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Income Tax - Case Laws
Showing 41 to 60 of 803 Records
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2016 (8) TMI 1532
Exemption u/s 11 - assessability of Voluntary Corpus Donations received by the assessee during the year under consideration - registration under section 12A - HELD THAT:- The year under appeal is assessment year 2011-12, wherein the order of assessment under section 143(3) of the Act was passed on 16.12.2013 i.e. after the date of filing the application for registration under section 12A of the Act on 12.11.2013. On the date when the application for registration was moved u/s 12A of the Act, the assessment proceedings relating to instant assessment year were pending. Admittedly, the objects and activities of trust remains the same i.e. running of an old age home and there is no change in that.
Whether the assessee since has been granted registration under section 12A of the Act in lieu of application moved on 12.11.2013, on which date the assessment proceedings were pending, then whether the assessee is entitled to the claim of exemption under sections 11 and 12 of the Act? - The answer to the same is yes, in view of proviso inserted under section 12A(2) of the Act. The proviso very clearly provides that in case the assessment proceedings were pending and the assessee has been granted registration under section 12A of the Act, then the provisions of sections 11 and 12 of the Act would apply to such income derived from any property under the trust, of any assessment year, for which the assessment proceedings were pending. Applying the said ratio to the facts of the present case, we hold that the assessee is entitled to the aforesaid claim.
We find support from the ratios laid down by Kolkata Bench of Tribunal in Sree Sree Ramkrishna Samity Vs. DCIT [2015 (11) TMI 119 - ITAT KOLKATA] and Shree Bhanushali Mitra Mandal Trust Vs. ITO [2016 (4) TMI 578 - ITAT AHMEDABAD]
Departmental Representative for the Revenue on the other hand, has placed reliance on the ratio laid down by Cochin Bench of Tribunal in Al-Madeena Charitable Trust Vs. ACIT [1999 (11) TMI 104 - ITAT COCHIN] wherein the said trust was engaged in the business of printing newspaper and it was held that it had not carried out any charitable activities and hence, it was held to be not entitled to the benefit of section 11 of the Act in respect of income as well as its voluntary contributions received towards corpus - in the facts of the present case, the assessee has received the corpus donations and has utilized the amount for purchase of land to the extent which has been referred to by the CIT(A) and in the totality of the above said facts and circumstances of the case, we find no merit in the orders passed by the authorities below and reversing the same, we hold that the assessee is entitled to the claim of deduction under sections 11 and 12 of the Act. The grounds of appeal raised by the assessee are thus, allowed.
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2016 (8) TMI 1531
Condonation of delay - a delay of 338 days in filing these appeals - assessee has explained that he is busy in looking after the agriculture activity as well as was concentrating the Board Examination of his child - HELD THAT:- As far as the reasons explained for monitoring the agriculture activity is concerned it is pertinent to note that the assessee is doing the business of coffee commission agent in the name and style of M/s. JNC Coffee Links and has explained the source of deposits in the Bank as the amount received from the purchasers of the Coffee and it was used for payment to seller of the coffee. Once the assessee is claiming his main and dominant activity as business of commission agent of coffee then the explanation for delay due to looking after agriculture activity is contrary to the explanation furnished by the assessee for the amount deposited in the Bank account.
As regards the time devoted to the study of child for preparing the Board Examination, it is manifest from the record that the assessee has not explained when did the Board Examination of his child take place as there is an inordinate delay of 338 days and the assessee has filed these appeals after around one year from the date of receipt of the order. Therefore if the Board Examination was over in the academic year 2014-15, then after the academic year was over this explanation of the assessee is bogus and vague even if he academic year of the child was 2015-16 then the delay upto 22.4.2016 for almost one year cannot be attributed for preparation of the Board Examination.
It is not a case of an ordinary delay of a month or a couple of months so that the reason explained by the assessee can be considered as a reasonable cause. Accordingly, in the facts and circumstances of the case when the assessee has given a vague explanation for cause of delay without specifying the definite cause or time period during which the assessee was constrained to devote his time in those activities as stated in the application for condonation of delay then the reasons explained by the assessee cannot be accepted as reasonable cause being contrary to the facts on record. Appeals of the assessee are dismissed.
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2016 (8) TMI 1530
Disallowance u/s 14A - HELD THAT:- As before us the stand of the assessee is that so far as assessment year 2004-05 is concerned it is squarely covered by the decision from Hon’ble Bombay High Court in CIT vs. India Advantage Securities Ltd. [2012 (11) TMI 458 - ITAT, MUMBAI]. Since, the assessee received dividend on shares and mutual fund units acquired and held as stock in trade and since the assessee itself disallowed a sum suo moto as expenditure attributable to the earning income.
The issue is squarely covered by the decision from Hon'ble jurisdictional High Court in CIT vs India Advantage Securities Ltd.(supra), therefore, the disallowance u/s 14A r.w.r 8D is not required to be made and therefore, cannot be sustained in view of the foregoing decision. Accordingly, the order of the Ld. Commissioner of Income Tax (Appeal) is set-aside and Ld. Assessing Officer is directed to delete the addition made u/s 14A r.w.r 8D of the rules. Appeals of the assessee are allowed.
