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2015 (12) TMI 1869
Disallowance u/s 40A(9) - Substantial question of fact or law - HELD THAT:- The said order was assailed by filing an appeal which was partly allowed and as such the department as well as the assessee approached the tribunal by preferring the second appeal and the tribunal by means of order and judgment [2011 (6) TMI 900 - ITAT KOLKATA] allowed the appeal so preferred by the assessee and at the same time dismissed the departmental appeal.
The order so passed by the Income Tax Officer was assailed before us.
Being aggrieved thereof, the instant appeal has been preferred. We have gone through the records and we are of the opinion that no substantial question of law arises out of the orders so passed tribunal.
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2015 (12) TMI 1868
Correct head of income - treating the interest income as income from other sources and not business income - crux of arguments advanced by the Ld. Counsel for the assessee is that there was no deployment of surplus income and it was not an independent transaction de hors by business rather JV partner had kept it in the account - HELD THAT:- We note that Hon’ble Jurisdictional High Court in CIT Vs. Lok Holdings [2008 (1) TMI 365 - BOMBAY HIGH COURT] while coming to a particular decision distinguished the decision from Hon’ble Apex Court, pronounced in CIT Vs. Bokaro Steel Ltd. [1998 (12) TMI 4 - SUPREME COURT] and TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD [1997 (7) TMI 4 - SUPREME COURT] then held that accrued interest arises out of business activity is assessable as business income and not income from other sources. Identically, Hon’ble Jurisdictional High Court in the case of CIT vs. Indo Swiss Jewels Ltd and Another [2005 (9) TMI 47 - BOMBAY HIGH COURT] wherein amount was set apart for import of machinery was invested in short term intercorporate deposits. Such interest income was held to be assessable as business income. There are various decisions in an identical situation but the fact of each case has to be kept in juxtaposition before taking any decision.
Interest of income on the funds placed with banks - As assessee had neither started commercial production nor even trial production during the year under consideration and the funds were kept in banks from which interest was earned. In such a situation, it can be said that interest income was earned prior to starting of business, therefore, it cannot be said to be business income of the assessee and has to be assessed as income from other sources. Funds were available with the assessee before the same are invested in actual business activity, therefore, it can be concluded that such interest income is not incidental to the business activity of the assessee. There is further finding in the impugned order that in the present case the source of funds on which the interest was earned were not the business funds. It is not the case that business funds were kept in bank for a short duration before starting the business. The expression “derived from” is narrower in scope than the expression “attributable to” as was held in CIT Vs. Sterling Foods Ltd. [1999 (4) TMI 1 - SUPREME COURT], Pandyan Chemicals Ltd. [2003 (4) TMI 3 - SUPREME COURT] and Ashoka Leyland Ltd. [1996 (12) TMI 4 - SUPREME COURT].
So far as the expression derived from is concerned it must be understood as profit directly arising from business of the assessee and not incidental to it. The ratio laid down by Hon’ble Apex Court in the aforementioned cases, if applied by keeping them in juxtaposition with the facts of the present appeal, it can be said that the interest received from FDRs, can be treated as income from other sources only. If such interest is derived from actual conduct of the business or such interest is oozing out from the direct source and having proximate commercial connection between the interest earned and business of the assessee then it can be said to be ‘derived from’ the business of the assessee, therefore, it was rightly held to be income from other sources, because no direct nexus has been established by the assessee between the interest so received and business of the assessee, therefore, the interest earned on account of FDRs, kept with the banks is income from other sources as it has ‘no direct nexus’ with the business activity of the assessee.
Payment of foreign exchange gain - We note that the expenditure has not been claimed as deduction during the year by the assessee. We find that in the aforementioned case of Enron Oil & Gas India Ltd [2008 (9) TMI 3 - SUPREME COURT] it was held that the loss arising on account of foreign exchange transaction would be allowed as business loss and the gain has to be treated as business receipt. Section 42 of the Act for claiming deduction is a special provision itself. The section becomes operative when it is read with production sharing contract, therefore, the provisions of production sharing contract will prevail as the PSC is an independent accounting regime and a complete code by itself u/s 42(1)(c) for the purposes of computing profit & gains of any business consisting of extraction or production of mineral Oil etc. and allowance as specified in the agreement - And such allowances shall be computed and made in the manner specified in the agreement, the other provision of the said being deemed for this purposes to have been modified to the extent necessary to give effect to the terms of the agreement.
