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2015 (11) TMI 1866
Deduction u/s 80IA in respect of income from generation of power and sale of carbon credit - AO held that the sale on “carbon credit” was neither having direct nor having immediate nexus with the income from power generation division of the assessee, therefore, profit on sale of carbon credit was not eligible for claiming deduction u/s 80IAWhether deduction is eligible for ‘power’ and not for ‘carbon credit'? - HELD THAT:- On identical facts and circumstances, we have already decided this issue in the case of ACIT, Raipur Vs Bajrang Power & Ispat Ltd.[2015 (11) TMI 1865 - ITAT RAIPUR] holding that the income on sale of carbon credit was derived from the activity of the industrial undertaking.
Disallowance on account of temple & pooja expenses when the expenses on temple and pooja are personal and not for the welfare of the employees - HELD THAT:- We have noticed that the AO has not pointed out any specific reason that why the expenditure in question was not admissible; specifically when the claim of the assessee was that the same were wholly and exclusively incurred for the purpose of assessee’s business. In a very cryptic manner, he has held that the purpose of the travel was not explained and the temple and pooja expenditure are personal and not for welfare of the employees. Hence, he had made disallowance respectively on ad-hoc basis. When the matter was carried before the first appellate authority, the learned CIT(A) has reversed the impugned ad-hoc disallowance on the ground that even on verification of bills and vouchers, no specific instance was mentioned by the AO in support of the said disallowances. We are also of the view that estimation in question pertaining to travelling expenses and temple & pooja expenses was not based upon any cogent evidence. As a result, we hereby confirm the findings of the learned CIT (A) and dismiss these two grounds of appeal of the Revenue.
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2015 (11) TMI 1865
Deduction u/s 80IA - sale of carbon credit as income derived from business of generation of power - whether expression “derived from” has a narrow meaning and different from the term “attributable to”? - CIT (A) has held that the profit was earned on sale of carbon credit only when power was generated and not otherwise and profit earned on sale of carbon credit was the gain derived from the business of generation of power, consequently, eligible for claiming deduction u/s 80IA (4) - HELD THAT:- We find that as we have already held that the receipt on account of carbon credit sale is a capital receipt and hence the same is not liable to tax. The adjudication of issue raised by the Revenue is only of academic interest. Accordingly we are not engaging under the same. Hence this ground raised by the Revenue is dismissed as infructuous.
Disallowance of the claim of assessee u/s 80IA - allegation of the AO was that the electricity was transferred at higher rate to one of the Division which was eligible for deduction u/s 80IA - HELD THAT:- On the issue whether the tariff determined by State Electricity Board represents market value or not, a detailed verdict has already been pronounced by the Hon’ble Jurisdictional High Court. In the case of CIT Vs M/s. Godawari Power & Ispat Ltd. [2013 (10) TMI 5 - CHHATTISGARH HIGH COURT] as held CIT-A and the Tribunal had rightly computed the market value of the power after considering it with the rate of power available in the open market namely the price charged by the Board. There is no illegality in their orders.
Disallowance u/s 14A r.w.r 8D - HELD THAT:- The formula of Rule 8D is to be applied only after considering the applicability of the main provisions of Section 14A of the Act. Due to this reason it is worth to restore this issue back to the file of the AO to first of all, determine whether the assessee has earned any dividend or exempted income from the alleged investment. If, no dividend is earned, then, next question is that whether any expenditure has been incurred to earn in connection with the investment made. If, expenditure is in the shape of interest, then, whether the assessee had sufficient self generated funds. For this reason, the assessee is directed to place on record that the investment has been made out of the self generated income to create interest-free funds. Hence, we deem it proper as well as justifiable to restore this issue back to the file of the AO to examine the facts afresh and then only apply the provisions of Section 14A of the IT Act as per law. Resultantly, this cross objection may be treated as allowed but, for statistical purposes only.
Addition of subsidy received - revenue or capital receipt - CIT-A held that the subsidy was capital in nature, therefore, directed to delete the addition - HELD THAT:- We are of the view that this issue has been decided in the case of DCIT Vs Reliance Industries Ltd. [2003 (10) TMI 255 - ITAT BOMBAY-J] Respectfully following this precedence, we hereby confirm the findings of the learned CIT (A) and dismiss the ground of appeal of the Revenue.
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2015 (11) TMI 1864
Addition u/s 68 on account of unsecured loans - non discharge the burden to prove the credit u/s 68 - AO objected to the admission of additional evidences - DR argued that there is violation of Rule 46A inasmuch as the learned CIT(Appeals) has admitted additional evidences and the AO has not been granted an opportunity to comment upon the merits of the case of additional evidences - HELD THAT:- As it is not the case that these particulars were false, there is no reason why the AO could not make necessary enquiry to satisfy himself. By providing all the necessary details regarding loan creditors the assessee has duly discharged the initial onus.
The onus of further enquiry and proving that the loans were bogus lied on the AO who has chosen not make any enquiry whatsoever. In these circumstances, in our considered opinion, there is no infirmity in the order of CIT(Appeals). CIT(Appeals) has noted that if the AO had any doubt about the transactions he could have issued summons u/s 133(6) or even deputed the Inspector which had not been done.
The creditors were assessed to income-tax at the same place and hence the AO could have very easily invoked any enquiry. In these circumstances, in our considered opinion, there is no infirmity in the order of learned CIT(Appeals). In this regard we may refer to Hon’ble Apex Court decision in the case of CIT vs. Orissa Corporation P. Ltd. [1986 (3) TMI 3 - SUPREME COURT].