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2016 (8) TMI 1528
LTCG computation - Reference to DVO for ascertaining the fair market value as on 1.4.1981 - whether CIT(A) has erred in law and on facts on reducing the LTCG by rejecting the valuation report of the Departmental Valuation Cell and adopting the Valuation Report of the Regd. Valuer? - HELD THAT:- We find that the issue is squarely covered by the case of GAURANGINIBEN S. SHODHAN INDL. [2014 (2) TMI 78 - GUJARAT HIGH COURT] prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown as on 1.4.1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation as on 1.4.1981. Thus we confirm the relief granted by the learned CIT(A) and decline to interfere in the matter. - Decided against revenue.
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2016 (8) TMI 1526
Valuation of closing stock - assessee was valuing the closing stock at the cost or realizable value whichever is less - HELD THAT:- This Bench of the Tribunal in the case of M/s Rm.K. Visvanatha Pillai & Sons [2016 (6) TMI 1415 - ITAT CHENNAI] has examined this issue elaborately and found that the assessee was valuing the closing stock at the cost or realizable value whichever is less regularly. If the stock was remained unsold for one year, the assessee estimated the realizable value at 25% of the cost and the if the same was remained unsold for two years, the asse estimated the realizable value at 50% of the cost. In case the stock remained unsold for more than three years, the assessee estimated the same at ₹ 100/- or the net realizable value whichever is less. It is not in dispute that the assessee is engaged in the business of readymade garments and textiles. Admittedly, fashion in textile is changing day by day in the textile industry and the assessee is required to keep the stock in tune with the changing fashion and technology. If the fashion is changed old fashion may not be liked by the customers who are coming to the showroom.
Tribunal disbelieved the claim of the assessee on the ground that the reduction of value method was not followed year by year. This Tribunal found that there is no consistency method followed by the assessee for valuing the closing stock. This Tribunal has not taken into consideration the change in fashion and technology in the textile industry. The method of valuation adopted by the assessee continuously for years together was also not brought to the notice of the Bench. When the nature of business and change of fashion were not considered, this Tribunal is of the considered opinion that the finding of the Tribunal in the case of Shri N. Viswanath [2015 (9) TMI 907 - ITAT CHENNAI] may not be applicable to the facts of this case.
In the case of M/s Rm. K. Visvanatha Pillai & Sons, this Tribunal examined the facts elaborately with regard to the nature of the business and the method of accounting followed by the assessee and found that the assessee has rightly valued the closing stock. Therefore, by following the order of this Tribunal in the case of M/s Rm. K.Visvanatha Pillai & Sons(supra), the addition made by the Assessing Officer towards valuation of closing stock is deleted.
Disallowance of contribution towards LIC gratuity fund - HELD THAT:- The contribution was made to gratuity fund of LIC. It is not in dispute that the amount paid cannot be got back by the assessee.The money has gone out of the hands irrecoverably. Therefore, as held by the Apex Court in the case of Textool Company Ltd. [2009 (9) TMI 66 - SUPREME COURT] the claim made by the assessee is allowable since admittedly, the payment was made by the assessee. Therefore, the orders of the lower authorities are set aside and the addition made by the Assessing Officer is deleted.
Disallowance of depreciation on additions to fixed assets - HELD THAT:- When the assessee filed the details of the plant and machinery, this Tribunal is of the considered opinion that there is no reason for disallowing the claim of depreciation. It is not in dispute that the plant and machinery, air conditioner, electrical equipment are eligible for depreciation. The assessee claimed depreciation only @ 7.5%. The rate of depreciation claimed by the assessee is not in dispute. In those circumstances, disallowing the claim of the assessee is not justified. Accordingly, the orders of the lower authorities are set aside and the addition made by the Assessing Officer is deleted.
Addition on account of purchases included in closing stock but not accounted - assessee has not received the original invoices from the vendors. Therefore, the same was not accounted in the purchase account as on 31.3.2008. After receipt of invoices from the vendors, the same were accounted in the subsequent year - When the assessee came to know this defect, a revised return was filed immediately including the entire purchases made in the assessment year 2008-09. Consequently, the purchases accounted for assessment year 2009-10 were also reduced - HELD THAT:- When the assessee has entered the purchases in the books of account and placed material evidence for receipt of goods physically, this Tribunal is of the considered opinion that the Assessing Officer is not justified in rejecting the claim of the assessee on the basis of the gross profit ratio. Gross profit cannot be a fixed figure for every year. The gross profit may vary depending upon various circumstances. When the assessee was maintaining books of account, this Tribunal is of the considered opinion that the gross profit reflected in the books of account has to be taken into consideration. If the gross profit goes down after considering the purchases to the extent of ₹ 1,11,30,290/-, this Tribunal is of the considered opinion that merely because the gross profit gone down, that cannot be a reason for making the addition. It is normal practice in textile business that the goods will be dispatched immediately on placing orders and the invoices will be set subsequently.
