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Income Tax - Case Laws
Showing 21 to 40 of 814 Records
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2015 (9) TMI 1719
Addition on account of investment written off - HELD THAT:- Notice is confined to issue A.
Addition on account of notional interest income - HELD THAT:- Issue covered in favour of the Assessee by the judgment of this Court in CIT v. Oriental Insurance Company Ltd. [2002 (9) TMI 44 - DELHI HIGH COURT]. Consequently, no question is framed.
Disallowance u/s 14A - disallowance on account of guest house expenses - HELD THAT:- Issues stands covered by the order of the ITAT in the Assessee’s own case for AYs 2000-01 and 2001-02 which has not been appealed against by the Revenue. Consequently, the Court declines to frame the said questions as well.
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2015 (9) TMI 1718
Dividend income as exempt u/s.10 (34) - dividend income is considered as part of Income of the life Insurance Business and is included as an income by actuary - HELD THAT:- We find that the impugned order of the ITAT has allowed the respondent-assessee's appeal by following the decision of this Court in General Insurance Corporation of India vs. Deputy Commissioner of Income Tax & anr [2011 (12) TMI 70 - BOMBAY HIGH COURT] and its own decision in the case of ICICI Prudential Insurance [2012 (11) TMI 13 - ITAT MUMBAI]
Revenue very fairly states that the revenue's appeal on this issue from the order of ITAT in ICICI Prudential Insurance Co.Ltd (supra) to this Court [2015 (7) TMI 972 - BOMBAY HIGH COURT] in view of the above, question (A) does not raise any substantial question of law and accordingly dismissed.
Whether negative reserve has an impact of reducing the taxable surplus as per Form-I and therefore, corresponding adjustment for negative reserve need to be made to arrive at taxable surplus? - HELD THAT:- The issue stands covered in favour of the respondent-assessee by the decision of the Apex Court in LIC of India [1963 (12) TMI 5 - SUPREME COURT] wherein it has inter alia been held that the Assessing Officer had no power to modify its accounts after Actuarial valuation is done. Accordingly, question (B) also does not give rise to any substantial question of law. Hence, dismissed.
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2015 (9) TMI 1717
Assessment of trust - “Principle of mutuality" - amount had received as non-occupancy charges by the society from members and not from the occupants - “principle of mutuality‟ to the non-occupancy charges received by the cooperative housing society - HELD THAT:- Similar issue was adjudicated by the Tribunal in the assessee‟s own case for the AY 2003-2004 - After hearing both the parties and on perusal of the said order of the Tribunal (supra), find vide paras 17 and 18, the assessee was given relief on account of non-occupancy charges received by the assessee in that AY 2003-04. Considering the commonality of the issue and binding nature of the coordinate Bench decision, ground no.1 raised by the Revenue is dismissed and to that extent the order of the CIT (A) is fair and reasonable and it does not call for any interference.
“Principle of mutuality" to the interest amount received from the bank on the FDs - HELD THAT:- Heard both the parties and perused the orders of the Revenue Authorities as well as the cited judgment of the Hon‟ble Supreme Court in the case of Bangalore Club [2013 (1) TMI 343 - SUPREME COURT] - On perusal of the said judgment of the Apex Court, we find that the said judgment is relevant in this regard, wherein it was held that “The principle of mutuality relates to the notion that a person cannot make a profit from himself. The concept of mutuality has been extended to defined groups of people who contribute to a common fund, controlled by the group, for a common benefit. Any amount surplus to that needed to pursue the common purpose is said to be simply an increase of the common fund and as such neither considered income nor taxable”. Applying the above ratio to the factual matrix of the present case, there is no dispute on the fact of receiving interest from the “Bank of India‟ and the said “bank is not a member of the club’, so that the “principle of mutuality‟ does not apply. Therefore, considering the same, the decision taken by the CIT (A) in this regard requires to be reversed - Ground no.2 raised by the Revenue is allowed.
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2015 (9) TMI 1716
Deduction u/s 80 P (2) (a) (i) - AO denied deduction as activity of the respondent was covered by Section 2 (24 (vii a) of the IT Act, which requires the inclusion of profits and gains of any business of banking (including providing credit facilities) carried on by a co- operative society - Whether the benefit of deduction, under Section 80 P (2) (a) (i) of the IT Act, could be denied to the assessee on the footing that, though the respondent was said to be a Co- operative Society, it was in fact a co-operative bank, within the meaning as assigned to such bank under Part V of the BR Act.? - whether Authorities under the IT Act were competent and possessed the jurisdiction to resolve the controversy as to whether the assessee was a co-operative society or co-operative bank, as defined under the provisions of the BR Act? - HELD THAT:- We are in respectful agreement with the general view taken as to the interpretation of the relevant provisions of law, by the co-ordinate bench of this court, in the above and several other judgments adopting the same view. However, it is to be noticed that there is a seriously disputed question of fact which the Authorities under the IT Act have taken upon themselves to interpret in the face of the BR Act prescribing that in the event of a dispute as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi) of Section 56 of the BR Act, a determination thereof by the Reserve Bank shall be final, would require the dispute to be resolved by the Reserve Bank of India, before the authorities could term the assessee as a co-operative bank, for purposes of Section 80 P of the IT Act. Any opinion expressed therefore is tentative and is not final. The view expressed by this court, however, as to the assessee being a co-operative society and not a co-operative bank in terms of Section 80P (4) of the IT Act, shall hold the field and shall bind the authorities unless held otherwise by the Reserve Bank of India. - Decided in favour of assessee.