In this case it was expounded that when the names and addresses of the creditors are given and they are income-tax assesses, then the onus to disprove the same lied on the Revenue. In this case admittedly the Revenue has not discharged the onus. We are not inclined to accept the submissions of the learned D.R. to remit the matter to the files of the AO. AO had all the informations before him at the time of assessment. Similarly he was again given an opportunity when the submissions of the assessee were remanded to him. Now the AO cannot give a third innings which will be clearly an injustice to the assessee and harassment by multiple assessment proceedings on same issue for no fault of the assessee. Accordingly we uphold the order of learned CIT(Appeals) on this issue and dismiss the ground taken by the Revenue.
Addition of miscellaneous expenses - HELD THAT:- We find that CIT(Appeals) has clearly found that the amount of miscellaneous expenses of Rs.10,758/- was added twice as it was once again included by the AO in the disallowance for unsecured loans and interest. This is clear from the reading of the AO’s order on the issue of addition for unsecured loan wherein the AO had started with the figure of Rs.51,38,998/- but in conclusion had added Rs.51,49,756/-. Clearly the different amount of Rs.10,758/- was a double addition. Hence the learned CIT(Appeals) has only deleted the double addition in the grounds dealt with by him. Hence we uphold the order of learned CIT(Appeals) on this account.
Addition on account of salary and other expenses - AO made the disallowance by observing that the assessee is having receipt by way of rent from BPCL land and has claimed various expenses - HELD THAT:- We find that it is true that the AO has made the disallowance in an adhoc manner without specifying which expenses are not supported by vouchers. It is settled law that the additions cannot be made on the basis of surmises and conjectures - Decided against revenue.
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2015 (11) TMI 1863
Exemption u/s 11 - assessee had not carried on any activity of charitable nature as contemplated under the trust deed - assessee - trust engaged running the business of printing a newspaper - depreciation claim of assessee trust - HELD THAT:- As relying on AL-MADEENA CHARITABLE TRUST. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [1999 (11) TMI 104 - ITAT COCHIN] held that when an assessee had not carried on any activity of charitable nature as contemplated under the trust deed except running the business of printing a newspaper, the assessee cannot be considered as carrying on charitable activity so as to grant exemption u/s.11 of the Act.
In view of the binding precedent relied on by the ld. DR, we are of the opinion that the assessee is not carrying on any charitable activity and cannot be granted exemption u/s.11 of the Act. However, we have to make it clear that the claim of depreciation to be granted on written down value of the assets. In other words, if the assessee has already claimed capital expenditure on acquisition of assets as application of income in earlier years and the value of the assets on which depreciation claimed has been fully allowed as expenditure or application in the earlier years that cannot be any claim of depreciation once again. The present claim of depreciation cannot be a double deduction over and above the fully value of the assets, if it was granted as application of income in earlier years. With these observations, we allow the Revenue’s appeal.
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2015 (11) TMI 1862
possession of disproportionate assets - allegations that accused Ramesh Nambiar while posted and functioning as AGM (Sport), Air India at New Delhi and other places, being a public servant, amassed assets - value of assets were disproportionate to his known sources of income or not - framing of charges - HELD THAT:- It is settled law that the property in the name of income tax assessee cannot be a ground to hold that it actually belongs to such assessee. However, the Court would interfere only if uncontroverted allegations on their face value show that no evidence is on record to make out the case and there is an abuse of the process of the Court. The test to determine a prima facie case would naturally depend upon the facts of each case and it is difficult to lay down a rule of universal application. By and large, however, if two views are equally possible and the judge is satisfied that the evidence adduced before him while giving rise to some suspicion but not grave suspicion against the accused, he will be fully within his right to discharge the accused. If the evidence which the Prosecutor proposes to adduce to prove the guilt of the accused, even if fully accepted before it is challenged by cross-examination or rebutted by the defence evidence, if any, cannot show that the accused committed the offence, then there will be no sufficient ground for proceeding with the trial.
The CBI failed to bring evidence on record to show that petitioner Bhojraj Teli had ever got any favour from accused Ramesh Nambiar, i.e., husband of petitioner Rekha Nambiar or that said accused was instrumental in awarding any contract to petitioner Bhojraj Teli from Railways during 1995-1996 or that any payment was made to M/s Archana Traders Pvt. Ltd. by petitioner Bhojraj Teli. However, the learned Trial Court while passing the order on charge recorded that in the absence of any record relating to consultancy, at this stage of charge, these entries have to be rejected and the entire such income is to be taken into account to see the extent of disproportion. The genuineness of the entries as submitted by the accused persons has to be established during trial only and no benefit of the same can be given to the accused at the stage of charge - The learned Trial Court has only considered the salary received from Deutsche Bank by petitioner Rekha Nambiar while calculating the disproportionate assets, however, ignored the consultancy fee, credit card used and travel expenses, which were duly intimated to the Income Tax Authority in ITRs. It shows that the learned Trial Court has ignored each and every aspect which is in favour of the petitioners and was on record. However, the learned Trial Court framed the charges only on the ground that petitioner Rekha Nambiar was not authorized to undertake any such consultancy work during the currency of her employment with Deutsche Bank without prior written approval of her employer.
