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Income Tax - Case Laws
Showing 241 to 260 of 771 Records
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2013 (11) TMI 1316 - ITAT MUMBAI
Disallowance of Interest expenditure - Assessee has borrowed huge funds from banks and also in the form of inter Corporate deposits etc - Assessee has been making early payments to the clients when the securities are sold and receiving delayed payments on the purchase transaction from the clientele and in the process has been incurring huge interest liability which apparently has not been passed to the clientele - Assessee has not been advancing any money to facilitate the transactions of clientele instead the assessee has been giving away the sale consideration immediately without waiting for the receipt of sale proceeds and assessee has been paying the monies which come from the clients on pay out day and pay in days – Held that:- Relying upon the Hon’ble Supreme court decision in the case of Bengal Enamel Works Ltd. [1969 (12) TMI 4 - SUPREME Court], it has been held that Assessee is the best judge of the expenditure. The expenditure incurred by assessee may found to be unnecessary and unavoidable. Still the same has to be accepted by department if it is for the purpose of business. There need not be any legal obligation to incur expenditure, but the principles of commercial expediency will ultimately prevail and the” act of the assessee has to be viewed from businessman angle not from the department.
The interest paid by the assessee on borrowings was paid to various banks etc. on prevailing market rate and brokerage has been charged by the assessee on prevailing market rate. Therefore, it cannot be said that the interest expenditure incurred by the assessee was on account of any illegal activity.
Allowability of excess brokerage shown in the service tax return as compared to brokerage income shown in profit and loss account – Held that:- Assessee has been reflecting the service tax return, the brokerage on accrued basis but in profit and loss account the brokerage has been shown on actual basis on the basis of constant method adopted by the assessee - Sometime the assessee is required to reduce the brokerage at the request of the assessee during the final settlement of the bills and some time the assessee is also required to waive part of the brokerage disputed by the clients - Therefore, difference as per the service tax return and as per profit and loss account was found explainable – Decided against the Revenue.
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2013 (11) TMI 1315 - ITAT BANGALORE
Allowability of deduction u/s 80IA of the Income Tax Act – Held that:- Reliance has been placed on the assessee’s own case for the assessment year 2004-05, deduction u/s 80IA allowed to the Assessee - The Tribunal in the said order has followed another order in assessee's own case for assessment year 2005-06 - Nothing has been brought on record to show that the said decision of the Tribunal has been reversed/modified by the Hon'ble Karnataka High Court. Hence, as on date, the decision holding the field is that of the Tribunal for the assessment year 2004- 05 – No any change in facts and circumstances in the present assessment year also – No any infirmity in the order of the Commissioner of Income-tax (Appeals) in following the decision of this Tribunal in assessee's own case for assessment year 2004-05 – Deduction u/s 80IA allowed – Decided against the Revenue.
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2013 (11) TMI 1314 - ITAT MUMBAI
Selection of comparables – Comparable being Vishal Information Technologies Ltd – Held that :- Annual accounts that Vishal Information Technologies Ltd was outsourcing a considerable portion of its business - Assessee is mainly engaged in rendering services at its own and not outsourced - Accordingly this case was excluded from the list of comparables.
Comparable being CMC Limited – Held that:- CMC’s related party transactions (RPTs) are much more than 25% of the total revenue – Reliance has been placed upon The Delhi Bench of the Tribunal in the case of ACTIS Advisers (P.) Ltd. v. Dy. CIT [2012 (10) TMI 779 - ITAT, DELHI], wherein it has been held that a case can be taken as uncontrolled if its related parties transactions do not exceed 25% of the total revenue – CMC Ltd., rejected as comparable.
Comparable being R Systems International Ltd. – Held that:- Unless the financial year-end of a comparable case matches with that of the assessee, it cannot be considered as comparable because the figures of different financial year endings are distorted – Reliance has been placed upon the judgment in the case of Automation India Ltd. v. Dy. CIT [2009 (2) TMI 736 - ITAT PUNE].[IT Appeal No. 4 (PN) of 2008, dated 11-2-2009], wherein it has been held that it is mandatory for the purposes of comparing the data of an uncontrolled transaction with an international transaction that the same must relate to the financial year ending similar to that of the assessee – Hence, excluded from the list of comparable.
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2013 (11) TMI 1313 - ITAT MUMBAI
When the conditions prescribed u/s 72A(2) are not satisfied by the amalgamated company for set-off of losses and depreciation – Set-off of losses of the amalgamating company in the hands of amalgamated company u/s 72A(1) of the Income Tax Act – Held that:- In a case where any of the conditions laid down in sub-section (2) are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the amalgamated company shall be deemed to be income of the amalgamated company chargeable to tax for the year in which such conditions are not complied with – Section 72A(3) of the income tax act gives logical meaning to consequences flowing from the failure to comply with the requirements with in the specified number of years as set out in sub-section (2) after having availed the benefit of set off and carry forward of accumulated loss of the amalgamating company as per sub-section (1) of section 72A. It transpires on a conjoint reading of sub-sections (2) and (3) of section 72A that the amalgamated company is entitled to set off and carry forward the brought forward business losses and unabsorbed depreciation of the amalgamating company from the very first year of the amalgamation. If, however, the conditions given in clause (b) of section 72A(2) are not fulfilled with in the prescribed time, then the set off as allowed in the earlier year(s) shall be deemed to be the income of the amalgamated company of the last year stipulated for compliance of such conditions – Set- off of losses allowed – Decided in favor of Assessee.
Classification of heads of income on sale of shares of Bayer (India) Ltd. as income under the head ‘Capital gain’ of ‘Income from business and profession’ – Held that:- No material has been considered or referred to verify as to whether such shares were held as 'Investment’ or 'Stock in trade’ – Matter is restored to the file of A.O for verification - If such verification divulges that the shares were held as investment, then the income from their transfer should be considered under the head ‘Capital gains’ otherwise ‘Business income’.
The relevant year of transfer(sale) of Harmer & Reimmer (H&R) Business - H&R Business was transferred to Symrise Ltd. on 30.9.2002. The sale of the business was effected pursuant to the decision of Bayer Group in Germany to hive off this business globally. Pending certain legal formalities, the assessee agreed to carry out the business on behalf of the buyer i.e. Symrise Ltd., as their custodian in India with the clear understanding that “any loss/profit arising out of the operations would belong to the buyer” – Held that:- Assessee can blowing hot and cold in the same breath – Non – reconcilable contention is made by the assessee. On one hand it is claiming to have transferred the business on 30.09.2002 and thereafter carried it as custodian of Symrise Ltd. and on the other it is claiming that the transfer of business took place on 31.03.2004 - The assessee cannot be considered simultaneously as agent of the buyer and also the owner of the business between 1.10.2002 to 31.30.2004. It is vivid that when the assessee conducted the H&R business during this period for and on behalf of Symrise Ltd. and also transferred income from such operations to them, then it cannot turn around and claim itself as owner of the business after 30.09.2002 – Confirmed the view of Commissioner(A) that the transaction of sale took place in the relevant A/Y 2003-04.
