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Income Tax - Case Laws
Showing 1 to 20 of 643 Records
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2015 (4) TMI 1363
Unexplained credit u/s 68 - assessee company had received/ taken loan/ amounts - party had not responded to the notice issued u/s 133(6) - AO observed that the copy of account filed by the assessee was simply a piece of paper with a rubber stamp of M/s Sai Soft Securities and copy of account did not bear the PAN no. of the party, the details of the AO assailing the above party and its copy of return were not filed so as to establish the identity of the lender and its capacity to lend money
HELD THAT:- Assessee referred to ledger account of M/s Sai Soft Securities in the books of assessee is contained to demonstrate that there were regular transactions between assessee and M/s Sai Soft Securities. We find from the said ledger account that sum was given by assessee through banking channel and there are two debits regarding sale of shares. Thereafter assessee has again given cheque of Rs. 6 lacs. All these transactions are up to 30-10-2006 and thereafter there are two entries relating to purchase of shares and amounts received from M/s Sai Soft Securities. This ledger account has been confirmed by M/s Sai Soft Securities also giving the circle where it is assessed as well as the PAN no.
Considering the fact that the assessment was completed on account of being time barring, we are of the opinion that the matter needs to be restored back to the file of AO for de novo adjudication, particularly because in the remand report the AO has not given detailed findings. Assessee’s appeal is allowed for statistical purposes.
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2015 (4) TMI 1361
Rejection of books of accounts - Correct Method of accounting - changing the recognized method of revenue generation based from Project Completion to % Completion Method - AO's allegation of non-maintenance of stock register and consequent non-compliance with AS-2 - application of Percentage of Completion method by Ld. AO in order to compute the income of assessee - Assessee filed its return at NIL income following Project Completion Method - rejection of methods of accounting regularly followed by assessessee is in accordance with the Accounting Standards recognized by the ICAI - reference made u/s 142A to the DVO - Accrual of income - non disclosure of advances received on booking of a flat - difference between the cost declared by assessee and determined by DVO.
HELD THAT:- Correctness of books become very material inasmuch as there is neither any gain nor motive for assesses to indulging in such practices when all the profits were deductible u/s 80IB. Besides the entire evidence and material has not been considered to come to a justiciable conclusion to reject the books of regularly audited accounts. A generalized observation about the ‘notorious trade practices’ in real estate business cannot be a reason for rejecting the books of accounts.
Hon'ble Apex Court in the case of Lalchand Bhagat Ambica Ram [1959 (5) TMI 12 - SUPREME COURT] and Discovery Estate Pvt. Ltd. [2013 (3) TMI 124 - DELHI HIGH COURT] held that practice of making additions on mere suspicions and surmises or by taking note of the ‘notorious trade practices’ prevailing in trade circles cannot be relied for making additions. Consequently and finding of “on-money transactions” based on assumption and in the absence of any incriminating material or examination of buyers is without any basis and justification. These observations, therefore, cannot be valid reasons for rejecting the audited books of account maintained by the assessee in regular course of its business as per past practices and accounting policies.
Substituting the method of accounting from Project Completion to % Completion by the authorities below is by observations that assessee’s have not followed Accounting Standards 9 & 7 which tantamount to not following Accounting Standard-1 as prescribed u/s 145(2) - It is admitted position that the appellant were regularly following project completion method from year to year and the assessments prior to the date of search were also framed by accepting project completion method.
As per ICAI guidelines real estate developer has an option to choose from Project Completion method or the Percentage Completion method as both are recognized methods for revenue recognition in such cases. Once the option is exercised by assessee, it is not open to the Assessing Officer to substitute his own opinion to change the method of accounting because mid way it is found that other method of accounting better suits the revenue. It is the accounting principle, consistent following of method and its earlier adoption which decides the issue and not the suitability or revenue.
In any case assessee’s are eligible for deduction u/s 80IB against their income, in this eventuality, take this method or that, the result is NIL taxable profits after deduction. Thus in these cases the substitution of method to % Completion Method is based on surmises, unwarranted facts, irrelevant considerations and a fruitless exercise. Except making some academic and theoretical rhetoric’s, the revenue has not been able to demonstrate that the method of accounting adopted by assessee is not in conformity with set accounting guidelines, provisions of sec. 145.
