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Income Tax - Case Laws
Showing 61 to 80 of 678 Records
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2016 (2) TMI 1262
Suppressed production - Assessment us 153A - high consumption of electricity in assessee’s case - HELD THAT:- AO has taken sufficient pains in referring the matter to the Chairman and Managing Director of Sponge Iron India Ltd., and also being examined by a Technical Officer of the said company, but there is a disclaimer by the company itself that those statements made by the Technical Officer is based on his personal experiences and cannot be used adversely. That it self takes away the basis of AO’s working. Not only that, AO himself accepts that assessee’s consumption of 1,260 KWH is on the basis of the production figures as shown in AY. 2001-02. He has taken that year as basis for arriving at the production in all the impugned assessment years including the later year of 2006-07 to 2008-09 (post search) on the same basis. He has not considered the objections raised by assessee at all. Moreover, as explained by assessee’s counsel and also considered the Ld. CIT(A), the various show cause notices issued by the Excise Department have been more or less settled in favour of assessee and no adverse view can be taken on the basis of the show cause notices. It has no bearing on the sales figures of assessee, as there is no case of Central Excise for any suppressed production. Even though, Ld. DR relied on the Central Excise case press note before us, it is a case by the Central Excise Department for suppressed production on a meticulous enquiry by the officer which was upheld by the Tribunal. In this case, in spite of conducting search and seizure operations, no incriminating material was found.
There is no scope for any addition being made in the present case. As rightly contended by the Ld. Counsel, Books of Accounts were not rejected. The addition made by the AO is purely on the basis of estimation of power consumption and supposedly suppressed production cannot be sustained in the absence of any evidence on record. Keeping these aspects in mind, we uphold the order of the Ld. CIT(A) and reject the Revenue’s grounds.
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2016 (2) TMI 1261
Bogus purchases of shares - Addition u/s 68 - HELD THAT:- The assessee has received the money on sale of shares as the said sale of shares is at the Stock Exchange, which fact is not in dispute. The Tribunal has sent the matter back to the file of AO to ascertain the date of purchase, so as to decide as to whether the assessee has earned short term capital gain or long term capital gain.
In the present proceedings, out of the two scripts, for one scrip, the Tribunal has already sent the matter to the AO and, the Hon’ble High Court [2014 (7) TMI 643 - BOMBAY HIGH COURT] has held finding of the Tribunal’s order dated 20/10/2010 in regular assessment proceeding would have direct relevance/ bearing on the Tribunal deciding the appeal arising from the assessment under section 143(3) and 153 A of the Act for the same assessment year and thus directed to recall the order of the Tribunal and directed to rehear the appeal.
The department has not challenged the order of the Tribunal [2010 (10) TMI 762 - ITAT, MUMBAI] before the High Court, the said order has become final,with regard to order under section 143(3) wherein the issue was restored to the AO. It may be noted that the assessee could not prove the purchases of penny stock shares of M/s Shalimar Agro Ltd. and M/s G.Tech Info Training Ltd., however, assessee submitted before us that the entire purchase and sale of shares are fully supported by necessary documents/evidences.
Therefore, we also restore the issue to the file of AO to avoid the conflicting assessment order in respect of same AY and direct the AO to verify and examine the actual date of purchase in both the cases and thereby to determine the short term capital gains or long term capital gains, or it may be added in income of the assessee u/s 68 on the basis of the alleged incriminating material found during the search as the case may be, and pass fresh assessment order after giving opportunity of being heard to the assessee and decide the same in accordance with law. - Appeal of assessee is allowed for statistical purposes.
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2016 (2) TMI 1260
Claim deduction u/s. 80IB(10) - allotment of multiple residential units to an individual - allottee have horizontally joined the flats on the respective floors - newly inserted provisions of section 80IB(10) were violated - HELD THAT:- In the facts and circumstances of the case and the CBDT Circular clarifying the applicability of the amended provisions, we are of the considered opinion that the provisions of Clauses (e) and (f) to section 80IB(10) of the Act cannot be applied to the transactions carried out before 19-08-2009 and accordingly deduction u/s. 80IB(10) cannot be denied to the assessee only for the reason that multiple residential units were allotted to an individual prior to the aforesaid date. Accordingly, we find merit in the appeal of the assessee and the same is allowed.