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2015 (9) TMI 1713
Deduction u/s 11 – violation of section 13(1)(d) - interest free loan to another society - HELD THAT:- Considering the fact that the issue raised in these appeals is already considered by the Delhi High Court in the case of Director of Income-Tax (Exemption) v. Acme Educational Society, [2010 (7) TMI 159 - DELHI HIGH COURT] and another decision of Division Bench of our High Court in the case of Commissioner of Income-tax, Bhopal v. Maa Vaishnav Education Society, [2013 (7) TMI 225 - MADHYA PRADESH HIGH COURT], both the appeals are disposed of on the same terms.
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2015 (9) TMI 1712
Expenditure incurred on account of non-compete fee paid to sellers of bottling business - revenue or capital expenditure - depreciation on the non-compete fee expenditure - Whether expenditure incurred towards ice boxes and dealer sign boards provided to hawkers/ dealers, carrying the brand name of the appellant, was capital in nature? - HELD THAT:- Appeal admitted for substantial question of law. Liberty is granted to the parties to file all the relevant documents which form part of the record of the case before the Assessing Officer, the CIT (A) and ITAT.
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2015 (9) TMI 1709
Exemption u/s 11 - disallowance made on account of vehicle running expenses and depreciation of car in terms of Section 13(2)(b) - CIT-A deleted the additions - HELD THAT:- AO has not brought any material on record as to how he has given his finding that the cars have been purchased for the benefit of the Chairman. AO was also not justified in holding that the assessee trust has no requirement to maintain luxury car. The expenses should be considered from the point of view of the assessee and not for the point of view of the AO.
In the absence of any material brought on record against the assessee, the order of the AO could not be sustained. Further, it is not in dispute that Shri Anoop Garg, Chairman is looking after the activities of the assessee trust whole time and has to visit various Government Departments in connection with the activities of the assessee trust. No incriminating material was found during the course of search if the Chairman has used the cars for personal purposes. Therefore, it appears that addition has been made wholly on adhoc basis which could not be sustained in law - The findings of the Assessing Officer have no basis what-so-ever, therefore, ld. CIT(Appeals) was justified in deleting the addition - Decided against revenue.
Addition on account of discrepancies in two set of trial balances found at the time of search - HELD THAT:- The assessee has given complete details of complete trial balances and incomplete trial balances and the remarks and the reasons for difference in the figure. These figures have been reconciled and is supported by all the entries made in the books of account. The difference in both the trial balances was thus, due to certain missing entries which have been even reconciled before us during the course of arguments. When all these reconciliations were submitted to the AO for his comments, the explanation of the assessee was not rebutted by the AO in any manner. CIT(Appeals) on the basis of material on record, was rightly satisfied with reconciliation done between incomplete trial balance and complete trial balance. Thus, ld. DR failed to point out any error in order of ld. CIT(Appeals) in deleting the addition.
When assessee prepared the balance sheet on the basis of complete data available in the trial balances, the figure came to more as compared to the lesser figure taken by the Assessing Officer from the incomplete trial balance. Therefore, this itself would show that there were no basis what-so-ever for making addition against the assessee. It was merely a mistake in not making certain entries in incomplete trial balance, thus could not be termed as undisclosed income of the assessee. The ld. CIT(Appeals) on proper appreciation of facts and reconciliation statement filed before him, was justified in deleting the addition.
Addition of salary paid to Chairman u/s 13(2)(b)(c) - amount so paid to the Chairman was excess of what may be reasonably paid for such services - HELD THAT:- It is not in dispute that the Chairman has rendered services to the assessee trust/institution on whole time basis. The assessee trust maintained three institutions, one at Moga and two at Panchkula. Therefore, Chairman shall have to visit these distant places and has also to visit several government organizations in connection with the activities of the assessee trust.
When the salary to the Chairman is paid less than ₹ 84,000/- per month in assessment year 2006-07, it could not be said to be unreasonable. In those years, even the persons in Govt. managerial capacity would be getting salary more than ₹ 85,000/- per month. The Assessing Officer has not brought any evidence of comparable institution to show that any excess salary has been paid to the Chairman. In the absence of any adequate evidence or material on record, particularly when during the course of search, admittedly no incriminating material was found regarding excess salary paid to the Chairman, addition is wholly unjustified. Therefore, we do not subscribe to the views of the authorities below in making and sustaining the addition. We, therefore, set aside the orders of authorities below and delete the addition.