In the case of CIT vs. Smt. V. Sikka & Another [1983 (11) TMI 48 - DELHI HIGH COURT] held that if the method of accounting is accepted in first year and regularly followed in subsequent year it cannot be substituted at the whims of AO. It is not mandatory for a real estate developer to follow percentage of completion method as prescribed by the Institute of Chartered Accountants of India under AS-7.
AS-7 issued by the Institute of Chartered Accountants of India, recognizes the position that in the case of construction contracts the assessee can follow either the project completion method or the Percentage completion method. Neither the revised Guidance Notes 2012 issued by Institute of Chartered Accountants of India nor the Exposure Draft for Guidance Note on Recognition of Revenue issued by the Institute of Chartered Accounts of India in 2011 are mandatory or override the statutory provisions.
CIT(A) has also taken contradictory stand; on one hand it is held that there can be no revenue recognition unless 25% project is complete, rightly so as no builder can earn from plinth or pillars on other hand it is held that the property in flats stands transferred by booking amount. The project completion method followed by the appellants, therefore, could not be faulted with by the revenue. The assumptions made by the authorities below that by not following AS-9 & 7 the same tantamount to not following prescribed AS-1 u/s 145(2) is profoundly misplaced, unnecessary and uncalled for besides being contrary to principles of accountancy and interpretation of the statutory provisions. The same, therefore, could not be taken a valid basis for change of method regularly employed by the appellant. Thus we uphold the method of revenue recognition adopted by the assessee’s as “Project Completion Method. The other judicial precedents cited by the assessee mentioned in ITAT orders as well as written submissions support our view.
Addition addition based on loose paper found from third party - Apropos Annexure A-2/51 as well as the statement of Shri Naveen Bhutani recorded on 28.01.2009 u/s 132(4) of the Act regarding a print out taken from his laptop; he stated that it was in relation to Unique Dream Builders only and not the assessee entities. This person was not produced for cross examination by the appellants and AO himself admits that the print out inventorized as seized Annexure revealing net realization of Rs. 17.91 crores and a profit of Rs. 5.17 crores reflects only the estimates. The said document does not reveal the actual state of affairs of the projects done by the assessees.
No corroborative evidence has been found as a result of search on him or from either side of separated group to support that figures written therein for the area constructed, sold or transferred nor about the net realization or profits earned in any such projects. The said excel sheet data was prepared for marketing of Unique Builder’s projects products and could not be taken as a relevant and reliable information of business operations or earning any extra money or “on money” was received by the appellant which could enable the Assessing Officer to reject the accounts maintained in regular course. In fact, this document as such did not have any evidentiary value against the assessee.
The authorities below made some projections to convert these hypothetical figures into assessee’s business operations on hypothetical assumptions. The booking agreements of these flats were reached at different timings at different locations with different specifications. The appellants have made detailed submissions in the synopsis on this factual circumstances, inconsistencies in laptop projections, impossibility of such profits in real estate trade as extrapolated by department and explained variation in rates. The explanation is bonafide and remains uncontroverted by the revenue. The observation as well as findings reached by authorities below cannot be upheld as they lack in credibility being based on irrelevant considerations and pure conjectures. Looking at the gamut of inconsistencies and infirmities in the projections of department vis a vis laptop found from Mr. Bhutani, therefore, could not be a reason sufficient to endorse that the accounts maintained by the assessee are unreliable or they were not verifiable. Consequently assesses ground in this behalf deserve to be allowed. On these facts the ITAT Jaipur in similar group cases have already decided these issues in favor of the assessee, which we respectfully follow.
Reference u/s 142A by the ADIT to DVO, the relevant provisions have been mentioned above. It is clear that this Section empowers only the AO as authorized officer to make reference to the DVO u/s 142A of the Act. This Section does not use any term like ADIT being an authorized officer. Further it has not been disputed that what has been referred to for valuation of stock in trade of the assessee and not any investment referred u/s 69A or 69B; buillion, jewellery or any other valuable article referred to in Section 69A or 69B; is not a property referred u/s 56(2) of the Act.