Quantum of gain/ loss – Computation of market value of stock - Held that:- Actual price of the stock realized, that is, ₹ 1.18 crore will be considered as market value of the stock on that date – Revenue authorities no where held that such value of stock actually realized by the assessee is concocted or in any manner does not represent its true market price.
There was evidence to show that the market price of the stock was more than that recorded in its books - Assessee recording higher market value in its books by showing certain profit on revaluation of stock but choosing to claim it as not taxable – In fact, there is no such material available in the facts of the instant case to show that the market value of stock was more than what was actually realized from the buyer of the H&R business - It was for the Revenue to show that the market value of the stock was more than the one which was actually realized from the buyer pursuant to the agreement - Both the transferor and transferee companies are unrelated to each other. It is not a case of the AO that there was some colorable arrangement between two independent parties to the agreement as the genuineness of the agreement has not been questioned. In such circumstances, the only conclusion which can be logically drawn is that the assessee transferred its stock at the market value recorded in the agreement at ₹ 1.18 crore. When the transferee company has paid total sale consideration of ₹ 7.12 crore, which includes a sum of ₹ 1.18 crore towards the value of inventories, then it is beyond our comprehension as to how the Assessing Officer can presume the market value of such inventories at ₹ 4.43 crore without any cogent reason – Decided in favor of Assessee.
Classification of head of Income on sale of HR business – Held that:- AO took item wise value of assets (both fixed and current) of the H&R business. He considered all other assets of H&R business as having been transferred by the assessee at book value - No chargeable income arose from the transfer of other assets. Thereafter, A.O. computed income from the transfer of stock in trade by assigning some market value to it. The resultant profit was held to be chargeable to tax as capital gain.
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2013 (11) TMI 1312 - ITAT BANGALORE
Legality of existence of firm BVRE – Held that:- Clear from documents available that firm BVRE has been accepted to be genuine by revenue in orders passed u/s. 185 of Act for AYs 1980-81 & 1984-85 - For AY 2006-07, firm BVRE has filed return of income before ACIT-I(1), Tirupathi on 30.10.2006. The said return has been accepted by revenue. Thus, prima facie, revenue has accepted genuineness and existence of firm BVRE - In light of evidence available on record, firm BVRE was genuine, legal and valid, was not defunct and was legally an existing partnership firm.
Whether HUF was partner of firm BVRE - Intention of parties is very clear that individual is a partner of firm as far as firm is concerned. As far as members of HUF are concerned, he is acting on their behalf in a representative capacity. This fact is also corroborated by fact that share income of V.Madhusudan Reddy, V.Vikram Reddy and V.Dinesh Reddy, who were shown as individuals in partnership deeds prior to 24.3.2006, concerned individual offered to tax in hands of HUF and taxed in hands of respective HUFs - A partner may be Karta of a Joint Hindu family, he may be a trustee, he may be a representative of a group of persons, he may be a benamidar for another. In all such cases he occupies a dual position; qua partnership, he functions in his personal capacity; qua third parties, in his representative capacity; third parties, whom one of partners represents, cannot enforce their rights against other partners, nor can other partners do so against said third parties - Their right is only to a share in profits of their partners who (qua them) was representative. It is thus clear that HUF was never partner in firm BVRE and conclusions to contrary by CIT(A) cannot be sustained.
Applicability of section 11(2) of Companies act, 1956 – Validity of firm as it consists of more than 20 partners – Held that:- Already held that 4 HUFs were not partners in firm BVRE and that V.Madhusudhan Reddy, V.Vikram Reddy, V.Dinesh Reddy and V.Dwarakanath Reddy signed deed in their individual capacity vis-à-vis firm and vis-à-vis HUF they were accountable to share of profits which they receive from firm BVRE – Therefore, number of partners would only be 13 - Assuming revenue is right in its conclusion that for purpose of computing number of partners, adult female and male members of HUF have to be reckoned, then number of “persons” in partnership as distinct from number of “partners”, would only be 15. Expression used in Sec.11(3) of Companies Act, 1956 is “member of a joint family” and not “co-parceners of joint family” and therefore all members- male and female, other than minors have alone to be reckoned. Sec.11(3) of Companies Act, 1956 specifically excludes minors while determining number of members of a HUF. Keerthana, Nachiketha and Tarun were minors and they are to be excluded. If done so, number of persons vis-à-vis 4 HUFs would be 12 (15 – 3). Since Sec.11(2) of Companies Act, 1956 uses expression “Person”, number of persons who have signed partnership deed in two capacities have to be reckoned as “one person”. If so done, V.Madhusudan Reddy, V.Vikram Reddy and V.Dwarakanath Reddy who signed in their individual capacity apart from their capacity on behalf of HUF have to be excluded. Then number of persons in partnership, would become 9. (12-3). Other partners are 6 (13-7 ( 7 = 4 HUFs + 3 individual capacity). Thus number of persons would only be 15 (9 + 6) and therefore there is no violation of provisions of Sec.11(2) of Companies Act, 1956 – BVRE is a valid partnership.
Validity of transfer of shares of NCCPL held by Assessees in favour of firm BVRE – Held that:- On basis of facts produced, it has been held that there was a valid transfer of shares of NCCPL held by Assessees in favour of firm BVRE during previous year relevant to AY 06-07 - Shares are registered in name of Madhusudan Reddy in share register of company NCCPL though shares belong to firm BVRE because a firm cannot hold shares in a company and cannot be shown as a registered share holder because firm has no legal existence and is a mere compendious name to describe its partners - Declaration u/s.187-C of Companies Act, 1956 clearly shows that beneficial owner of shares standing in name of Madhusudan Reddy is firm BVRE - Factum of transfer by Assessees in favour of firm has been accepted by revenue and capital gain declared in AY 06-07 has been taxed in hands of Assessees by revenue in earlier years. This fact reiterated in assessment orders of Assessees for AY 07- 08 wherein revenue taxed only difference between actual capital gain and capital gain already taxed in hands of Assessees for AY 06-07 – Therefore, transfer of shares is a valid transfer.