If the provision of the Act is analysed that it can be concluded that the production sharing contract is an independent accounting regime which includes tax treatment of cost, expenses, income, profit etc. it prescribes separate rule of accounting as it is a complete code by itself. Reference may be made to Joshi Technologies International Inc. Vs. Union of India [2013 (7) TMI 809 - DELHI HIGH COURT] - The additional benefits, apart from the normal allowance, admissible under other provisions of the Act is to be allowed as a deduction in computing the business profit of the assessee provided such allowances are specified in the agreement of the assessee entered into with the Central Government etc. and then the allowance shall be computed in the manner specified in the agreement. In the present appeal, neither such agreement was discussed before us nor there is a finding in the impugned finding, therefore, we set aside this issue to the file of the Ld. DRP to examine the facts and then decide the issue in accordance with law, therefore, this ground is allowed for statistical purposes. The assessee be given opportunity of being heard.
Claim of depreciation with respect to assets such as office equipment fixture and furniture etc used at the project office of the assessee - There is a finding in this impugned order that drilling activities has been started thus the claim of depreciation is a statutory allowance, it has to be allowed more specifically when the assessee is the owner of the asset which was used for business purposes. Since the asset was put to use and owned by the assessee, the depreciation has to be allowed.
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2015 (12) TMI 1865
Assessment in the name of company amalgamated - corporate death of an entity upon amalgamation - Amalgamation of two companies - Assessment to be made on which entity? - HELD THAT:- In view of the decision of this Court in Commissioner of Income Tax(Central-II) v. P.D. Associates (P) Ltd [2015 (7) TMI 1400 - DELHI HIGH COURT] no substantial question of law arises for determination by the Court in these appeals.
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2015 (12) TMI 1864
Addition u/s 68 - Addition of sum received by assessee trust as unsecured loan - onus to prove - CIT -A deleted the addition - HELD THAT:- Creditor has explained that the amount was withdrawn from Rajasthan bank Limited and same were deposited in union bank of India and then cheques were issued to the assessee trusts. These facts were also confirmed by AO in remand proceedings also. Now looking at the information that has been gathered by AO from ADIT is very simple which is available in case of every company and is also based on the information filed by those companies as per the Companies Act 1956. Therefore it is the same information which company has uploaded on the website of MCA and same information is supplied by the assessee and lender company to the AO.
On perusal of information received it does not suggest that the company is not in existence or the sources of the funds which are given as loan to the assessee trust are not proper in spite of the compliance made by lender by making himself available before AO for examination. It is also not important that whether the company is carrying on any business activity or not but what is important is that funds lent by that company are also shown in the balance sheet of the lender who is assessed to Income Tax - assessee has discharged its onus cast up on as per the provisions of section 68 by proving identity, creditworthiness and genuineness of the transaction and therefore we confirm the order of CIT (A) in deleting the addition - Decided against revenue.
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2015 (12) TMI 1862
Unexplained share application money - Information u/s 133(6) as received from the following parties - Proof of identity of the share applicants, their creditworthiness and genuineness of the transaction - HELD THAT:- In the present case the assessing officer himself has not doubted the identity in respect of all the share holders of the assessee company. Hence, the following the decision of the Hon’ble Co-ordinate bench in the case of M/s Agrawal Coal Corporation[2011 (10) TMI 496 - ITAT INDORE]the amount of share application money as received by the assessee requires to be accepted as genuine.
As regard share premium of ₹ 990/- Per share is concern, the assessee company is a big player in the Media segment and engaged in the Print and Boarding business. The assessee company was incorporated on 05-04-1989 and therefore having more than 20 years experience of this line of business. The assessee company declared total income in its books of account prior to depreciation was of ₹ 9995881/- as on 31.03.2008 and the same was increased to ₹ 12489838/- as on 31.03.2009. That considering the long standing in the business and huge profit the amount of share premium is duly justifiable. That in case of private limited company the amount of share premium is mutually decided between the Management of the company and share applicant. Hence, the issue in dispute should not be the amount of share premium but the identity of the share holders who has applied in the share application money of the assessee company.
Once the assessee has established the identity of the share holder in that case the amount of share premium is not an issue. If the assessing officer has not satisfied with the explanation of the share applicant, necessary addition is to be made in the hand of the share applicant but not in the case of the assessee.