In these eventualities, the judgment of Umiya Co-op Housing Society Ltd. [2006 (7) TMI 200 - GUJARAT HIGH COURT] and ME & Mummy Hospital vs. ACIT [2014 (2) TMI 898 - GUJARAT HIGH COURT] and various other judgements cited before us support the contentions of the assessee. Thus DVO reference is held to be invalid. We also find merit in the contention of the assessee that DVO ought to have applied the PWD rates in place of CPWD rates. Besides 2.5% rebate on account of self supervision and self bulk procurement of material is too meager. In our view this rebate ought to have been to at least to the scale of 5% as the assessees are the professional builders having their own engineering staff. Going by DVO valuation, the difference of valuation comes to 5.5% which amounts to nominal difference when viewed from the angle that its comparisons of two estimates which basically are two opinions. If the PWD rates are applied alongwith 5% rebate as mentioned above then it will leave no scope for any diferrence or addition on account of valuation report. Thus DVO’s reference is bad in law being void ab initio besides it has no merit. Consequently, any addition in respect of valuation cannot be made under the assessee's case.
Apropos revenue appeal we have already upheld that Project Completion Method adopted by the assessee being proper; books of accounts have been upheld, Projections of Mr. Bhutani having been found as not representing the actual business operations of the assessee. Consequently the findings of ld. CIT(A) about there being no revenue recognition unless 25% project if completed become redundant. Therefore, revenue ground becomes inconsequential.
Allowability of sec. 80IB deduction to assesses, we find no infirmity in the orders of ld. CIT(A) in as much as per material available on record assesses have complied with relevant conditions of sec. 80IB. Besides revenue grounds challenge admission of additional evidence u/r 46A and relief based thereon. Thus assessee’s eligibility on merits is not specifically challenged. In view thereof we see no infirmity in the order of ld. CIT(A) on the issue of allowing deduction u/s 80IB, furthermore it will be eligible in the year of revenue recognition. By upholding the Project Completion Method of accounting and upholding of books of accounts and rejection of estimates; there will be no taxable profits.
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2015 (4) TMI 1359
TP Adjustment - Foreign Exchange Gain as a part of Operating Revenue - contention of the assessee that the TPO erred in not treating the foreign exchange fluctuation as part of the operating profits and adding the same to the income from IT enabled services - HELD THAT:- Foreign exchange fluctuation has arisen as a result of the realization of the consideration for rendering software development services. It, therefore, arises or occurs in the normal course of business and hence there is no reason why it should be excluded from determining the operating revenue while computing the margin - we hold that the operating revenue of the assessee be computed by including the foreign exchange gain.
Donation to be excluded from operating revenue while computing the margin of the assessee - As already expressed the view that those expenses incurred / incomes earned in the normal, course of business are to be included for determining the operating revenue while computing the margins. By the same analogy, those expenses which are not part of normal business activities should get excluded for determining the operating revenue while computing the margin. As donation is not in the nature of the normal business activity of the assessee, we hold and direct that donation requires to be excluded from operating revenue, while computing the margin.
Comparable selection - Accentia Technologies Ltd. be excluded from the list of comparables in view of the occurrence of extra-ordinary event of the amalgamation which would impact financial results in the period under consideration thereby rendering it not comparable to the assessee in the case on hand.
eClerx Services Ltd. is to be excluded from the final list of comparables since it is engaged in providing high end services involving specialized knowledge and domain expertise rendering it functionally different from an IT enabled service company, as in the assessee in the case on hand.
Cosmic Global Ltd. was excluded because the only comparable segment, i.e. Accounts BPO segment has low volume of sales as compared to the entity level. Whether this finding of fact is also applicable to the assessee case, requires fresh examination as it has not been examined by the TPO and neither has this issue been agitated by the assessee either before the authorities below or before us in the present appeal. In this view of the matter, we deem it appropriate to remand this issue to the file of the TPO to consider the comparability of this company afresh in the light of the judicial pronouncements cited and the principles and observations laid out therein.
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2015 (4) TMI 1358
Expenses claimed or not incurred for earning exempt income - Amount received from Bharat Lok Shiksha Parishad - AO found the assessee is not a University or other Educational Institution and has also not claimed any Exemption u/s 10(23C) - AO found the expenses claimed in the financial statement are unconnected to the said receipt received from the Bharat Lok Shiksha Parishad, New Delhi - assessment has to be completed treating the assessee like any other business entity - HELD THAT:- We find that there is no dispute of the receipt of a sum from Bharat Lok Shiksha Parishad, New Delhi. However, the expenditure incurred by the assessee is required to be examined with evidences. There is no clarity in the orders of the revenue about the business connections of the assessee Bharat Lok Shiksha Parishad, New Delhi.
