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Income Tax - Case Laws
Showing 241 to 260 of 10077 Records
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2019 (12) TMI 1105
Disallowance on account of labour expenses - HELD THAT:- Genuineness of the payment of the wages to the temporary staff cannot be suspected as it was subject to professional tax and Provident fund. Once the genuineness of the expenses is established, then in our considered view the AO cannot occupy the armchair of the assessee and direct it to make the payment of wages at particular rate. As such it was the wisdom of the assessee for making the payment of the wages at the particular rate which cannot be questioned by the AO.
In the similar facts and circumstances the disallowance made by the AO in the case of the assessee in the earlier assessment year i.e. 2008-09 [2016 (12) TMI 1803 - ITAT AHMEDABAD] was deleted by this tribunal
Therefore, in our considered view the principles laid down by this tribunal in the own case of the assessee are squarely applicable to the case on hand. Accordingly, respectfully following the same we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him - Decided in favour of assessee.
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2019 (12) TMI 1104
Penalty u/s 271(1 )(c) - non recording of proper satisfaction in terms of provisions of section 271(l)(c) - whether the assessee has concealed particulars of income or has furnished inaccurate particulars of such income during assessment proceedings - HELD THAT:- Satisfaction recorded by the AO shows that at the time of initiating penalty AO himself was not aware enough if he has initiated the penalty proceedings on account of furnishing of inaccurate particulars of income or for concealment of income by the assessee rather mechanically sought to initiate the penalty proceedings u/s 271(1)(c) of the Act. When initiation of the penalty itself is not valid, it does not provide any cause of action as required u/s 271(1)(c) of the Act to levy the penalty on the assessee.
Moreover when AO has not recorded valid satisfaction required u/s 271(1)(c) notice issued u/s 274 read with section 271(1)(c) to initiate the penalty proceeding is not specified one so as to make out if the assessee has concealed particulars of income or has furnished inaccurate particulars of such income.
Ratio of CIT vs. SSA’s Emerald Meadows [2016 (8) TMI 1145 - SC ORDER] is applicable to the facts and circumstances of the present case because when at the time of initiating the penalty proceedings AO was not clear enough as to whether penalty proceedings have been initiated for concealment of particulars of income or furnishing inaccurate particulars of income, penalty cannot be levied. - Decided in favour of assessee.
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2019 (12) TMI 1103
Revision u/s 263 - Capital gains declared by the assessee from the sale of ancestral property as the AO has not applied the provisions of Section 45(2)and consequently the profit arising from sale of the property ought to have been bifurcated into capital gains as well as business income - HELD THAT:- In the case in hand, the fair market value of the asset shall be taken as the valuation adopted by the stamp duty authority as provided u/s 50C of the Act being full value consideration and therefore, for the purpose of computing the capital gains the said amount of ₹ 1,08,25,150/- would be deemed to be full value consideration which is the actual sale consideration. Therefore, there will be no change in the capital gains computed and declared by the assessee even after applying the provisions of section 45(2) of the Act. Resultantly, the business income, if any, from the said transfer under the provisions of Section 45(2) of the Act would be Nil being the cost of acquisition of stock in trade and the sale consideration of the said property is the same.
Even after invoking the provisions of Section 45(2) of the Act, there would be no change in the tax liability of the assessee and hence the order passed by the AO cannot be said prejudicial to the interest of the Revenue. It is undisputed proposition of law that for exercising the power u/s 263 of the Act, the Commissioner has to satisfy itself that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue.
Without satisfaction of the twin conditions that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue, the provisions of Section 263 cant be invoked. Therefore, in the case in hand, when there will be no Revenue loss even if provisions of section 45(2) is applied then in such a situation the Commissioner is not allowed to exercise its power u/s 263 of the Act merely because the AO has accepted the capital gains declared by the assessee.
Hence, impugned ex-parte order passed by the ld.PR. CIT without proper opportunity of hearing to the assessee and without establishing the order of the AO is prejudicial to the interest of the Revenue is not sustainable in law and consequently the same is quashed and set aside.
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2019 (12) TMI 1102
Deduction u/s 80P(2) - CIT(A) passed order u/s 154 wherein the claim of deduction u/s 80P was denied - HELD THAT:- In the case of Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT [2016 (4) TMI 826 - KERALA HIGH COURT] had held that when a certificate has been issued to an assessee by the Registrar of Co-operative Societies characterizing it as primary agricultural credit society, necessarily, the deduction u/s 80P(2) has to be granted to the assessee.
