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Income Tax - Case Laws
Showing 21 to 40 of 806 Records
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2015 (11) TMI 1870 - ITAT CHANDIGARH
Revision u/s 263 - TDS u/s 194C - Non deduction of TDS on contract work undertaken - penalty proceedings under section 271C initiated by AO - HELD THAT:- On perusal of the replies, we find that all these payees have confirmed that the payment to them have been made for supply of earth, mitti and stones etc. Since payment for supply of material is not exigible to TDS, there was no need for the assessee to deduct such tax at source and resultantly the provisions of section 40(a)(ia) do not come into play. In this way, there was no need for the Assessing Officer to make disallowance of these expenses.
Since these letters are a part of assessment records, we are of the view that the Assessing Officer did not invoke the provisions of section 40(a)(ia) and did not make disallowance, getting convinced by the fact that the payments were made for supply of material. The fact that the AO in his order did not mention these investigations made by him does not itself make his action illegal. He may not have referred to these documents may be because he was convinced that no disallowance is called for. Therefore, in such a scenario, on the facts and circumstances of the case, we do not find any error in the order of the Assessing Officer.
In this case, Commissioner of Income Tax had tried to read too much from the mind of the Assessing Officer. Once, we reach to a conclusion that provisions of section 40(a)(ia) of the Act are not applicable on the facts and circumstances of this case, whatever was going through in the mind of the Assessing Officer at that time, it is a fact that he has reached to a correct conclusion.
The order of the Assessing Officer cannot be said to contain any error on this count. The fact that the payments were made for supply of material also got strengthen by the fact that the assessee was engaged in such kind of project from Sahara India Commercial Corporation Ltd. during the year. The issue of nomenclature ‘commission’ given to the said payments also got clarified during the assessment proceedings. Therefore, there is no question of invoking the provisions of section 194H of the Act. Further, there being no contract or son-contract, the provisions of section 194C are also not applicable. The nature of payments is quite clear from the replies sent by the supplier to the Assessing Officer directly.
The fact that the Assessing Officer has initiated proceedings under section 271C, may have weighed too much in the mind of the Commissioner of Income Tax, while holding the order to be erroneous. But in our view, initiating penalty proceedings under section 271C of the Act by the Assessing Officer is not a relevant factor to decide whether the disallowance under section 40(a)(ia) was called for or not. Since as already held by us, the payments were not prone to invoking the provisions under section 40(a)(ia) of the Act, the disallowance, in any case, was not called for.
Thus there being no error in the order of the Assessing Officer, the jurisdiction assumed by the Commissioner of Income Tax under section 263 of the Act is not as per law. - Decided in favour of assessee.
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2015 (11) TMI 1866 - ITAT RAIPUR
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.1[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 - ITAT RAIPUR
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 - ITAT RAIPUR
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 - ITAT CHENNAI
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 1861 - ITAT CHENNAI
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 1859 - ALLAHABAD HIGH COURT
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 - ITAT MUMBAI
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 - ITAT BANGALORE
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 - RAJASTHAN HIGH COURT
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 1854 - ITAT INDORE
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 1852 - ITAT JODHPUR
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 - ITAT DELHI
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 - ITAT CHENNAI
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 - ITAT CHANDIGARH
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 - ITAT CHENNAI
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 - ITAT CHENNAI
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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2015 (11) TMI 1844 - DELHI HIGH COURT
Closing stock estimation - value of scrap items lying on the shop floor at the end of relevant year - insurance premium paid at the time of purchase of car - provision for head office expenses - Mark to market loss in respect of outstanding option contracts - disallowance of deduction claimed under section 80IA in respect of profit derived from captive power generating unit, on the ground that profit of the said unit was to be computed by adopting the transfer price of power as the rate at which power was supplied by local State Electricity Board/ Haryana State Electricity Board (‘HSEB’) to the Dharuhera unit - disallowance of provision for advertisement expenses under section 40(a)(ia) of the Act for alleged failure to deduct tax at source - disallowance of expenditure incurred on account of rental charges paid towards cars taken on lease under section 40(a)(ia) on the ground that the appellant failed to deduct tax at source therefrom under section 194-I - Disallowance of expenditure incurred towards distribution of motor vehicles to winners of game shows organized by TV channels under section 40(a)(ia) on the ground that the appellant failed to deduct tax at source therefrom under section 194B - disallowance of aggregate expenditure incurred on account of (i) booking of banquet halls/space in hotel to convene various meetings/training courses andmeal expenses incurred at the time of such meetings/conferences room on the ground that appellant failed to deduct tax at source from such payments under section 194I/194C, invoking provisions of section 40(a)(ia) of the Act - disallowance made by the assessing officer under section 40(a)(ia) by holding that the appellant was liable to deduct tax at source from hire charges of generator used at the corporate office under section 1941 of the Act - disallowance of additional depreciation claimed under section 32(1)(iia) of the Act on computers installed at supervisory offices located in the compound of manufacturing plants located at Gurgaon and Dharuhera, on the ground that the appellant failed to prove with evidence that the aforesaid computers were installed at the said premises, without appreciating that the aforesaid fact was admitted and not disputed by the lower authorities - assets used for purposes of testing were used for scientific research and, therefore, entire cost thereof was eligible for deduction under section 35(1)(iv) of the Act - HELD THAT:- Questions are framed for determination - Learned counsel for the parties are permitted to file additional documents/papers which are part of the assessment record or were filed before the ITAT within eight weeks.