Prorata deduction u/s. 80IB(10) - contention of Revenue is that there is no concept of allowing proportionate deduction u/s. 80IB(10) to a housing project - HELD THAT:- No merit in this plea of the Revenue. The Tribunal in numerous cases has allowed proportionate deduction u/s. 80IB(10) on eligible units of a housing projects and the same have been upheld by the Hon'ble High Courts. Thus, the question whether proportionate deduction can be allowed u/s. 80IB(10) to the eligible units of a housing project is no more res-integra
In M/S. ARUN EXCELLO FOUNDATIONS PVT. LTD [2012 (12) TMI 415 - MADRAS HIGH COURT] has granted proportionate deduction to the housing project u/s. 80IB(10). The Hon'ble Madras High Court in the case of Viswas Promoters Private Limited Vs. ACIT [2012 (11) TMI 1117 - MADRAS HIGH COURT] has held that the assessee is entitled to claim proportionate relief on the units satisfying the extent of built up area - assessee is eligible to claim deduction in respect of the residential units on which the Commissioner of Income Tax (Appeals) has denied proportionate deduction - Decided in favour of assessee.
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2016 (2) TMI 1259
Cancelling registration u/s 12A - One of the principal grievances of the Appellant both before the ITAT and this Court is regarding violation of principles of natural justice and denial of sufficient opportunity to the Appellant in response to the show cause notice (‘SCN’) issued on 18th November 2011 - HELD THAT:- Revenue states that the Revenue would have no objection if the matter is remanded to the ITAT for fresh determination of all the pleas raised in the Assessee's appeal before the ITAT.
This Court sets aside the impugned order passed by the ITAT and restores it to the file of the ITAT for a fresh decision in accordance with law. It will be permissible for the Appellant as well as the Revenue to file their respective written notes of submissions in advance of the date of hearing of the appeal with reference to the grounds raised in the appeal and the documents already on record. In rendering a fresh decision in the appeal, the ITAT will be uninfluenced by its earlier which has been set aside by this order.
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2016 (2) TMI 1256
Entitled to the benefit u/s 10-B - department submits that most of the activities are "outsourced" and very small part of the manufacture was undertaken by the assessee - HC restored the order passed by the first appellate authority pertaining to the benefit of exemption under Section 10B - HELD THAT:- Delay condoned. Leave granted.
The respondent is at liberty to file counter affidavit or additional documents, if any, within six weeks from today.
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2016 (2) TMI 1253
Penalty u/s 271(1) (c) - addition of notional interest under section 36(1) (iii) - HELD THAT:- The impugned penalty has been levied on account of proportionate disallowance of the interest on amount advanced to the sister concern. It is also true that the disallowance was made on estimated basis. In that view of the matter, we hold that the CIT(Appeals) has correctly held that the assessee had not committed any default within the meaning of Sect ion 271(1) (c) of the Act. In the case of CIT Vs Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] has observed that, “Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars.” . Also “Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting the penalty under section 271(1) (c) of the Act.”
Addition of declared tax liability to the book profit under section 115JB - HELD THAT:- Assessee vehemently argued that clause (viii) was inserted in Explanation- I below Section 115JB(1) by Finance Act, 2008, but with retrospective effect from 01.04.2001 and so the assessee could not have known in the year in question that the deferred tax liability was not to be reduced for the purpose of calculation of book profit, which was credited to the Profit & Loss Account. In our opinion, there is merit in the above contention of assessee and therefore, we hold that the ld. CIT(Appeals) was fully justified in canceling the penalty on the addition of declared tax liability.
Also the tax as per MAT is more than the regular tax calculated by the Assessing Officer. Hence, the assessee company was assessed on the book profits under section 115JB of the Income Tax Act, 1961. Recently, the CBDT has issued circular No. F.279/Misc./140/2015/ITJ dated 31.12.2015, wherein i t is stated that when the tax payable on income computed under normal procedure is less than the tax payable under the deeming provisions of Sect ion 115JB of the Act, then penalty u/s 271(1) (c) of the Act could not be imposed with reference to additions /disallowances made under normal provisions. - Assessee appeal allowed.