When the assessee received the invoices subsequently, the same ought to have been entered in the books of account during the year under consideration. Unfortunately, that was not done. However, after realizing the mistake, the assessee has recorded the same in the books of account and filed a revised return. Consequently, the assessee has also made a claim in assessment year 2009-10 to reduce the so called purchases which were wrongly entered. When this is the position, this Tribunal is of the considered opinion that the Assessing Officer ought to have accepted the revised return filed by the assessee. In view of the above, we are unable to uphold he orders of the authorities below. Accordingly, the orders of the lower authorities are set aside and the addition made by the Assessing Officer is deleted.
Disallowance of lease commitment charges and donations - HELD THAT:- As relying on case of M/s Rm.K. Visvanatha Pillai & Sons [2016 (6) TMI 1415 - ITAT CHENNAI] both lease commitment charges and donations is to be allowed as revenue expenditure.
Addition on account of stock discrepancy - HELD THAT:- AO appears to have found that the items could not be verified due to various factors but has not pointed out any single fact which prevented him from verifying or tracking the system to find out how the stock purchased by the assessee travelled from the date of purchase till the date of sale. Moreover the unsold stock for more than one year, two years and three years as the case may be, is available in the stock which was not reflected in the physical inventory taken by the Revenue authorities. The Assessing Officer himself admits that he could not identify the stock with reference to by number provided by the assessee. If the Assessing Officer could not identify the stock with reference to by-number allotted by the assessee, this Tribunal is of the considered opinion that the inventory taken by the Revenue may not reflect the correct position of closing stock.
When the assessee is maintaining stocks systematically by allocating by-number and also providing a system of tracking through the computer, this Tribunal is of the considered opinion that the authorities below ought to have examined the method adopted by the assessee in a detailed manner and an opportunity shall be given to the assessee to explain how the method works. However, without considering all these factors, the Assessing Officer simply came to the conclusion that there was a discrepancy. This Tribunal is of the considered opinion that the discrepancy was due to stocks remain unsold for more than one year and the assessee valued the same at the net realizable value or cost whichever is less, therefore, the CIT(A) is not justified in confirming the addition made by the Assessing Officer.
Disallowance of expenses towards renovation of the building - assessee incurred the expenditure for interior decoration, temporary wooden partition, flooring etc. - HELD THAT:- On identical set of facts, in the case of assessee’s group concern, M/s Rm. K. Visvanatha Pillai & Sons [2016 (6) TMI 1415 - ITAT CHENNAI] found that the similar expenditure is revenue in nature. Assessee appeal allowed.
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2016 (8) TMI 1525
Depreciation on Patent expenses which were capitalised in the books by the appellant - HELD THAT:- As pursuant to the recharacterisation of the patent expenses as “Capital expenditure” by the A.O, the assessee company as a result thereof was entitled towards depreciation on the “Block of assets- Patents”, i.e not only as regards the capitalized value of the “Patent expenses” pertaining to the year under consideration, but also as on the Opening W.D.V of those pertaining to the preceding years, to the extent the same had been capitalised in the said preceding years. We thus restore the issue to the file of the A.O with a direction that the entitlement of the assessee company towards deprecation on the capitalized value of the “Patent expenses” be computed
Summarily acceptance of the Opening W.D.V of “Patent expenses” by the A.O while framing the assessment in the hands of the assessee company for A.Y. 2009-10, does not inspire much confidence, therefore as a word of caution the A.O is directed to work out the Op. W.D.V of the “Block-Patent expenses” as on 01/04/2009 after making necessary verifications to his satisfaction, and only on being convinced that no part of the said “Patent expenses” had in the said preceding years been allowed as a “revenue expenditure” in the hands of the assessee company, therein rework the entitlement of the assessee company towards deprecation on “Block of assets- Patent expenses” - Assessee ground allowed for statistical purposes.
Disallowance of deduction U/s 35(2AB) - entitlement of the assessee company as regards weighted deduction u/s 35(2AB) - HELD THAT:- As find ourselves to be in agreement with the Ld. A.R and are of the considered view that as the aforesaid expenses had been incurred by the assessee company on the scientific research pertaining to its business of manufacturing pharmaceutical formulations (not being expenditure in the nature of cost of any land or building) on in-house research and development facility approved by the prescribed authority, therefore the same in the absence of any fact which could go to prove that the said claim of expenditure by the assessee company on rent and repairs does not pertain to the R &D premises, or the professional and legal charges has no nexus with the scientific research of the assessee company, thus stands duly eligible for claim of weighted deduction u/s 35(2AB) of the “Act”. Thus in light of our aforesaid observations, the disallowance
Addition on account of bogus purchases - HELD THAT:- As submitted by the Ld. A.R that the purchases of ₹ 13,04,375/- (supra) made by the assessee company towards purchase of “fixed assets”, inadvertently had been capitalized under the head “Factory building”, in support of which contention the Ld. A.R has taken us through the relevant extracts of SAP placed on record, wherein the said transactions as claimed hereinabove, stood reflected. We have perused the facts of the case and the material furnished before us, and are of the considered opinion that the lower authorities had hushed through the matter and on the basis of premature findings therein made an addition of ₹ 13,04,375/-(supra) in the hands of the assessee company. Thus taking an overall view of the issue under consideration, we in all fairness herein restore the matter to the file of the A.O for verifying the aforesaid claim of the assessee company that the purchases under consideration had been capitalized under the head “factory building”, and in case if the said contention of the assessee company is found to be in order, therein direct the A.O to restrict the addition upto the amount of the corresponding depreciation so claimed on the said capitalized value.