Thus, the very basis of alleging abetment was that husband of petitioner Rekha Nambiar had been earning substantial commission in connivance with various Industrialists and in this process had obtained unlawful commission through petitioner Bhojraj Teli in the name of consultancy fees for his wife and routed the same through a company under the name and style of ‘M/s. Archana Traders Pvt. Ltd.’. However, while filing the final report, CBI could not establish the complicity of M/s. Archana Traders Pvt. Ltd. - once the very basis and genesis of the allegation stood disappeared, then could still the petitioners be prosecuted, is a question to be considered.
It is settled law that before framing the charge, the court must have some material on the basis of which it can come to the conclusion that there is a prima facie case against the accused. Before framing a charge, the court must apply its judicial mind on the material placed on record and must be satisfied that the commitment of offence by the accused was possible. The charge may although be directed to be framed when there exists a strong suspicion but it is also trite that the court must come to a prima facie finding that there exists some materials. Therefore, suspicion cannot alone, without anything more, it is trite, form the basis or held to be sufficient for framing charge. The petitioners have been charged with offence punishable under Section 109 IPC read with Sections 13(1)(e) and 13(2) PC Act - The CBI itself recorded in the charge sheet that accused No.1 was posted as Private Secretary to the then Minister of State for Railways during September, 1995 to March, 1996 and the petitioner Bhojraj Teli used to receive orders for supply of machines from various Railway Zones from 1981 onwards. Hence, as per the case of the prosecution, there is no nexus between the said petitioner and accused No.1, and therefore, there was no occasion for the commission of any of the alleged offences.
There is evidence on record to establish that money paid by the M/s HYT Group of Companies to petitioner Rekha Nambiar has been duly shown in the books of accounts and in the ITRs of the respective years. Moreover, petitioner Rekha Nambiar had also disclosed the income received from M/s HYT Group of Companies in her ITRs, however the learned Trial Court has ignored both the documents mentioned above and opined that these documents are matter of trial - It is true that the evidence in possession of the accused will be considered at the time of trial, however, the fact remains in the instant case is that documents taken into possession by the CBI establish that both the petitioners had declared the payments made and received in their ITRs and if any misconduct towards the employer has been committed by petitioner Rekha Nambiar, she can be liable for the departmental action, however cannot be booked in this case. It is not the case of the CBI that petitioner Rekha Nambiar has acquired the assets more than her known sources. Her sources are very much known; each and every document was recovered by the CBI, however that has been ignored. Therefore, in the present case, everything cannot be left for trial.
The order on charge dated 01.05.2014 and charge dated 26.05.2014 have been passed by the learned Trial Court without application of mind by ignoring the clinching evidence available on record in favour of the petitioners - petition allowed.
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2015 (11) TMI 1861
Exemption u/s 11 - assessee-trust is not registered u/s 12AA of the Act and its activities are also not examined by the lower authorities - Taxation of corpus donations - HELD THAT:- The Tribunal considered the submission of both the counsels where the corpus donations are given with specific direction exempted from income-tax. Since the benefit of sec. 11 will not be available to the trust as it is not registered u/s 12AA of the Act. The ld. Counsel relied upon the order of this Tribunal in case of Pentafour Software Employees Welfare Foundation [2008 (7) TMI 984 - ITAT CHENNAI] which is rendered on different facts wherein the Bench concluded that matter needs to be examined with reference to the scheme of the Act as regards corpus donation, but does not allow corpus donation exempted to unregistered trust. Since the assessee-trust is not registered u/s 12AA, corpus donations are taxed at normal rates. - Appeal of assessee dismissed.
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2015 (11) TMI 1860
Dishonor of Cheque - insufficiency of funds - condonation of delay of 10 days in filing the complaint - Jurisdiction of Magistrate to condone the delay in lodging the complaint, after the trial was over and when the case was posted for hearing of arguments on merit - Section 142(b) of Negotiable Instruments Act - HELD THAT:- The decision rendered by the Apex Court in Pawan Kumar Ralli's case [2014 (8) TMI 608 - SUPREME COURT], comes to the aid of the petitioner and negates the contention urged on behalf of the respondent. The said decision of the Apex Court goes to the root of the matter and the decision of this Court in Sri T.S. Muralidhar [2010 (3) TMI 1269 - KARNATAKA HIGH COURT] cannot stand.
The proceedings conducted by the Magistrate, from the stage of taking cognizance being vitiated, also stand quashed - Petition allowed.
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2015 (11) TMI 1859
Validity of assessment - non issuing notice u/s 143(2) - Curable defect u/s 292BB - HELD THAT:- The contention of the Department that it is no longer open to the assessee to question the service of notice in view of the provision of s. 292BB of the Act cannot be accepted in as much as the said section came into existence w.e.f. 2008 whereas the present appeal is of the financial year 1997-98. Further, the Supreme Court DISTILLERS COMPANY LIMITED [2007 (4) TMI 200 - SUPREME COURT] has held that the jurisdiction of the AO starts if the notice is issued within 12 months from the end of the month when the return was filed. It has nothing to do with the service of the notice which is contemplated under s. 292BB of the Act. In view of the aforesaid authoritative decision of the Supreme Court, we are of the opinion that a substantial question arises for consideration which is based on the records and which does not require investigation of any facts and, therefore, in our view, we entertain the appeal on the aforesaid question of law.
Preliminary objection raised by the learned counsel for the Department is accordingly rejected for the reasons stated aforesaid.
In view of the admitted position that no notice u/s 143(2) of the Act was issued, we are of the opinion that the order of the Tribunal, the first appellate authority, and the assessment order cannot be sustained and are quashed. - Decided in favour of assessee.