Addition based upon the rough notings in the diary seized during the course of search - HELD THAT:- No propriety in filing Department appeal on same issue in parts. The reasons for deletion of addition is same for which huge addition was deleted by ld. CIT(Appeals) and that too on the basis of comments received from the Assessing Officer during remand proceedings. DR during the course of arguments, have not been able to point out any infirmity in the order of ld. CIT(Appeals) in deleting the addition - On going through the material on record, we find that ld. CIT(Appeals) was justified in deleting the addition in respect of duplicate entries/double additions made by the Assessing Officer and part of the amount which was not recorded. From the above discussion in the light of the findings of the ld. CIT(Appeals), we do not find any justification to interfere with the order of ld. CIT(Appeals). The departmental appeal, thus, stands dismissed on ground Nos. 1 & 2.
Addition on the same issue based on rough notings in the seized diaries - HELD THAT:- The entries contained in the diary itself are not corroborated by any material or evidence on record. The ld. CIT(Appeals) also in his findings in column No. 5, as reproduced above, has mentioned that the students who have not taken admission during the year but maintained addition of ₹ 28,25,000/- on the reasons that the remand report mentioned specific dates with amount against the students. The findings of the authorities below are wholly unjustified because when the students whose names have been mentioned in column No. 5 as per the seized diary have admittedly not taken admission in the institution of the assessee trust, where is the question of those students in paying any amount by way of capitation fees or fee to the assessee trust. Therefore, there was no justification to make addition of such students who have not taken admission in the Institution of the assessee trust merely because their names were mentioned in the seized diary. The addition is liable to be deleted.
Addition in respect of the amount “out of the balance amount which have been recorded in the books.” - HELD THAT:- When the findings of the ld. CIT(Appeals) based on the remand report of the Assessing Officer says that the amount of ₹ 1.66 Cr has been recorded in the books of account of the assessee trust, where is a question of making addition against the assessee trust. The ld. CIT(Appeals), on the basis of the remand report noted that the dates appearing in the seized diary do not match with the ledger account, therefore, addition was made.
As is noted above, since seized diary was the estimated figures made by the Chairman Shri Anoop Garg, therefore, there is no question of matching the dates with the entries contained in the regular books of account maintained by the assessee. Since the diary was found from the possession of Shri Anoop Garg, therefore, it is probable that the same may be his personal notings which may not be directly connected with the assessee's affairs. It is not explained as to how the entries contained in the diary relate to the assessee trust. The entries contained in the diary relates to four types of entries of the fees on which substantially the ld. CIT(Appeals) deleted the addition and others also liable to be deleted. The assessee also filed affidavit of some of the students before the authorities below stating that they have not paid any amount as mentioned in the diary to the assessee trust but none of the deponents have been examined by the authorities below. Whatever NRI students were admitted, their fees was found recorded in the books of account. Since some of the students were not admitted, the authorities below were not justified in adding the amount against their names whose names were mentioned in the diary. If the dates of the fees recorded in the books of account do not match with the diary, the authorities below failed to explain as to from where the assessee has received the fees and how they have been recorded in the books of account.
Therefore, the amounts, even if do not match with the seized diary, when have been recorded in the regular books of account even prior to the search, there was no justification for the authorities below to make the addition of ₹ 1,66,40,072/-. Similarly, the students who have not admitted to the assessee trust, there is no question of receipt of fees of ₹ 28,25,000/- from them, therefore, addition of ₹ 28,25,000/- was wholly unjustified. For the sake of argument, even if it is believed that Shri Anoop Garg has received any alleged amount but there is no evidence on record to prove that Shri Anoop Garg has handed over the alleged amount to the assessee trust.
The amount of ₹ 75.80 lacs, once accepted by Shri Anoop Garg of his own, therefore, same can not come to the assessee in any manner and therefore, the balance amount of ₹ 80.48 Cr in the hands of the assessee in respect of column No. 7 which is balance amount left, which is the estimation by Shri Anoop Garg, could not be added in the hands of the assessment trust. This amount could only be considered in the case of Shri Anoop Garg, Chairman of the assessee trust and sine surrendered amount of ₹ 75.80 lacs has already been made in the case of Chairman and his appeals have been dismissed separately, there was no justification to make double addition of ₹ 80.48 lacs in the hands of the assessee trust.
