|
Advanced Search Options
Case Laws
Showing 121 to 140 of 1706 Records
-
2016 (7) TMI 1592
Validity of reopening of assessment - assessment was sought to be made after the expiry of four years - search and seizure operation u/s 132, leading to the proceedings being initiated under Section 153A - HELD THAT:- The original assessment was completed under Section 143(1), after the assessee filed a return of income on 29.10.2014. There was a search and seizure operation u/s 132, leading to the proceedings being initiated under Section 153A. Thereafter, the assessment was again completed under Section 143(3).
This is not a case of normal assessment, which has gone on in a routine manner, without any suspicion in the eyes of the AO. This is a case where a scrutiny assessment was made, after which, a search and seizure operation was conducted and, thereafter, the assessment was again completed under Section 143(3) r/w Section 153A.
In a third round of attack AO claimed that as per the annual report of the Directors for the previous year 2003-2004, an amount was identified to the assets acquired, from out of the total interest paid to another Company. The Directors report forms part and parcel of the records available for scrutiny. The Department could have taken refuge under Explanation-I, if there had been a processing of the return only once. But in this case, there had been a processing of return twice over. On the second occasion, the processing of the return took place, pursuant to a search and seizure operation.
Therefore, this is a case where, in our considered opinion, the Tribunal was right in holding that the case would not fall within the purview of the proviso to Section 147 and that even Explanation-I will not go to the rescue of the Revenue. Therefore, we find no justification to entertain the appeal and, hence, it is dismissed.
-
2016 (7) TMI 1591
Deemed dividend u/s 2(22)(e) - two companies have made payments on various dates to the Directors/Shareholders, who held substantial interest in the mentioned companies - whether debit balances in the accounts can be construed as “advance” or “loan” by the companies.? - contention of A.R is that the assessee herein is also given advance to those companies and the companies are also benefitted from the loans given to Directors and these are running accounts between the directors and the companies and the running account - HELD THAT:- In view of the binding decision of jurisdictional High Court in the case of SUNIL KAPOOR [2015 (3) TMI 812 - MADRAS HIGH COURT] wherein observed that any amount paid to the assessee by the company during the relevant year, loan amount repaid by the assessee in a same year should be deemed to be construed as “dividend” for all purposes.
While computing the deemed dividend one has to be considered the payments made by the assessee to the company. Hence as observed each debit will have to be individually considered because it may or may not be a loan. AO is, therefore, directed to verify the each debit entry on the aforesaid loan and treat only the excess amount of debit in the books of accounts of the company as a deemed dividend u/s.2(22)(e).
Only those net amounts which reflected the debit side of the books of accounts of the assessee falling under the definition of the loans and advances, is with regard to these assessee in the relevant assessment years will be entitled to be taken as a deemed dividend.
AO has to compute the day to day debit balance of these assessee in the books of accounts and thereafter the AO has to arrive at average yearly balance of the debit in the books of account of each company and compare with it, accumulated profit in respect of each company and lower of these to be considered as deemed dividend in the hands of present assessee. With this observation, we remit the issue to the file of AO for fresh consideration.
Whether only peak debit balance of loans of each director in the books of accounts in respect of company to be considered to arrive at deemed dividend in terms of Sec.2(22)(e)? - This argument of the ld.A.R is devoid of merit. If we accept this contention of the ld.A.R, it leads to absurdity and makes the Sec.2(22)(e) of the Act as redundant. Since provision is applicable for each payment, then there is no question of arriving at deemed dividend in the hands of Director. Hence, we are not in a position to consider these arguments of the ld.A.R that only peak credit to be considered to determine the deemed dividend.
Double entry of book keeping, the journal entry is also have the financial implication and it cannot be ignored as argued by the ld.A.R. The journal entries are also to be considered while computing the yearly debit balance in respect of loans and advances.
-
2016 (7) TMI 1590
Monetary limit for maintainability of appeal - low tax effect - assessee has submitted that the tax effect in the appeal filed by the Revenue is less than the monetary limit of ₹.10,00,000/- fixed by the CBDT to file an appeal by the Revenue before the Tribunal as per the CBDT Circular No. 21/2015, dated 10.12.2015 - HELD THAT:- DR fairly conceded the submissions made by the ld. Counsel for the assessee. Being so, the Revenue authorities are precluded from filing the appeal before the Tribunal, since the tax effect is less than ₹.10,00,000/- in this appeal. Accordingly, the appeal filed by the Revenue is dismissed as un-admitted.