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2016 (2) TMI 1252
Failure to deduct tax at source u/s 195 - assessee, a non-resident foreign company - another non-resident foreign company has engaged the assessee in the business of exploration/production of mineral oils, which did not deduct tax at source u/s 195 on payment to assessee - duty of the non-resident foreign company to deduct the tax at source - assessee is not liable to pay interest u/s 234B for default on part of that foreign company (employer) in deducting TDS - HELD THAT:- Delay condoned. Leave granted. Hearing expedited.
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2016 (2) TMI 1250
Reopening of assessment - unexplained cash deposits - GP estimation - addition on account of difference in gross profit - rejection of books of accounts - HELD THAT:- From the reasons recorded, we find that the case of the assessee was reopened on account of an AIR information regarding the factum that the assessee had deposited certain cash in his bank account with the Standard Chartered Bank, Jalandhar. The assessee during the course of assessment proceedings in the AY 2009-10 had admitted that part cash of deposit in the bank account represented unaccounted sales. The AO had observed that a part of cash deposit was also deposited in AY 2008-09. Therefore, he reopened the assessment for AY 2008-09 while finalising the assessment order for the AY 2009-10, the AO made trading addition of ₹ 2,55,92,341/- but did not make separate addition for cash deposited in the bank account, as he held that trading addition made by him covered the cash deposit in the bank.
AO did mention the fact of deposit of cash in the AY 2008-09 and he has held that since the assessee had already admitted that the source of deposit in the bank account is unaccounted sale proceeds, therefore, he made the trading addition ignoring cash deposit as he had already observed that the cash deposit represented unaccounted sale proceeds. No force in the arguments of the ld. counsel that since he had not made the addition of cash deposit, no other addition can be made. In view of the above, additional ground taken by the assessee is dismissed.
Rejection of books of account - We find that AO has nowhere rejected the books of accounts and in fact he has relied upon the same figures of opening stock, purchases, and closing stock to calculate cost of goods sold on accepted accounting principles and therefore contention of the ld. Counsel that income was estimated without rejection of books of accounts does not hold ground as income of assessee was not estimated and it was calculated only on the basis of same figures from Trading Account submitted by Assessee - CIT(A) has recorded a finding that books of accounts were rejected which is not a correct findings. However, since we have held that income was not just estimated but was calculated on the basis of figures submitted by assessee himself therefore, this ground of appeal has become a non-issue and therefore is not being adjudicated.
Assessee had not recorded a part of sale in the regular books of accounts as he has already admitted that part of sale proceeds were deposited in the bank. Therefore, the AO and the ld. CIT(A) has rightly not considered the figure of sales for arriving at the cost of goods sold. However, the authorities below have rightly estimated the calculation of cost of goods sold on the basis of figures provided by the assessee in his trading account. The authorities below completely verified the purchases after calling information u/s 133(6) from the various suppliers of the assessee and from where the assessee was getting discount also. By completing the assessment, the AO did not allow benefit of free distribution of stationery and books which the assessee had claimed and which was one of the reasons for low gross profit ratio. Before the ld. CIT(A) complete details alongwith confirmations from Principals of various Schools alongwith details of books distributed free of cost were filed which were forwarded to the AO also. CIT(A) after obtaining the remand report from the AO had found the claim of the assessee as genuine and therefore, he rightly allowed the relief to the assessee on account of free distribution of books/discount allowed by assessee. This is the only grievance raised by the Revenue but which in our opinion has been rightly allowed by ld. CIT(A) as AO did not raise any objections on merits during remand proceedings. In view of the above grounds of appeal taken by Revenue are dismissed.
CIT(A) calculated suppression in gross profits by applying the highest Gross Profit ratio - The contention of the ld. counsel that gross profit ratio with respect to sales should have been applied while working out suppression in the gross profit does not carry any force as the sale figure in the trading account itself was not reliable. Therefore, any working with respect to sale will not give fair results. Moreover, the argument of the ld. counsel that assessee be allowed relief on account of wastage etc. equivalent to 10% of purchase also do not carry any force in view of the fact that method of valuation of stock as adopted by the assessee and as noted in audit report is cost or market price, whichever is less. Therefore, the deterioration in value of stock if any on account of change in syllabus/wastage must already have been taken into account while valuing the stock at market prices as apparently market value of such stock would have been lower than the cost price. In view of the above, these two arguments of the ld. counsel are rejected and the formula adopted by the ld. CIT(A) is upheld subject to application of gross profit rate worked out by him - Appeals filed by assessee are partly allowed.