Appeal of the assessee company is partly allowed.
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2016 (8) TMI 1524
Depreciation on toll road - whether ITAT was justified in deleting addition on account of depreciation on toll road ? - HELD THAT:- Leave granted.
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2016 (8) TMI 1523
Deduction u/s 80 IA - Unabsorbed depreciation of the earlier years before the first year or claim, which has already been absorbed, should not be notionally carried forward and taken into consideration for computation of deduction u/s.80 IA - HELD THAT:- Similar to the facts and circumstances of the case, while adverting to the substantial questions of law raised and after considering the judgment of the Hon'ble Apex Court in Liberty India vs. CIT [2009 (8) TMI 63 - SUPREME COURT] and the judgment of the Rajasthan High Court in CIT vs. Mewar Oil & General Mills Ltd. [2003 (10) TMI 12 - RAJASTHAN HIGH COURT], a Hon'ble Division Bench of this Court in Velayudhaswamy Spinning Mills Pvt. Ltd.'s case [2010 (3) TMI 860 - MADRAS HIGH COURT]held that once the losses and other deductions are set off against the income of the assessee in the previous year, it should not be re-opened again, for the purpose of computation of current year income, under Sections 80-I and 80-IA of the Act. Questions of law raised are answered against the Revenue and in favour of the assessee and the instant appeal deserves to be dismissed.
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2016 (8) TMI 1522
Disallowance of interest expenditure - assessee has not carried out any business activity and the payment of interest on the loan taken for paying of earlier loan is thus not for the purposes of business - HELD THAT:- AO has accepted that the loans old or new have been taken for the purpose of business. This fact has neither been denied nor contradicted anywhere in the assessment order. Since this is an established fact that the real estate business is always carried out on the basis of loans from various agencies and their utilization is exclusively to expand the business without in any way leading to the fact that any stoppage or a lull period would hamper the construction work. Even if, for argument sake, the findings of the Ld. AO are considered that there was no business due to stay order of the court, thus it cannot be said that the repair works, construction of passage and other allied and facility items did not continue during this period also as the stay order was purely for constructing new units and extension of the existing units.
It is proved that business of the assessee was not discontinued rather temporarily stayed under the order of the Hon’ble Court which has been revived now by vacation of stay with effect from settlement reached between parties.
The suspension or discontinuation of one of the activities of business out of several such activities does not disentitle the taxpayer from deduction of interest or other expenditure incidental to the business. All the business activities taken together constitutes the business undertaking as one and so long the same remains under the common management with common resource employment and common establishment and control it cannot be said that the business activity is separate and distinct. The appellant continued its business in the relevant assessment year and the business was neither closed nor discontinued nor it had ever ceased to be functional during the previous year relevant to the assessment year under appeal.
Thus we direct the AO to delete the disallowance of interest expenditure. Thus the appeal of the assessee is allowed.
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2016 (8) TMI 1521
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Assessee made certain investment with an object of acquiring controlling stake in a group concern and not for earning any income out of investment, Assessing Officer was not justified in invoking provisions of section 14A, read with Rule 8D in order to disallow a part of incidental dividend income earned on said investment.
Similarly in Rainy Investments Pvt. Ltd. [2013 (1) TMI 961 - ITAT MUMBAI] has held that share application money cannot be regarded as an investment in shares, or an asset yielding tax-free income, and neither is it capable of yielding any tax-free income, thus no disallowance can be made u/s 14A. In the present case as per the working of the average value of tax free investment under rule 8D submitted by the assessee, the assessee had made investment of ₹ 13,73,00,000/-. Assessing Officer should not have included the share application money while working out the average value of investment under Rule 8D. Therefore, the Ld. CIT(A) has rightly issued the direction to the A.O to exclude share application money of ₹ 13,73,00,000/- for the purpose of computation of disallowance of u/s 14A.
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2016 (8) TMI 1519
Reopening of assessment - Bogus purchases - information received from the office of the DDIT (Inv) Unit II-1, that the assessee had shown bogus/suspicious purchases from various vendors, who were listed in the web site of sales tax department as hawala dealers - CIT-A upheld the addition of 6% of alleged bogus purchases - HELD THAT:- We found that on the basis of information by the sales tax department regarding bogus suppliers and also keeping in view the reasons recorded by AO for reopening, we do not find any infirmity in the action of AO for reopening of the completed assessment.
Assessee being a trading concern merely sells purchased items at a small mark up to it’s purchases without any further processing. AO has not questioned sales made by the assessee. Most of the sales were made to a government entity. AO has not doubted sales undertaken by the assessee nor rejected books of accounts. However, no comparative chart was placed on record by assessee to substantiate the contention that assessee had earned same margin of profit out of sales of goods purchased from hawala dealers vis-a-vis other regular dealers.