AO is required to examine the expenditure treating the assessee as independent business entity. The assessee is required to earn income and incur the expenditure like any business entity. This is the claim of the assessee that the expenditure incurred by the assessee should be construed on business expenses.
In our opinion, the matter should be remanded to the file of the AO for fresh adjudication of the issue after giving an opportunity of being heard to the assessee. Assessee should demonstrate that expenditure in incurred for business of the assessee only. Accordingly, the grounds raised by the assessee is allowed for statistical purposes.
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2015 (4) TMI 1356
TP adjustment - two international transactions, namely, payment of export commission and payment of royalty for export to the Associated Enterprises (AEs) - HELD THAT:- After considering the rival submissions and perusing the relevant material on record, we find that similar issues were raised in appeal by the assessee for the AY 2008-09 [2015 (5) TMI 350 - ITAT DELHI] which came to be heard simultaneously with the instant appeal.
We have passed separate order for the above referred AY 2008-09 in which the question of determination of ALP in respect of Export commission has been restored to the file of AO/TPO with certain directions and the payment of royalty for exports to AE has been accepted at arm’s length price. No distinguishing feature has been brought to our notice in the facts of the instant year vis-à-vis those of the above referred AY 2008-09.
We adopt the same reasons for the year under consideration as well and, accordingly, remit the international transaction of payment of ‘export commission’ to the file of AO/TPO for a fresh determination as per the guidelines given in our above referred order and delete the addition on account of payment of ‘royalty’ in respect of exports made to the AEs.
Disallowance being Sales tool expenses incurred by the assessee - HELD THAT:- After considering the rival submissions and perusing the relevant material on record, we find that similar issue has been raised by the assessee in its appeals for the AYs 2006-07 [2015 (4) TMI 502 - ITAT DELHI] and 2008-09 [2015 (5) TMI 350 - ITAT DELHI] for which separate orders have been passed. In the order passed for the AY 2006-07, we have remitted the matter to the file of AO for deciding this issue in conformity with the final view taken in earlier years. Since the fact situation remains similar for the instant year as well, inasmuch as neither the ld. AR nor the ld. DR could clearly inform about the final view taken on this issue for the earlier years, we set aside the impugned order and send the matter back to the file of AO for deciding it in conformity with the view taken by us in our order for the A.Y. 2006-07.
Appeal is allowed for statistical purposes.
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2015 (4) TMI 1351
Deduction u/s 80IB - pro-rata deduction u/.80- IB(10) - project ‘Garden Estate’ was allowable on a proportionate basis or not, i.e., excluding the profit attributable to the area covered by the flats exceeding the upper limit of 1000 sq. ft., as prescribed u/s.80-IB(10)(c) of the Act - HELD THAT:- In the instant case, eighteen flats have admittedly been converted into nine duplex flats, implying at least nine allotments to the same allotee/s, or to his family member, attracting the rigor of s. 80-IB(10)(e)/(f). This aspect ought to have, in view of the changed law, providing for the eligibility of the project w.r.t. allotment, brought to our notice, which we consider as a serious failing, which gets in fact compounded in view of the earlier lapse in not clarifying to the tribunal the fact that the Revenue is also in appeal, so that the assessee’s appeal stood heard by it in isolation despite it being a case of cross appeals, and on the same issue.
So much so that we think that it was a proper case for recall of the assessee’s appeal for being heard along with the instant appeal, which again has not been attempted by the Revenue. In fact, the relevant facts came to light only on perusing the file; the matter, as afore-stated, being closed as a squarely covered matter, which it indeed is, i.e., qua facts. The purview of an appellate authority, it needs to be appreciated, is to ascertain the correct tax liability by enabling determination of the correct income chargeable to tax, and the parties are obliged to assist the court in arriving at the correct decision
The consequence would be that profit of the project ‘Garden Estate’ shall not be eligible for deduction u/s. 80-IB(10) for the current year; it being again trite that only a cumulative satisfaction of all the qualifying conditions would render a project as an eligible project.
This aspect of the matter, which we regard as legal in view of the admitted facts, being further determined by the tribunal in the assessee’s own case, and with reference to which the assessee pleads its facts as identical with that for the preceding year, even as stated by the ld. CIT(A), having not been either considered during the assessment or the first appellate stage, or even before us, we only consider it fit and proper to restore the matter back to the file of the ld. CIT(A) to consider the eligibility of the said project, particularly with reference to the amended law, i.e., clauses (e) and (f) to s. 80-IB(10), inserted with effect from the relevant assessment year, determining the said issue after allowing reasonable opportunity of hearing to both the sides, in accordance with law. Revenue’s appeal is allowed for statistical purposes.