Whether there was a transfer of shares of NCCPL by assessees in favour of GBFL, so as to bring to tax capital gain on transfer of such shares u/s. 45 of Act in hands of assessee – Held that:- 13 partners of firm BVRE are described in share purchase agreement dated 10.6.2006 as confirming party to share purchase agreement dated 10.6.2006. Clause in Agreement which refers to transfer of shares, makes a reference to sale of shares by sellers to purchasers (GBFL) and there is no reference to confirming parties to agreement selling shares to GBFL - Confirming parties only confirm fact that they have transferred shares of NCCPL held by them to firm BVRE and that they have no right, title or interest whatsoever over shares so transferred – Thus, there was no any transfer of shares of NCCPL by Assessees to GBFL.
Colourable transaction - Whether entire series of transactions by which shares of NCCPL were ultimately transferred to GBFL were all not valid – Held that:- There is nothing on record to suggest real intention of parties was to treat Assessee as owner of shares even after transfer of shares to firm - 13 partners signed agreement only to confirm fact that they had already transferred shares held by them to firm BVRE as capital contribution and they have no other rights over business of NCCPL or as shareholders of NCCPL - It is only NCSPL that transferred shares together with 3 other shareholders of entire paid up share capital of NCCPL - There were two ways in which shares of NCCPL held by 13 partners of BVRE could have been transferred to GBFL. One way was that 13 partners in their individual capacity could have transferred shares of NCCPL held by them to GBFL at a price at which they were ultimately sold to GBFL through NCSPL. Other way was manner in which Assessees have transferred shares through medium of firm BVRE. Latter course would certainly result in lesser tax burden to Assessees but that is a course which law permits.
Series of transactions by which shares of NCCPL held by Assessee ultimately was transferred to GBFL were intended to lessen tax burden on capital gain on transfer of shares - Course adopted by Assessees was within framework of law and was permissible – Thus, entire series of transactions by which shares of NCCPL were ultimately transferred to GBFL were all valid as it is permitted within framework of law.
Series of transactions by which shares of NCCPL were ultimately transferred to GBFL were not colourable or dubious device or subterfuge and were legal and valid. Consequence of same, even if it results in reduction of tax burden, is that they cannot be ignored and revenue cannot bring to tax quantum of capital gain which would have resulted, had transactions of sale of shares of NCCPL to GBFL being carried out by assessees directly to GBFL instead of through NCSPL/BVREPL – Decided in favor of Assessee.
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2013 (11) TMI 1311 - ITAT HYDERABAD
Exemption u/s 10A – The assessee is engaged in the business of rendering software development services and registered under STPI scheme - It has two units namely Hyderabad Unit and Chennai Unit - Held that:- The assessee invested capital separately and distinctly for creating infrastructure for Chennai unit - It has built up separate infrastructure, such as building, furniture, computers and other infrastructure, like employees etc. - The assessee has separately complied with all the legal as well as administrative requirements for starting a separate business unit at Chennai - Distinct capital was invested in creating a new unit at Chennai, without comprising the employees strength of the Hyderabad Unit - There is no relocation of transfer of plant and machinery in any form from Hyderabad Unit to Chennai Unit - The nature of services rendered by the assessee through both these units are classified into three categories, (1) BPM, (2)ECM and (3) Data warehousing - The services of both the units are distinct and separable - Existence of some old employees in the new undertaking is not a disqualification for granting exemption benefit to the assessee under S.10A as long as larger chunck of HR Department has not moved to the new unit from the old one - If both the units are existing and doing the declared business and are not formed out of the existing business, the assessee must not be denied the benefits of S.10A - The old as well as new unit engaged in the same business with identical product shall not contribute to the denial of the beneficial exemption to the assessee – Decided in favour of assessee.
Computation of relief u/s 10A – Communication charges and insurance charges and reimbursement of expenses to exporter – Held that:- Following Patni Telecom (P) Ltd V/s. ITO [2008 (1) TMI 452 - ITAT HYDERABAD-A] - To constitute export turnover the consideration should have a nexus with the sale proceeds from export of goods or computer software and that there should be an element of profit in such consideration – Following California Software Co. Ltd. V/s. ACIT [2008 (8) TMI 430 - ITAT MADRAS-A] - The issue was restored for fresh decision.
Disallowances u/s. 40A(3), u/s. 40A(7) and u/s. 43B – Held that:- Following Zawata India P. Ltd. [2010 (1) TMI 1102 - ITAT HYDERABAD] – Decided against Revenue.
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2013 (11) TMI 1284 - ITAT CHENNAI
Period of Limitation - Whether the assessment order had been passed within the period of limitation – Held that:- As per the provisions of section 158BE, order u/s 158BC had to be passed within a period of two years from the end of the month in which the last of the authorization for search ended u/s 132 and for requisition u/s 132A - Relying upon C. Ramaiah Reddy Vs. ACIT [2010 (9) TMI 862 - Karnataka High Court] - The limitation for passing the assessment order comes to an end on 31.05.2002 by taking into consideration the last valid panchanama dated 4.5.2000 - The remaining two panchanams dated 30.06.2000 and 28.08.2000 are nothing but abuse of the process of law for enlarging the time of passing the order - A perusal of panchanama dated 30.06.2000 would show that search lasted for only one hour i.e. from 11.30 am to 12.30 pm and panchanama dated 28.08.2000 shows the duration of search as 55 minutes i.e. from 11.15 am to 12.10 pm. It can be safely concluded the last two panchanamas were mere formalities to keep the search proceedings alive - In the instant case, even if we enlarge the period as per the provisions of section 132(8A) authorization ended on 18.06.2000. Therefore, the period of limitation for passing assessment order ended on 30.06.2002, whereas the assessment order had been passed on 30.08.2002 i.e. beyond the period of limitation provided in the Act - Therefore, in our considered opinion, the assessment order was bad in law and was set aside being barred by limitation.
Validity of Assessment Order u/s 158BC - No seizure of any incriminating documents/evidence - Held that:- No incriminating evidence or document had been recovered against the assessee during the search, the addition made against the assessee was unsustainable - The properties do not form investment or the properties of the assessee - They have to be assessed in the hands of the respective registered owners - It was also not the case of the Revenue that the owners of the said properties have denied ownership of the properties alleged to be registered in their respective names - The Revenue had also not stated that in the income returned, the assessee had not included the properties registered in his name – the notice issued to the assessee company under section 158BD suffers from limitation - the notice and the proceedings arising are bad in law thus set aside - Decided in favour of Assessee.