Full Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT [2016 (4) TMI 826 - KERALA HIGH COURT] had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P. In view of the dictum laid down by the Full Bench of the Hon’ble jurisdictional High Court (supra), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. AO shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act.
Interest on the investments with Cooperative Banks and other Banks, the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. However, as regards the grant of deduction u/s 80P on such interest income, the Assessing Officer shall follow the law laid down in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. It is ordered accordingly.
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2019 (12) TMI 1101
Reopening of assessment u/s 147 against deceased assessee - legal heirs of the deceased assessee have challenged the assumption of jurisdiction u/s 147 - HELD THAT:- The undisputed facts are that the assessee, Shri Bhura Ram had expired on 26.11.2008 as per death certificate dated 11.02.2009 issued by Jaipur Municipal Corporation. The reasons for reopening the assessment u/s 147 were recorded on 15.03.2013 and thereafter the notice u/s 148 was issued in the name of assessee on 20.03.2013. Therefore, at the time of issuance of the notice u/s 148, the assessee had already expired and the notice was thus issued in the name of deceased assessee. Further, we find that there is no subsequent notice u/s 148 which has been issued by the Assessing Officer on the legal heirs of the deceased assessee.
In the instant case, the notice issued u/s 148 in the name of the deceased assessee is a nullity in the eyes of law. Further, no notice u/s 148 has been issued in the name of the legal heirs and therefore, the provisions of section 159 cannot be invoked in the instant case. Consequently, the present reassessment proceedings initiated by issuance notice on the deceased assessee are being quashed for want of jurisdiction. - Decided in favour of assessee.
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2019 (12) TMI 1100
LTCG - exemption u/s 54F - Long term capital gain on the sale of the property by adopting deemed sale value u/snder section 50C - HELD THAT:- AO admitted the claim of the assessee for exemption u/s 54F(1)(b) in respect of investment on long term capital gain but instead of taking actual sale consideration received, has adopted the figure of sale consideration by invoking Section 50C. This is not in accordance with the provision of Section 50C which has created a deeming fiction.
Section 54F is an exemption provision and it has given its applicability in itself, therefore, Section 50C will not come under picture. The Long Term Capital Gain exemption is admissible u/s 54F(1)(b) of the Income Tax Act, 1961 wherein total taxable gain comes to ₹ 2,68,830/- only as the investment made by the assessee adopting the figure of the actual sale consideration received in consequence with Section 54F. Therefore, CIT(A) while enhancing the addition has ignored the very effect of the provisions of Section 54F. Besides this, the CIT(A) while enhancement has not given any reasons as to why the enhancement is necessary and why the assessee is not justified in adopting the figure of the actual sale consideration received. Thus the Assessing Officer as well as CIT(A) failed to justify the stand by making addition of ₹ 30,17,456/- in respect of long term capital gain without granting exemption u/s 54F - Appeal of the assessee is allowed.
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2019 (12) TMI 1099
Addition u/s 69 - unexplained cash deposits - HELD THAT:- CIT(A) did not accept opening cash balance on the ground that the assessee is not maintaining books of accounts, however, accepted the factum of sale of land earning of agricultural income and did not accept the contention that the amount so withdrawn was deposited in the bank account.
We have considered the material available on record and perused the finding of the Ld. CIT(A) the undisputed fact is that the CIT(A) accepted the fact that assessee was having agricultural income and also sold a piece of agricultural land proceeds whereof was deposited in the bank account of the assessee. It is also not rebutted by the revenue that before making deposits of sum of ₹ 10,65,000/- on 18.07.2005. The assessee had withdrawn sum of ₹ 40,000/-, ₹ 5,000/-, ₹ 7,000/- and ₹ 11,00,000/- on 04.07.2005,09.07.2005, 12.07.2005 and 15.07.2005 from the same bank account. Hence, the cash available with the assessee was higher than the cash deposited on 18.07.2005.