Addition u/s 68 - HELD THAT:- There is no mention of any date against these names. Even no name of assessee is mentioned in seized paper. The statement of the Chairman Shri Anoop Garg was recorded in which also he has not made any allegation against assessee trust of taking any loan or passing the same loan to the assessee trust. There are no entries of the said loans recorded in the books of account of the assessee. The addition under section 68 of the Act could be made if any sum is found credited in the books of account of the assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer as satisfactory, the sum so credited could be charged to income tax as income of the assessee of that previous year. Since there is no sum found credited in the books of account of the assessee in assessment year under appeal and no reliable evidence was found during the course of search, that these were genuine loans taken by assessee in assessment year under appeal, no addition could be made with the help of Section 68 of the Act of the rest of amount.
In the case of the assessee also in the seized paper in the names of other persons, only 3, 5, 15, 15, 7 and 36 are mentioned. It would not indicate whether these are in rupees or in lacs. No material is produced before us to support findings of the authorities below. Considering the above discussion, we are of the view that authorities below were wholly unjustified in making and sustaining the addition of the authorities below are, therefore, set aside and the entire addition is deleted.
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2015 (9) TMI 1704
Interest expenditure disallowance - HELD THAT:- We find that the Tribunal in the case of Eminent Holdings [2014 (7) TMI 466 - ITAT MUMBAI] have followed the decision of the Tribunal given in common group case of Hitesh S. Mehta [2013 (10) TMI 1065 - ITAT MUMBAI]and restored the matter to the file of the Ld. CIT(A) for fresh adjudication
We restore this issue to the files of the Ld. CIT(A) for fresh adjudication after giving reasonable opportunity of being heard to the assessee. Before closing this issue, the Ld. Counsel for the assessee pointed out that the Ld. CIT(A) has held that the issue of interest expenditure is pending before the Hon'ble Special Court. It is the say of the Ld. Counsel that the proceedings in which the said issue of interest was issued by the custodian have been already concluded which fact has already been recorded by the Ld. CIT(A) in the impugned order. We, therefore, direct the Ld. CIT(A) to consider this fact while deciding the issue afresh.
Levy of interest u/s. 234A, 234B and 234C - HELD THAT:- Identical issue was decided in the cases of Topaz Holdings Pvt. Ltd. [2014 (6) TMI 998 - ITAT MUMBAI] and Eminent Holdings Pvt. Ltd. [2014 (7) TMI 466 - ITAT MUMBAI] that the Tribunal had upheld the levy of interest in principal, that it had set aside the issue for calculating the interest to the file of the AO with direction that the tax deducted as source should be reduced while calculating the interest.Respectfully, following the above order we restore back the issue to the file of the AO who would levy the interest as per the provisions of section 234 of the Act and give credit for the TDS amounts.
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2015 (9) TMI 1703
Revision u/s 263 - HELD THAT:- We find that the order of the CIT made u/s. 263 of the Act was appealed by the assessee before the Tribunal and the Tribunal2014 (12) TMI 1370 - ITAT MUMBAI] has held the revision proceedings infirm and illegal and consequentially restored the regular assessment dated 31.10.2009.
“Sublato fundamento cadit opus” meaning thereby that in case the foundation is removed,super structure falls. In the present case also the foundation i.e. order made u/s. 263 has been removed by the Tribunal in ITA No.23/Mum/2012, hence the structure i.e. the assessment made u/s. 143(3) r.w.s 263 of the Act falls. Hence, the appeal filed by the assessee becomes otiose.
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2015 (9) TMI 1701
TP Adjustment - selection of MAM - TNNM OR RPM - HELD THAT:- On perusal of the order of the Tribunal, we find that the assessee had entered into international transactions for purchase of medical equipments and there was no dispute with regard to the method adopted by the assessee during its TP study. Such being the case, there is no reason as to why the assessee should not be allowed to adopt the same method even during the relevant A.Y.
On perusal of the TPO order, we find that the TPO has reproduced the parameters to be taken into consideration for adopting the RPM for comparability analysis, but except stating that the RPM method can be adopted only where the products are closely comparable, he has not given detailed reasoning as to why the said method is not applicable to the assessee. We find that the TPO has not brought on record any evidence as to how the products sold by the comparable companies are not similar to the products sold by the assessee herein. When the TPO desires to reject the method consistently being followed by the assessee and desires to adopt a different method, the TPO is required to give his reasoning which is absent in the case before us.
We deem it fit and proper to remand the issue to the file of the TPO for determination of the most appropriate method for determination of the ALP. Further we direct that if the TPO holds that the RPM is to be adopted as the most appropriate method, then the TPO shall also take into consideration the comparable companies selected by the assessee in addition to the companies selected by him for determination of the ALP.- Ground of assessee is treated as allowed for statistical purposes.