-
2016 (7) TMI 1589
Assessment u/s 153A - Depreciation on the opening WDV - Whether no incriminating material available with the Assessing Officer? - HELD THAT:- Under section 153A an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers u/s 153A and the earlier assessment shall have to be reiterated.
As rightly pointed out by controversy involved in the present case stands concluded by the decision of this court in the case of CIT-1 v. Jayaben Ratilal Sorathia [2013 (7) TMI 850 - GUJARAT HIGH COURT] wherein it has been held that while it cannot be disputed that considering section 153A AO can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the AO with respect to the sale transactions in the particular assessment year. - Decided in favour of the assessee
-
2016 (7) TMI 1588
Deduction u/s 80-IC - Disallowance of deduction as a case of splitting up of the old unit, rather than of that substantial expansion, as canvassed by the assessee - assessee claimed to have two units, namely Unit-I and Unit-11, at Baddi - HELD THAT:- It remains unchallenged on record that Unit-II of the assessee is an entirely independent unit from the erstwhile unit. It was set up by installing new machinery worth ₹ 71 lacs. Obviously, it has a separate electricity connection. It is being worked by separate employees. The purchases to and sales from Unit-II are separate, as borne out from the separate stock register maintained. All this has duly been taken into consideration by the Tribunal in its order for the assessment year 2006-07 (supra). Physically also, though located in the same complex, Unit-I & Unit-II are housed separately. Thus, for all intents and purposes, the two units are mutually distinct and separate entities, Unit-II having come into being only as a result of the substantial expansion carried out by the assessee. It is in this light, that the applicability of the provisions of section 80IC(6) have to be construed. The ld. CIT(A) has erred in not doing so.
Section 80IC(8)(v) states that ‘initial assessment year’ means the assessment year relevant to the previous year in which the undertaking or enterprise, inter-alia, begins manufacture, or completes substantial expansion. In the present case, substantial expansion was brought about in the assessment year 2004-05 and that being so, the period of 10 years’ tax holiday is to commence with reference to this assessment year, i.e., A.Y. 2004-05. The assessee claimed deduction under section 80-IC with respect to Unit-II. This was wrongly disallowed by the AO and the ld. CIT(A) erroneously confirmed the disallowance.
The initial assessment year for the proposed Unit-II, for the purposes of section 80-IC(6), was A.Y. 2004- 05. - Decided in favour of assessee.
-
2016 (7) TMI 1587
Revision u/s 263 - additions on account of TP adjustment in relation to transaction with AE - Assessment order is erroneous and prejudicial to the interest of revenue for this reason alone that he has not referred the international transaction between the assessee and its associated company i.e. M/s GLA Trading International PTE Ltd. for determination of ALP - HELD THAT:- CBDT Instruction No. 3 dated 20.05.2003 is not binding on the A.O. Hence, the action of the A.O. of himself determining the TP adjustment without referring the matter to the TPO in the present case is a possible view as per this tribunal order. In this view of the matter, the assessment order cannot be said to be erroneous because the view taken by the A.O. of not referring the matter to the TPO is a possible view as per this tribunal order. Learned DR of the revenue could not point out any other basis indicated by the learned CIT in the impugned order to say that the assessment order is erroneous.
This is a settled position of law by now that revisionary powers of CIT u/s 263 can be invoked only when the assessment order is erroneous as well as prejudicial to the interest of the revenue. Since, in the present case, the assessment order could not be established to be erroneous, the impugned order of CIT u/s 263 is not sustainable - Appeal of the assessee is allowed.
-
2016 (7) TMI 1586
Classification of goods - Di-calcium Phosphate - allegation that the appellant is using Rock Phosphate, Hydrated lime and Lime Stone powder which would not fall under the category of “Animal Feed Grade” - N/N. 4/2016-C.E. (N.T.), dated 12-2-2016 - HELD THAT:- It has been correctly pointed out by the learned Counsel that the Govt. of India vide Notification No. 4/2016-C.E. (N.T.), dated 12-2-2006 has held that Central Excise duty is not payable on such goods.
The impugned order is not sustainable - Appeal allowed - decided in favor of appellant.
-
2016 (7) TMI 1585
Addition of payment made on account of 'Mehta Sukhadi' - HELD THAT:- As decided in own case [2016 (5) TMI 490 - BOMBAY HIGH COURT] it is an agreed position between the parties that Question No.(a) as framed herein above, stands concluded against appellant and in favour of the revenue.