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2016 (2) TMI 1249
Territorial jurisdiction of HC to adjudicate the matter - transfer of cases u/s 127 - Unexplained peak credit - HELD THAT:- Since the initial process of assessment was started at Surat and the final assessment was framed by the Assessing Officer at Surat, this court lacks territorial jurisdiction to adjudicate the matter.
This court has no territorial jurisdiction to adjudicate upon the lis over an order passed by the Assessing Officer, i.e. Income Tax Officer, Ward 1(1), at Surat. Accordingly, the complete paper book of appeal including application for condonation of delay is returned to the appellant-revenue for filing before the competent court of jurisdiction in accordance with law. With regard to the cross objections, learned counsel for the respondent submits that in view of the return of the appeal, the cross objections have been rendered infructuous and be disposed of as such. Ordered accordingly.
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2016 (2) TMI 1248
Determination of house property income - rental income in respect of vacant period - Property was let out for a period of ten months out of twelve - rent received by the assessee together with the notional interest on the security deposit - HELD THAT:- Property was let out for a period of ten months and it remained vacant for a period of two months. No finding by the AO that the rent received by the assessee was less than the fair market value as per the requirement of sec. 23(1)(b) - AO has determined the rental income in respect of vacant period also and the same is against the provisions of section 23(1)(c).
Notional interest estimated by the AO on the security deposit received by the assessee, we notice that the AO has not made any enquiry to find out that the rent received by the assessee compels inclusion of the such notional income, which in turn could be determined only if it is shown that the rent received by the assessee together with the notional interest on the security deposit was less than the fair market value determined u/s 23(1)(a). See case of CIT Vs. Tip Top Typography [2014 (8) TMI 356 - BOMBAY HIGH COURT] . In view of the above, we do not find any infirmity in the decision rendered by Ld CIT(A) on this issue.
Addition made u/s 41(1) - CIT(A) has given categorical finding that liability of the assessee towards the deposits did not cease. CIT(A) has noticed that one of the parties, viz., ICICI Bank has initiated legal proceedings against the assessee. Hence, we are of the view that the CIT(A) was justified in cancelling the addition made u/s 41(1) of the Act.
Determination of the business income - CIT(A) has held that the assessee did not carry on any business and hence the question of setting off of current year as well as brought forward losses of the assessee does not arise. We notice that the said decision of the CIT(A) is in accordance with law. Hence, we do not find any reason to interfere with the order of the CIT(A) on this issue.
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2016 (2) TMI 1245
Penalty u/s 271(1)(c) - addition by invoking deemed provisions u/s 2(22)(e) - HELD THAT:- The Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products [2010 (3) TMI 80 - SUPREME COURT] has observed that “where there is no finding that any details supplied by the assessee in its return of income are found to be incorrect or erroneous or false, there is no question of invoking penalty u/s 271(1)(c) of the Act. Mere making a claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such as claim made in the return cannot amount to furnishing inaccurate particulars.
In the present case, the assessee filed all the details and he made claim i.e. the amount received by him is an advance. According to the assessing officer the amount received by the assessee is a deemed dividend by virtue of deemed provisions of law i.e. 2(22)(e) of the Act.
Thus, we find that the assessee neither concealed the income nor filed inaccurate particulars. The above judgement of the Hon’ble Supreme Court squarely applies to the facts of the case
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2016 (2) TMI 1244
Penalty u/s 271D - whether there is a reasonable cause for the alleged violation of section 269SS ? - HELD THAT:- The object of introducing section 269SS is to ensure that a tax payer is not allowed to give false explanation for his unaccounted money, or if he makes any false entry, he shall have no escape by giving false explanation to the same.
In the instant case, it is clear that the cash transactions of the assessee were with his close friend Shri Gajender Singh who is an agriculturist. The Hon'ble Supreme Court in the case of Asst. Director of Inspection (Investigation) Vs. Kum. A.B. Shanthi [2002 (5) TMI 4 - SUPREME COURT] has clearly laid down that if there is a genuine and bonafide transactions and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bonafide reason, the authority vested with the power to impose penalty has a discretionary power. No penalty u/s 271D of the Act can be validly levied in this case. Accordingly, cancel the impugned penalty. - Decided in favour of assessee.