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2015 (11) TMI 1858
Claim of amortization of premium paid on purchases of investment - HELD THAT:- In assessee’s own case for the assessment year 2003-04 [2010 (10) TMI 764 - ITAT, MUMBAI] wherein the issue with regard to amortization of premium paid on purchases of investments was allowed in favour of assessee.
Amortization of pre-operative expenses - HELD THAT:- As per assessee’s own case for the assessment year 2003-04 [2010 (10) TMI 764 - ITAT, MUMBAI] we confirm the action of the CIT(A) for allowing assessee’s claim for amortization of pre-operative expenses.
Addition made on account of profit on sale of investment being chargeable to tax - HELD THAT:- As per assessee’s own case for the assessment year 2003-04 [2010 (10) TMI 764 - ITAT, MUMBAI] the profit on sale of investment in the case of an assessee carrying on general insurance business cannot be brought to tax after the omission of rule 5(b) and as per the Circular cited.
Exempting dividend income - HELD THAT:- This issue is also covered by the order of the Hon’ble Bombay High Court in the case of General Insurance Corporation of India [2011 (12) TMI 70 - BOMBAY HIGH COURT] - we do not find any infirmity in the order of CIT(A) exempting the dividend income.
Disallowance u/s 14A - HELD THAT:- As relying on M/S. RELIANCE GENERAL INSURANCE CO. LTD. VERSUS. THE DY. COMMISSIONER OF INCOME-TAX [2010 (4) TMI 1076 - ITAT MUMBAI] we do not find any merit in the action of lower authorities for disallowance made u/s.14A, which is not applicable to the Insurance Company.
TDS u/s 194C or 194I - payment made to Hotel - HELD THAT:- We have considered rival contentions and found that the payment to Hotel is covered by the provision of Section 194I. Circular No.5 dated 30-7-2002 also supports the contention that while making payment to the Hotel tax is liable to be deducted u/s.194-I. Hon’ble Bombay High Court in the case of East India Hotels Ltd. & Anr. [2009 (3) TMI 8 - BOMBAY HIGH COURT], held that in case of payment to Hotels tax is to be deducted at source as per provisions of Section 194-I and not as per the provisions of Section 194C.
Respectfully following the decision of the Hon’ble jurisdictional High Court vis-à-vis the CBDT Circular, as discussed above, we do not find any merit for disallowance of expenses on the plea that payment to Hotel is subject to deduction of tax u/s.194C of the IT Act. Accordingly, the AO is directed to delete the disallowance so made.
Nature of expense - expenditure on purchase of hard disk, head sets, RAM etc - revenue or capital expenditure - HELD THAT:- The issue is directly covered by the decision in the case of Southern Roadways Ltd., [2006 (10) TMI 82 - MADRAS HIGH COURT], wherein it was held that expenditure on replacement of machinery and expenditure on upgradation of computer are revenue in nature. In the instant case also the expenditure was incurred for upgradation of the computers by placing its hard disk, RAM etc. Respectfully following the decision of Hon’ble Madras High Court, we do not find any merit in the AO’s action for disallowing the expenditure on purchase of hard disk, head sets, RAM etc. on the plea that the same being capital in nature.
Disallowance of expenditure pertaining to purchase of software/renewal of software licence, considering the same to be capital in nature - HELD THAT:- Respectfully following the order of the Tribunal in assessee’s own case, we direct the AO to delete the disallowance made on account of expenditure pertaining to purchase of software, renewal of software licence.
TDS u/s 194H - Disallowance of co-insurance fees u/s.40(a)(ia) of the Act for non-deduction of TDS - HELD THAT:- In the present case, the co-insurers were stated to be neither acting as an agent nor acting as broker for and on behalf of the assessee and therefore the payments of co-insurance fees could not be construed as commission as per the Act or in commercial parlance. The AR made detailed submissions to bring out how the provisions of Sec.194H were not applicable in their case. The AR also placed reliance on a number of judicial pronouncements, the ratio of which is not applicable to the facts of this case. Considering totality of facts and circumstances of the case, we are in agreement with the contention of ld. AR that no disallowance is warranted u/s.40(a)(ia) in respect of coinsurance fees paid by assessee.
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2015 (11) TMI 1857
Exemption u/s 11 - accumulation of income u/s.11(1)(a) was computed at 15% of the net income from property held under trust and not from the gross income from property held under trust - HELD THAT:- We find that the issue raised before us is squarely covered by the judgment of Hon’ble Apex High Court in the case of Addl.CIT v. A. L. N. Rao Charitable Trust [1995 (10) TMI 2 - SUPREME COURT] Same view has been taken by us in the case of DCIT v. M/s. Rashtrothana Parishat [2016 (1) TMI 444 - ITAT BANGALORE]
Accordingly we are of the opinion that assessee’s claim for accumulation under section 11(1)(a)of the Act, could not have been restricted and was eligible for accumulation of 15% of gross receipt from all streams of its income. Appeal of assessee allowed.
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2015 (11) TMI 1856
Addition of income - HELD THAT:- As in case the assessee shows better result during the year under consideration as compared to past year, then there is no need for making any further addition. The finding arrived by the Tribunal is in consonance with the settled law, therefore, no addition in the income could have been made by the Assessing Officer. The Tribunal rightly declared the addition made as erroneous. The appeal does not involve any substantial question of law, hence, dismissed.
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2015 (11) TMI 1855
Proceedings under sections 3 and 4 of the Prevention of Money Laundering Act, 2002 - The primary contention for the petitioner is that the entire basis of the ECIR has been the contents of the FIR filed by the CBI - HELD THAT:- Permission to file SLP is granted.