That as regard the blank transfer deed duly signed by the share applicant as found during the course of survey. The assessing officer himself after being satisfied not taking any cognizance for the same. Since, by the time of assessment proceeding these transfer deed was not used by the assessee and therefore after the date of Annual General Meeting , old date transfer deed has no legal value.
Additional evidence filed before the Ld CIT[A] - department in this ground of appeal has challenged the Rule 46A of the Income Tax Rules - HELD THAT:- During the course of hearing, we find that the assessee has submitted all the documentary evidence before the Assessing Officer and the ld. DR has not disputed this fact, therefore, we are of the view that this departmental ground deserves to be dismissed. We dismiss the same.
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2015 (12) TMI 1861
Seeking stay against the balance outstanding demand - assessee has already paid 50% of the total demand - AO has already granted stay against recovery after payment of 50% of total demand but stay granted by the AO is only till the disposal of the appeal or 29/02/2016 - assessee’s grievance is that if the assessee’s appeal is not disposed of by 29/02/2016, then there is an apprehension for taking a coercive action by AO for recovery of balance of 50% - HELD THAT:- Since assessee has already paid 50% of total demand and AO himself has stayed recovery till disposal or 29/02/2016, therefore, assessee has made out a good prima facie case for stay of balance outstanding demand till disposal of appeal or for a period of 180 days whichever is earlier. Accordingly, balance outstanding payment which is 50% of total demand is hereby stay for a period of 180 days or till disposal of appeal of assessee whichever is earlier. Appeal of the assessee is already fixed for hearing on 05/01/2016 which may be listed in the category of stay granted cases out-of-turn hearing. In the result, stay petition is allowed.
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2015 (12) TMI 1858
Deduction u/s 54F - capital gain declared on sale of two residential houses - assessee sold two residential flats and one shop located at Pune - As per AO assessee should not own more than one residential house, other than the new asset, on the date of transfer of original asset - Date of sale of shop - HELD THAT:- As assessee had sold the residential flat on 31.7.2007 and thereafter sold the shop on 01-02-2008, while the tax authorities have presumed the residential units have been sold after the sale of shop. Since the factual aspects relating to this contradictory stand require verification, we set aside this matter to the file of the assessing officer for carrying out proper examination of the facts.
Assessee has violated the second condition prescribed u/s 54F - We have noticed that the assessing officer has already submitted a remand report by obtaining details from the society office, where in it was certified that both the flats are used by the assessee as a single residential unit. Since this fact has been accepted by the tax authorities, merely because, the two flats have been purchased by way of two separate agreements, in our view, will not make any difference. Accordingly, we are of the view that both the flats purchased by the assessee and joined and also used together as a single unit should be considered as a single residential house for the purpose of sec. 54F.
Quantum of deduction allowable u/s 54F - We are of the view that there is merit in the contentions of the A.R. There is nothing in the provisions of the Act that the cost of new asset shall be arrived at by deducting the deduction allowed u/s 54 of the Act for the purpose of computing deduction u/s 54F of the Act. There is also no provision in the Act which list out the priority of the deductions. Accordingly, we direct the AO to compute the deduction u/s 54F of the Act by taking the cost of new asset without deducting the deduction allowed u/s 54 of the Act, subject to the decision taken with regard to the verification of the dates of sale of residential house and shop.
With the above said observations, we set aside the matter relating to the deduction u/s 54F of the Act to the file of the assessing officer. Assessee Appeal partly allowed for statistical purposes.
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2015 (12) TMI 1854
Reopening of assessment u/s 147 - as argued no reasons were recorded for reopening before the date of issue of notice u/s.148 - HELD THAT:- From the notesheet, we found that the first entry pertains to issue of notice u/s.148 dated 6-3-2009 and the last entry is dated 16-12-2009. However, we do not find any entry in notesheet recording the reasons for reopening, after the date of issue of notice on 6-3-2009 u/s.148, it means reasons for reopening was not recorded after issue of notice u/s.148 dated 6-3-2009.
Since note sheet recording entries prior to the date of issue of notice u/s.148 dated 6-3-2009 was not made available to us, it is not possible for us to find out independently as to whether any reasons for reopening was recorded prior to issue of notice u/s.148. As per entry on the note sheet, between 24-8-2009 to 16-12-2009, the assessee had asked for issue of reasons and the AO has sent the reasons. However, the notings of the proceedings carried out by AO before issue of notice u/s.148 was not made available to us. Thus, the copy of notesheet so filed by ld. DR which is incomplete, do not help us to reach to the conclusion as to whether any reasons were ever recorded by the AO prior to the issue of notice u/s.148 on 6-3-2009. Under such circumstances, we have no option other than relying on the finding recorded by CIT(A) to the effect that no reasons were recorded for reopening before the date of issue of notice u/s.148 on 6-3-2009. - Decided in favour of assessee.