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2016 (2) TMI 1243
Reopening of assessment u/s 148 - HELD THAT:- We note that in the operative paragraph the AO has held that “since the expenditure of ₹ 2,47,468/- were incurred by the assessee through credit card remained unexplained, have reason to believe that income to the tune of ₹ 2,47,468/- has escaped assessment”.
This conclusion of the AO is factually baseless as this issue was posed to the assessee by DCIT, Banglore replying to his notices and the DR has into disputed that copies of the said notices and reply was filed before the AO on the assessment record. In this situation it was on the AO to peruse the relevant assessment record of AY 2005-06 which forming reason to believe and thus it is safely presumed that the AO initiated reassessment proceedings u/s 147 and issued notice u/s 148 of the Act without application of mind working in a mechanical manner and thus the same are not sustainable in the facts and on law.
Respectfully following the dicta laid down by jurisdictional High Court in the case of CIT vs. G & G Pharma [2015 (10) TMI 754 - DELHI HIGH COURT] we are inclined to hold that the AO issued notice u/s 148 of Act on the wrong and invalid assumption of Jurisdictional and all subsequent proceedings is pursuance thereto can’t be held as sustainable and valid hence, the same deserve to be quashed and we quash the same. It is ordered accordingly. Accordingly, legal ground no. 1 & 2 of the assessee are allowed.
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2016 (2) TMI 1242
Addition u/s 68 - Addition to share application money as unexplained cash credits - Addition of commission paid from undisclosed sources - HELD THAT:- We are of the view that AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law.
AO has mechanically issued notice u/s. 148 on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed.
Similar and identical to the issue involved in the present appeal and is squarely covered by the aforesaid decisions in the case of G&G Pharma [2015 (10) TMI 754 - DELHI HIGH COURT]. Legal issue in dispute in favor of the Assessee and against the Revenue and accordingly quash the reassessment proceedings. Since we have quashed the reassessment proceedings, as aforesaid, the other issues are not being dealt with. - Appeal filed by the Revenue stand dismissed.
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2016 (2) TMI 1240
Reopening of assessment - notice for reopening on the ground that AO had relied on the show cause notice issued by the Excise department to form a reason to believe that income chargeable to tax had escaped assessment - HELD THAT:- Tax Appeals admitted on substantial question of law - Whether the ITAT is justified in law as well as on facts in holding that reopening of the assessment under section 147 and 148 of the Act is bad in law and cannot be sustained and thereby further holding that the reassessment orders are required to be cancelled?
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2016 (2) TMI 1239
Levy of interest u/s 201(1A) - calculation of amount - whether the term ‘month’ could be given ordinary sense, i.e., “a period of 30 days” or whether it could be treated as “British Calendar Month” as per General Clauses Act? - CIT(A) directed the Assessing Officer to work out interest by adopting period of 30 days as one month - HELD THAT:- This issue is squarely covered in favour of the assessee by the case of CIT vs. Arvind Mills Ltd, [2011 (9) TMI 244 - GUJARAT HIGH COURT] as held that for the purposes of Section 244A, term ‘month’ must be given ordinary sense of term, i.e., 30 days of period and not British calendar month as defined under section 3(35) of General Clauses Act.
Similar view has been taken in the case of Oil & Natural Gas Commission vs. ACIT (TDS), Surat, [2015 (10) TMI 1006 - ITAT AHMEDABAD] wherein it was held that “levy of interest u/s 201(1A) is compensatory in nature and thus gap of time between point of time when tax ought to have been deducted at sources vis-à-vis point of time when tax was actually deducted are to be seen and it is in this context that connotation of expression ‘month’ is to be examined.” In view of aforesaid decisions, we do not find any infirmity in the order of the CIT(A) which is hereby upheld.
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2016 (2) TMI 1237
Rectification u/s 154 - netting of interest income against interest payment - assessment was completed u/s 143(3) and books of account were rejected by the AO and a flat rate of 8% of total receipts as net profit was applied - HELD THAT:- We find that the assessment in this case was completed by applying net profit rate of 8% of the gross receipts and the books of account were rejected during the assessment proceedings and, therefore, the same books of account cannot be relied upon for carrying out mistake u/s 154 of the Act. Once the books of account has been rejected, the AO cannot fall back upon the same books for making addition on the interest accrued on the FDRs reflected in the books of account.