Issue notice.
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2015 (11) TMI 1854
Validity of assessment order passed u/s 153C - Mandation Recording of satisfaction - HELD THAT:- There is nothing in the assessment order or otherwise to show that the satisfaction as envisaged u/s.153C was ever recorded by the A.O. Considering it, the A.O. did not assume jurisdiction to complete assessment u/s.153A and therefore, the assessment order passed by him is invalid. He pleaded that even when there is same Assessing Officer for searched person and where 153C action is taken then also recording of satisaction in both the cases is necessary in view of decision of the Hon'ble jurisdictional High Court in the case of Mechman [2015 (7) TMI 538 - MADHYA PRADESH HIGH COURT]
The harmonious construction of entire provision would lead to an irresistible conclusion that the term ‘assessment’ has to be read in the context of abated assessments and the term ‘reassessment’ has been used in the context of unabated assessments. In the case of completed assessments, income has to be re-assessed in terms of Sec.153A. The re-assessment requires belief of assessing officer regarding escapement of income from assessment. The belief should be founded on existence of appropriate material or information. It should be rational belief held in good faith and not arbitrary, subjective or a mere pretence. The material or information in his possession should have direct nexus with his belief regarding escapement of income. The absence of such nexus shall render the re-assessment proceedings invalid. Thus, the re-assessment of income u/s.153A cannot be made sans any incriminating material or merely on change of opinion in relation to material already considered. - Decided in favour of assessee.
Unexplained investment - HELD THAT:- There is no evidence regarding any unaccounted transaction with relation to shares acquired, transferred and re-acquired by various family members of Sangla family and associate concerns. The revenue’s claim that no promoter would divest with such a huge holding at a very nominal profit is without any basis and only a guess work. The assessee’s contention that the promoters were intended to go for public issue is well established by the fact that expenditure incurred in this regard has been debited in the books of accounts of Adroit Industries Ltd., therefore, the revenue’s contention that the promoters were not intended to go for public issue is not correct. In our considered view, all such allegations are wild and without any basis.
Revenue has even failed to bring anything on record to establish that any unaccounted transaction in any form was done by any of the persons of this group and associates. There is no evidence against the assessee with regard to transfer and reacquisition of shares of Adroit Industries Ltd. during the relevant period to the assessment years 2007-08, 2008-09 and 2010-11 respectively. The revenue’s allegations are general and not supported by any evidence. In our considered view, no addition could be sustained only on the basis of guess work or in the absence of any positive evidence. In view of this factual matrix, we find no merit in the addition made in the assessment year 2008-09 on the transfer of shares of Adroit Industries Limited and also the addition made for unexplained investment on account of reacquisition of shares of Adroit Industries Ltd. during the financial year 2010-11. We direct to delete the same.
Assessee claimed deduction u/s 80C and 80D filing the return of income u/s 153A/153C - HELD THAT:- Since we have already allowed the appeal of the assessee on the ground of issue of recording satisfaction prior to issue of notice u/s 153C of the Act and also on the ground that no incriminating document was found and seized, therefore, there is no question of allowing such deduction to the assessee. Further we would also like to state that the provisions of section 153A/153C are not made for the benefit of the assessee. Return filed in response to notice u/s 153A/153C of the Act is not substitute of revised return for the claim of such benefits.
Apex Court in the case of Goetze (India) Ltd [2006 (3) TMI 75 - SUPREME COURT] ruled out that a fresh claim before the Assessing Officer can be made only by filing a revised return and not otherwise. Therefore, whatever claim the assessee has not made while filing the return u/s 139(1)/139(4) of the Act, he cannot make fresh claim by filing the return u/s 153A/153C of the Act and reduce the taxable income originally declared - this ground of the assessee’s appeal stands dismissed.
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2015 (11) TMI 1853
Dishonor of Cheque - insuficiency of funds - authorisation given by another power of attorney, without proper authorisation to represent the Company - additional evidence obtained without giving opportunity to the revision petitioner - violation of principles of natural justice - HELD THAT:- Normally Court will not non-suit a person on the ground of technicalities. However, the question of competency to institute a prosecution under Section 138 of the NI Act on behalf of the company is not a technical matter, but it has to satisfy the condition under Section 142(a) of the Act. The complainant here is a Company incorporated under the Companies Act and the complaint was filed by its power of attorney holder. Subsequently, the power of attorney holder delegated the power given to him to another person and the resolution from the company was not produced in the Trial Court. Now that sub-delegation was challenged by the revision petitioner in this case. It is true that a power of the attorney holder can sign a complaint and file a complaint on behalf of the payee or holder in due course, but he has no power to delegate such power to another person without proper authorisation.
The evidence of PW 1 shows that the cheque was dishonoured for the reason of funds insufficient and he demanded the amount by giving a notice in writing. Ext. P1 is the power of attorney given by Apollo tyres to one Sreekumar who filed the complaint. Ext. P2 is the power of attorney executed by Sreekumar in favour of one Jose. But, these two persons were not examined as witnesses in this case - no documents were produced in the Trial Court to show that Joseph and Jose J. P. are one and the same person and not examined the validity of the power delegated by Sreekumar. The power of attorney holder can depose and verify on oath before Court in order to prove the content of the complaint. However, he has to prove the nature of delegation in the power of attorney.