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2015 (4) TMI 1347
In the light of the judgment and order passed in a batch of appeals in Contintental Warehousing Corporation (Nhava Sheta) Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT] one of which is concerned with the revenue's appeal against the decision of the Tribunal in the case of Commissioner of Income Tax V/s. M/s. All Cargo Global Logistics Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT] which has been followed and applied. We do not find that the appeal raises any substantial question of law. It is accordingly dismissed. No order as to costs.
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2015 (4) TMI 1346
Nature of receipt - Carbon Emission Reduction Units - Revenue Receipt OR Revenue receipt - CIT(A) deleted the addition which was made by the AO by denying the benefit of deduction claimed by the assessee was not “derived from” the eligible business of the assessee - HELD THAT:- The facts of the case are identical to the facts of the case decided by Hyderabad Bench of the Tribunal in the case of My Home Power Ltd [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] carbon credit was in the nature of “an entitlement” received to improve world atmosphere and environment reducing carbon, heat and gas emissions. It was not an offshoot of business but an offshoot of environmental concerns. No asset was generated in the course of business. Credit for reducing carbon emission or greenhouse effect could be transferred to another party in need of reduction of carbon emission. It does not increase profits in any manner and does not need any expenses. In the nature of entitlement to reduce carbon emission, and there was no cost of acquisition or cost of production to get this entitlement. Carbon credit was not in the nature of profit or in the nature of income. The amount realized on transfer of carbon credit was not taxable.
This decision has been followed by Chennai Bench in two cases of Ambika Cotton Mills Ltd [2014 (3) TMI 428 - ITAT CHENNAI] and Sri Velayudhaswamy Spinning Mills P. Ltd [2015 (4) TMI 132 - ITAT CHENNAI]. Even Jaipur Beach has followed this decision in the case of Shree Cement Ltd [2015 (3) TMI 759 - ITAT JAIPUR] No doubt the DR has been able to point out the contrary decision rendered by Cochin Bench of the Tribunal in the case of Apollo Tyres Ltd [2015 (3) TMI 760 - ITAT COCHIN]. Since the decision of Hyderabad Tribunal Bench has already been confirmed by the Hon'ble Andhra Pradesh High Court and there is no contrary decision from any other High Court, in our opinion, we are bound to follow the decision of High Court. Therefore, following this decision we decide this issue against the Revenue.
Deduction u/s 80-IA - Receipt as ‘insurance receipt’ which was disallowed AO since the same was not “derived from” the eligible business of the assessee - HELD THAT:- This issue has not been discussed in detail by Assessing Officer and CIT(A) in their respective orders. Therefore, if it is a case of refund of only insurance premium then assessee would be entitled to deduction u/s 80IA on this amount also. However, this fact need to be verified, therefore, we set aside the order of Ld. CIT(A) and direct the Assessing Officer to verify the nature of insurance receipts and if the same was in the Revenue field, then deduction u/s 80IA should be allowed otherwise the issue may be decided in accordance with law.
Allowance of deduction u/s 80IA in respect of interest subsidy - The effect of the interest subsidy would be that normal interest expenditure would get reduced because of this subsidy. This in turn would lead to increase in normal profits which would entitle to deduction u/s 80IA, therefore, in our opinion, the Ld. CIT(A) has correctly decided this issue and we confirm his order. Thus the appeal is partly allowed for statistical purposes.
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2015 (4) TMI 1344
Accrual of income - Addition retention money - assessee contended that the right to receive the retention money was not accrued to the assessee and hence the same was not shown in its income during the year under consideration - HELD THAT:- As complete facts of the case were not examined and verified including the amount if any incurred by the assessee for business purpose out of the retention amount. However, after passing of the impugned orders, there is a change on the matter in issue and the points have now been decided in favour of the assessee which is also not disputed by the learned DR. However, the authorities below have no occasion to examine the facts of the case in the light of the above decisions cited by the learned Counsel for the assessee.