The revenue has not placed on record demonstrating that these sums were utilized for any other purpose. Therefore, we are unable to affirm the finding of the Ld. CIT(A) for sustaining this addition as made on the basis that purpose of withdrawal of specific sums was not given. In our view revenue should have brought some material suggesting that the money as withdrawn from the bank account was used somewhere else and it was not available with the assessee for making deposits. In absence of such facts Ld. CIT(A) ought to have accepted the source of deposit of ₹ 10,65,000/- on 18.07.2005. Hence, we direct the AO to delete this addition. In respect of the remaining addition it is noticed that the Ld. CIT(A) has not accepted the opening cash balance of ₹ 5,27,432/-. Looking to the fact that the assessee was having agricultural income and other source of income even if the opening balance is considered to be higher at least the assessee would be having cash on hand a sum of ₹ 3,00,000/- which appears to be reasonable.
Hence, the assessing officer is directed to delete the addition of ₹ 3,00,000/- being available as cash in hand.
Regarding higher consideration received in cash we are of the considered view that onus was on the assessee to prove that the cash was received in addition to sum mentioned in sale deed. Further, the provisions of section 50C would not help as same operate in the different field. The contention of the assessee is therefore rejected. Hence, out of addition of ₹ 16,04,000/- sustained by the Ld. CIT(A) we direct the AO to delete the addition of ₹ 13,65,000/-, and remaining addition of ₹ 2,39,000/- is sustained. Ground numbers 3 to 6 are partly allowed.
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2019 (12) TMI 1081
Entitled to interest on the amount refunded by the Department u/s 244A - HELD THAT:- As relying on nion of India Vs. Tata Chemicals Ltd. [2014 (3) TMI 610 - SUPREME COURT] there is no reason to deny payment of interest to the deductor who had deducted tax at source and deposited the same with the Treasury. In our opinion, this observation squarely applies to the appellant.
As a result, we allow this appeal and direct the Department to pay interest as prescribed under Section 244-A of the Income Tax Act as applicable at the relevant time at the earliest.
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2019 (12) TMI 1080
Permission by ITAT to raise additional grounds - HELD THAT:- All that the Tribunal has done is to permit the respondent to raise the additional ground. The same does not tantamount to acceptance of the additional ground on its merits. The petitioner would have the right to assail the interlocutory order, whereby additional ground has been admitted as well as the finding that the Tribunal may return on the said additional ground, in case the petitioner is aggrieved by the final order that the Tribunal may pass in the pending appeal while preferring an appeal under Section 268 of the Income Tax Act. We are, therefore, not inclined to entertain the present writ petition to assail the impugned order.
We dispose of the writ petition while directing the Tribunal to advert to the written submissions filed by the petitioner at the time of final adjudication of the pending appeal, including additional ground permitted to be raised before it.
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2019 (12) TMI 1079
Applications for selection to the post of Member, Income Tax Appellate Tribunal (‘ITAT’) - Applications not considered as valid since all their APARs were not received before the stipulated date i.e. 30.08.2018 - HELD THAT:- No infirmity in the decision of the Committee since for any selection process a cut-off date must be fixed, failing which there would be no finality to the recruitment process; and subsequent documents would be furnished by various candidates from time-to-time, especially in view of the fact that in this case, the Committee found 287 incomplete applications. Mr. Datar submits that since the department has been unable to give any reason for not sending the complete application of respondent no.1; and since furnishing of the APAR for the year 2016 – 2017 was only in the control of the department, respondent no.1 should not be made to suffer.
In the circumstances however, he says that respondent no.1 would make a representation to the Committee to enable it to examine the grievance of respondent No.1 since otherwise a competent departmental candidate would lose-out in the recruitment process.
Accordingly, we dispose of the writ petition with the observation that if a representation is made within 3 days, the Committee would examine the same.
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2019 (12) TMI 1078
Undisclosed business income - deference in income declared in ITR after survey and income surrendered during survey u/s.133A - unexplained expenditure and receipts - CIT(A) sustained the addition at ₹ 14.00 lakh thereby deleting the addition of remaining amount on account of undisclosed income - HELD THAT:- In the instant case, we are confronted with the facts which are germane to the second situation, in which some undisclosed business income was admitted to have been earned and simultaneously some undisclosed expenditure was also incurred for the incurring of income. In such a scenario, it is only the excess of one over the other, which can be charged to tax. Adverting to the facts of the instant case, it is seen that there is net outflow of ₹ 1.00 lakh which calls for addition in as much as the assessee received business receipt of ₹ 25.00 lakh outside the books of account and also spent business expenses of ₹ 26.00 lakh outside of the books of account.