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2015 (12) TMI 1852
Treatment of carbon credit receipts - revenue or capital receipts - HELD THAT:- As decided in M/S. ARUN TEXTILES PRIVATE LIMITED VERSUS ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE, TIRUPUR [2014 (9) TMI 922 - ITAT CHENNAI] we are inclined to hold that the receipt from sale of carbon credits has to be considered as capital receipt and accordingly, it is not taxable. Thus, there is no question of considering the same for deduction u/s.80IA.
Deduction u/s.80IA - Whether depreciation of earlier years, which have been absorbed, cannot be notionally carried forward and considered in computing the quantum of deduction u/s.80IA? - HELD THAT:- This issue is covered by this Tribunal in favour of the assessee in the case of M/s. Ambika Cotton Mills Ltd. & Others [2015 (12) TMI 1851 - ITAT CHENNAI] mere pendency of Special Leave Petition before the Apex Court cannot be a reason to take a different view. The judgment of Madras High Court is binding on all the authorities in the State of Tamil Nadu and Union Territory of Pondicherry. Commissioner of Income Tax (Appeals) has rightly allowed the claim of the assessee by following the binding judgment of Madras High Court in Velayudhaswamy Spinning Mills (P) Ltd [2010 (3) TMI 860 - MADRAS HIGH COURT] - Decided against revenue.
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2015 (12) TMI 1851
Deduction u/s 80-IA in respect of windmills - AO rejected the claim of the assessees on the ground that the Department has filed a Special Leave Petition against the judgment of Madras High Court in Velayudhaswamy Spinning Mills (P) Ltd[2010 (3) TMI 860 - MADRAS HIGH COURT] - HELD THAT:- This Tribunal is of the considered opinion that mere pendency of Special Leave Petition before the Apex Court cannot be a reason to take a different view. The judgment of Madras High Court is binding on all the authorities in the State of Tamil Nadu and Union Territory of Pondicherry. Therefore, the Commissioner of Income Tax (Appeals) has rightly allowed the claim of the assessees by following the binding judgment of Madras High Court in Velayudhaswamy Spinning Mills (P) Ltd (supra). Therefore, this Tribunal do not find any infirmity in the order of the Commissioner of Income Tax (Appeals). Appeals of the Revenue are dismissed.
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2015 (12) TMI 1850
Unexplained expenditure under section 69C relating to the purchase of goods - addition based on name of the two suppliers figured in the list of suspicious dealers in the website of sales Tax department - eligible proof that the assessee has indulged in the bogus purchases - CIT(A) deleted the additions - HELD THAT:- When the AO himself has not doubted the purchase and sale transaction and all the expenditure has been duly accounted in the books of account, then it can not be said to be a case of unexplained expenditure. It is not the case of the AO that the goods were purchased by the assessee at a lesser rate or that someone has supplied the goods to the assessee for free or that the assessee has booked a bogus expenditure. When it is not so, solely on the basis of unconfronted and general statements of alleged suppliers made before sales tax authorities, addition u/s 69C under the circumstances on account of purchases are not warranted at all.
Assessee has relied upon the decision of Nikunj Enterprises (P.) Ltd.” [2013 (1) TMI 88 - BOMBAY HIGH COURT] wherein the Hon’ble Bombay High Court has upheld the findings of the tribunal that where the assessee filed letters of confirmation of suppliers, copies of bank statement showing entries of payment through account payee cheques to suppliers and stock reconciliation statements, sale of purchased goods was not doubted, the transactions were supported with evidences and confirmations, in such an event merely because the suppliers have not appeared before the AO or the Ld. CIT(A), one can not conclude that the purchases were not genuine.- Decided in favour of assessee.