Addition on account of inflation of labour charges - appellant is a partnership firm, engaged in the business of trading in tarpaulins, including renting the tarpaulins for hire and erection of Monsoon Sheds as required by its Customer - HELD THAT:- No basis to make any addition on account of labour charges. We notice that in the statement dated 15th September, 1988, Mr. T. V. Goshar has stated that labour expenses are inflated. It is pertinent to note that the order of the CIT(A) which partly deleted additions made on account of labour charges and restricted it up to 10% of ₹ 10.97 lakh, had itself rendered a finding that there was a shortcoming in the accounts of the labour charges till the date of search. In the above context, reliance by the Tribunal upon the statement made under Section 132(4) of the Act after considering the retracted statement, could not be faulted with. The view taken by the impugned order of the Tribunal is a possible view in the facts and circumstance of the present case. Thus, substantial question (b) as framed is answered in the affirmative i.e. in favour of the revenue and against the appellant-assessee.
Addition on account of wrong billing - HELD THAT:- Impugned order does record that the Assessing Officer had rendered a finding that the appellant has not entered bills for hiring charges in its books of account in daytoday running of the business. Thus, the contention of the appellant is not sustainable.
Reliance is placed upon the decision of Gujarat High Court in N. K. Paper Board [1998 (3) TMI 102 - GUJARAT HIGH COURT] to hold against the appellant. We find that the citation is incorrect and does not assist the revenue. However, the impugned order of the Tribunal even in the absence of the above decision cannot be held to be bad in law. In the above circumstance, the view of the Tribunal in upholding the order of the Assessing Officer to add an amount to the appellant's income cannot be faulted. This is a possible view on facts found. - Decided in favour of revenue
-
2016 (7) TMI 1584
Reopening of assessment u/s 147 - non issue of notice under section 143(2) - HELD THAT:- Question that return filed was within or beyond time prescribed under section 139 or has been filed after notice issued under section 148 or filed earlier after expiry of period under section 139 is not relevant to determine the question whether AO can proceed to make assessment under section 143(3) without issuing notice under section 143(2). The provision being mandatory, Assessing Officer cannot proceed to make assessment without issuing notice under section 143(2). - Decided against revenue.
-
2016 (7) TMI 1583
Rejection of books of accounts - net accretion method adopted by the AO for determining the total income - HELD THAT:- In the present case also, the Ld. CIT (A) following its earlier finding in the case of Shri. Hitesh S. Mehta for A.Y. [2013 (12) TMI 244 - ITAT MUMBAI] on the same issue, has rejected the books of account produced by the assessee. Since the identical issue has already been decided by the coordinate Bench, we respectfully following the finding of the coordinate bench direct the Ld. CIT(A) to compute the income of the assessee as per books of accounts. Ground no. 3 is accordingly allowed for statistical purpose.
Determination of the total income by considering net accretion to various assets - HELD THAT:- Since, we have directed the Ld. CIT(A) to compute the taxable income as per books of account of the assessee, we delete the additions contested.
Undisclosed investment - HELD THAT:- As we have directed the Ld CIT(A) to determine income on the basis of books of account. Since the AO has determined certain investments as “undisclosed investments” on the basis of material collected by him and since they were not compared with the books of accounts and the assessee was not provided with the opportunity to explain her case, we set aside this issue to the file of Ld. CIT(A) with the direction to cause compare the alleged undisclosed investments with the books of account. CIT (A) may get a remand report from AO in this regard. If any investment is found not recorded in the books of account, to seek explanation from the assessee and take appropriate decision after providing adequate opportunity to the assessee.
Disallowance of deduction on account of interest expenditure - HELD THAT:- Following the decision of Co-ordinate Bench we restore this ground of appeal back to the file of the AO with the direction to follow the direction of the Tribunal passed in SHRI HITESH S. MEHTA, [2013 (11) TMI 1650 - ITAT MUMBAI]
-
2016 (7) TMI 1582
Addition of difference of profit between the value of bagasse transferred to and power transferred from subsidiary company - bagasse, a by-product arising in the manufacture of sugar, supplied by the assessee to its subsidiary company TEL in exchange for the power and steam received by the assessee from the subsidiary company - AO considered the market value of the bagassee supplied by the assessee to its subsidiary company and against the said value of bagassee, considered the value of power received by the assessee from the subsidiary company and arrived at the difference - HELD THAT:- As decided in assessee's own case [2013 (1) TMI 1007 - ITAT CHENNAI]we are inclined to decide the issue in favour of the assessee. This ground raised by the Revenue is dismissed.