The payment of commission to certain persons for fetching customers has direct relation with the running of Hotel business from which unaccounted receipts of ₹ 25.00 lakh were earned. Further, the payment of commission is a normal incidence of business and is not hit by Explanation 1 to section 37(1) of the Act. Once this is the position, we fail to appreciate as to how any addition other than ₹ 1.00 lakh on this score can be made, apart from addition of ₹ 10,71,000/- on account of investment in flat and ₹ 5,00,000/- towards additional income offered by the assessee on account of omissions and commissions. When these three amounts are added up, the total comes to ₹ 16,71,000/-. As against that, the assessee offered ₹ 17.00 lakh as additional income. In this view of the matter, there is no reason for making or sustaining any addition over and above this amount. We, therefore, order to delete the addition of ₹ 14.00 lakh sustained by the ld. CIT(A). - Decided in favour of assessee.
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2019 (12) TMI 1077
Claim of deduction u/s 54 made by the assessee on a property the assessee - Admission of additional ground for reference to the Valuation Officer - HELD THAT:- Since the additional ground raised by the assessee is for reference to the Valuation Officer and the assessee had already raised the said objection before the CIT (A), as deem it fit and proper to admit the same and adjudicate as under. Since the assessee had raised its objection to the adoption of the SRO value u/s 50C of the Act, by pointing out certain deficiencies in the property, we deem it fit and proper to set aside the order of the CIT (A) and remand the issue to the file of the AO with a direction to refer the valuation of the property to the valuation cell and recompute the capital gain after giving the assessee a fair opportunity of hearing including claim of deduction u/s 54 made by the assessee on a property the assessee.
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2019 (12) TMI 1042
Levy Fringe Benefit Tax (FBT) - Parliament Power under Entry 82 or Entry 97 of the Union List - Constitutional validity of Chapter-XII-H of the Income Tax Act - Double taxation -legislative competence of Parliament - Non inclusion of Fringe Benefit - scope of total income u/s 2(24) - Conflict with Sections 5 and 37(1) of the Income Tax Act, 1961 - HELD THAT:- Perusal of sub-section 37(1) is not contrary to sub-section (2) of Section 24 of Act, 1961. Since XII - H is an independent provision and it is not against Section 5 'total income' and one cannot draw inference that it is an anti-avoidance measure as employer. There is a nexus in introducing FBT and question of irrational concept is not attracted. Section 115-WC (2) do not violate Article 14 of constitution in terms of the above discussion on the issue.
Further question of double taxation is not attracted in view of independent provisions for taxation. The petitioners have not pointed out how Section 115-WB & WC would be self contradictory and unworkable and it is only presumption, so also in what manner Section 200(1) of the Companies Act, 1956 offends.
Perusal of various issues like extending certain benefits to the employees by the employer it is evident employers are avoiding tax, so the contention of the petitioners that all employers are tarred as tax avoiders is not tenable. Question of extending opportunity while assigning percentages under Section 115-WC may not arise, since it is a policy matter.
The contention of non inclusion of Fringe Benefit under sub-Section (24) of Section 2 and its inclusion under sub-section (43) does not vitiates provision of FBT with reference to charging section-4, since FBT is incorporated as an independent provision. The cited decisions on behalf of the petitioners do not assist in view of the fact that source of power to incorporate Chapter XII-H of the Income Tax Act, 1961 is available at 7th Schedule to Constitution read under Entry 97. Further violation of Article 14 is not made out in view of my answer to the point in the preceding paragraphs.
In that view of the matter petitioners have not made out ground to interfere with Chapter XII-H of the Income Tax Act, 1961 on Fringe Benefits or any part thereof, it is not unconstitutional and opposed to Articles 14 and 246(1) read with Entry 82, List I of the Seventh Schedule to the Constitution of India. Hence, the legislative competence of Parliament to enact Chapter XII-H is upheld.
Accordingly the above mentioned writ petitions stand dismissed.