The object of taking additional evidence under Section 391 of the Code is to ensure that justice is done between the prosecution and the accused. Additional evidence cannot be permitted at the appellate stage as of right and Appellate Court has to exercise its discretion on sound judicial principle alone. It is not an arbitrary discretion, while giving opportunity to take additional evidence at the appellate stage, the Court has to record its reason - If the power of attorney holder has no direct knowledge about the transactions, he cannot be examined as a witness to prove the transaction in a case. The Courts below failed to verify the nature of delegation and sub-delegation of power in Exts. P1, P2 power of attorney. The nature of sub-delegation was not answered by the Courts below. Moreover, additional evidence has been admitted without giving opportunity to the revision petitioner. Hence, these infirmities warrant me to invoke the revisional jurisdiction in this case.
The conviction and sentence passed by the Judicial First Class Magistrate under Section 138 of the NI Act are set aside. The matter is remitted to the Trial Court for fresh consideration - Application disposed off.
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2015 (11) TMI 1852
Disallowance u/s 43B - payment of privilege fees - said payment was application of income or appropriation of profit and also the fact that these expenses are a capital nature - HELD THAT:- As decided in own case [2013 (9) TMI 557 - ITAT JAIPUR] appellant company was granted exclusive privilege for wholesale trade of Indian Made Foreign Liquor & Beer in the State of Rajasthan for the financial year 2006-07 under the provisions of the Rajasthan Excise Act, 1950 by competent authority under the said Act. In exercise of its powers under section 30 and 42(c) of the Rajasthan Excise Act, 1950, the competent authority under the said Act has levied a privilege fees for FY 2006-07 vide its order No. F. 4(5)FD/Ex/2005 dated 28.3.2007 upon the appellant company in lieu of granting the said privilege. In view of these facts and following the order of Hon'ble Tribunal, Jaipur for AY 2006-07, we direct the AO to delete the addition
Addition prior period expenses - HELD THAT:- During the course of appellate proceedings, the appellant submitted that in respect of prior period items shown in the Profit & Loss account, it is the position of the assessee that if the net result of prior period items is positive, the same is duly offered as income in the respective years and if the net result is in negative, the same has been claimed in the respective years and the said policy has been consistently followed by the appellant over the years - it is noted that while allowing relief to the assessee, the ld. CIT (A) has also taken into consideration the supporting documents which have been filed by the appellant before the AO towards the claim of these expenses. In the light of above, we do not feel that there is need to interfere in the finding of ld. CIT (A) and hence this ground of Revenue is also dismissed.
Delayed /depositing the PF/ESI payment the prescribed time - HELD THAT:- Bench has been taking a consistent position that where the contributions of PF/ESI has been deposited before the due date of filing of the return of income, the same should be duly allowed in the hands of the appellant and the said position shall apply both in respect of employees' contribution as well as the employer's contribution. In the light of above and following the Hon'ble Supreme Court decision in the case of CIT v. Vinay Cement [2007 (3) TMI 346 - SC ORDER] this ground of the Revenue is dismissed.
Addition of debit balances of suppliers which remained outstanding and which have been written off in the books of account of the appellant - HELD THAT:- During the appellate proceedings before the ld. CIT (A), the assessee submitted that the assessee has given the advances to suppliers for business purposes only but liquor was not received. CIT (A) followed the Hon'ble Supreme Court decision in T.R.F. Ltd. v. CIT, [2010 (2) TMI 211 - SUPREME COURT] wherein it has been held that if the bad debt is written off as not recoverable in the accounts of the assessee, it has to be allowed. In the instant case it is not in dispute that this debit balances have been actually written off in the books of accounts of the appellant. Accordingly we find no infirmity in the order of ld. CIT (A) who has deleted the said addition following the decision of Hon'ble Supreme Court in the case of T.R.F. Ltd., hence this ground of Revenue is dismissed.
Disallowance u/s 43B - HELD THAT:- We agree with the contention of the appellant and delete the disallowance which was not claimed by the appellant at first place. Hence the question of disallowance does not arise. Similarly, regarding the disallowance towards surcharge on excise duty, the submission of the appellant is that the same represents the closing provision as on 31.3.2009 and during the year, no amount was charged to the Profit & Loss account. In the light of above, the disallowance is also deleted in the hands of the appellant. Hence, the ground no. 1 of assessee is allowed.
Disallowance of un-reconciled bank balance for the period 2005-06 which was written off by the assessee in its books of account - HELD THAT:- It is not disputed that the management took a conscious decision to write off its balances maintained with the bank which were not getting reconciled for a long period of time. So where the balances maintained with the bank which belong to the assessee are written off in the books of account, the assessee has to charge the same as an expense/loss in the Profit & Loss account. We do not understand how the same would have been reported as Income in the hands of the appellant. In any case the assessee has submitted that if in future it is able to recover these bank balances, it will offer the same for tax. We do not believe the revenue is at a loss by such claim and submission of the appellant. In the light of above, the disallowance made by the A.O. is deleted and necessary relief is granted to the assessee. Hence, this ground of assessee is allowed.
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2015 (11) TMI 1851
Disallowance on account of depreciation to assessee trust - assessment of trust - HELD THAT:- CIT(A) has relied upon various judgments which is in favour of the Revenue. Similarly, the Ld. Counsel for the assessee has also relied upon various judgment including the judgment of the Hon’ble Delhi High Cour which are decided in favour of the assessee. No decision, direct on the point, of Hon’ble Jurisdictional High court has been brought to my notice. Keeping in view of the facts and circumstances of the present case and the judgment cited by both the parties which are in favour of the assessee as well as in favour of the Revenue also, we refer the Hon’ble Apex Court decision in the case of M/s Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME COURT], wherein it has been held that in the taxing provision if two constructions are possible, one favouring assessee should be adopted.