TDS u/s 194C - contribution towards sponsorships - HELD THAT:- The assessee relying upon Board Answer to Q. No.1 to lay stress on his argument that only if a payment is made to an advertising agency, the TDS provision of section 194C is applicable. However, we find that the Question Nos. 18 and 19 and answers to these questions are relevant to the case before us. In the case before us, as stated in the earlier paragraphs of this order, we find that the assessee had advertised itself by display of banners etc., during the seminars etc, sponsored by it. Therefore, the provision of section 194C is fairly applicable to the case before us. In view of the same, we uphold the findings of both the authorities below on this issue.
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2015 (9) TMI 1699
Disallowance u/s 14A - As per assessee no exempt income was earned - HELD THAT:- A.O. as well as Ld. CIT(A) has not pointed out any income earned by assessee which was exempt income.There was no exempt income pointed out by the Revenue Authorities and A.O. had made addition holding that assessee had source of exempt income. Section 14A of the Income Tax Act cannot be invoked when no exempt income was earned. The case of assessee is fully covered in its favour by the order of M/s Mayank Auto Engineers P Ltd. vs. DCIT [2015 (3) TMI 1172 - ITAT DELHI] as well as the decision of CIT Vs Holcim India Pvt. Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT]
As assessee had not earned any exempt income during the year disallowance u/s 14A was not warranted. - Decided in favour of assessee.
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2015 (9) TMI 1697
Ad hoc disallowance of expenses - expenses claimed by the assessee are not fully verifiable, as no vouchers have been produced in respect of few expenses for verification - HELD THAT:- Ad hoc disallowance is not permissible under the law and if the Assessing Officer is not satisfied with a particular expense, he may make necessary verification and also to point out defect in the books of account, but ad hoc disallowance should not be made by making general observation. In the instant case, since ad hoc disallowance is made by making general observation, we do not find any merit in the addition made by the Assessing Officer. We accordingly delete the addition made on ad hoc basis after setting aside the order of the ld. CIT(A) - Decided in favour of assessee.
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2015 (9) TMI 1696
Short deduction of TDS - TDS u/s 194J OR 194I - disallowance u/s. 40(a)(ia) relating to VSAT and lease line payments - CIT(A) holds that only proportionate disallowance is to be made in view of the fact that the assessee had already deducted TDS - HELD THAT:- It is evident that the co-ordinate bench in assessee’s own case for assessment year 2006-07 holds that the disallowance in question cannot be made because of shortfall in TDS deduction as per hon’ble jurisdictional high court decision in CIT vs. Prayas Engineering Ltd Tax [2014 (11) TMI 1086 - GUJARAT HIGH COURT] and CIT vs. S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT]. The Revenue fails to draw any distinction on facts or law. CIT(A) has erred in partially confirming the Assessing Officer’s action making the impugned disallowance of VSAT and lease line charges in question. The assessee’s arguments are accordingly accepted and that of the Revenue are rejected.
Disallowance of bad debts - assessee had claimed these amounts arising from downfall/market crash in Jan, 2008 due to which wealth of investors vanished and they were not in a position to pay the same as investment in question reached to negligible value resulting in huge unpaid liabilities. - HELD THAT:- CIT(A) follows lower appellate order in preceding assessment year deciding the issue in assessee’s favour. He quotes case law of TRF Ltd. [2010 (2) TMI 211 - SUPREME COURT] and DCIT vs. Shreys Morakhia [2010 (7) TMI 455 - ITAT MUMBAI] in support. We find that the co-ordinate bench (supra) has already rejected the Revenue’s identical ground in preceding assessment year. It does not point out any exception on facts or law in the impugned assessment year. The Revenue’s corresponding ground is decided in assessee’s favour.
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2015 (9) TMI 1695
Disallowance of bad debts write-off - Amount written off by the assessee is on advance given by it to one PIE Education P. Ltd. - HELD THAT:- When assessee itself had not charged any interest on the amount advanced, it cannot say that any income from such loans were taken into account for computing its total income. For the simple reason that assessee had never charged any interest on the loan to PIE Education P. Ltd, such loan cannot be treated as money lent by the assessee in the ordinary course of a business of money-lending. In our opinion, assessee is squarely hit by the limitation placed by section.36(2)(i) of the Act. Claim of the assessee also cannot be considered as a business loss, for the reason that assessee was not in the business of providing education and training. Even if we presume that assessee was carrying on a business of lending money, the amount written off here was not lent in the course of money lending business.
Coming to the judgment of Hon’ble Apex Court in the case of T. R. F. Ltd [2010 (2) TMI 211 - SUPREME COURT], the question there was whether for a claim of bad debts, write- off in the books alone was sufficient - In the judgment of Amalgamations P. Ltd [1997 (4) TMI 8 - SUPREME COURT] question was whether loss incurred for providing bank guarantee for loans taken by a subsidiary could be allowed. Assessee here has nowhere stated that PIE Education P. Ltd is a subsidiary of the assessee company, nor was the write-off in relation to any bank guarantees.