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2015 (12) TMI 1849
Computation of deductio u/s 10A - Assessee incurred sales commission in foreign currency during the previous year relevant to the assessment year 2006-07 - AO excluded it from the export turnover, however, not reduced from the total turnover - CIT(A) by following the decision of ITO vs Sak Soft Ltd [2009 (3) TMI 243 - ITAT MADRAS-D] observed that for the purpose of applying the formula u/s 10A, the sales commission expenses which was incurred in foreign currency for providing technical services outside India are to be excluded both from export turnover as well as total turnover - HELD THAT:- Since the issue is covered in favour of the assessee by the decision of the Special Bench in Sak Soft Ltd (supra) and the CIT(A) has followed the same, we do not find any infirmity in the order of the CIT(A). Accordingly, the same is confirmed. - Decided against revenue.
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2015 (12) TMI 1847
MAT Computation u/s 115JB - Deduction on account of prior period expenditure from net profit shown in Profit & Loss Account for the purpose of computing book profit u/s 115JB - HELD THAT:- Only in cases where a particular item of income or expenditure is required to be disclosed in the Profit & Loss Account but was disclosed in the notes to accounts, then such item of income or expenditure will be treated as part of Profit & Loss Account for the purposes of computing profit u/s 115JB. Assessee has not brought on record anything to show as to how this amount was required to be part of Profit & Loss Account prepared in accordance with part II of Schedule VI of the Companies Act.
We further note that the CIT(A) has allowed the claim of the assessee on the premise that once assessee has disclosed this amount in notes to accounts, then the same will be treated as disclosed in Profit & Loss Account and consequently has to be adjusted for computation of book profit u/s 115JB.
CIT(A) has not gone into this aspect of the issue whether this prior period expenditure was required to be part of Profit & Loss Account as per Schedule VI of Companies Act or not. Therefore, if this amount was not required to be part of Profit & Loss Account prepared as per Schedule VI of the Companies Act, then undisputedly this amount not being part of any of the clauses of Explanation to sec. 115JB cannot be excluded from net profit for the purposes of computing book profit u/s 115JB.
Since neither the revenue nor the assessee has furnished any record in support of their respective claims, whether this amount of prior period expenditure was required to be part of Profit & Loss Account prepared as per provisions of Schedule VI of the Companies Act, therefore, we set aside this issue to the record of the CIT(A) to re-examine the issue in light of the relevant provisions of Schedule VI of the Companies Act as well as the relevant accounting standard applicable on this item of expenditure and then give a finding whether this amount of prior period expenditure is required to be part of profit and loss account or not - Appeal of the revenue allowed for statistical purposes.
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2015 (12) TMI 1846
TDS u/s 194J - Disallowing the expenses on account of violation of the provisions of TDS - payment from the party/ organizers for the artistes - assessee submitted that she is acting as a co-ordinator between artists and the organizer for arranging musical programmes - HELD THAT:- The assessee receives the payments from the organizers after TDS and make over the negotiated amount without TDS since the appellant is representing and acting for and on behalf of the organizers. All the artistes are very famous, widely acclaimed and have themselves furnished declaration with PAN that they will be directly responsible for their respective tax matters and one of them, Alka Yagnik even unequivocally stated that she had already paid income tax on such income.
DR vehemently relied on the orders of authorities below. We find from the aforesaid discussion that AO disallowed the expenses claimed by assessee due to violation of provision to Sec. 194-J of the Act. The argument of the assessee that the recipient of income has paid the tax in their respective hands has also been regarded. However, we find that there is an amendment in proviso to Sec. 40(a)(ia) r.w.s. 1st proviso to Sec. 201, wherein, if any payee has paid the taxes by offering / disclosing the said receipt in his / her return of income, then the payer (the assessee herein) should not be treated as assessee in default and no disallowance u/s/. 40(a)(ia) of the Act could operate in that scenario.
As relying on Ansal Land mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] we deem it fit and appropriate in the interest of justice and fair play to set aside this issue to the file of Assessing Officer to decide the issue afresh in the light of the aforesaid judgment to ensure whether the deductee has paid taxes on their income. Accordingly, we direct the Assessing Officer to verify whether the payees have included the subject mentioned receipts in their respective returns and paid taxes thereon or not. If that is so, then disallowance u/s. 40(a)(ia) of the Act shall not be made in the hands of the assessee. Accordingly, the ground raised by assessee is allowed for statistical purposes.