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2015 (11) TMI 1843 - ITAT MUMBAI
Disallowance u/s.40-A(3) being 20% of the expenditure incurred in cash - HELD THAT:- Undoubtedly, the assessee company was incurring expenditure on behalf of its clients. The assessee company has shown the handling charges, transport charges, BPT charges, and gunny bag purchases. In fact, all these charges are belonging to the clients and the same cannot be said to be expenditure of the assessee company. The assessee company also explained in this regard that the company was utilizing the said amount for the payment of labour for job work, for stenciling done manually and high piling and speed money charges to the labour for speed delivery of the cargo.
No doubt, to clarify the said expenditure the AO issued notice to the concerned companies but failed to receive the answer from the other companies but it cannot be the ground to disallow the expenditure incurred on behalf of the clients and add the same to the income of the assessee company. Moreover, no expenditure was claimed by the assessee company nor these amounts belong to the assessee company. Thereupon, the said situation, in our view section 40A(3) of the IT Act is not attracted in the hands of the assessee. Hence, the Ld. CIT(A) has rightly deleted the being 20% of the expenses.
Addition of speed money is to be payable by the company to the labourers and others to achieve the result or to do the work at spot. This expenditure has also been incurred by the assessee company on behalf of its client. This amount has not been belonging to the assessee company and in this regard the company also reflected the said amount in its Profit and Loss account. As discussed above, section 40A(3) deals with the computing of income under the head of profit and gains of business and provision under section 40A(3) is one of the sub sections of section 40A and while computing the taxable income under the head of profit and gains of business then the provisions of section 40A(3) can be invoked. When there is no claim with regard to any expenditure, therefore there should not be any disallowance in view of the provision under section 40A(3)
When the expenditure is not related to the assessee company, however executed on behalf of its client, then the question of application of the provisions of section 37(1) of the Income Tax Act, 1961 does not arise
Addition on account of payment made to the Dena Bank as one time settlement against the liability - HELD THAT:- The assessee has constructed the warehouse project and installed plant and machinery. The warehouse project was completed in the year of 1990 & 1991 and amount debited in the balance sheet for the year of 1990-91 - Against the said project, the assessee took the loan from Dena Bank and failed to repay the same, hence, the bank has filed the recovery suit against the assessee. There was a settlement for the amount payable to the bank against the assessee’s term loan liability.
The assessee paid a sum of ₹ 23,74,000/- in assessment year of 2006-07 and ₹ 24,26,000/- in assessment year of 2007-08 making total payment to ₹ 48 lakhs to Dena Bank. The amount was debited to the separate account and shown separately on the asset side as against the Dena Bank’s settlement of term loan. The intimation was given by the assessee by virtue of letter dated 24.10.09.Therefore, in the said situation the ld. CIT(A) has rightly deleted the amount from the income of the assessee. - Decided against revenue.
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2015 (11) TMI 1842 - ITAT BANGALORE
Revision u/s 263 - Deduction u/s 80P(2)(a)(i) - assessee is a cooperative credit society and derives its income from business of accepting deposit and lending loans to its members HELD THAT:- As decided in M/S BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERATIVE SOCIETY LTD. [2011 (4) TMI 1222 - ITAT BANGALORE] section 80P(4) is applicable only to cooperative banks and not to credit cooperative societies. The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessee’s case and therefore, it is entitled to deduction u/s 80P(2)(a)(i) of the Act.
Following the decision of the coordinate Bench of the Tribunal in the case of Bangalore v. M/s. Bangalore Commercial Transport Credit Co-operative Society Ltd. (supra), we quash the order u/s. 263 passed by the ld. Pr. CIT. - Decided in favour of assessee.
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