Once the books of account were rejected, no separate addition on account of interest earned on FDRs, which was made for business purposes was maintainable, therefore, we are in agreement with arguments of the ld. AR. Moreover, we find that for invoking the provisions of section 154 the mistake has to be apparent from the record and rectification is not possible if the question is debatable. This has been held by the Hon’ble Supreme Court, in the case of CIT vs. Hero Cycles Pvt. Limited, [1997 (8) TMI 6 - SUPREME COURT]. Also further held that for invoking the provisions of section 154, the point should have been examined on facts and in law.
The Hon’ble Kerala High Court in the case of Satish Chandra vs. CIT [1998 (7) TMI 73 - KARNATAKA HIGH COURT] has held that where the point is debatable, rectification was not valid.
Depreciation and interest as allowable deduction from deductions from the net profits - total income is calculated by applying net profit rate - HELD THAT:- The matter is no longer res integra. The Division Benches of this Court in Commissioner of Income Tax vs. Chopra Bros. India (P) Limited [2001 (9) TMI 90 - PUNJAB AND HARYANA HIGH COURT] and Girdhari Lal vs. Commissioner of Income Tax [2001 (9) TMI 28 - PUNJAB AND HARYANA HIGH COURT] while considering the aforesaid issue, in view of the circular issued by the Board, had held in a case where the assessee makes a specific claim for depreciation and gives the information as required under section 32 of the Act, the assessing officer is bound to take the claim of the assessee into consideration. Following the aforesaid judgments, it is held that the assessee is entitled to deduction on account of depreciation from receipts while applying net profit rate on the gross receipts
Allowability of salary and interest to the partners - Allow payment of salary and interest out of the estimated income subject to the condition that the income thus, arrived at should not fall below the returned income.
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2016 (2) TMI 1236
Addition made towards entertainment expenses - assessee has claimed deduction under this head is allowable expenditure or not after deletion of section 37(2) - HELD THAT:- Assessee has submitted that the expenditure was incurred through its 238 branches, Central Office and Division Offices for the whole year and requested to delete the disallowance made by the Assessing Officer. After considering the submissions of the assessee, CIT(A) has observed that the Assessing Officer has reasonably estimated the expenditure to the tune of 5% only as not utilized wholly and exclusively for the purposes of business and confirmed disallowance - no infirmity in the order of the authorities below, which calls for our interference.
Addition made towards Fringe Benefit Tax - contribution made to superannuation Fund - HELD THAT:- The assessee company has made a provision for contribution to superannuation fund and the same was paid in the next Financial year. There is no dispute about the provision and the payment and there is no escapement of value and same was subject to fringe benefit tax. Similar issue was considered by the Co-ordinate Bench in the case of M/s. Bharat Overseas Bank [2013 (2) TMI 881 - ITAT CHENNAI] wherein held that provision of contribution to the approved superannuation fund was not subject to charging of FBT. Accordingly, we direct the Assessing Officer to delete the addition. - Decided in favour of assessee.
Disallowance u/s 14 r.w.s. Rule 8D - HELD THAT:- In the present case, the assessee has not admitted any expenditure to earn the exempt income. Further, it was the submission of the assessee that the assessee bank has enormous own funds as well as interest free funds for purchasing tax exempt securities [shares and mutual funds]. Be as it may, but some expenditure in the form of travel, telephone, postage, stationery and manpower might have been involved in earning the exempt income. Moreover, we are of the opinion that the investments would have definitely involved certain administrative and establishment works have to be undertaken which entails definite costs. Hence, the contention of the assessee that no expenses have been incurred to earn the exempt income is not acceptable. In view of the notification of Rule 8D and applicable from the assessment year 2008-09, the AO should have worked out the expenses under Rule 8D(2)(iii) instead of disallowing 2% of exempt income. Accordingly, we set aside the orders of authorities below and direct the Assessing Officer to work out the disallowance under section 14A r.w. Rule 8D. Thus, the ground raised by the assessee is partly allowed for statistical purposes.