Addition of sale of Molasses - Addition in respect of the sale of molasses by the assessee by comparing the price at which another company, Trichy Distilleries and Chemicals Limited has purchased the molasses - CIT(A) deleted the addition on the reason that the price depends upon quality or grade as well as on the demand and supply position. The AO has taken average rate of ₹ 1,680/- per MT, in respect of one customer - HELD THAT:- addition made by the AO cannot be sustained and we find no reason to interfere with the order of Ld.CIT(A). The price of the molasses is depending on the quality of the same. The prices are to be compared with same quality of molasses.The AO’s comparison of price is not proper. The Ld.CIT(A) considered the quality of molasses and various components included in it to arrive at a proper comparison. The Departmental Representative was not able to controvert the findings of CIT(A). Hence, the same is confirmed and this ground of Revenue is rejected.
Deemed dividend u/s.2(22)(e) - HELD THAT:- When there is a running account between the parties on account of business transactions and there is no obligation of repayment by the parties, which is in nature of trade advance, to give effect to commercial transaction does fall within the meaning of sec.2(22)(e) of the Act. Hence, in our opinion deletion of addition by the CIT(A) is justified and the order of Ld.CIT(A) is confirmed on this issue. This ground is rejected.
Addition made on account of export sales to Agrocorp - CIT-A deleted the addition - HELD THAT:- The details of document produced by the assessee before the authorities show that the assessee has properly accounted the export sales at ₹ 40.94 crores, which was duly reflected in the sales reported in the P & L A/c for the year ended on 31.03.2009. Further, the assessee has produced before the Ld.CIT(A), the party-wise and group-wise export of sale of Sugar to M/s.Agrocorp, which is at ₹ 40.94 crores. Ld.D.R is not able to controvert the findings of the Ld.CIT(A)’s recording in para 11.3 of CIT(A)’s order. Hence, when the books of accounts are duly audited and there is no adverse findings regarding the recording of the export sales and documents relating to the export show the same export figure, there is no question of doubting the same. Hence, we do not find any infirmity in the order of Ld.CIT(A) and the same is confirmed.
Addition u/s.14A r.w.Rules 8D - main plea of the ld.A.R is that investment is a sister concern and associated companies and interest pertained to borrowings used for earning exempt income from the investments to be considered - HELD THAT:- Interest on borrowing which are made for specific purpose of business cannot be considered for the purpose of Rule 8D of the Income Tax Rules. Further, investments in sister concerns or subsidiaries with which the assessee is having business transactions, that investments cannot be considered for the purpose of applicability of Rule-8D. See Sun TV Networks [2016 (2) TMI 928 - ITAT CHENNAI]
AO has to consider the assessee’s own fund i.e. capital and reserves as available for investment which yields exempted income and thereafter he shall apply the Formula in Rule 8D and also exclude investments in subsidiaries as held by the above order of Co-ordinate Bench. With this observation, we remit the issue to the file of AO for fresh consideration. Hence, this ground is allowed for statistical purposes.
-
2016 (7) TMI 1581
Exemption u/s 11 - Charitable purpose u/s 2(15) - Income from property held for charitable or religious purposes - whether the provisions of Section 11(4A) were attracted to the assessee’s case - whether by rendering specific services to members and non-members for a fee, a trade, professional or similar association can be said to be carrying on a business activity? - HELD THAT:- It is not in dispute that the issues raised in these appeals stand covered in favour of the Assessee for the earlier Assessment Years [2012 (11) TMI 429 - DELHI HIGH COURT] as held it not proper to characterise the activities of the chamber as activities amounting to a business in the generally understood sense of the word, the most important feature of business being profit motive. It has not been suggested by the income tax authorities that the activities carried out by the assessee chamber were propelled by any profit motive.
In such circumstances, it is proper to view the activities as driven by a charitable motive in the sense in which a charitable purpose is defined in Section 2(15). In this view of the matter, the provisions of Section 11(4A) are not attracted to the present case and a remand to the AO for finding out whether the activities were incidental to the objectives of the trust and separate books of accounts were maintained for such business was unnecessary - Decided in favour of the assessee.