Respectfully following the above precedent, decide this issue in favour of the assessee and against the revenue and accordingly delete the addition in dispute and decide the ground no. 2 in favour of the assessee.
Not allowing the exemption u/s. 10(23C)(iiiae) - HELD THAT:- As per the AO, the assessee has not filed any documentary evidence before the lower authorities. But before me the assessee has filed a Paper Book for substantiating his claim having copy of assessee’s reply dated 17.12.2012 filed to the AO; copy of assessee’s reply dated 8.1.2013 filed to the AO alongwith annexures; copy of assessee’s reply dated 22.1.2013 filed to the AO; copy of assessee’s submissions dated 9.1.2015 filed before the Ld. CIT(A) and copy of assessee’s submissions dated 30.4.2015 filed before the Ld. CIT(A) which needs to be considered afresh, under the law. Therefore, in the interest of justice, this issue is remitted back to the file of the AO for fresh consideration, after giving adequate opportunity of being heard to the assessee.
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2015 (11) TMI 1850
Deduction u/s 54F - assessee an individual purchased several plots from seven members of a family - contiguous property purchase or multiple units - restricted deduction only to that portion of land where the building is situated which is purchased from Mr. Y.J.Alex and ignored the other plots of land purchased from other family members under separate sale deeds for the purpose of allowing deduction under section 54 - whether the assessee is entitled for deduction u/s 54F on the seven plots of land or is entitled to deduction only in respect of land purchased from Mr. Y.J.Alex in survey numbers 98/9, 98/10, 98/11 and 98/2-3? - HELD THAT:- On a perusal of the map furnished by the assessee, we find that this map is not prepared by any government agency or any government recognized agency, so no much credence can be given to the map furnished. AO made clear in the assessment order that huge land is adjacent to the Vambanadu lake which joins Arabian sea, in and around this lake there are several resorts and tourism is a major activity in the surroundings. The land purchased by the assessee is surrounded by canals in which passenger boats ply which is common way of transport in this particular area, therefore approach should not be a problem to the assessee.
Interpretation given by the Revenue that assessee purchased several pieces of land by way of separate sale deeds and therefore not eligible for deduction under section 54F of the Act on the entire land is hyper technical and contrary to the intention of the provision. No doubt provision is intended to benefit the assessee that invests in acquisition of residential house. However, in this case the intention of the assessee appears to be not to purchase residential house but to develop a resort.
The developmental activities, if any on the property are at the instance of M/s. Arun Excello Construction and the assessee has no connection therewith. All these things go to clearly show that assessee’s intention was to purchase land and develop a resort rather than a residential house for residing purpose. If the version of the assessee that all the land purchased is contiguous land forms part of one property with one residential house though purchased from several individuals of a family should be considered as eligible for deduction under section 54F of the Act, it defeats the very purpose of introducing the provisions of section 54F of the Act which is enacted to intend the benefit to the assessee who invests in acquisition of residential house especially in the present circumstances where the assessee purchased huge extent of 5.61 acres of land stating to be contiguous which was later developed into a resort for commercial purposes.
Even assuming that survey numbers 98/2/1A, 99/5-3, 99/5-2, 99/51 are taken to be independent properties the land in survey numbers 98/2-2, 98/2-1 are contiguous to survey number 98/9 housing residential property and relief under section 54F is liable to be granted also cannot be accepted for the reason that all the properties are independent properties purchased from several individuals even though from the same family having various water bodies with clear demarcation of land of each property with buildings thereon in the three of the properties with municipal door numbers. In the facts and circumstances of the case, it is to be noted that each transaction as a separate transaction and it cannot be considered as contiguous properties - Assessing Officer is perfectly justified in restricting the deduction only to the portion of the land purchased from Mr. Y.J.Alex in survey numbers 98/9, 98/10, 98/11 and 98/2-3. Thus, we uphold the order of the AO - Decided in favour of revenue.
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2015 (11) TMI 1849
Addition of interest paid on unsecured loans u/s 40 A(2)(b) - reasonableness of interest payment @ 15% - HELD THAT:- The undisputed fact is that the assessee has paid 15% interest on unsecured loan to persons covered under section 40A(2)(b) of the Act. This is also undisputed that the rate of bank loans are at around 10.5% but this is also a fact that the loans from banks are taken against the charge on the property and there are other opportunity costs involved in raising the loans from the banks, which are not there in the cases of these unsecured loans and the loans from these related persons are instantly available also - since the rate of interest charged by Market Committee itself is 18%, we are in agreement with the findings recorded by the learned CIT (Appeals) that the rate of interest at 15% is quite reasonable. Since the borrowings from private parties are always at higher rate of interest than the banks and these Market Committees. In view of this, order of the learned CIT (Appeals) in this regard is confirmed.
Addition u/s 36(1)(iii) - interest on the advances made to the sister concern - HELD THAT:- As in assessee’s own case for assessment year 2006-07 we see that the additions in that year were also made on account of proportionate interest on the advances made to the sister concern M/s Gauri Shanker & Co., Chandigarh and transactions with some other parties to whom sales were made. Since in this year also the transaction has been made with M/s Gauri Shanker & Co., Chandigarh and the facts have not been distinguished by any of the lower authorities and even before us, the learned D.R. could not controvert the findings given by the learned CIT (Appeals). With regard to M/s Khandelia Udyog Pvt. Ltd., in the Paper Book filed by the assessee detailed ledger account of the said party has been filed and on perusal of which, we find that the regular sales and purchases are being made from this party through out the year.The ground of appeal raised by the Revenue is dismissed.