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2013 (11) TMI 1283 - ITAT CHANDIGARH
Disallowance of Deduction u/s 80P(a)(i) of Income Tax Act,1961 – Conditions u/s 80P(4) - Revenue was of the view that the assessee didnot satisfied the conditions mentioned in the Explanation below Section 80P(4)to be eligible for deduction u/s 80P(2)(a)(i) - Held that:- Following Khamano Primary Cooperative Agricultural Development Bank Ltd.[ 2013 (9) TMI 558 - ITAT CHANDIGARH ] and Commissioner Of Income-Tax Versus Pondicherry Co-operative Housing Society Limited [1990 (11) TMI 132 - MADRAS High Court] - The assessee was primary co-op agriculture and rural development bank, entitled to benefit of deduction u/s 80P(2)(a)(i) of the Act - Merely because certain deficiencies were noted in not holding the meetings on periodic intervals or the membership number of members were not available in particular list, etc., does not make the activities under taken by the assessee society to be not in the nature of providing credit facilities to its members - The basic activity carried on the assessee society as enshrined in its bye laws was to provide long term loans to its members for specified purposes and the assessee admittedly was doing so - Once the primary activity of providing loans to its members had been undertaken by the assessee society, its entitlement for exemption u/s 80P(2)(a)(i) of the Act merits to be allowed.
Section 80P of the Act exempted certain categories of income of co-operative societies - The income arising from the specified activities were exempt from tax and not the whole receipts of the previous year - In order to avail the exemption provided u/s 80P of the Act, onus was upon the assessee to prove that it was engaged in carrying on of one or more of the activities specified in 80P(2) of the Act - The exemption u/s 80P of the Act was not to be denied where the society was carrying on certain other activities - The underlying principle of granting exemption to a society was whether it was engaged in any of the activities falling under 80P(2) of the Act.
The assessee was allowed exemption u/s 80P (2)(a)(i) of the Act on income arising from providing credit facilities to its members - However, because of the amendment by Finance Act, 2006, the insertion of section 80P(4) of the Act comes into play and its provisions are applicable to the year under appeal i.e. A.Y, 2007-08 - The subsequent amendment to section 2(24) of the Act entails that such income is includible as 'income' where the assessee is engaged in banking activities - the amended provisions of 80P of the Act come into play in respect of co-op societies, which are primary agricultural credit society or primary co-op agricultural and rural development bank - The explanation under section 80P of the Act, defined the societies - The claim of the assessee was that it was primary co-op agricultural and rural development bank i.e. society having an area of operation confined to a taluka and providing long term credit for agricultural and rural development activities - The assessee was admittedly not engaged in the banking activities and hence was not hit by the amendment by Finance Act, 2006 - Decided against Revenue.
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2013 (11) TMI 1282 - ITAT MUMBAI
Determination of Business Income – Set off of Depreciation/ Losses - Disallowance of Deduction u/s 80-IA(5) of Income Tax Act, 1961 – Held that:- There was firstly nothing in the language of the section to suggest its applicability only for the year/s the eligible business returns profits - The losses/unabsorbed depreciation, irrespective of the year to which these pertain, are placed at par under the provision - Further, placing such an interpretation, as afore-stated, the losses and/or unabsorbed depreciation for the years prior to such year/s would stand to be excluded for aggregation, to no good reason, and in consequence defeat the clear object of the provision - as imminent from its language, i.e., to confine the benefit of deduction thereunder only to the income from such business, which would stand to be breached if the negative income (losses and depreciation allowance) is ignored or excluded - Rather, existence of an alternate source of income vitiates the application of the provision further by extending the tax shelter to such income as well.
The year of commencement of operations was the initial assessment year, with effect from which year, irrespective of the years which the assessee may choose to opt for as the holiday period, the loss or unabsorbed depreciation, if any, incurred, was to be taken into account, i.e., aggregated, for the purpose of determination of the quantum of deduction under the provision, of course up to the last of the years for which the deduction is to be determined - The whole premise of the provision is to include such losses for the purpose of determination of the deduction by introducing the 'stand alone' principle, providing for its supersession over the other applicable provisions of the Act - The tax shelter u/s. 80IA(1), it may be emphasized, was to be accorded only to the profits from the eligible source, and which was all what s. 80IA(5) seeks to achieve - This was as the aggregation prescribed by the section was limited only to quantify the deduction u/s. 80IA(1), and which would only be on the unit turning positive, returning profits - As a corollary, the losses/unabsorbed depreciation would stand to be set off against the other incomes under the regular provisions of the Act.
Section 80IA(5) being applicable for the current year - whether the assessee's claim for set off of loss/allowance u/ss. 32(2), 70 and 71, i.e., against other income, admittedly from a non-eligible business/source, sustainable in law – Held that:- The Revenue was not correct in law in denying the set off of the unabsorbed depreciation allowance/loss of the assessee's eligible unit/s against its income from other sources in terms of ss. 32(2), 70 & 71 of the Act - The unabsorbed allowance/ loss, however, would stand to be set off in terms of s. 32(2) & 72, against the income of the respective eligible units for the subsequent years, i.e., where so, in computing the assessee's eligible income for determining the quantum of deduction u/s. 80-IA(5), taking the legal fiction of the said provision, which we have found to be applicable for the relevant years, to its logical end - We are, as explained above, unable to consider the twin aspects as disparate, but only as inextricably linked, arising from and integral to the issue before us for adjudication, i.e., the scope and ambit of s.80-IA(5) r/w s. 80-IA(1) of the Act.
Income from House Property – Held that:- The stand of both the parties to be only partly correct - Firstly, qua the assessee's claim of the property being used for the purposes of its business; the same only needs to be stated to be rejected - The same was not only not borne out by the record, and stands advanced before us for the first time de hors any material, introducing a new dimension to the case, but is also contrary to assessee's consistent stand throughout that the property was vacant since April, 2004 as it could not find a suitable tenant - Could a property which remains vacant for want of a suitable tenant, could be at the same time be used for own purposes - If so, where was the question of vacancy allowance - And all that the assesse was required to do in that case, was to establish the user of the said house property for the purpose of its business, while, as afore-noted, there was not even any claim in this respect.