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2019 (12) TMI 1041
TP Adjustment - selecting Future Capital Holding as comparable - Whether TPO has wrongly applied OP margin as 37.68% as against actual OP margin of 15.21% - assessee has also filed calculation giving details of computation of OP margin in the case of Future Capital Investment segment - HELD THAT:- We are of considered view that there appears to be a clerical error in calculation of OP margins. This issue is restored to the file of Assessing Officer/TPO for recomputation of OP margin in respect of Future Capital/investment segment. The TPO/Assessing Officer, after recomputing O.P margin shall apply corrected margins, in accordance with law. The ground No.1 of the cross objections is allowed for statistical purposes.
Selection of Kshitij Investment Advisory Co. Ltd as comparable - HELD THAT:- The assessee company is justified in asserting that Kshitij Investment Advisory Co. Ltd. deserves to be excluded from the final set of comparables on account of peculiar economic circumstances during the year under consideration
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2019 (12) TMI 1040
Exemption u/s 11 - addition of corpus donation - registration u/s 12AA is granted in the subsequent year then exemption refused in the earlier years - HELD THAT:- In view of the order of the Kolkata Benches of ITAT in the case of Sree Sree Ramkrishna Sanity vs. DCIT [2015 (11) TMI 119 - ITAT KOLKATA] it is of view that addition of corpus donation has already been decided in favour of the assessee by the ITAT Delhi Bench (supra) by holding that even if there was a non compliance of section 12A(b) of the Act by the assessee then the corpus donation received by the assessee is not taxable in the hands of assessee.
Registration under section 12AA is granted in the subsequent year then exemption cannot be refused in the earlier years merely for non registration under section 12A in terms of amended under section 12A of the Act. Keeping in view of the aforesaid discussion and respectfully following the precedents as aforesaid, the addition on account of corpus donation is deleted.
Disallowance on account of repair and maintenance - After considering the arguments advanced by the learned counsel for the assessee and the learned DR alongwith the documentary evidences filed by the assessee in support of his contention, books of accounts of the assessee are audited and bill and vouchers in support of the expenses has been produced by the assessee and examined by the Assessing Officer.
Assessing Officer has not pointed out any defect and has also not rejected the same by applying the provisions of section 145 of the I.T. Act. Even otherwise, all the payments were through bank channel and TDS deducted, against building repair and maintenance amount.
Therefore, keeping in view the facts and circumstances of the present case and the non rejection of books of accounts the addition in dispute is not sustainable in the eyes of law, therefore, the same is deleted by allowing the ground no. 2.
Impugned order is set aside and the additions involved in the grounds of appeal are deleted by accepting the appeal filed by the assessee.
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2019 (12) TMI 1039
Penalty levied u/s 271(1)(c) - provision for bonus claimed u/s 43B - HELD THAT:- Profit includes profit from Sri Lanka branch as well. Thereafter, the assessee has reduced the profits & losses of the overseas branch at Sri Lanka and Bangladesh, respectively. The assessee is that the assessee was under bona-fide belief that the profits of the overseas branches are taxable in the host country as the assessee is having permanent establishment in the said country. This belief of the assessee is further substantiated by the fact that the assessee has offered income from said overseas branch to tax in the host country. The DRP has given benefit of the tax credit to the assessee for the taxes paid overseas.
Whether the profits of foreign branch are liable to be taxed in India is debatable - We find that in the case of DCIT vs. Essar Oil Ltd. [2011 (8) TMI 428 - ITAT MUMBAI], the Tribunal has held that income from overseas branch is taxable in the country where branch is established. In the immediately succeeding assessment year, the Co-ordinate Bench of Tribunal in the case of very same assessee i.e. Essar Oil Ltd. vs. Addl. CIT (supra) has held that the profits of overseas branch are taxable in India. These two divergent views by two different benches of the Tribunal has made the issue debatable. The matter has travelled to the Hon’ble Bombay High Court [2016 (12) TMI 1802 - BOMBAY HIGH COURT] as admitted substantial question of law on the issue of place of taxability of profits earned by the overseas. It is a trait law that where the issue is debatable no penalty under section 271(1)(c) is leviable. We further observe that the assessee in computation of income has already disclosed profits of Sri Lanka branch though, the same were subsequently reduced from the total taxable income by the assessee. Merely for the reason that the claim made by the assessee under bona-fide belief is not accepted by the Department penalty under section 271(1)(c) of the Act cannot be levied.
Our this view is fortified by the decision rendered in the case of CIT vs. Reliance Petroproducts Ltd. (2010 (3) TMI 80 - SUPREME COURT).