Addition on account of interest on non-performing assets - AO observed that in view of the RBI guidelines, the interest need to be offered for tax on accrual basis by the banks in respect of non-performing assets, which are more than 90 days old NPAs, but have not become ‘sticky account’ under Rule 6EA r.w.s. 43D - HELD THAT:- On second round of litigation, the ld. CIT(A) by following the decision in the case of United Commercial Bank Ltd. v. CIT [1999 (5) TMI 3 - Supreme Court] as held that “interest to a suspense account should not be taxed on accrual basis”, deleted the addition in respect of interest on NPAs. Against the above order of the CIT(A), though the Revenue has preferred appeals for the assessment years 2007-08 and 2008-09, the Revenue, while raising other grounds, has not raised the ground with regard to the deletion of addition in respect of interest on NPAs by the ld. CIT(A). Under the above facts and circumstances, we delete the addition made on account of interest on non-performing assets. Thus, the ground raised by the assessee is allowed.
Disallowance of deduction under section 36(1)(viii) - AO has not accepted the revised claim - HELD THAT:- Profits derived from long-term finance only can be considered for the purpose of allowing deduction under section 36(1)(viii) of the Act and hence these receipts as interest on deposits, lease rentals, consultancy and other professional charges, legal fees, guarantee commission, appraisal fees, financial changes, interest on guarantee commission and miscellaneous income, etc., are not in the nature of income from long-term finance and hence these receipts cannot be included in total income for the purpose of computing deduction allowable to the assessee under section 36(1)(viii) - These receipts can be attributed to the income of business of providing long-term finance but it cannot be said that these are income derived from the business of providing long-term finance because the business of providing long-term finances, can be carried out even without these activities such as consultancy, legal service, appraisal, etc., in leasing there is no finance and hence lease rental is not income from providing long-term finance. Other interests and financial charges are not shown to be out of providing long-term finance and hence not eligible for deduction under section 36(1)(viii).
We set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to decide the issue afresh - Ground raised by the assessee is allowed for statistical purposes.
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2016 (2) TMI 1234
TP Adjustment - classification of the goods as slow moving or as old stock - ALP of exports of goods - TPO clearly held that the assessee company could not produce anything on record which could substantiate that the goods so exported were part of the slow moving old goods - Selection of MAM - as per CIT-A a fit case to use CUP as a most appropriate method HELD THAT:- The contention of the DR that the assessee instead of selling old stock through AE has directly sold the same to the third party is not correct. The CIT(A) gave finding after considering all the aspects to that effect. It can be found that the said stock was of old stock and the sale was also through the AE as well. The goods sold are exactly the same, as the goods were dispatched from the warehouse of the assessee to the ultimate buyer who is an independent entity. The time gap between the sale of the assessee and the sale of the AE are negligible because it has happened within the same month. The gross profit earned by the assessee is in India. TPO had not disputed the classification of the goods as slow moving or as old stock. Therefore, the CIT(A) has rightly held in favour of the assessee.
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2016 (2) TMI 1232
Revision u/s 263 - difference of contract receipt as per TDS certificate and as per profit and loss account of the assessee - AO has passed the order u/s. 143(3) - case of the assessee was selected for scrutiny and notice u/s. 142(1) was issued to the assessee and the assessee was specifically asked to reconcile contract receipts shown in its books of account vis-`-vis that when in 26AS - HELD THAT:- We are of the view that in the instant case, CIT's revisional power is uncalled for and unjustified. We find that it is in the nature of reviewing the fishing inquiry.
CIT proceeded on the assumption that no such information was furnished to him at the time of assessment order. Commissioner has mentioned that the AO has not examined the profit and loss account assuming so, this made the order erroneous, but it is not prejudicial to the interests of revenue. In the instant case, the AO has verified the reconciliation of statements and it is mentioned in paragraph 4 of the assessment order. AO has taken one of the possible views.
Therefore, we allow the appeal of the assessee and we hold that the AO has applied his mind. Therefore, the impugned assessment order cannot be leveled as erroneous and prejudicial to the interests of the revenue under the ambit of provisions of Section 263 . The assessee's case is squarely covered by the decision of Malabar Industrial Co. Ltd. vs. CIT [2000 (2) TMI 10 - SUPREME COURT] - Decided in favour of assessee.
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