-
2016 (7) TMI 1580
Undisclosed income of the block period u/s 158BB - Hawala transaction in the sale of Neptha - HELD THAT:- CIT(A) while considering the addition on account of sale of Neptha observed that the addition to the income of assessee on account of sale of Neptha has been made on the basis of statement of Naresh B. Vora, the document impounded from his business premises and some other factor. Not a single word has been written specifically what evidence was collected during the course of search, the details gathered during the block assessment proceeding. AO has nowhere referred that any statement of assessee was recorded. Neptha is a buy product crude oil which is sold by the PSU for the license holder, who is actual user i.e. manufacturer of petro chemicals for which explosive license is mandatory. During the entire proceeding u/s 132, no incriminating material was found or seized which may show or prove that assessee was quote holder of Neptha or that he owned a factory having manufacturing of petro chemicals, the statement of assessee was recorded on 22.01.2001 exactly six days before the date of assessment order. The assessee was not confronted with the alleged material and the statement of Shri Naresh B. Vora which has been used against him, not a single question was asked about the sale of Neptha or his relationship with Ahmadabad and Baroda parties. After analyzing the fact and the alleged corroborative evidence a basic question here arises as whether the addition of income of the assessee can be made on the basis of the above referred material. CIT(A) find its answer in No. No illegality or infirmity in the order of CIT(A) in deleting the addition on account of sale of Neptha, thus, this ground of appeal raised by Revenue is dismissed.
Addition on account of sale of delivery orders - HELD THAT:- Mr. Vora informed that Sunil Thakkar had obtained chemicals in the name of Galaxy Petrochem and sold it in the market. The assessee has totally denied his involvement and argued that no paper were found at the premises of the assessee nor were found during the survey of premises of Naresh Vora. Ld. CIT(A) while considering this ground concluded that the addition cannot be sustained u/s. 158BC in absence of independent, primary evidence found and seized during search operation. The name appearing on the backside of two bills “Sunil Bhai” is not proved and AO has not given any reasoning as to how he arrived at the conclusion that the signature were of the assessee. Thus, we are in agreement with the finding of Ld. CIT(A). This ground of appeal raised by Revenue is also dismissed.
Addition on protective basis on the statement of Naresh Vora - HELD THAT:- AO made the addition merely on the statement of Naresh Vora dated 09.02.2001. Ld. CIT(A) while considering the contention of assessee concluded that the addition made by AO is not as per the provision of law. Except the statement of Naresh Vora, no other document seized during the search has been referred by AO for making the addition and deleted the addition. We have noticed that Mr. Vora has not alleged anywhere that assessee was working on behalf of Atlas, Avani or Ankini. With these observations, we do not find any illegality or infirmity in the order of ld. CIT(A), thus this ground of appeal of Revenue is also failed.
Addition on account of Foreign Tour Expenses - HELD THAT:- The assessment order is silent about the evidence which may prove that assessee spend ₹ 2,00,000/- on foreign trip in AY-1998-99 and/or the said money was unaccounted income of the assessee. In fact, during the assessment proceeding, the assessee filed some details about the foreign travel/trip, on the basis of which the addition has been made and the same was deleted by the Ld. CIT(A). DR for revenue failed to disclose that there was any material to make any addition. Since there was no material in respect of unaccounted income for foreign travel during the search proceeding, hence, the same was deleted by Ld. CIT(A). With this observation, we do not find any infirmity in the order of CIT(A). Hence, this ground of appeal is also dismissed.
Addition on account of Household Expenses - addition was made on the basis of one Gandhi Dairy in the premises of Sunil Chemicals - HELD THAT:- The Dairy is not in handwriting of the assessee or any of his family member, the said Dairy was of the Accountant and was written by the Accountant. The assessee has no concern with the said Dairy. The additions were made on conjecture and surmises. As per law for block assessment period, the estimated addition cannot be made. Ld. CIT(A) while considering this ground concluded that during the course of search and seizure action, no incriminating document or evidence was found that may prove the withdrawals made by assessee or his family members were inadequate to run the Household. AO has not mentioned that the total withdrawal made by members of the assessee’s family, whereas the assessee had strongly emphasized the point. AO has not done this exercise otherwise he would not have reached to the conclusion that Household Expenditure incurred by family was sufficient and deleted the addition. The finding of CIT(A) deleting the addition are quite reasonable - Decided against revenue.
-
2016 (7) TMI 1579
Appointment of Valuer - HELD THAT:- It seems that a valuer was appointed by the order dated 27th July 2015. That valuer was changed by a subsequent order dated 15th October 2015. Both these orders inadvertently do not reference Company Appeal No. 88 of 2014 under which the present valuer was appointed.
List the matter for directions on 30th September 2016.
-
2016 (7) TMI 1578
Assessment of trust - determination of income for the purpose of application of income for charitable purpose method of accounting followed by the assessee - HELD THAT:- As decided in own case [2010 (1) TMI 1276 - ITAT VISAKHAPATNAM]assessee is following Cash System of accounting for determination of income for the purpose of application of income for charitable purpose. Therefore, we direct the A.O. to compute the income as per the method of accounting followed by the assessee.