Keeping in view the GP rate and net profit rate shown by the assessee in earlier years vis-a-vis profit rate generally shown by other assessee engaged in similar trade, and also keeping in view the advantage obtained by assessee through purchases from hawala dealer we modify the orders passed by lower authorities and restrict the addition to the extent of 3% of the alleged bogus purchases in place of 10% upheld by AO and 6% upheld by the CIT(A). - Decided partly in favour of assessee.
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2016 (8) TMI 1518
Validity of reopening of assessment - claim u/s.10B was disallowed - main contention of the ld.A.R that the reopening is invalid cannot be accepted because there was no scrutiny assessment earlier for this assessment year and also there is no failure on the part of the assessee to disclose the material facts - A.R pleaded that the re-opening of assessment is without jurisdiction and that fresh application of mind by the AO on similar facts would tantamount to review of own decision and that the amended section u/s.147 does not authorize it - HELD THAT:- AO had jurisdiction to issue notice u/s.148 for bringing to tax income escaping assessment in an intimation under sec.143(1)(a) on the ground that the claim of deduction by the assessee was not acceptable as the conditions for allowance not fulfilled. Failure to take steps u/s.143(3) of the Act will not render the AO powerless to initiate reassessment proceedings when intimation u/s.143(1) has been issued. Being so, we do not find any infirmity in the reopening of assessment for the A.Y. 2006-07. This ground of appeal of the assessee is dismissed.
Deduction u/s.10B - manufacturing activities under section 2(29BA) - as assessee has not discharged the onus of proving that the undertaking was set up without transferring any machinery used for any other purpose earlier Revenue has denied the deduction claimed u/s.10B - HELD THAT:- Assessee-company has not undertaken any manufacturing activity. The assessee has not manufactured any new article or thing distinct from the original raw material. The final product i.e., article or thing cannot be called by any other name than the original name. The assessee has purchased live crab and finally sold the crab in the form of meat. The assessee does only processing activity for the purpose of preservation and marketing the same. The assessee purchased crab from fishermen and sells to the public/customers. Whatever activity is undertaken by the assessee is for only to preserve the product. Whereas the contention of the ld.A.R is that at the time of purchase from the fishermen/agents, it was live crab and it was undergone various manufacturing activities before selling it for human consumption.
After purchase of the live crab it is processed by various treatments which are cleaning, grading, separating, laboratory testing, preserving treatment and packing and labeling. After these treatments, the crab becomes a consumable crab for human consumption. There is no change in the biological component of the crab. It is to be noted that the live crab would have been used in the same manner as the crab meat is used for human consumption. There is no change in the substance using in live crab or using it as by extracting it as meat from the same live crab. The crab meat is crab meat only - live crab would be used for human consumption as crab meat used for human consumption. In other words, input and output is same, which is crab only.
It is well settled law that process of standardization, preservation, grading cannot be treated as manufacture activity or production.
No merit in the argument of the ld.A.R that in earlier assessment year deduction u/s.10B was granted, even in the assessment year under consideration, the same view must be adopted - assessee can be allowed deduction, but the satisfaction of the conditions envisaged in the law could not be said that it was fulfilled merely because it was erroneously allowed deduction in the earlier years. It is a settled position that res judicata is not applicable in the administration of tax laws. No vested right can be held to be created in favour of the assessee merely because of allowance or deduction in the earlier years which is not legally entitled to. In view of the above, we upheld the order of Ld.CIT(A) on denying the deduction u/s.10B Similarly, alternate claim u/s.80IB(11A) of the Act has no merit.- Decided against assessee.
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2016 (8) TMI 1517
Bogus LTCG - A.O. following the information received from the DDIT (Inv,.) Unit VI(2), Delhi on the issue that the company had introduced share application money from the accommodation entry providers - CIT-A deleted the addition - HELD THAT:- No infirmity in this finding of the First Appellate Authority. AO has made the addition in question on the premise that, this amount of ₹ 35 lakhs was taken to accommodate book entries in the shape of share capital and whereas the actual fact is that these amounts were loans taken by the assessee company. Revenue’s appeal is dismissed.
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2016 (8) TMI 1512
Penalty levied u/s 271(1)(c) - addition made towards introduction of capital in partners account and towards unexplained credit - HELD THAT:- Assessee or his representative could not bring out any materials to establish that the additions are made and sustained due to possible interpretations of the Act or difference of opinion. It is purely a factual case where the assessee was not able to establish the genuiness of the credits in the assessee’s current account in the partnership firm where the assessee is the Managing Partner and other credits in his books of accounts which is elaborately discussed in the orders of the Revenue.
These aspects of the case lead to the fact that the assessee has concealed his income. In such circumstances, we do not find it necessary to interfere with the order of CIT (Appeals). Accordingly we hereby confirm the order of the CIT (Appeals). Appeal of the assessee is dismissed.