As held that solitary transaction by itself could not be considered as an impediment for construing the meaning of money lending business. As against this, assessee here had advanced the money to PIE Education P. Ltd without any agreement regarding interest and that too not as a part of its lending activity, if at all it had any. Lower authorities were justified in disallowing the sum - Ground.3 of the assessee is dismissed.
Disallowance u/s.14A on account of assessee’s own submission - HELD THAT:- Sole grievance was that the disallowance u/s.14A of the Act made on account of assessee’s own submission, was considered by the AO as a disallowance made by the latter - As admitted addition we are of the opinion that assessee cannot have any grievance now. We do not find any reason to interfere in the order of lower authorities on this issue also. Ground.4 of assessee is dismissed.
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2015 (9) TMI 1690
Long Term Capital Gain - Year of assessment - ancestral property - property has been jointly held by all the family members - HUF of the assessee has not filed return of income - assessee along with other co-owners has sold an ancestral property purchased by his Grand-father - partial share of the assessee in the sale consideration - HELD THAT:- Admittedly, the conveyance deed was executed on 31.3.2008 and the same was registered under the Registration Act on 1.7.2008. On a perusal of the conveyance deed, we notice that the possession of the property was also given to the buyers on 31.3.2008 and the assessee along with other co-owners have received the entire consideration before 31.3.2008.
Hence, we agree with the contentions of the assessee that the impugned property has been transferred during the year relevant to the assessment year 2008-09 and hence AO was not justified in assessing the same in AY 2009-10. As A.R submitted that the registration of deed on 1.7.2008 was only a formality and upon the registration of the deed, the conveyance would date back to the date of execution of the deed we find support to the contentions of the assessee in the decision rendered in the case of M. Shyamala Rao [1998 (4) TMI 113 - ANDHRA PRADESH HIGH COURT] as observed that the registration of the conveyance deed relates back to the date on which the agreement for sale was executed in favour of the buyer by the owner. In view of the above, the capital gain, if any, is assessable in AY 2008-09 only.
Whether the capital gain can be assessed in the hands of the assessee herein in his individual capacity - assessee has contended before the AO that the property belongs to the HUF and what he has received is only a share from the HUF - HELD THAT:- We notice that the tax authorities have rejected the claim on the reasoning that the HUF has not filed return of income and hence the capital gain should be assessed in the individual hands. In our view, the approach of the tax authorities cannot be uphold in view of the decision in the case of Ch.ATCHAIAH [1995 (12) TMI 1 - SUPREME COURT] wherein held ITO can, and he must, tax the right person and the right person alone. By right person, we mean the person who is liable to be taxed, according to law, with respect to a particular income.
Merely because the HUF of the assessee has not filed return of income, the assessing officer cannot assess the capital gain in the hands of the assessee in his Individual status. Since the property has been jointly held by all the family members, the same cannot be said to belong to the assessee in his individual status. In fact, the conveyance deed wasl also executed jointly by all the co-owners. AO was not correct in law in assessing the share of the assessee as capital gain in the individual status. - Decided in favour of assessee.
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2015 (9) TMI 1689
Reopening of assessment - "change of opinion" - rate of depreciation on “water supply & drainage” and some part of the block of asset viz., the value of non-productive assets - claim of excess rate of depreciation on the on-productive assets is being restricted @ 10% instead of 15% - HELD THAT:- There is a change of opinion by the AO for the purpose of reopening the assessment u/s.147. As held by the Supreme Court in the case of Kelvinator India Ltd. [2002 (4) TMI 37 - DELHI HIGH COURT] mere change in opinion would not confer jurisdiction upon the AO to initiate a proceeding u/s.147 of the Act. Therefore, we uphold the order of the CIT(Appeals) on this issue and quash the assessment order passed u/s.147 - Decided against revenue.
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2015 (9) TMI 1685
Deduction u/s 80IA - proof of manufacturing activities - need for filing of audit report alongwith the return - HELD THAT:- As in the assessee’s own case [2013 (6) TMI 882 - ITAT INDORE]wherein the ITAT has found assessee as eligible for claiming deduction u/s 80IA on Unit-2 relating to manufacturing of micro nutrient fertilizers.
Audit report was filed and the requirement of section 80IA(7) has been duly met with. Unit-II was separate and independent unit from the existing unit and the new unit commenced its production during A.Y. 1997- 98. The manufacturing of micronutrient fertilizers even has not been disputed by the Assessing Officer. It is not the case that the unit in dispute is part of earlier unit or its expansion. There is an uncontroverted finding in the impugned order that the assessee was maintaining separate accounts for both the units which are duly audited. Since the assessee has duly fulfilled the requirements of section 80IA(7) of the Act by filing the audit report before framing the assessment, we are of the view that the Assessing Officer wrongly disallowed the claim of the assessee. As per provisions of section 80IA(7), requiring filing of audit report alongwith the return is not mandatory rather it is directory and if the audit report is filed at any time before framing the assessment, the required conditions are considered to be fulfilled.- Decided in favour of assessee.
