit were forfeited which was written off by the assessee.
After considering the detailed findings of the Ld. CIT(A) we observed that the impugned advances made in the ordinary course of business were written off when these were irrecoverable . In the light of the above facts and after considering the detailed finding of the learned CIT elaborated with judicial findings we do not find any error in the decision of ld. CIT(A) on this issue. Accordingly, this ground of the revenue is also dismissed.
Addition u/s 41(1) - Outstanding sundry creditors - HELD THAT:- After considering the decision of on the Hon’ble jurisdictional High Court of Gujarat in the case of Commissioner of income tax -3 versus Bhogilal Ramjibhai Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT] it is noticed that there was nothing on record to suggest that there was a remission or cessation of liability that too during the previous year relevant to the assessment year in the case of the assessee. In the light of the above facts, material on record and detailed finding of the learned CIT appeal we considered that outstanding were disputed liability was not ceased to exist, therefore, we do not find any infirmity in the decision of the Ld. CIT(A) therefore the appeal of the revenue is dismissed.
Disallowance u/s 14A r.w.r. 8D - as per assessee interest free funds of the company including reserves were utilized towards purchase of investment yielding tax free dividend, therefore, the question of entire disallowance of interest etc. did not arise - HELD THAT:- With the assistance of the learned consul we have gone through the material on record and have noticed that assessee had submitted comparative statement of tax-free income and taxfree investment and the learned CIT appeal afters taking into consideration such undisputed information has rightly directed the assessing officer to recalculate the disallowance u/s. 14A r.w. Rule 8D correctly after taking into consideration the correct figure submitted by the assessee. In the light of the above facts and circumstances we do not find any infirmity in the decision of learned CIT appeal therefore this ground of appeal of the revenue is dismissed.
Disallowance on account of administrative expenses incurred towards earning exempt income - HELD THAT:- As noticed that assessee was having sufficient interest free fund as against the investment made on which exempt income was earned. We have gone through working of disallowance made u/s. 14A r.w. Rule 8D of the I.T. Rule and it is noticed that major part of the disallowance was made by the assessing officer to the amount of ₹ 20,57,946/- being 0.5% of the average investment for administrative expenditure. After considering the nature of investment made in the form of Bonds & securities we are of the view that it will be appropriate to restrict the disallowance on account of administrative expenses incurred towards earning exempt income.
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