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2016 (8) TMI 1511
Reopening of assessment u/s 147 - exercise of reopening is being undertaken at the behest of the audit party - Capital gain not showed by the assessee on transfer of a land to Shri Ashwinbhai B. Patel - HELD THAT:- If the view of the Assessing Officer was that once the land was sold through a exchange deed, the assessee was liable to pay capital gain, irrespective of the subsequent cancellation of the deed, he ought to have taxed such income in the order of assessment. The fact that the assessee had executed such documents and not offered any income of capital gain to tax was thus within the knowledge of the Assessing Officer. Without there being anything additional, such issue cannot be reexamined in exercise of powers of reassessment. As noted, the letter dated 24.10.2003 of the Assessing Officer of Shri Ashwin B. Patel may prima facie, give an impression that such facts were being brought to the notice of the present Assessing Officer for the first time, but as noted, the queries raised by the Assessing Officer during the original assessment and the replies of the petitioner would show that all these details were very much part of the record.
Reduction on account of withdrawal of interest and the additional depreciation claimed - As question of additional depreciation in ground (2b), the Assessing Officer had not inquired into the nature of reduction of interest - It may be that such interest though paid during the assessment year 2009-2010 was later on withdrawn. Withdrawal of the interest happened during the assessment year 2010-2011. The Assessing Officer therefore, would be prima facie, correct in questioning the assessee in reducing such interest for the assessment year in question namely, 2009-2010. Computation of income being specific to the period pertaining to the previous year relevant to the assessment year under consideration, a legal question would arise whether for a later withdrawal of interest, the assessee could have claimed effect thereof during the earlier year. Being at a stage where the assessment is yet to be framed, we would not give our conclusive opinion on this aspect. Suffice it to say, this issue was not examined by the Assessing Officer in the original assessment.
Higher depreciation - additional depreciation which was on account of increase in opening WDV did not match the figures contained in the report of the Chartered Accountant - Entire claim of depreciation in whatever form presented by the assessee was under examination. The assessee had replied to such a question in detail giving sufficient materials. If the Assessing Officer was not satisfied he could have either raised further query or disallowed the claim in toto. Not having done that same cannot be reexamined in exercise of powers of reassessment.
Disallowance of interest - assessee had received total interest of ₹ 2.00 crores against which it had paid interest to the department to the tune of ₹ 31.39 lacs which could not have been adjusted against the interest income - As petitioner pointed out that though such adjustment was claimed in the return, the Assessing Officer disallowed the same. He took us through the order of assessment and pointed out that such amount of ₹ 31.39 lacs was not allowed to be reduced from the interest income. Learned counsel for the Revenue was unable to controvert this aspect. This ground thus was based on inaccurate factual premise.
Depreciation of windmill - AO was of the opinion that four wind turbine generators were not commissioned on 30.9.2008 thus depreciation relatable to such investment was not allowable - assessee had pointed out the factum of installation and commission of wind power turbines and the details regarding why the depreciation and additional depreciation was available on such investment. This issue was also therefore, thoroughly scrutinised.
Depreciation at a higher rate on the energy saving device - Energy saving device is covered under the item (3)(8)(ix) under the heading of machinery and plant. As provided in section 32(1)(iia) additional deprecation is allowed in case of machinery and plant. It is submitted that it is fulfilling all the conditions narrated in section 32(1)(iia) and therefore it is eligible for additional deprecation.” Thus it was after a minute scrutiny that Assessing Officer did not disturb the income of higher depreciation on this investment. Reopening on such basis would not permissible.
Expenditure towards notified area tax - assessee had made such payment before the due date of filing the returns and the Assessing Officer during the assessment proceedings scrutinised such issue are not in dispute. That being the position it would not be open for the Assessing Officer to revisit such a claim in reassessment.
Short deduction of tax at source on freight charges - In the order of assessment, the Assessing Officer had made a detailed discussion on the payment made to clearing and forwarding agent without TDS and whenever necessary, Assessing Officer made disallowance. Thus the entire issue was examined by the Assessing Officer during the scrutiny assessment.
Disallowance of interest expenditure under section 14A r.w.r. 8D - This issue also was pointedly in focus before the Assessing Officer during the scrutiny assessment.
Non deduction of tax on export commission paid by the assessee - AO noted that such expenditure was allowed without deduction of tax in view of the earlier circulars of CBDT dated 23.7.1969 and 7.2.2000 - assessee had while disclosing that foreign commission was paid to non residents, no TDS was deducted in view of circular dated 7.2.2000. The assessee produced copy of such circular. It was after such inquiry that Assessing Officer made no disallowance, as can be seen from the reasons recorded on account of such circular of the CBDT. It is doubtful whether later circular of CBDT could have been pressed in service to fasten the liability on account of non deduction of tax while making payment which was being done at a time when later circular was not in existence. Quite apart from this legal question, undisputedly, the Assessing Officer was aware about such payments, as was pointed out by the assessee, that no TDS was deducted and the reason why the same was done.