It is not a fit case for levy of penalty under section 271(1)(c) of the Act. - Decided in favour of assessee.
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2019 (12) TMI 1038
Disallowance of set off and carry forward of Long Term Capital Loss of sale of quoted equity shares (STT paid) against Long Term Capital Gain arising on sale of property - whether set-off of LTCL on sale of quoted equity shares would be allowable to the assessee against LTCG earned on sale of properties keeping in view the fact that LTCG on similar transactions of sale of quoted equity shares were exempt from tax u/s 10(38)? - HELD THAT:- Concept of income including losses would apply only when the entire source was exempt from tax and not in cases were only one particular stream of income was falling in exempt provisions. The income contemplated u/s 10(38) was only a part of the source of capital gains on shares and only a limited portion of source was treated as exempt and not the entire capital gains.
In the above background, we find that various coordinate benches of Tribunal has chosen to take a view favorable to the assessee and therefore, respectfully following the same, we prefer to take similar view. Accordingly, we hold that the assessee would be entitled for set-off of Long-Term Capital Losses against aggregate Long-Term Capital Gains and entitled to carry forward unutilized losses.
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2019 (12) TMI 1037
Revision u/s 263 - claim of exemption u/s 10(10D) - income in the hands of the assessee on account of maturity receipts of the Keyman Insurance Policy - HELD THAT:- The amendment brought in by Finance Act 2013 in explanation 1 to section 10(10D) of the Act is prospective in nature and by no stretch can be termed as retrospective or clarificatory in nature and shall only apply on the keyman insurance policy assigned after 01.04.2014. Even otherwise it has been submitted before us that has the policy been not assigned by the company to its Keyman and maturity proceeds offered to tax by the company , their would have been no loss to revenue as the company had huge losses much above the maturity proceeds during the Assessment Year 2015-16.
Though Ld. Pr. CIT in the impugned order has referred to various judgments on merits as well as legality of the case but in our considered view they are not squarely applicable on the facts of the instant case and thus have no applicability on the issues raised before us.
Action of the Ld. Pr. CIT invoking the provision of section 263 can be tested on twin conditions having been satisfied or not an order sought to be revised should be erroneous and prejudicial to the interest of Revenue.
In the present case as per the Pr. CIT the assessment order is erroneous and prejudicial to the interest of revenue on the ground that by virtue of the amendment introduced in the Explanation 1 to section 10(10D) inserted w.e.f. 01.04.2014 would also be applicable in the present case as well on the basis that such explanation is clarificatory in nature. The issue related to taxability of such Keyman Insurance policies assigned in favor of Keyman or other individual has been examined has been examined by Hon'ble Delhi High Court in the case of CIT vs. Rajan Nanda [2014 (1) TMI 249 - ITAT DELHI] holding them to be exempted u/s.10(10D).
In view of this binding precedence we do not find any fault with the assessment order as the assessing officer has taken a view expressed by the Hon'ble Delhi High Court which was law of the land. Pertaining to the assessment year under appeal no view was expressed by any of the authority or the court that the clarification was introduced by the amending Act would be retrospective in nature. Therefore, it cannot be inferred that the assessment order is erroneous. Even no such clarification by the CBDT was available at the time of passing of assessment order. Thus the view expressed by the Ld. CIT(A) is not supported by any of the binding precedence.
The assessment order dated 13.12.2017 which has been set aside by the Ld. Pr. CIT invoking the powers u/s 263 of the Act is not erroneous in nature since the assessing officer has conducted adequate enquiry relating to the issue of proceeds from prematurity of LIC policy claimed to be exempted by the assessee after providing detailed information in the computation of income and various replied to the satisfaction of the assessing officer during the course of assessment proceedings.
Assessee has given detailed replies on numerous occasions which have been duly considered by the Ld. AO. We are also of the view that the assessment order dated 13.12.2017 is also not prejudicial to the interest of revenue since proceeds are on prematurity of the life insurance policies which was noted by LIC of India on its assignment changing the characteristic from Keyman Insurance Policy to Life insurance policy and no expenditure has been claimed post its assignment and also in our view as the Amendment brought in by Finance Act 2013 explanation 1 to section 10(10D) of the Act w.e.f. 01.04.2014 is prospective in nature , same is not applicable on the assessee since assignment of policy in favour of the keyman Mr. A.S. Bhatia was in October 2010 and thereafter assignment recorded by the LIC in favour of the assessee on 30.01.2013 were much before the amendment brought in the Explanation 1 to section 10(10D) of the Act effective from 01.04.2014 and thus Ld. Assessing officer was justified in accepting the claim of the alleged receipts as exempted income u/s 10(10D) of the Act.