Both the parties agreed that the matter may be remanded to the file of the AO for reconsideration of the issue in the light of the decision delivered by the Hon'ble Punjab & Haryana High Court [2009 (11) TMI 995 - PUNJAB AND HARYANA HIGH COURT] and the Hon'ble Supreme Court (2009 (5) TMI 16 - SUPREME COURT]. We find force in the submissions of both the parties that the matter requires reconsideration in the light of the above decisions. We accordingly, set aside the orders of the authorities below and restore this issue to the file of the AO for reconsideration of the same in the light of the above decisions cited by the learned Counsel for the assessee.
AO shall also verify the details filed by the assessee on this issue and shall pass reasoned order in accordance with law by giving reasonable sufficient opportunity of being heard to the assessee. In the result, these grounds of appeal of the assessee are allowed for statistical purposes.
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2015 (4) TMI 1343
Addition made on account of data processing cost - addition u/s 40(a)(ia) on interest to head office - HELD THAT:- Issue decided in favour of assessee as relying on own case [2014 (3) TMI 726 - ITAT MUMBAI] payment made by the Branch to the H.O. towards reimbursement of cost of data processing cannot be held to be covered within the scope of expression “royalty” under Article 12(3)(a) of the India Belgium DTAA. Accordingly, the conclusion drawn by the learned Commissioner (Appeals) is affirmed. Since we have already held that the data processing cost paid by the assessee does not amount to royalty, consequently, there is no requirement for deducting tax at source on such payment. Therefore, the provisions of section 40(a)(i) will not apply.
Deduction u/s 44C - The data processing cost, pertains to allocation of expenses incurred by the Head Office on prorata basis for the banking application software acquired by the Head Office. Such expenditure does not fall within the meaning of “Head Office Expenses” as provided in section 44C. The nature of expenses as given in section 44C, has to be necessarily in the nature of executive and general administrative expenses only. The conclusion drawn by the learned Commissioner (Appeals) that such expenditure does not fall within the purview of section 44C.
Thus as the assessee had itself disallowed the said amount on account of failure to deduct the tax at source and further disallowance will lead to double disallowance. Thus, the ground no.4 is also dismissed
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2015 (4) TMI 1342
Disallowance of deduction being Sales Tax Entitlement - HELD THAT:- Tribunal has remanded the matter back to the file of Assessing Officer for re-adjudicating the issue afresh as per the directions of the Tribunal given for A.Y. 2007-2008 in the case of the very assessee. Therefore, it cannot be said that the learned Tribunal has committed any error in remanding the matter back to the file of the Assessing Officer, even with respect to the year under consideration. No substantial question of law arises and hence, the present appeal qua proposed question No.(A), as reproduced hereinabove, is hereby dismissed.
Disallowance of deduction u/s 80IA in respect of profits derived from generation of electricity from wind mills - HELD THAT:- Appeal admitted to consider the following substantial question of law:-
“(B) Whether on the facts and circumstances of the case as well as law, the ITAT was justified in deleting the addition made on account of disallowance of deduction u/s 80IA in respect of profits derived from generation of electricity from wind mills?
Disallowance u/s 14A - addition made on account of disallowing interest expenditure and restricting the administrative expenses to Rs.900/- which is not in accordance with the method provided by Rule 8D - HELD THAT:- As the amount involved/tax effect would be Rs.1,49,710/-, on the smallness of amount, we are not inclined to entertain the present appeal with respect to proposed question No.(C). Under the circumstances, present appeal qua proposed question No.(C) is hereby dismissed. However, keeping the question of law, if any, open.
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2015 (4) TMI 1340
Deduction u/s 80P(2)(a)(i) - Tribunal held that the Appellant is a Co-operative Bank and hence, it is not entitled to deduction under Section 80P(2)(a)(i) by virtue of Section 80P(4) - transactions with non members - HELD THAT:- It is undisputed that the transactions with non members are insignificant/miniscule. On the above basis it cannot be concluded that the appellant's principal business is of accepting deposits from public and therefore it is in banking business. In fact, the impugned order erroneously relies upon bye-law 43 of the society which enables the society to receive deposits to conclude that it can receive deposits from public. However, the impugned order relies upon bye-law 43 to conclude that it enables the appellant to receive deposits from any person is not correct. Thus in the present facts the finding that the appellant's principal business is of Banking is perverse as it is not supported by the evidence on record.