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2015 (9) TMI 1684
Assessment made u/s 144 - AO disbelieved the correctness of loss returned by the assessee and rejected such loss stating that assessee has not produced books of accounts - HELD THAT:- Commissioner of Income Tax (Appeals) stated that books of accounts were not produced even before him for verification. However the contention of the assessee was that CD was produced before the Commissioner of Income Tax (Appeals) containing the books of accounts. Taking the totality of the facts and circumstances into consideration, in the interest of justice, we are of the opinion that the assessment has to be redone afresh by the Assessing Officer. Thus, we set aside the orders of lower authorities and restore the assessment back to the file of the Assessing Officer with a direction to complete the assessment de novo and in accordance with law, after providing adequate opportunity to the assessee.
Denial of exemption u/s 10B/10A - since the approval was not given by the Board set up under Industries (Development & Regulation) Act, 1951 approval obtained by the assessee cannot be accepted as approval under section 10B of the Act for the purpose of claiming deduction - HELD THAT:- Refering to submission of the assessee that the assessee started its business in the year 1999 as a manufacturer and exporter hydraulic cylinder and its components and since then they have been filing their return claiming exemption under section 10B of the Act and the same was allowed the Department upto the assessment year 2008-09 we do not see any reason as to why the assessee should not be allowed deduction under section 10A if it is proved that assessee is entitled for deduction under section 10A instead of section 10B of the Act. Therefore, we are of the view that in case the assessee is not entitled for deduction under section 10B of the Act, the assessee’s claim shall be considered under section 10A of the Act, subject to fulfilling of the conditions therein. Therefore, we set aside the issue to the file of the Assessing Officer for de novo consideration and decide the issue refering to cases TECHNOVATE E SOLUTIONS PVT LTD [2013 (3) TMI 372 - DELHI HIGH COURT] and REGENCY CREATIONS LTD., VALIANT COMMUNICATIONS LTD. [2012 (9) TMI 627 - DELHI HIGH COURT] - Appeals of the assessee are allowed for statistical purposes.
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2015 (9) TMI 1683
Revision u/s 263 - quantum of short deduction of tax at source was admitted by the assessee and there was no further verification required by the Assessing Officer - HELD THAT:- Disallowance under Section 40(a)(ia) of the Act could not be made where there was a short deduction of tax at source and that such claim was made by the assessee in the audit report, which wasaccepted by the Assessing Officer. It also considered that the same was in consonance with the view expressed by the Tribunal earlier and confirmed by the Calcutta High Court in the case of CIT –vs- S.K.Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH] - Further, it has been held that since two views were possible to be taken by the Assessing Officer in the case of the assessee, and one of the possible views has been taken, then in such a situation the jurisdiction under Section 263 of the Act could not have been exercised.
No infirmity with the order of the Tribunal in allowing the appeal of the assessee
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2015 (9) TMI 1682
Accrual of income - Disallowance of revenue subsidies and grants - short receipt of earlier years’ income that it was not expenditure of the year under appeal - AO asked the assessee to explain why the same should not be disallowed and added back to its total income - HELD THAT: - Assessee was entitled to get subsidy @3% from the state government that as per the agreement with WB it was decided that it would get higher subsidy i. e. @4. 5%, that subsequently the state government reduced the subsidy to 3% that the assessee had in pursuance of the agreement, showed subsidy at higher rate that after resolution of the state government it decided to reverse the entries of subsidy disclosed in the earlier years. We have perused the resolution and it clearly shows that the assessee was informed by the state government about reduction in subsidy during the year under consideration only. Therefore, if the reduced the unrealised subsidy-that was disclosed in the returns of incomes of earlier years in the books of accounts for the year under appeal-it was justified.
Income shown in the returns in anticipation and not realised finally cannot be taxed. Basic principle of taxation jurisprudence lays down that income which an assessee could have,but has not earned cannot be made taxable as income accrued to him. In other words what has really accrued to an assessee has to be found out and what has accrued must be considered from the point of view of real income taking the probability or improbability of realisation in a realistic manner. See MOTOR CREDIT CO. PVT. LIMITED [1980 (4) TMI 64 - MADRAS HIGH COURT]
In the case before us the assessee came to know about the fact-that the income accrued to it in pursuance of agreement entered in to with World Bank would not be received-during the year under appeal. Therefore in our opinion the FAA has rightly held that the assessee was entitled to show lesser receipt during the year. Confirming his order we decide first ground of appeal against the AO.