Denial of exemption u/s. 11 - violation of the provisions of section 13(1)(c) & 13(2)(g) r.w.s. 13(2) - addition towards refund of excess amount - HELD THAT:- As decided in own case [2015 (5) TMI 1210 - ITAT VISAKHAPATNAM] Excess amount refunded to M/s. South India Corporation Ltd. does not amount to diversion of funds as defined u/s. 13(2)(g) of the Act. The assessee has refunded excess amount collected from the party by way of anonymous decision of the Board of Directors of the Trust further supported by proof of payment. Therefore, we are of the view that the A.O. was not correct in holding that the assessee has violated the provisions of section 13(1)(c) & 13(2)(g) r.w.s 13(3) of the Act. Hence, we direct the A.O. to allow the exemption as claimed by the assessee and delete the additions made towards refund of excess amount to M/s. South India Corporation Ltd.
Addition towards accrued interest - A.O. observed that the assessee itself has offered interest as per the TDS certificate - HELD THAT:- We find force in the arguments of the assessee for the reason that the assessee is consistently following cash system of accounting for the purpose of determination of income. However, though assessee claims that it is following cash system of accounting for the purpose of determination of income, the assessee itself admitted that it has offered interest income based on TDS certificate. There is a contradictory statement from the assessee as regards the method of accounting followed for the purpose of determination of income and treatment of interest accrued on fixed deposits for the purpose of tax. Though, in principle, we accept the contention of the assessee that it is following cash system of accounting, in view of the claim made by the assessee that it has offered interest on accrual basis, we deem it appropriate to remit the issue back to the file of the A.O. and direct the A.O. to examine the issue afresh in the light of the above discussions.
Penalty u/s 271(1) - refund of excess amount made - HELD THAT:- Since, the quantum addition on which penalty levied was deleted, the penalty levied u/s. 271(1)(c) of the Act cannot sustain. Even otherwise, the question whether the refund of excess amount made to M/s. South India Corporation Ltd. is an expenditure incurred for the purpose of the Trust or the said payment is a diversion of funds to the interested persons which violates the provisions of section 13(1)(c) r.w.s. 13(3) of the Act, is a legal issue and could involve difference of opinion.
A.O. disallowed the amount because he had denied the benefit of exemption u/s. 11 of the Act. The Hon'ble Supreme Court in the case of CIT v. Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT] clearly held that disallowance of expenditure does not amount to concealment of particulars of income or furnishing inaccurate particulars of income which leads to levy of penalty u/s. 271(1)(c) of the Act. Therefore, considering the facts and circumstances of this case, we direct the A.O. to delete the penalty levied u/s. 271(1)(c) of the Act. - Decided in favour of assessee.
-
2016 (7) TMI 1577
Assessment of trust - Accumulation of income u/s. 11(2) of the Act by filing Form No. 10 - assessee is following Cash System of accounting for the purpose of determination of income to be applied for charitable purpose u/s. 11 - A.O. was of the opinion that though assessee filed Form No. 10 along with revised return in response to notice u/s. 148, failed to file Form No. 10 along with original return of income, therefore, the assessee is not eligible for benefit of accumulation of income - HELD THAT:- If the Form No. 10 is not filed before completion of assessment, would mean that the assessment order will have to be reopened for the purpose of computation of income available for accumulation. Therefore, any form filed before the completion of assessment has to be accepted. In the present case on hand, we find that the assessee has filed Form No. 10 before completion of assessment. Therefore, we are of the opinion that the A.O. is not correct in rejecting the Form No. 10 and denying the benefit of accumulation of income u/s. 11(2) of the Act. Hence, we direct the A.O. to re-compute the income after allowing benefit of accumulation u/s. 11(2) of the Act.
Method of accounting followed by the assessee - HELD THAT:- Considering the facts and circumstances of this case and also respectfully following the Co-ordinate Bench decision in assessee’s own case [2010 (1) TMI 1276 - ITAT VISAKHAPATNAM], we are of the view that the assessee is following Cash System of accounting for determination of income for the purpose of application of income for charitable purpose. Therefore, we direct the A.O. to compute the income as per the method of accounting followed by the assessee.