So far as the issue of primary object of the appellant is concerned the impugned order gives no finding on that basis to deprive the appellant the benefit of Section 80P of the Act. The impugned order sets out the object clause of the appellant, which has 24 objects but thereafter draws no sequiter to conclude that the primary object is Banking. Consequently there is no occasion to deal with the same as that is not the basis on which the impugned order holds that it is a Primary Cooperative Bank.
In the above view, the alternative contention of the appellant that it is not in the business of Banking as the sine quo non to carry on banking business is a licence to be issued by the Reserve Bank of India, which it admittedly does not have, is not being considered.
As rightly pointed out on behalf of the appellant the word society as referred to bye law 9(d) would include the co-operative society. This is so as the definition of a society under the Co-operative Act is co-operative society registered under the Cooperative Act. Besides the qualifying condition 3 for being considered as a primary Cooperative bank is that the bye laws must not permit admission of any other cooperative society. This is a mandatory condition i.e. the bye laws must specifically prohibit admission of any other cooperative society to its membership.
Revenue has not been able to show any such prohibition in the bye laws of the appellant. Thus even the aforesaid qualifying condition (3) for being considered as a primary cooperative bank is not satisfied. Thus, the three conditions as provided under Section 5 (CVV) of the Banking Regulation Act, 1949, are to be satisfied cumulatively and except condition (2) the other two qualifying conditions re not satisfied. Ergo, appellant cannot be considered to be a co-operative bank for the purposes of Section 80P(4) of the Act. Thus, the appellant is entitled to the benefit of deduction available under Section 80P(2)(a)(i) of the Act.
The contention of the revenue that the appellant is not entitled to the benefit of Section 80P(2)(a)(i) of the Act in view of the fact that it deals with non-members cannot be upheld. This for the reason that Section 80P(1) of the Act restricts the benefits of deduction of income of co-operative society to the extent it is earned by providing credit facilities to its members. Therefore, to the extent the income earned is attributable to dealings with the non-members are concerned the benefit of Section 80P of the Act would not be available. In the above view of the matter, at the time when effect has been given to the order of this Court, the authorities under Act would restrict the benefit of deduction under Section 80P of the Act only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members. - Decided in favour of assessee.
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2015 (4) TMI 1339
Assessment in the name of a company which had been amalgamated - corporate death of an entity upon amalgamation - Curable defect u/s 292B - HELD THAT:- CIT (A) had accepted the assessee’s plea that the notice and consequent search assessment proceedings under Section 153 (c) was void and unsustainable given the fact that the original assessee had amalgamated and transferred with B.S. Infratech Pvt. Ltd. during assessment years 2009-10.
The connected appeals were the subject matter of a previous order of this Court [2014 (11) TMI 1257 - DELHI HIGH COURT]. noticed and relied upon the judgment in Spice Entertainment Ltd. [2011 (8) TMI 544 - DELHI HIGH COURT] No question of law, therefore, arises; the appeal is accordingly dismissed.
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2015 (4) TMI 1337
Unexplained jewellery - unaccounted jewellery - jewellery, which was found to be not matching in any of these four criteria with the assessee’s valuation report, was therefore seized - comparison between the valuation of the assessee and the valuer of the department - HELD THAT:- DR could not controvert the conclusion of the CIT(A) that minor difference in description of jewellery in two valuation reports is possible, because of difference in nomenclature used by two valuers, the minor difference in number of small diamonds is possible on the facts of the case, because of human counting error or because of normal wear and tear, and nominal difference in weight could also be on account of two different perceptions of jewelers. We, thus, do not find any force in the appeal of the Revenue, and accordingly, the same is dismissed.
Whether gold jewellery to the extent of gross weight already disclosed should not be treated as undisclosed, because description of the jewellery keep on changing on remaking of jewellery? - We find that no finding has been recorded by the lower authorities as to whether the jewellery found during the course of search, which were not tallied with the description of jewellery given in the valuation report filed with wealth-tax return, could be made from remaking of untallied jewellery stated in the valuation report filed along with wealth-tax return or not.
We, further, observe that the assessee also could not bring any material before us to show that the same was possible. In the above circumstances, in our considered view, it shall be in the interest of justice to restore this issue back to the file of the AO for deciding the issue afresh after taking into consideration the above cited decision, and actual position in the light of the discussion made above. Needless to mention that, the AO shall allow reasonable and proper opportunity of hearing to the assessee before adjudicating the issue afresh. Thus, this ground of the cross objection of the assessee is allowed for statistical purpose.