Addition being interest of borrowed capital - assessee claimed expenditure in respect of various capital projects undertaken by it and which were capitalised in the books of accounts that same expenditure was claimed u/s. 36(1)(iii) - Rejection of claim made by the assessee on the ground that that the same could be allowed only if it is payable in respect of the period after the assets have been put to use in terms of the provisions of Explanation 8 to section 43(1) of the Act, that the assessee could not follow two methods of accounting one for the purposes of its books and the other for the purposes of computing its total income that even if the interest is allowable it would be disallowed u/s. 43B as proof of payment has not been produced - HELD THAT:- This issue is directly covered by the judgment of the Hon’ble Apex court delivered in the case of Core Health Care Ltd. [2008 (2) TMI 8 - SUPREME COURT] unlike section 37 which expressly excludes an expense of a capital nature, section 36(1)(iii) emphasises the user of the capital and not the user of the asset which comes into existence as a result of the borrowed capital. The Legislature has therefore, made no distinction in section 36(1)(iii) between “capital borrowed for a revenue purpose” and “capital borrowed for a capital purpose”. An assessee is entitled to claim interest paid on borrowed capital provided that the capital is used for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed. “Actual cost” of an asset has no relevancy in relation to section 36(1)(iii) - The proviso inserted in section 36(1)(iii) by the Finance Act, 2003, with effect from April 1, 2004, will operate prospectively - Decided against revenue.
Disallowance of prior period expenses - HELD THAT:- We find that the AO had disallowed the claim of the assessee as it had not filed any evidence in that regard that the FAA had held that the assessee had itself disallowed two item that the expenditure of earlier years’ could be allowed in subsequent years. As fare as the suo motto disallowance is made we are of the opinion that the FAA was correct in holding that no addition could be made in that regard.
But for other expenses we have to consider the relevant facts. From the order of the FAA we do not find that such details were made available to him. Even if such details were filed he has not mentioned a single word about it. He has allowed the expenditure because law permits prior period expenses to be allowed. He totally forgot that the AO had made the disallowance because the claim made by the assessee was not substantiated by evidences. Before us,also no material was produced to prove that crystallization had actually taken place during the year. In our opinion,an assessee has to show the manner in which the earlier years’ expenditure was quantified in the year under appeal. Without these facts no expense can be allowed. Following particular guide line or rule governing a particular activity does not absolve the assessee from filing of documentary evidence in support of its claim for an expenditure- especially when the AO had directed it to file the same during the assessment proceedings. In the cases relied upon by the assessee the Hon’ble courts or the Tribunal had not dealt with the issue of crystallisation of expenses in a particular year. Thus, the facts are totally distinguishable. Considering the peculiar facts of the issue before us,we hold that the AO was justified in disallowing the of prior period expenses,because the assessee had failed to establish that these expenses actually crystallised during the year under consideration. Since it was following the mercantile system of accounting it had to establish that these liabilities pertaining to the previous year actually crystallised during the year under appeal. So,partly revering the order of the FAA we decide ground no. 3 in favour of the AO,in part.
Disallowance of electricity duty u/s 43B - HELD THAT:- Electricity duty is not being a sum payable by the assessee as a primary liability by way of tax, duty cess or fee, section 43B is not attracted to the assessee in respect of electricity duty collected by it for being passed on the State Govt. See KERALA STATE ELECTRICITY BOARD VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [2010 (11) TMI 127 - KERALA HIGH COURT] and M/S MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. AND VICA-VERSA [2015 (10) TMI 597 - ITAT MUMBAI].
Disallowance of loss suffered by the assessee on account of flood,cyclone/storm, theft etc. - HELD THAT:- . As far as loss of stock in concerned we are opinion that same is to be allowed as revenue expenditure. So the order of the FAA is reversed to that extent. For the balance amount we hold that the assets were forming part of block of assets. Therefore, depreciation should be allowed with regard to them. We find that issue of the claim of depreciation about assets of block has been decided in favour of the assessee by the decision of Tribunal relied upon by the assessee. Ground no. 2-3 are allowed in favour of the assessee in part.
Write off of intangible assets - AO disallowed the claim on the ground that the same was capital in nature - HELD THAT:- In the matter of Raychem RPG Ltd [2011 (7) TMI 953 - BOMBAY HIGH COURT] has held that of the software facilitated the assessee's trading operations or enabled the management to conduct the assessee's business more efficiently or more profitably then it was not in the nature of profit-making apparatus and that the expenditure was to be allowed. We find that lawyer’s fees has been held to allowable expenditure in the matter of Bombay Cycle and Motor agencies Ltd. [1979 (1) TMI 64 - BOMBAY HIGH COURT] . In that matter fees was paid to draw up lease agreement. We find that the FAA has followed the orders for AY. 99-00 and 2000-01 but has not distinguished the facts of the case of AY. 1997-98 and the facts of the matter under appeal. Order passed without giving any reason for not following the decision favouring the assessee comes under the category of non speaking order. The order of the FAA falls under that category hence cannot be endorsed. So, reversing his order we decide last ground in favour of the assessee.
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