Claim for Allowance for Vacancy – Held that:- The property was let at a monthly rent of Rs.1,54,843/- (annual rent: Rs.18,58,116/-) continuously from the year 1997 to 2004 - What better proof of the same representing its AV could possibly be – There was nothing on record to show or infer that the property, which, as late as April, 2004, yielded a rent to the tune of Rs.18 lakhs p.a., became incapable of fetching as much and, rather, plummeted to about 1% thereof - That was, an erosion in rental capacity by nearly 99%, and almost overnight - The A.O. in the instant case has kept the AV (at Rs.13,00,681/-), i.e., net of standard deduction at 30%, constant for all the years, i.e., up to A.Y. 2008-09, and which we consider as reasonable, satisfying the only condition placed by law on an otherwise totally factual matter.
Assessment of Income from House Property – Held that:- There being nothing on record to suggest the appropriateness of the annual value as adopted by the Revenue, the matter was set aside to the file of the AO to determine the fair rental value with regard to the comparable cases, i.e., the rentals obtaining in the locality for similarly placed properties for the relevant period - The matter is factual, rather than legal - There was no merit in the assessee's argument that the property being not actually let, the notional rent could not be brought to tax - it being trite that it was not the income actually realized, but that which could, fairly speaking, be, or the income potential of the property that is brought to tax u/s.23 of the Act as its annual value (AV) - The provision of section 23(1)(b) come into play only where the property (or part thereof) is actually let out, and which exceeds the fair rental value u/s.23(1)(a). In fact, the assessee does not dispute this position, advancing its case with reference to its claim for vacancy allowance u/s. 23(1)(c).
Disallowance u/s.14A with reference to Rule 8D – Held that:- The asssessee would have to exhibit that no interest cost has, as a matter of fact, been incurred in respect of the said investment, if the prescription of the rule is not to apply - The matter thus hinges on the ability of the assesse to establish its claim/s in this regard with reference to its accounts - Following GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Businesses normally have dedicated funds, as for financing projects or asset acquisition or for financing working capital, so that where shown to be so used for the relevant year, the same would (alongside the corresponding assets) merit exclusion in applying the proportionate method - general borrowings, as for 'business purposes', would only stand to be considered as forming part of the general pool of funds – matter restored back to the file of the A.O. and to allow the assessee an opportunity to show as why the interest disallowance u/s.14A(1) should not be worked out following the proportionate method, as directed by the ld. CIT(A) – Decided partly in favour of Assessee.
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2013 (11) TMI 1281 - ITAT DELHI
Income from undisclosed sources - Income from rent – Agricultural Income - Addition u/s 68 Applicability of sec. 68 – section 68 would has no application where the assessee was not maintaining any books of account – Following Ms. Mayawati vs. DCIT, [2007 (11) TMI 328 - ITAT DELHI-A] - The relationship was not necessary for making the gift – the contention that the transaction entered into was merely an accommodation entry in the absence of any evidence being brought on record cannot be accepted.
The onus is on the assessee to prove the identity, creditworthiness and the capacity of the donor - the donor had prima facie capacity to make a gift to the Donnee - Even it was also held that at the relevant time Indian currency could not be deposited in an NRE account - the AO was not correct in law in making the addition in the case of the assessee again in set aside proceedings - The AO was duty bound to provide the opportunity to cross examination - the proposition that if the request for permission to cross examine persons on the basis of whose statement the additions are made if not allowed the principles of natural justice stand violated and the order of the assessment is not valid - This is an admitted fact that in this case the AO could not produce Mohd. Shamim for the cross examination of the assessee - The basis of the addition is the statement of Mohd. Shamim whose statement has been recorded at the back of the assessee - Once the AO could not produce Mohd. Shamim for cross examination in view of the decision of this Tribunal dated 3rd July, 2006 no doubt the AO was bound to re-determine this issue on the basis of the other relevant material available on record – Additions made by the AO was rejected – Appeal Partly Allowed.
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2013 (11) TMI 1280 - ITAT BANGALORE
Cancellation of Registration Granted u/s 12A of Income Tax Act,1961 – Objects of the Trust – Charitable or not – Proceedings u/s 12AA (3) - Held that:- Registration already granted to the Assessee cannot be cancelled on the ground that the Assessee which pursues as a charitable purpose, “advancement of objects of general public utility” carries on commercial activities -the order passed u/s. 12AA(3) of the Act was liable to be quashed – Relying upon CIT v. Sarvodaya Ilakkiya Pannai [2012 (2) TMI 160 - Madras High Court]
The income of the society comprised of receipts from the activity of letting out a kalyana mantapa owned by it on rent, fees received from the members on sale of liquor in the bar run by the assesse, it does not follow that the activities of the Assessee are not genuine or that the activities were not being carried out in accordance with the objects of the Assessee - The DIT(E) in the order had only commented about the objects of the Assessee not being charitable - That cannot be a ground for the DIT (E) to invoke the provisions of Sec.2(15) of the Act - by reason of the statutory amendment to the definition of “Charitable Purpose” u/s.2(15) of the Act by insertion of a second proviso, by the Finance Act, 2010 with retrospective effect from 1.4.2009, even if there are receipt from commercial activities - it was not open to the DIT(E) in an action u/s. 12AA(3) of the Act to examine the objects of the trust to see if the same were charitable in nature - That had already been done when a registration was granted to the assessee u/s. 12AA(1) of the Act - It was not open to the DIT(E) to re-examine the objects of the trust in proceedings u/s.12AA(3) of the Act.
The DIT(E) in exercise of his powers u/s 12AA(3) of the Act, cannot curtail the right of an assessee which was charitable trust or institution which pursues the advancement of objects of general public utility from claiming the exemption u/s 11 & 12 of the Act in a year in which the receipts of the charitable organization from commercial activities is less than the limits prescribed in the second proviso to Sec.2(15) of the Act - It was clear from the reading of the provisions of Sec.2(15) of the IT Act, 1961 as well as Sec.12AA(3) of the Act, that registration already granted u/s 12A cannot be revoked for the reasons that the charitable trust or institution pursuing of advancement of objects of general public utility carries on commercial activities - the order u/s12AA(3) is liable to be cancelled.
Nature of Income – Business Income or not - Rental Income from letting out – Held that:- Relying upon COMMISSIONER OF INCOME-TAX Versus SENGUNTHAR THIRUMANA MANDAPAM [2006 (6) TMI 64 - MADRAS HIGH COURT] - The kalyana mantap had been let out to one of the trustees - The trustees had the absolute discretion to apply the income to any of the objects - the reasons set out in the order by the DIT(E) for canceling the registration does not satisfy any of the conditions laid down in section 12AA(3) of the Act - Decided in favour of Assessee.