If we compare the audit objections and the reasons recorded, we find that the Assessing Officer has included all objections pointed out by the audit party but has also included one more ground namely, of the escaped capital gain on sale of land by the petitioner to Shri Ashwin Kumar B. Patel. This ground was not part of the audit objection. In our opinion, this would indicate that the Assessing Officer had independently applied his mind and formed a belief that on the grounds mentioned by the audit party in its objection letter and additional ground which is recorded in the reasons, the income chargeable to tax in case of assessee had escaped assessment. We may recall the issue of capital gain tax on sale of land was referred in the letter dated 24.10.2003 by the Assessing Officer of Shri Ashwin Kumar B. Patel. In our opinion therefore, on this ground also, petition must fail.
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2016 (8) TMI 1510
TP Adjustment - Selection of MAM - Tribunal directing AO to restrict the adjustments only in relation to the transactions with the Associate Enterprise and not on the entire revenue of manufacturing segment - assessee has selected Transactional Net Margin Method and applied the same at entity level - whether if the overall margins are less than the arms length margin, the short fall must be on account of the Associate Enterprise transactions and not on pro-rata basis? - HELD THAT:- The impugned order of the Tribunal decided the issue framed herein in favour of the respondent assessee by following its decision in CIT v. Thyssen Krupp Industries India (P.) Ltd. [2015 (12) TMI 1076 - BOMBAY HIGH COURT] and in the case of CIT v. Tara Jewels Exports (P.) Ltd. [2015 (12) TMI 1130 - BOMBAY HIGH COURT]. No distinguishing features in this case to the above two cases relied upon by the impugned order has been shown to us.
Question as framed does not give rise to any substantial question of law.
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2016 (8) TMI 1509
Validity of order passed u/s.153A - agricultural income which was treated by the AO as bogus - HELD THAT:- After relying on the judicial pronouncements in the case of Umesh Electricals [2011 (2) TMI 1584 - ITAT AGRA] , Pragati Coop Bank [2005 (6) TMI 26 - GUJARAT HIGH COURT] and case of Orient Trading Co. Ltd [1962 (8) TMI 69 - BOMBAY HIGH COURT ] CIT(A) has deleted the addition on account of agricultural income. Detailed finding recorded by CIT(A) are as per materials on record, therefore, do not warrant any interference on our part. Accordingly, we confirm the action of CIT(A) regarding agricultural income earned and declared by assessee.
Long term capital gain on sale of shares - Our attention was invited to the statement and copies of the contract notes for purchase and sales of shares of Planter Poly to indicate that actual sales was made in the assessment year 2003-04. AO has made this addition in the assessment year 200102. In the interest of justice and with a limited issue of verifying actual year of sale, we restore the addition back to the file of AO for verifying the factual position and make addition in the correct year of sale.
Similarly in the case of Jayant B Patel [2010 (10) TMI 1208 - ITAT MUMBAI] addition on account of sale of shares of Tripex Ltd.was made in the assessment year 2001-02 and also addition on account of 5% commission. Ld. AR drew our attention to the statement and copies of the contract notes for the purchase in the month April 2005 and sales in August, 2006. As per ld. AR the sale of shares of Tripex Ltd. was made in the assessment year 200708 and not in the assessment year 2001-02, therefore, the AO was not justified in making addition in the assessment year 200102. In the interest of justice and fairplay, we restore this issue back to the file of AO for verifying the record and taxing the same in the current assessment year.
All other additions made by the AO in respect of sale of shares are being confirmed.
Addition made on account of seizer of cash and jewellery, we confirm the respective additions so made by AO in the hands of the assessee in his individual capacity.
Addition on the ground of telescoping - whether assessee could not establish link between the income declared and cash found during the course of search, therefore, benefit of telescoping cannot be given? - HELD THAT:- Assessee had offered profit on sale amounting to ₹ 63,73,000/in various years and also from agricultural operations amounting to ₹ 5,25,500/. The AO has not brought any material on record to suggest that profit so declared was spent by assessee and not available with him at the time of search. In these circumstances CIT(A) found that again making addition in respect of cash found during the course of search amounts to double addition, insofar as addition has already been made on account of income declared on account of GP on cash sales and agricultural income. Under these circumstances, we do not find any infirmity in the order of CIT(A) for allowing telescoping of cash seized which was less than the amount offered by the assessed on account of GP on estimated sales and agricultural income amounting to ₹ 69.73 lakhs.
Addition on account of gifts - HELD THAT:- As held in ITAT Jodhpur in the case of Vishal Dembla [2013 (12) TMI 868 - ITAT JODHPUR] wherein it was held that where the assessee has already submitted his return prior to search which has attained finality and no incriminating document was found during the search, gifts already disclosed by the assessee in the return of income which has attained finality, could not be disturbed u/s.153A.
No merit for the addition made by the AO with respect to gifts received by assessee in A.Y.2003-04 & 2004-05, which were not pending on the date of search and no incriminating material was found during search with regard to these gifts. Accordingly, addition of gifts made by AO when no incriminating materials was found during the course of search is not sustainable. The AO is directed to delete the same. Since we have already decided the legal issues in favour of the assessee, we are not going into merit of the addition made on account of gifts. - Assessee appeal is partly allowed.