Denial of exemption u/s. 11 - AO was of the opinion that the activities carried out by the assessee are not in the nature of charitable activity as defined u/s. 2(15) as merely engaged in the business of providing organized labour to two of its Settlors Association - HELD THAT:- As decided in own case [2010 (1) TMI 1276 - ITAT VISAKHAPATNAM] registration of a Trust u/s 12A of the Income-tax Act of 1961 once done is a fait accompli and the Assessing Officer cannot thereafter probe into the objects of the Trust - we are of the view that activities carried out by the assessee are in the nature of charitable activities as defined u/s. 2(15) of the Act. Therefore, we direct the AO to allow the exemption u/s. 11 as claimed by the assessee.
Violation of Section 11(2)/(5) r.w.s. 13(1)(c) of the Act towards loans to two of its Settlers Association - AO held that the assessee has diverted its funds to other associations without charging any interest, therefore, opined that there is a violation of Section 13(1)(c) and hence not eligible for exemption u/s. 11 - HELD THAT:- In assessee’s own case[2010 (1) TMI 1276 - ITAT VISAKHAPATNAM] authors of the assessee trust are two trade associations and as stated earlier there cannot be any personal interest so far as the trade associations are concerned. The impugned loans have not been given to the trustees but only to the trade associations. Though the trustees fall in the category of specified persons u/s 13(3), the trade associations in which they are office bearers cannot be treated as a concern in which they are substantial interested. Hence the question whether the provisions of section 13(1)(c) shall apply to the assessee in respect of the impugned advances or not is a debatable issue. Be that as it may, in any case, on merits, we have seen that the impugned advances have been made with adequate security and adequate interest and they have been collected subsequently. Hence we do not find any reason to suspect the adequacy of security or interest in terms of section 13(2)(a)
Disallowance of depreciation on Fixed Assets - AO computed income under the normal provisions of the Act by adopting the excess of income over expenditure as per the Income and Expenditure A/c - HELD THAT:- We find force in the arguments of the assessee for the reason that the assessee is following Cash System of accounting. The assessee has claimed cost of total assets purchased as application of income. We further noticed that the assessee has not claimed depreciation on Fixed Assets as application of income. Therefore, the AO was not correct in disallowing the depreciation. Hence, we direct the AO to delete the additions made towards depreciation.
Disallowance of income tax - assessee has claimed income tax payments as application of income for charitable purpose - AO disallowed income tax and added back to total income of the assessee - Contention of the assessee that income tax is allowable as a deduction while computing income in the case of trust claiming exemption u/s. 11 - HELD THAT:- We find force in the arguments of the assessee for the reason that income of any trust or society claiming exemption u/s. 11 has to be computed under normal commercial principles. Income tax payable is necessarily an out go from the income of the trust. Therefore, once there is out go towards income tax payment, it has to be allowed as a deduction towards income available for application of income for charitable purpose as held in Trustee of V.H.E.H. the Nizams Supplemental Trust [1978 (2) TMI 7 - ANDHRA PRADESH HIGH COURT] The CIT(A) after considering the relevant submissions rightly allowed the claim of the assessee.
Disallowance of un-paid liability u/s. 43B - contention of the assessee that it is following Cash System of accounting for the purpose of determination of income u/s. 11 of the Act and hence not considered any liability on accrual basis while computing the income - HELD THAT:- We find force in the arguments of the assessee for the reason that the assessee is following Cash System of accounting, accordingly, net cash surplus for the year is considered as income available for application of income as per the receipts and payments accounts. The assessee has considered only actual payments made towards liability referred to in sec. 43B for the purpose of application of income. Therefore, the AO was not correct in making additions towards unpaid liability by following the Mercantile System of accounting. The CIT(A) after considering relevant submissions of the assessee, allowed the claim of the assessee.
-
2016 (7) TMI 1576
Compensation on account of death caused by rash driving - enhanced income shown by dependent of deceased for claiming enhanced compensation - HELD THAT:- From the first three income-tax returns, it is obvious that the deceased did not show the income earned by these package tours of taxies to the Income Tax Department, but revealed the income of his salary only and when he passed away, his dependants without discerning the implications of such disclosure presented the incometax return for the year 2006-07 to the tune of ₹ 98,500/-, which was almost double than the last three income-tax returns filed by the deceased. Therefore, the income which might have been earned by the dependants out of these two cabs could not at all be taken into consideration for evaluating the compensation - It is for yet another reason that even after the death of such owner of vehicles, the income of the dependents out of these vehicles would not have lost and they would have continued to earn the income from these vehicles even after the death of Mr. Arya.