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2013 (11) TMI 1279 - ITAT COCHIN
Computation of Depreciation on Machinery - Non-deduction of Non-Refundable Deposits - Held that:- it cannot be said that the dealers have contributed money for purchase of these machineries - the question of adjustment of security deposit against the cost of assets for the purpose of computation of depreciation does not arise - With regard to the amount of security deposit collected from the customers, we notice from the agreement that it remains the liability of the assessee till the agreement is cancelled - So long as the agreement remains in force, the security deposit will remain as the liability of the assessee - it is clearly provided in the agreement that the dealer shall hold the machineries in trust - The question of refund/adjustment of deposit arises only on the event of the dealer choosing to give up/discontinue the Car Radial Business - It cannot be said that the dealers have contributed money for purchase of the machineries – thus, the question of adjustment of security deposit against the cost of assets for the purpose of computation of depreciation does not arise
Depreciation on machinery – Expenses incurred on clubs – Depreciation on Let Out Property - Deduction u/s 80IA - Held that:- The expenditure incurred towards entrance fee/subscription can be termed as business expenditure and the cost of services can be allowed only if the commercial expediency in incurring the same was proved - the details furnished by the assessee required verification at the end of the AO - the depreciation claimed on let out properties - the order of Ld CIT(A) on this issue and restore the addition made by the AO - deduction u/s 80IA of the Act on the D.G. power generation units I & II by considering the same as an “undertaking” for the purposes of sec. 80IA of the Act - Both the parties agreed that this issue has been decided in favour of the assessee.
Claim of Amount Written as Irrecoverable - Write off of irrecoverable advance paid for purchase of machineries – Held that:- The advance written off is a loss of capital, hence not allowable as deduction – Following Swadeshi Cottom Mills Co. Ltd. Vs. CIT [1966 (9) TMI 32 - SUPREME Court] - compensation payable for breach of contract to purchase capital asset is a capital expenditure – and CIT vs. Mysore Sugar Co. Ltd. [1962 (5) TMI 3 - SUPREME Court ] - loss of capital nature is not deductible while calculating business income - The advances given for acquisition of Capital assets was liable to disallowed as ‘Capital loss’ and the advances given for acquisition of revenue items was allowable u/s 37 of the Act as current expenses.
Setting off of Long Term Capital Loss - Loss on sale of equity shares and Mutual fund units against long term capital gain earned on sale of land – Held that:- In order to claim exemption u/s. 10(38) of the Income Tax Act, the assessee had to prove that they have complied with the conditions stated therein - Since the compliance had not been proved the exemption u/s. 10(38) of the Income Tax Act cannot be granted to the assessee - once income which included loss was exempt, the same cannot be taken for computation - exemption u/s. 10 was granted not as per claim of the assessee but as per fulfilment of conditions stipulated - Sec. 70 provided for set off of loss from one source against income from another source under the same head of income - The very scheme of such set off implied that the source in respect of which a loss had occurred, was such that, had there been profit instead of loss they would have been chargeable to tax - In the assessee’s case Long Term Capital Gain on sale of land was taxable whereas Long Term Capital gain on sale of share on which SIT had been paid was exempt.
Addition of Deferred Tax Liability – Computation of book profit u/s 115JB of the Act - Held that:- Both the parties agreed that the provisions of sec. 115JB have been amended by Finance Act, 2008 with retrospective effect from 1.4.2001, as per which “the amount of deferred tax and the provision thereof” was liable to added to the net profit for the purpose of computation of book profit.
Weighted Deduction on scientific research expenditure - Weighted deduction @ one and one half times of the expenditure - Held that:- The issue was not examined by the assessing officer – Accordingly the instant claim made by the assessee was required to be examined by the assessing officer – issur remanded back with the direction to examine the claim of the assessee and take appropriate decision in accordance with the law.
Deduction of Quality Loss Claim from Export Market - Held that:- The assessee was not entitled to claim deduction relating to Quality claims - Following M/s MIL Controls limited Vs. CIT [2011 (6) TMI 495 - Kerala High Court ] - The assessee was putting forth claim for deduction of expenditure relating to “Quality Claim” only for the reason that the said claim was disallowed in the hands of M/s PTL Enterprises Ltd, even though the said company had accepted the liability for the same - the disallowance was made in the hands of M/s PTL Enterprises Ltd for the reason that the said assessee failed to furnish any proof.
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2013 (11) TMI 1278 - ITAT DELHI
Disallowance of Foreign Exchange Fluctuation - Held that:- Loss due to foreign exchange fluctuation was a revenue loss - unrealized forex foreign exchange fluctuation loss being in the nature of revenue, should be allowed as deduction - Appeal of assessee relates to disallowance of expenditure on account of inland haulage expenses and clearing and forwarding expenses - there was no evidence to prove that that nothing was payable - Nor a copy of balance sheet or other document showing that nothing remained to be paid was submitted nor it is a part of record - Matter remitted back to the AO for re-adjudication.
Disallowance of Expenditure u/s 14 of Income Tax Act, 1961 - Held that:- Following CIT vs Dhanlaxmi Bank Ltd. [2002 (11) TMI 17 - KERALA High Court] - Disallowance of administrative expenses in the absence of claim of interest expenses was not warranted - disallowance u/s 14A should be limited to interest liability and should not extend to over heads or administrative expenses which should be considered for disallowance under Rule 8D from AY 2008-09 onwards - there is no claim of interest expenses - Assessee has not claimed any interest expenses and the total expenses claimed against turn over crores were quite reasonable and moreover the case of assessee relates to AY 2005-06 when Rule 8D was not applicable– Decided in favour of Assessee.
Disallowance of Inland haulage and clearing and forwarding expenses u/s 40A (i)(iii) of Income Tax Act, 1961 – Held that:- There was no evidence to prove that nothing was payable as on 31st March - Nor a copy of balance sheet or other document showing that nothing remained to be paid was submitted nor it is a part of record – Matter remitted back to the AO for re-adjudication -
Addition of DEPB Benefits - Held that:- Assessee had offered to tax, the actual amount of receipt of DEPB and the short amount received by assessee was not liable to tax - the addition was not justified - As regards, loss on sale of DEPB licenses, copies of sale of DEPB licenses are placed at paper book - The invoice bills mentions, face value of DEPB licenses along with sale value and difference represents amount which the assessee had booked as loss on the sale of such licenses - AO was not justified in making addition and Ld. CIT(A) had rightly deleted the addition - There was detail of short amount of DEPB receipt and the details are placed - The supporting documents showing lower receipt of DEPB against the DEPB accrued are also placed - The papers showing actual receipt are placed at paper book pages.