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2015 (4) TMI 1335
Transfer u/s 127 - "reasonable opportunity of being heard" - HELD THAT:- Merely stating that the transfer is for the purpose of coordinating in itself is not a ground to consolidating the cases at one place. The cause of action has arisen within the State of Himachal Pradesh. The convenience of the party cannot be overlooked. The order passed by the competent authority transferring cases is a quasi judicial order and not an administrative order. The decision to transfer the case must comply with the provisions of section 127(2)(a) - The principles of natural justice have to be complied with at every stage. Violation of principles of natural justice at the initial stage cannot be cured at the subsequent stage. Moreover, the order should be self-contained/speaking and not merely a paper-decision. Recording of reasons is also sine qua non, as per mandatory provisions of section 127(2)(a) of the Income-tax Act.
We are of the considered opinion that the petitioners at least should know the gist of enquiry carried out against them and were also liable to be supplied adverse material gathered against them during assessment proceedings or information available, in order to enable them to represent their cases effectively before the Commissioner of Income-tax. The adverse material gathered against the petitioners by way of inquiry, information etc. was to be made available before hand and not at the time of assessment proceedings. There is a difference between pre-decisional hearing and post-decisional hearing. In the instant case, taking into consideration the legal/factual assessment involved, petitioners are entitled to pre-decisional hearing in order to contest the show cause notice(s) dated 20.1.2015. There is a prima facie case and balance of convenience is also in favour of the petitioners.
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2015 (4) TMI 1334
Disallowance of interest as per proviso to sec. 36(1)(iii) - HELD THAT:- A bare perusal of the proviso to section 36(1)(iii) clearly reveals that there should be specific finding that the amount of interest paid is in respect of capital borrowed for acquisition of an asset for extension of existing business or profession. Therefore, direct nexus between the capital borrowed and the acquisition of asset has to be established before proviso can be invoked. In the present case the AO has not established this nexus.
The proviso was wrongly invoked by him. Further, we find that it was specifically stated before the AO that there was introduction of fresh capital on which no claim of any interest had been made in the books. AO has not at all taken into consideration as to how this fund was utilized. Further, assessee has also pointed out that it had received interest free loan, which has been reproduced earlier. In any case, the assessee’s claim was that the entire borrowed funds had been utilized for business purposes and not for acquisition of fixed assets. In view of above discussion, we do not find any reason to interfere with the order of ld. CIT(A) and the same is upheld.
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2015 (4) TMI 1333
Exemption u/s 11 - charitable activity u/s 2(15) - applicability of proviso of section 2(15) - Registration u/s 12AA - denial of exemption on the ground of commercial transactions - HELD THAT:- It is agreed between the parties that the questions of law as raised in these appeals stand decided in favour of the development authority in the case of CIT v Lucknow Development Authority [2013 (9) TMI 570 - ALLAHABAD HIGH COURT] as well as in connected matters as per the judgment.
We have also been informed that the Income Tax Appellate Tribunal in the case of assessee himself [2015 (2) TMI 287 - ITAT DELHI] has followed the law laid down in the case of CIT v Lucknow Development Authority (Supra) and has restored the registration granted to the assessee under Section 12- AA of the Income Tax Act. Appeals are dismissed as infructuous.
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2015 (4) TMI 1332
Disallowance of interest payable claimed - interest payable, which was not paid during the year - interest payable to the Government of Tamilnadu and M/s Infrastructure Leasing and Financial Services - HELD THAT:- As decided in own case[2014 (6) TMI 1062 - ITAT CHENNAI] neither the Government of Tamil Nadu nor Infrastructure Leasing & Financial Services Ltd. IL&FS fall within the definition of Public Financial Institution. Hence, the learned Commissioner of Income Tax (Appeals)’s premise that Explanation 3(c) of Section 43B(d) is applicable, is erroneous. As we have already held earlier that as per the reading of loan agreement, the interest amount has very much accrued and the liability has crystallized. In this view of the matter, we hold that order of the authorities below is liable to be set aside and assessee's claim be allowed
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2015 (4) TMI 1331
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2015 (4) TMI 1330
Allowability of Development fee - HELD THAT:- We have, by a separate order and judgment passed today in Income Tax Appeal [2015 (5) TMI 656 - BOMBAY HIGH COURT], dismissed the said two appeals. For the reasons recorded while dismissing the said appeals, each of the above appeals also stand dismissed.
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