Therefore, since twin conditions which are mandatorily required to be fulfilled by Ld. Pr. CIT before passing the order u/s 263 remains unfulfilled as the order of the Ld. AO is neither erroneous nor prejudicial to the interest of Revenue. We, therefore, are of the view that Ld. Pr. CIT was not correct in law in exercising the jurisdiction u/s 263 of the Act and cancelling the assessment. - Decided in favour of assessee.
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2019 (12) TMI 1036
Disallowance u/s 14A read with Rule 8D - HELD THAT:- A comprehensive details of investment starting from 31.3.2005 upto 31.5.2015, has been placed by the assessee before the AO. Identical issue arose in the Asstt.Year 2008-09, wherein addition of ₹ 73.30 lakhs were deleted by the Tribunal, and order of the Tribunal was upheld by the Hon’ble High Court [2017 (9) TMI 531 - GUJARAT HIGH COURT] . In the Asstt.Year 2011-12 also ITAT has deleted the disallowance, and one of us (JM) is author of the order.
Therefore, considering past history and the availability of funds with the assessee, we are of the view that the amounts which have been calculated by the assessee itself for taking care of the tax free income is sufficient, and no further disallowance is required to be made, because only two persons have been kept for tracking of these investments, and part salary payable to them have already been disallowed.
Disallowance u/s 14A is required to be added back in the book profit for the purpose of section 115JB - HELD THAT:- Disallowance worked out by the AO, and nothing left for making adjustment except the amounts the assessee itself added back, but apart from that we find that this issue is squarely covered in favour of the assessee by the decision of Special Bench of the Tribunal in the case of Vireet Investment, [2017 (6) TMI 1124 - ITAT DELHI] . From the Asstt.Year 2008-09 to 2010-11, the issue has been decided in favour of the assessee by the ITAT. It is also covered by the decision of Hon’ble Bombay high Court rendered in the case of Reliance Industries Ltd., [2019 (1) TMI 887 - BOMBAY HIGH COURT] . In brief, the outcome of this order is that the disallowance under section 14A is not required to be added back in the book profit under section 115JB of the Act.
Interest income from its subsidiary - HELD THAT:- CIT(A) has rightly held that no notional interest income is to be assumed because the assessee has not charged interest on ICDs. from subsidiary. The assessee has offered such interest income as business income in earlier years, and therefore, advancement of loan was considered for the purpose of business. To our mind, the ld.CIT(A) has appreciated the controversy in right perspective. It was in the interest of the assessee to revive its subsidiary, otherwise, its share capital as well as advances of ₹ 2278 crores would be in jeopardy. Therefore, we do not find any merit in these grounds of appeal.
Disallowance of 75% of foreign travel expenses - HELD THAT:- Foreign visit was at least partly for business purposes and, therefore, just because this visit resulted in, assuming it is correct, personal benefit to the director, the expenses incurred on the visit cannot be disallowed as personal expenses. This is at best expense of the assessee company which resulted in benefit to the director. In any event, there is no material whatsoever to come to the conclusion that 75% time on this trip was used for personal purposes of the director. The case relied upon by the CIT(A) was a case in which a detailed analysis of the activities of the director was carried out and then this conclusion was drawn. There is no such material on record in this case. Once the CIT(A) came to the conclusion that the trip was for some business purposes, it was not open to him to deny any part of deduction for these expenses- particularly when there is no material to hold that the visit was for personal purposes. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance.
Disallowance of bad debts - HELD THAT:- The moment debts have been written off in the books, it is to be allowed without expecting the assessee to demonstrate whether debts have actually become bad or not. A reliance can be made to the decision of Hon’ble Supreme Court in the case of TRF Ltd. [2010 (2) TMI 211 - SUPREME COURT] . It is altogether irrelevant, whether QFL actually paid tax or not. If a liability has ceased, then it will be added back in the taxable income of the QFL. Now, if that concern was suffering huge loss, then that cannot be the reason to disallow claim of the assessee. If this type of logic is being accepted, then every business organization was required to show profit only. This is a misplaced notion at the end of the ld.CIT(A) for rejecting the claim of the assessee. We allow this ground of appeal, and delete disallowance of bad debts. In the other words, claim of bad debt at ₹ 170.91 lakhs is allowed.