Addition of Cessation of Trading Liability – Held that:- The balance payment out after deducting USD 60000 out of USD 1,10,029 were received during following years - There is also a bank certificate of export and realization which is placed at the paper book which also certifies the export and receipt of payment - AO was not justified in making additions on account of cessation of liability as the liability had not ceased but got adjusted in next year with the amount of export.
Disallowance of Expenditure of Non-Deduction of TDS – Held that:- The breakup of loading/unloading charges and also the breakup of carriage outward charges which suggests that no payment was in excess – Thus the assessee was not liable to deduct TDS - Decided partly in favour of Assessee.
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2013 (11) TMI 1277 - ITAT AGRA
Addition of Unexplained Credit u/s. 68 - Held that:- CIT(A) was justified in confirming the addition u/s. 68 of the IT Act – Relying upon Smt. Suman Gupta vs. ITO [2012 (10) TMI 741 - ITAT AGRA] - the assessee has not adduced any sufficient evidence before the authorities below to prove the creditworthiness of the creditors and genuineness of the transactions in the matter - the assessee has not satisfied the essential ingredients of section 68 of the IT Act.
The assessee has failed to prove the creditworthiness of all the creditors and no source of their income has been filed - At the best the assessee is able to prove identity of the creditors, but the assessee failed to prove the genuine credit in the matter. All the creditors have been rightly found to be men of meager means and no source of income have been filed to prove that they were having sufficient funds or savings in order to give loans to the assessee - On verification of the bank account of the depositors, it was specifically found that there were no sufficient funds available in their bank account and they were having only small bank balance, which was even not sufficient to meet out their household expenses or day- to-day requirements - it is unbelievable to accept the contention of the assessee that said persons were having creditworthiness to advance any loan to the assessee - The documents produced by the ld. counsel for the assessee in the paper book merely prove the case of assessee superficially, which is far from reality or truth.
Their affidavits could not be subjected to examination by the AO - The affidavit is like an Examination-in-Chief and unless the deponents of the affidavits have been produced, the same could not be subjected to cross-examination and such affidavits in their cases cannot be relied upon to explain their creditworthiness and genuineness of the transactions. assessee failed to prove creditworthiness of all the creditors and genuineness of the transactions in the mater - no interference is called for in the orders of the authorities below - Burden upon the assessee has not been discharged in accordance with law – Decided against Assessee.
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2013 (11) TMI 1276 - ITAT HYDERABAD
Disallowance on account of Revenue Recognition - Held that:- The finding of the CIT (A) is that the assessing officer simply by rejecting the method of accounting followed by the assessee is not proper since assessments have been completed in other group cases based on the same accounting method - there was force in the finding of the CIT (A) for the reason that since the assessing officer rejected the method of accounting followed by the assessee but he accepted the same method of accounting followed by group companies of the assessee, which is contrary as per law - The assessing officer has not given a clear finding mandated under section 145(3) of the Act and yet re-computed the profit from the projects done by the assessee company - The additions made by the assessing officer are not supported by any facts and figures which can demonstrate that the method of accounting policy adopted by the assessee company resulted in under estimation of profit - The assessing officer has taken estimated revenue from the projects without considering the fact that whether the units are sold or not - In other words, profit is being estimated on unsold stock also - the method followed by the assessee company cannot be called as an unreasonable method and any change in the method would only be tax neutral - Thus there was no infirmity in the order of the CIT (A) as the same has been passed by the CIT (A) after analyzing and examining the issue elaborately.
Disallowance of Reimbursed Expenditure u/s 40(a)(ia) of Income Tax Act, 1961 – Held that:- In case of reimbursement of common expenses incurred by the parent company for the benefit of group concerns, there is no need to deduct tax at source, and disallowance could not be made by invoking the provisions of S.40(a)(ia) – Following Linklaters LLP V/s. ITO [2010 (7) TMI 535 - ITAT, MUMBAI ] – from the details of the expenditure incurred, which were reimbursed by the assessee to M/s. Ambience Properties P. Ltd., it is seen that the expenses related to various items like office rent, electricity charges, salaries, staff welfare, conveyance, telephone charges, vehicle maintenance, printing and stationery, computer expenses etc. Therefore, the expenditure incurred cannot be treated as rent alone to bring it within the ambit of S.194I of the Act – also the assessee has produced sufficient material to prove that the amount represented reimbursement of the expenditure incurred by M/s. Ambience Properties Ltd. - there was no reason to interfere with the order of the CIT(A) – Decided against Revenue.
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2013 (11) TMI 1275 - ITAT CHENNAI
Expenses for Replacement of Machinery - Expenditure incurred for replacement of Ring Frames – Revenue OR Capital expenditure - Held that:- Following CIT v. Ramaraju Surgical Cotton Mills Ltd. 2007 (8) TMI 39 - SUPREME COURT OF INDIA and CIT v. Sri Mangayarkarasi Mills P. Ltd. 2009 (7) TMI 17 - SUPREME COURT - the expenditure incurred by the assessee is capital expenditure - AO held that the expenditure are capital in Nature and depreciation can be claimed - CIT(A), ITAT and High Court held that the expenditure revenue in nature and allowed the deduction - it is clear on record that the assessee has sought to treat the said expenditure differently for the purposes of computing its profit and for the purpose of payment of income tax - The expenditure has been treated as an addition to the existing assets in the former and as revenue expenditure in the latter - Though accounting practices may not be the best guide in determining the nature of expenditure – here they are indicative of what the assessee itself thought of the expenditure it made on replacement of machinery - the claim for deduction was made merely to diminish the tax burden.
Interest under Sections 234A and 234B of Income Tax Act - Whether interest can be charged in an order of rectification under Section 154 for the first time - Held that:- If the return is not filed within time or if advance tax is not paid within time then the assessee is liable to pay interest and the payment of interest is mandatory – Following - CIT v. M/s. Ruchira Papers Ltd. [2012 (10) TMI 60 - HIMACHAL PRADESH, HIGH COURT] - if the AO or the appellate authority does not order the payment of interest, the assessee cannot be directed to pay interest by the demand notice - levy of interest u/s 234B and 234C of the Act for all the years sustained.