Addition on account of suppression of sales - assessee has made substantial portion of the sales i.e. 38.42% to its sister concerns, which were at a very low rate as compared to the sales made to independent parties - HELD THAT:- In the instant case, the persons to whom sales are made at lower rates are tax payers in the highest marginal tax bracket and so it can not even be viewed as a scheme for tax reduction. In view of this discussion, it is held that the Assessing Officer was not justified in making addition on account of sales made to associated concerns at lower rate and the same is deleted - Ground of Revenue is dismissed.
Disallowance u/s 14A - Sufficiency of own funds - HELD THAT:- In present case, assessee has been able to demonstrate that at the time of making investments, the assessee was having huge amount of owned funds. In view of this, the Assessing Officer cannot make disallowance of interest for the purposes of section 14A of the Act as per Rule 8D. As regards the expenditure part of the disallowance, we agree with the submission of the assessee that nowhere in his order the Assessing Officer has recorded any satisfaction directly or indirectly to the effect why the amount of expenditure incurred for earning exempt income as stated by assessee is not correct. As per the proposition laid down in the case of Deepak Mittal (2013 (9) TMI 764 - PUNJAB & HARYANA HIGH COURT] in the absence of such satisfaction, no disallowance of expenses can be made under section 14A of the Act as per Rule 8D. The ground of appeal raised by the assessee is allowed.
Undervaluation of stock - As per AO assessee was valuing raw material and packing material at cost and the finished goods at estimated cost or net realizable value, whichever was lower - assessee was not following any systematic method for valuation of closing stock, which should have been as per the FIFO method - HELD THAT:- As perused the details filed by the assessee, whereby it is seen that all relevant expenses have been considered for valuing stock. Therefore, the observation of the Assessing Officer that expenses have not been loaded is also not correct. Further, the difference worked out in respect of oil, has been applied to all categories of stock i.e. oil cakes, de-oiled cakes, stock in process etc. This all shows the lack-luster approach, which has been adopted by the Assessing Officer for working out the difference in valuation of stock. On the other hand, the assessee has filed before the lower authorities all details pertaining to basis of valuation of stock of various items. These basis have been explained to us during the course of hearing in great detail. We do not find any irregularity in the same. In view of this, the addition made by the Assessing Officer is hereby deleted
Disallowance on account of commission expenses - HELD THAT:- Disallowance on account of commission paid to Shri Anil Rastogi on the basis that his address is in Delhi, while the assessee has not made any sale in Delhi is not correct. It may be that the address is of Delhi, but Shri Anil Rastogi must be operating in West Bengal also. This issue has not been dealt with by the lower authorities in right perspective. Further, the confirmations filed by the assessee before the learned CIT (Appeals) were not admitted. In the interest of justice, we restore the issue back to the file of the learned CIT (Appeals) to consider afresh. The assessee is at liberty to produce evidence and material to defend its case. It may be given proper opportunity of being heard.
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2015 (11) TMI 1848
Deduction claimed u/s 10A in respect of unit at Siruseri - HELD THAT:- An identical issue in respect of the same unit at Siruseri was considered by this Tribunal in assessee’s own case for assessment year 2009-10 [2013 (11) TMI 1784 - ITAT CHENNAI] as held that assessee is having only two STPI units – one at Adyar and the other at Siruseri. Both the units are independently registered as a separate STPI unit.
Both the units are carrying on software activities and generating income from exports. The assessee is not having any other unit, which is not entitled for the benefits conferred to the STPI units. If Siruseri unit is not treated as an independent, new unit, the said unit should be treated as an extension or part of Adyar unit. Siruseri unit has worked during the previous year and made exports of software - we cannot ignore those operations carried at Siruseri unit. If the Siruseri unit is not treated as independent, according to the argument of the Assessing Officer itself, Siruseri unit becomes part of Adyar unit. If so, the entire turnover of export generated by the assessee should be accounted in the hands of Adyar unit. The entire income arising out of such exports is eligible for deduction under Section 10A in the hands of Adyar unit itself for the reason that Adyar unit as well as Siruseri unit are registered as STPI units. - This Tribunal found that the unit at Siruseri is entitled for deduction u/s 10A of the Act. - Decided against revenue.
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2015 (11) TMI 1847
Exemption claimed u/s 54F - reinvestment made in purchase of house property - Real ownership - possession of two residential houses on the date of transfer of property thus denied the exemption - one house is in the name of the assessee's wife - AO Rejected the claim of the assessee because as per Section 27(i) of the Income Tax Act ownership of the property lies with the assessee - HELD THAT:- It is a well recognized rule of interpretation endorsed by various higher judiciaries that a fiction created by any provisions of the Act cannot be super imposed on another provisions of the Act which has a fiction. Section.54F of the Act is a provision granting deduction to the assessee and therefore, it has a fiction. Hence, while interpreting the provision 54F of the Act, any other provision of the Act, which has a fiction, cannot be super imposed.
Hence, in the given case before us, for the purpose of Section.54F of the Act, it has to be construed that the assessee is not the owner of the residential house at 24, Vijayaraghavachari Road, T Nagar, Chennai-17 and therefore he has only one house, accordingly he is the entitled to claim of exemption U/s.54F of the Act as held by the Ld. CIT (A). Hence, we do not find it necessary to interfere with the order of the Ld. CIT (A). - Decided against revenue.
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