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2015 (12) TMI 1844
Non admission of addiontioal evidence - CIT(A) has passed the appellate order without considering the application u/s. 250(4) read with Rule 46A of the Income Tax Rules filed by the assessee - HELD THAT:- CIT(A) has not considered the application moved by the assessee for leading additional evidence u/r. 46A of the Rules. In order to meet the ends of justice, we are of the considered view that the order passed by learned CIT(A) without deciding the application for leading additional evidence moved by the assessee is not sustainable in the eyes of law and therefore the same is set aside and send back to the file of learned CIT(A) with the direction to decide the application moved by the assessee u/r. 46A after providing opportunity to the assessee. Appeal filed by the assessee is allowed for statistical purposes
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2015 (12) TMI 1843
Dismissal of appeal for non-prosecution - HELD THAT:- During the course of hearing today, nobody was present on behalf of the assessee neither any adjournment was sought. The notice of hearing was sent to the assessee through Registered Post on 05.11.2015, which has not yet been returned back by the Postal Authority. We find that on earlier occasion, when the case was listed the matter was adjourned at the request of the assessee. It, therefore, appears that the assessee is not interested to prosecute the matter.
The law aids those who are vigilant, not those who sleep upon their rights. This principle is embodied in well known dictum, “VIGILANTIBUS ET NON DORMIENTIBUS JURA SUB VENIUNT’. Considering the facts and keeping in view the provisions of rule 19(2) of the Income-tax Appellate Tribunal Rules as were considered in the case of CIT vs. Multiplan India Ltd.[1991 (5) TMI 120 - ITAT DELHI-D] we treat this appeal as unadmitted.
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2015 (12) TMI 1842
TP Adjustment - disallowance of the corporate service charges - HELD THAT:- It is seen from the DRP’s order for A Y 2010-11 that observing that the facts of the matter are similar to those for A. Y. 2009-10, the DRP followed the same findings and decisions therein. In that view of the matter, we follow the decision of the co-ordinate bench in the assessee’s own case for A. Y. 2009-10 [2015 (9) TMI 286 - ITAT MUMBAI] and accordingly, in the interest of equity and justice, remit this matter of the computation of the ALP of the international transactions on account of the payment of corporate service charges by the assessee to its AE, to the file of the DRP for fresh adjudication by way of a speaking and reasoned order after affording reasonable opportunity to the assessee of being heard. It is accordingly ordered. Consequently, ground no. 1 is treated as allowed for statistical purposes.
Disallowance of Depreciation on goodwill - assessee contends that the AO erred in not following the directions issued by the DRP to allow the assessee depreciation on goodwill u/s. 32(1)(ii) - HELD THAT:- For A. Y. 2010-11 that the AO has not considered and allowed the assessee depreciation on goodwill of polymehtane business and textile effects business as directed by the DRP - We, therefore, direct the AO to follow the directions of the DRP and compute and allow the assessee depreciation on goodwill for A. Y. 2010-11.
Depreciation on intangibles - HELD THAT:- We find that the very same issue of allowability of the assesee’s claim of depreciation on intangible assets viz. Material supply contracts, brand usage and distribution networks was considered at length by a coordinate bench of this Tribunal in[2015 (9) TMI 286 - ITAT MUMBAI] wherein it has been held that the assessee is entitled to claim depreciation on intangible assets. Decided in favour of the assessee.
Disallowance u/s. 14A r.w.r. 8D - As contended that the authorities below ought to have taken into account that investments made were by way of strategic investments in its subsidiary concern out of interest free funds - HELD THAT:- Following the aforesaid decisions in the cases of Holcim India (P) Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] and Cheminvest Ltd.[2015 (9) TMI 238 - DELHI HIGH COURT] we hold that since the assessee has not earned any exempt income in the year under consideration, i. e. assessment year 2010-11, no disallowance u/s. 14A of the Act can be made and accordingly delete the disallowance made in this regard by the authorities below.
Disallowance of Expenditure on payment basis u/s. 43B - not allowing deduction for payment it made in connection with liabilities of CIBA Speciality Ltd. taken over by way of slump sale - assessee submitted that the assessee had taken over the liabilities of CIBA Ltd. and that these being known liabilities of which the assessee had to bear the expenditure as per the agreement - HELD THAT:- The recovery of the debt is a right transferred along with the numerous other rights comprising the subject of the transfer. If the law permits the transferor to treat the whole or part of the debt as irrecoverable and to claim a deduction on that account, the same right should be recognised in the transferee. It is merely an incident flowing from the transfer of the business, together with its assets and liabilities, from the previous owner to the transferee. It is a right which should, on a proper appreciation of all that is implied in the transfer of a business, be regarded as belonging to the new owner - See T. Veerbhadra Rao case [1985 (7) TMI 2 - SUPREME COURT] - Decided in favour of assessee.