Thus, only the average of first three income-tax returns would have been the base for evaluating the compensation. Such average income comes to ₹ 52,635/-. Looking to the status of the family, I would not like to deduct 1/4th towards the personal expenses, but it must have been 1/3rd and considering such standards, the total dependency come to ₹ 35,090/- and applying the multiplier of “16” thereon, the amount of compensation comes to ₹ 5,61,440/- - Again considering the financial status of the family, I further reduce the amount from ₹ 20,000/- to ₹ 10,000/- towards the loss of consortium. The amount awarded for the loss of love and affection is also reduced from ₹ 10,000/- to ₹ 5,000/-. However, the amount of ₹ 5,000/-, awarded for the funeral expenses, is left intact - This way the total compensation comes to ₹ 5,61,440 + 10,000 + 5000 + 5000 = 5,81,440/-.
The quantum of compensation is reduced to the extent indicated - the appeal of the insurance company is hereby allowed.
-
2016 (7) TMI 1575
Termination of services - furnishing of false information or suppression of factual information - HELD THAT:- The verification of antecedents is necessary to find out fitness of incumbent, in the process if a declarant is found to be of good moral character on due verification of antecedents, merely by suppression of involvement in trivial offence which was not pending on date of filling attestation form, whether he may be deprived of employment? There may be case of involving moral turpitude/serious offence in which employee has been acquitted but due to technical reasons or giving benefit of doubt. There may be situation when person has been convicted of an offence before filling verification form or case is pending and information regarding it has been suppressed, whether employer should wait till outcome of pending criminal case to take a decision or in case when action has been initiated there is already conclusion of criminal case resulting in conviction/acquittal as the case may be. The situation may arise for consideration of various aspects in a case where disclosure has been made truthfully of required information, then also authority is required to consider and verify fitness for appointment.
Whether an employee on probation can be discharged/refused appointment though he has been acquitted of the charge's, if his case was not pending when form was filled, in such matters, employer is bound to consider grounds of acquittal and various other aspects, overall conduct of employee including the accusations which have been levelled? - HELD THAT:- If on verification, the antecedents are otherwise also not found good, and in number of cases incumbent is involved then notwithstanding acquittals in a case/cases, it would be open to the employer to form opinion as to fitness on the basis of material on record. In case offence is petty in nature committed at young age, such as stealing a bread, shouting of slogans or is such which does not involve moral turpitude, cheating, misappropriation etc. or otherwise not a serious or heinous offence and accused has been acquitted in such a case when verification form is filled, employer may ignore lapse of suppression or submitting false information in appropriate cases on due consideration of various aspects.
Suppression of 'material' information presupposes that what is suppressed that 'matters' not every technical or trivial matter. The employer has to act on due consideration of rules/instructions if any in exercise of powers in order to cancel candidature or for terminating the services of employee. Though a person who has suppressed the material information cannot claim unfettered right for appointment or continuity in service but he has a right not to be dealt with arbitrarily and exercise of power has to be in reasonable manner with objectivity having due regard to facts of cases - What yardstick is to be applied has to depend upon the nature of post, higher post would involve more rigorous criteria for all services, not only to uniformed service. For lower posts which are not sensitive, nature of duties, impact of suppression on suitability has to be considered by concerned authorities considering post/nature of duties/services and power has to be exercised on due consideration of various aspects.
Information given to the employer by a candidate as to conviction, acquittal or arrest, or pendency of a criminal case, whether before or after entering into service must be true and there should be no suppression or false mention of required information - While passing order of termination of services or cancellation of candidature for giving false information, the employer may take notice of special circumstances of the case, if any, while giving such information.
Reference answered accordingly.
-
2016 (7) TMI 1574
MAT credit - tax credit u/s 115JAA is to be given, whether after levying surcharge and education cess on the tax calculated as per the normal provision or before - whether adjustment on account of MAT credit is to be made against the tax determined under the normal provisions of the Income Tax Act, before levying surcharge and cess or otherwise? - HELD THAT:- MAT credit does not include surcharge and cess, which fact we find, has not been controverted by the Revenue. Therefore, following the proposition laid down by the co-ordinate Bench in the above noted cases, also the decision of Vacment India Ltd. [2014 (10) TMI 787 - ALLAHABAD HIGH COURT] we hold that the adjustment of MAT credit under section 115JAA is to be made from the tax determined as payable before including surcharge and cess thereon.
Direct the AO to allow the MAT credit against the tax liability payable before surcharge and education cess.
-
2016 (7) TMI 1573
TP Adjustment - adjustment in respect of International transactions of the assessee with its AE in providing fees for software development and related services - comparable selection - HELD THAT:- Assessee is engaged in providing software development services and related services to its AE. The assessee used TNMM to Bench mark the international transactions and arrived at margin of 14.5%, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
............
|
9911796707