Deduction u/s 80HHC - Exclusion of 90% of insurance receipts and miscellaneous income from the profits - Held that:- There was no reason to interfere with the order of Commissioner of Income Tax (Appeals) in holding that 90% of the insurance receipts and miscellaneous income are to be excluded for the purpose of computing relief under sec.80HHC of the Act – Following CIT vs. Ravindranathan Nair [2007 (11) TMI 10 - Supreme Court of India] - it is clear that packing charges are received on waste cotton sales and are incidental to the sale of waste cotton - The waste cotton arises as a result of the manufacturing operation of the assessee. It cannot be said that it is directly related to the export activity of the assessee – Decided against Assessee.
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2013 (11) TMI 1274 - ITAT DELHI
Disallowance of claim - Held that:- The assessee had rightly claimed the expenditure - The facts have not been disputed that the assessee company made above payment during the year under consideration for the purchase of additional equipment from L&T as per drawings approved by BSP - The TPI contract with Bhilai Steel Plant was on turnkey basis and the L&T supplied equipments in accordance with drawings approved by BSP, the disputed amount was debited to the P&L account in the accounting year 2001-02 and there was actual supply of equipment - the finding of the Assessing Officer is not sustainable - the liability was actually crystallized during the year.
Furnishing of Satisfactory Evidences - Held that:- The Commissioner of Income Tax(A) rightly held that the claim of the assessee was to be allowed during the year under consideration - The revenue has not disputed the point that the assessee made a payment as damages PU Decks as per contractual terms when supply was made - This fact also has not been disputed by the revenue that at the trial run it was found that the supplied PU Decks were defective and the BSP directed the TPI to re-supply the PU Decks or to suffer a recovery and due to rise in the price of PU Decks, the TPI chose to pay the damages and the recovery was made according to contractual terms during the year under consideration - While the same amount of recovery has been taken into account by the assessee during the financial year 2001-02.
The financial year ended on 31.3.2002 and the assessee company has made all payments after end of financial year - the recovery of cost of MST Compound by BSP, the payment for erection of building Structures and Technological Structures to M/s HSCL and payment to M/s Andrew Yule & Co. Ltd. against Final Painting was actually settled and made after the end of financial year.
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2013 (11) TMI 1273 - ITAT DELHI
Eligibility for Deduction u/s 80-IC(2)(b)(ii) - Product "handicraft" OR “100% machine made/machine” - Held that:- The product manufactured by the assessee i.e. "Handicraft Items" comes within the ambit of section 80IC of the Act - The percentage of utilization of human skills through manual intervention cannot be measured because there is no objective standard to measure such involvement of human skill towards production or manufacturing of the finished goods - The articles are surely graced with visual appeal in the nature of ornamentation with an element of artistic improvement - the value added by way of human skill or craftsmanship or artisanship has not got consumed or obliterated by the use of machine and to that extent the end product can be definitely termed as 'handicraft' - The Revenue should respect the observations and findings of the ITAT or it may proceed for further legal remedy against the earlier orders of the Tribunal – Following Unison Hotels Ltd. Versus Deputy Commissioner of Income-tax, Circle 18(1), New Delhi [2012 (8) TMI 258 - ITAT DELHI].
appellant has undertaken substantial expansion within the meaning of section 80- IC(8) (ix) stands settled in the first year of such claim of deduction u/s 80-IC of the I.T. Act - the criteria of substantial expansion has been accepted to be fulfilled in the first year of such claim of deduction u/s 80IC in A.Y. 2004-05 – Decided against Revenue.
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2013 (11) TMI 1272 - ITAT DELHI
Search and Seizure u/s 132(1) - Addition of unaccounted cash made on protective basis - Held that:- Addition on the basis of statement of the third party without any corroborative evidence is not tenable - protective addition in the hands of assessee firm has been deleted by the Commissioner of Income Tax(A) in all assessment years under consideration - Following Rama traders vs. First ITO [1988 (2) TMI 142 - ITAT PATNA] and in Asst. CIT v Kishore Lal Balwani Rai [2007 (6) TMI 299 - ITAT CHANDIGARH] - no addition could be made, on the basis of presumption raised by section 132(4A), in the hands of the assessee where in the books of another firm, certain figures were found showing the purchase made by the assessee – though the diary seized enable the revenue to presume that its contents are true, such presumptions is available only against the person to whom it belongs and this is a rebuttable Presumption - The Commissioner of Income Tax(A) held that the substantive additions made in the cases of Shri Mukesh Garg could not sustain, the protective additions made by the Assessing Officer in the hands of assessee partnership firm cannot survive - Decided against Revenue.
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2013 (11) TMI 1271 - ITAT MUMBAI
Revision u/s 263 - Recognition of Income - Assessee recognized income from both the projects based on the 'project completion method' consistently followed over the years – Held that:- The Gym View Project is already completed in the year under consideration; whereas the Link Corner Project is yet to be completed as on 31st March of this PY - This approach of the CIT is not proper - There is no discussion in the order how the method of accounting followed by the assessee in respect of Link Corner Project is inappropriate - There is no discussion in the review order how following Project completion method is prejudicial to the interest of review and what is the revenue loss in this process - CIT has not demonstrated in his review order how AS-7 or AS-9 are legally binding on the assessee in matters of recognizing the income of the project when the said AS-7 and AS-9 are not notified by the CBDT for the purpose of section 145 of the Act - If they are binding on project say Link Corner Project of the assessee, the same is binding on the other project i.e; Gym View Project too - In that sense, the CIT turned Nelson's Eye to the method adopted in respect of the other project as the same is inconvenient to him - This approach of the CIT is not valid.
Jurisdiction u/s 263 - Held that:- The assumption of jurisdiction by the CIT is not valid - the revenue cannot trust a method of accounting on the assessee though that method is superior and therefore, substitution of method of accounting is not allowed unless, the loss of revenue is made out of the project of the assessee - CIT has not made out that by following project completion method, the assessee fulfilled the condition relating to 'prejudicial to the interest of revenue' used in section 263 of the Act - Therefore, when the assessee is not held by the revenue guilty of change of method of accounting with the mala fide intention to reduce the tax liability, the CIT cannot allege the mala fide in the method followed by the assessee in respect of the income of the Link Corner project - the CIT cannot assume jurisdiction u/s 263 of the Act, when the issue relating to selection of method of account is debatable one in nature - Assessee has not committed any legal error by uniformly and consistently following 'Project Completion Method' in respect of his project - AO's order does not suffer from any error both on law or fact - it is a trite law that the CIT can only assume jurisdiction when there is erroneous assumption of law or fact or where the AO failed to apply his mind to an issue during making of an assessment or where AO failed to conduct reasonable enquiry into the claim made in the return – Decided in favour of Assessee.
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