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2016 (8) TMI 1507
Contribution received from members incidental to sale of plot ["Transfer Fees"] - exemption on the Principle of Mutuality - Allowability of deduction u/s.80P(2)(d) - contribution received by the Society from a member on the occasion of the use of TDR by the member and which was exempt on the Principle of Mutuality - HELD THAT:- Issue decided in favour of assessee as relying on case Land End Cooperative Housing Society [2016 (2) TMI 620 - ITAT MUMBAI]
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2016 (8) TMI 1506
Deduction under Section 80-IA - Classification of rental income received by the assessee - rental income received by the assessee by letting out the property - “income from house property” or “income from business” - HELD THAT:- Assessee admittedly developed a technology park by name “Olympia Tech Park”, which is exclusively meant for developing software and I.T. enabled services. The assessee, apart from the building, has also provided infrastructure facilities such as specialized air-conditioners, specialized cabling, specialized electrical fittings, specialized furniture in the form of business modules, etc.
Therefore, it has to be construed as infrastructure facility with all specifications and requirements. CIT(Appeals) has rightly placed reliance on the judgment of Madras High Court in Elnet Technologies Ltd. [2012 (11) TMI 671 - MADRAS HIGH COURT] - As rightly submitted by assessee, the judgment of Madras High Court in Chennai Properties & Investments Ltd. [2003 (3) TMI 28 - MADRAS HIGH COURT] was reversed by the Apex Court [2015 (5) TMI 46 - SUPREME COURT]. The Apex Court found that when the assessee let out the property as business, the rental income has to be assessed as income from business. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee.
Disallowance u/s 14A - Only contention of the assessee that the investment in deep discount bonds does not result in any exempted income and the income from deep discount bonds is taxable - HELD THAT:- No details of investments said to be made by the assessee which earned taxable income are available either before the Assessing Officer or before this Tribunal. Moreover, the so-called investments in subsidiary companies are also not available on record. In the absence of any such details either before this Tribunal or before the CIT(Appeals) or before the Assessing Officer, the claim of the assessee that the investment made in deep discount bonds and subsidiary companies has to be excluded cannot be accepted. When the assessee claims that investment in deep discount bonds resulted in taxable income, it is for the assessee to file necessary material to substantiate its case. In the absence of any such material, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
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2016 (8) TMI 1505
Revision u/s 263 - Nature of expenses - expenses incurred by the assessee company for launch/ initial issue of ‘Franklin India Flexicap Fund’ and one other scheme - revenue or capital expenditure - HELD THAT:- As on debatable issues where two views are possible jurisdiction u/s.263 is not to be exercised. We accordingly hold that exercise of jurisdiction u/s.263 could not have been made.
As the impugned order passed u/s 263 has been quashed by the Tribunal [2012 (6) TMI 629 - ITAT MUMBAI] and therefore, there are no basis to continue with the impugned disallowance made by the AO on account of launch/initial issue expenses in consequent to the order passed by the CIT u/s 263. Therefore, under these circumstances the impugned disallowance being devoid of force of law is directed to be deleted. - Decided in favour of assessee.
Disallowing the administrative and other expenses and depreciation allowance - expenses pertaining to a erstwhile company which stood merged/amalgamated with the assessee company - HELD THAT:- There is no dispute that the assessee company is engaged in the business activities in a full-fledged manner. This fact is confirmed in the impugned assessment order passed in the hands of the assessee company wherein income of the assessee company has been assessed under the head ‘income from business’. It is further noted that in the hands of erstwhile company itself, the AO of the said company in subsequent year i.e. A.Y. 2007-08 assessed its income under the head ‘income from business’ and also allowed the benefit of depreciation. Thus, no contradictory action could have been taken in the hands of the assessee company while computing taxable income of the erstwhile company to be included in the taxable income of the assessee company, in consequence to the amalgamation/merger of FTAMC into the assessee company - entire facts and circumstances of this case suggest that lower authorities have themselves acknowledged factum of continuation of business - no rational to disallow routine administrative expenses under the erroneous presumption of non-continuation of business activities - disallowance of expenses and depreciation to be incorrect on facts as well as on law. - Decided in favour of assessee.
Depreciation allowance u/s 32(1)(ii) of goodwill acquired by the assessee on acquisition and merger - HELD THAT:- As relying on SMIFS SECURITIES LTD. [2012 (8) TMI 713 - SUPREME COURT] assessee is prima facie entitled for the claim of depreciation on the amount of Goodwill acquired by the assessee on account of acquisition of erstwhile company (FTAMC).
However, we find it appropriate that requisite facts in this regard should be verified by the AO. Therefore, we send this ground back to the file of the AO. The AO shall verify the factual assertion made by the assessee that depreciation has been allowed on this amount of Goodwill in subsequent years, as has been claimed before us. If it is found to be correct, then depreciation should be granted from the beginning. The assessee shall file requisite documents in support of its claim. AO take into account all the documentary evidences and other submission as may be made available by the assessee on objective basis before deciding this issue afresh, but keeping in view the legal position as discussed. - Decided in favour of assessee for statistical purposes.
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