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2015 (12) TMI 1841
Exemption u/s 11 - rejection of application for registration u/s 12A - assessee failed to produce necessary details and documents about objects of the trust and genuineness of the activity - HELD THAT:- The activities of the trust have to be considered if such registration is sought much after the formation of trust or after expiry of the earlier registration granted in favour of the trust.
The Hon’ble High Court in case of Meenakshi Amma Endowment Trust [2010 (11) TMI 853 - KARNATAKA HIGH COURT] has observed that if the assessee is seeking immediately after formation then, there is no provision under the Act for seeking such registration. If assessee satisfies the condition as required for registration u/s 12A. Further, the CIT(E) has not pointed out anything against objects of the assessee being not charitable in nature. Therefore, we direct the CIT(E) to grant registration u/s 12A to the assessee.
Recognition u/s 80G - CIT(E) has rejected the application of the assessee by giving reference of the order whereby application for registration u/s 12A was rejected - In view of our finding that registration u/s 12A, assessee is entitled for registration u/s 80G of the Act as well.
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2015 (12) TMI 1840
Disallowance of expenses - assessee did not carry out any business during the year - HELD THAT:- Unless there is some material on record to show that the assessee has completely abandoned the business. There is no finding by any of the authorities below that there was a cessation of business. It is not the case, as has been stated by the AO, that the assessee is claiming deduction of business expenses from rental income. The expenses incurred by the assessee are business expenses and just because there is no business income during the relevant period, such deductions cannot be declined. The depreciation is not in respect of the assets rented out either. The assessee is incurring is a business loss and thats all that matters. Whatever be the consequences of such losses on assessee’s ultimate tax liability does not govern the question whether deduction for expenses could be allowed or not - disallowances sustained by the CIT(A) infact deserve to be deleted - Decided in favour of assessee.
Unexplained credit - amount shown as deposit received from Pharmason Exports was added as unexplained credit by the Assessing Officer, for want of complete details and verifications - HELD THAT:- We are not inclined to uphold this addition. We have noted that the amount is received from the banking channel, it is duly referred to in the rent agreement itselfa copy of which was placed before us as well, and the assessee has regular dealing with the concern which has placed this security deposit. On these facts, this amount cannot be treated as unexplained credit. It stands duly explained. We, therefore, direct the Assessing Officer to delete this addition as well.
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2015 (12) TMI 1839
Additions u/s 40(a)(ia) - Whether disallowances on the basis of a deeming fiction, thereby causing great hardships to various tax payers even in some genuine cases? - HELD THAT:- Assessee should be provided with full opportunity to explain its case, before final tax liability is determined against it applying such deeming provisions. It is noted that second proviso was inserted to section 40(a)(ia) to mitigate hardships of the tax payers. The said proviso has been inserted to avoid the unintended consequences created by section 40(a)(ia). Under these circumstances, its benefit should be given to all the assessee irrespective to the fact that at what stage their cases are pending. It is further worth noting that in the case of CIT vs. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] has discussed this entire issue at length, and held that second proviso is declaratory and curative and has retrospective effect from 1st April 2005. In view of this major legal development, we find that the assessee deserves another opportunity.
We send this issue back to the file of AO with the direction that he shall exercise his requisite powers under the law to call for requisite information from the concerned payees. The assessee shall also extend full cooperation to the AO by furnishing all the documents and details in the form of names and address, PAN nos. place of assessment and confirmations etc., to the extent as feasible for the assessee. Needless to add, the AO shall give adequate opportunity of hearing to the assessee. Thus, these grounds are allowed for statistical purposes.
Prior period expenses - HELD THAT:- We find that the claim of the assessee should not have been denied in this manner by the lower authorities. We send this issue back to the file of the AO to consider this claim after verification of requisite facts taking cognizance of the revised computation filed by the assessee during the course of assessment proceedings. Thus, this ground is allowed for statistical purposes.
Claim on account of contribution to PF and ESIC - HELD THAT:- As already held that the claim has been rightly allowed by the CIT(A), therefore, following our order as has been given in the asessee’s appeal, we uphold the order of Ld. CIT(A) on this issue, rejecting the grounds raised by the Revenue.
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