Non granting set off brought forward business loss against income from house property - HELD THAT:- A decided in own case income from warehouse has been shown under the head “income from house property” which cannot be equated by any cannon of law as “profit and gains from business or profession”.Both the lower authorities made no mistake in not allowing set off of brought forward business losses against the “Income from house property”.
Loss suffered by the assessee on sale of preferential shares - whether actual sale consideration of the shares supported by the valuation report can be replaced with fair market value of the shares? - HELD THAT:- Full value of consideration would be replaced by way of deeming provision provided in section 50C which is relatable to transfer of capital asset in the shape of land or building or both. No such provision has been provided with regard to the sale of shares. With effect from Asstt.Year 2018-19, a provision has been made for sale of shares also. It is section 50CA.
Prior to insertion of this section, there is no power with the Revenue authorities to replace the full sale consideration with fair market value of the shares. Since the ld.CIT(A) was not having jurisdiction to replace the full sale consideration disclosed by the assessee with FMV, therefore, there is no need to examine the justification of valuation report in support of sale consideration shown by the assessee vis-à-vis FMV determined by the ld.CIT(A). We do not deem it necessary to go into this issue, and make any discussion. In view of the above, we are of the view that the assessee is entitled for claim of capital loss suffered by it on sale of shares
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2019 (12) TMI 1035
Revision u/s 263 - estimation of profit @ 5% of gross business receipt - HELD THAT:- The assessee having failed to produce the books of accounts, bills, vouchers etc. during the second round of assessment proceedings; the AO had valid reasons to not be fully satisfied about the correctness and completeness of the accounts of the assessee; and therefore, the AO was justified in invoking the provisions of Section 145(3) of I.T. Act. Moreover, the Ld. Counsel for assessee has failed to bring any materials for our consideration to establish that the estimation of profit @ 5% of the gross business receipt is excessive, unreasonable, high pitched or contrary to law having regard to the facts and circumstances of the case. In view of the foregoing, we confirm the order of the lower authorities invoking provision of Section 145(3) of I.T. Act for the purpose of estimating business profits and we further confirm the estimation of business profits @ 5% of gross business receipts.
Loss on sale of machinery - addition amounts to double addition of the same amount - HELD THAT:- Aforesaid amount was part of the business loss claimed by the assessee and once that loss is disallowed, and estimated net profit is assessed as income; the aforesaid amount stands disallowed automatically. Therefore, assessee correctly submitted that there was no justification for once again making repeated addition on the aforesaid amount in the Assessment Order. DR agreed that the repeated addition made by the AO in respect of the aforesaid amount amounts to double addition of the same amount and he left it to the discretion of the Bench to give appropriate direction to the AO for deleting the double addition. As both sides are in agreement that repeated addition made by the AO amounts to double addition of the same amount; we accordingly direct the AO to delete the repeated addition.
Claim of depreciation - estimation of net profit - HELD THAT:- Both sides were in agreement that the assessee was eligible for depreciation of Income Tax Act, 1961 and Income Tax Rules, 1962. As the AO has estimated net profit and not gross profit of business, both sides were also in agreement that the depreciation as claimed by the assessee in the books stands already allowed in the estimation of net profit; and therefore, depreciation to be allowed to the assessee as per Income Tax Act, 1961 and Income Tax Rules, 1962 needs to be reduced by the amount of depreciation claimed by the assessee in the books of accounts. In view of the foregoing, and as both sides have agreed to this at the time of hearing before us, we direct the AO to allow depreciation as per Income Tax Act, 1961 and Income Tax Rules, 1962 as reduced by the amount of depreciation claimed by the assessee in the books of account.
Claim for interest expenses on business borrowing of the assessee and does not relate to interest paid / payable to the partner of partnership firm - HELD THAT:- We agree with the contention of the Ld. DR that in a case where the determination of income of the assessee is based on estimation of net profit (and not gross profit) interest expenses on commercial borrowing of the assessee are deem to have already been allowed to the assessee. Therefore, this ground of appeal by the assessee is dismissed.
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