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Income Tax - Case Laws
Showing 1 to 20 of 783 Records
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2017 (3) TMI 1947
Penalty u/s 271(1)(c) - AO on scrutiny of the information available in AIR and ITS noticed that the assessee was paid technical service fees which had not been declared by the assessee in her return of income - in the proceedings before the AO u/s 271(1)(c) assessee pointed out that there was a mistake at the time of filing the return of income and there was no intention whatsoever to conceal any particulars of income - HELD THAT:- It is not in dispute that the amount in question was received by the assessee by way of cheque and that the payee had duly deducted tax at source on the payment made to the assessee. Thus the tax due and payable on the income in question has already reached the coffers of the revenue. When the fact that the receipt from M/s. Crisil Ltd was not disclosed in the return of income was confronted to the assessee, she immediately agreed to the addition and also appraised the AO that non disclosure of the said receipt in the return of income was inadvertent and not willful.
This circumstance clearly show that there was neither an attempt to conceal particulars of income by the assessee nor to furnish inaccurate particulars thereof. We therefore accept the plea of the assesse and hold that in the facts and circumstances of the case imposition of penalty u/s 271(1)(c) of the Act was not called for. We therefore cancel the order imposing penalty and allow the appeal of the assessee.
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2017 (3) TMI 1946
Nature of land sold - capital asset or agricultural land - Deduction u/s 54F - main grievance of the assessee is that though the land was converted for industrial purpose, agricultural operations were continued to be carried on in the land and therefore, same should have been treated as agricultural land - HELD THAT:- We are of the considered opinion that it is not disputed fact that the land was situated beyond the prescribed limits of the Mysore City Corporation and also that the land was converted for non-agricultural purpose by the competent authority, the conversion was sought by the assessee himself.
Therefore, the intention of the assessee is manifest from the conduct of conversion of the land into non-agricultural land and the land ceased to be agricultural land. Even the character of land is shown as non-agricultural in the revenue records. Therefore, submission of the learned counsel for the assessee that the land continues to be agricultural land cannot be accepted.
New claim made before CIT(A)/FAA - Deduction u/s 54F - investment made in apartment - assessee had not made any claim before the AO for grant of benefit u/s 54F and it is only before the CIT(A) that this ground was raised praying for benefit of section 54F - No doubt, law is quite settled to the extent that new claim can always be made during the course of assessment proceedings even though not made in the return of income. But no new claim can be made for the first time before the appellate authority, though powers of the CIT(A) are co-terminus with that of the AO, it is equally settled law that the CIT(A) cannot do what the AO himself could not have done.
Thus we hold that the CIT(A) ought not to have entertained new claim which also requires verification of certain facts as to investment in new house etc. whether the investment was made within prescribed time or not. More so, without affording an opportunity to the AO. This action of CIT(A) offends rule 46A and also it amounts to CIT(A) acting beyond the powers vested with him u/s 250 of the Act or beyond the subject matter of appeal.
Appeal filed by the revenue is allowed.
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2017 (3) TMI 1945
Assessee in default for which the Income Tax department has sought to effect recovery - Learned counsel for the petitioner prays for liberty to withdraw the Writ Petition as also the Special Leave Petition and instead avail of his remedies under the provisions of the Income Tax Act. Liberty as prayed is granted. The Writ Petition as also the Special Leave Petition are accordingly closed on withdrawal with liberty as aforesaid.
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2017 (3) TMI 1941
Benefit of tonnage tax scheme provided under Chapter XII C of the Act - CIT(A) held that the assessee is eligible for tonnage tax scheme, thus further disallowance u/s 14A cannot be made - CIT(A) further deleting the addition of 14A for the purpose of 115JB disallowances holding that section 14A is not acceptable to shipping companies - As contended by the ld. DR that against the order of the Tribunal for the assessment year 2006-07, as has been followed in the assessment year 2008-09, the Department has filed an appeal before the Hon’ble Madras
HELD THAT:- As respectfully following the decision of the Coordinate Benches of the Tribunal in assessment year 2008-09 2015 (3) TMI 226 - ITAT CHENNA], we sustain the order of the ld. CIT(A), who has passed a well reasoned order by holding that the assessee is entitled for the benefit of tonnage tax scheme provided under Chapter XII C of the Act.
Disallowance under section 14A read with Rule 8D as well as inclusion of the said disallowance to 115JB of the Act, the ld. CIT(A) followed the decision of the Tribunal for earlier assessment years, wherein, the decision of Mumbai Benches of the Tribunal in the case of Varun Shipping Corporation Ltd. v. ACIT [2011 (11) TMI 370 - ITAT MUMBAI] has been followed. Under the above facts and circumstances, we find no reason to interfere with the orders of the ld. CIT(A) and all the three grounds raised in the all the appeals of the Revenue are dismissed.
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2017 (3) TMI 1940
Penalty levied u/s 271(1)(c) - Assessee had filed a belated return of income showing a loss which is not eligible to be carried forward, and was not claimed in any subsequent years - HELD THAT:- On a careful consideration of the facts it appears that there is no intention on the part of the Assessee to conceal the income or furnish inaccurate particulars of income. The return of loss filed belatedly is not useful to the Assessee since the loss cannot be carried forward and it cannot be set off against the income in subsequent years as the return was filed belatedly. Therefore the Assessee has to forgo whatever loss is shown in the return of income. It appears that the CFO was entrusted with the filing of return and he made a mistake in not properly uploading the return by filling up the return with the disallowances which were already reported by the auditors in the tax audit report.
CFO had undoubtedly made an error in filing electronically by uploading incorrect particulars. Therefore for the fault of the professional, the Assessee cannot be penalized. There is no intention of furnishing of any inaccurate particulars or concealment of income as the facts undoubtedly suggest in this case.
Hon’ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. [2012 (9) TMI 775 - SUPREME COURT] considered a situation where the Assessee by mistake claimed deduction in respect of provision towards payment of gratuity in its return of income even though tax audit report indicated that such provision was not allowable.
Hon’ble Madras High Court in the case of CIT Vs. Balaji Distelleries Ltd [2012 (10) TMI 514 - MADRAS HIGH COURT] following the decision of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers pvt. Ltd,[2012 (9) TMI 775 - SUPREME COURT] held that the absence of due care does not mean that the Assessee was guilty of furnishing inaccurate particulars to conceal his income.
We hold that there is no concealment of income or furnishing of inaccurate particulars of income by the Assessee, but it is only a mistake in not adding back the expenses disallowable in the computation of income while uploading the return of income in the given facts and circumstances of the Assessee’s case. Thus, we direct the AO to delete the penalty levied u/s 271(1)(c) of the Act. Appeal of assessee allowed.
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2017 (3) TMI 1938
Addition u/s 40(a)(ia) - non-deduction of tax at source towards courier charges paid - DR submitted before us that the Ld. CIT(A) had deleted the addition based on fresh evidence without obtaining a remand report from the AO - as requested that the matter may be remitted back to the file of Ld. AO for fresh consideration in the light of the evidence filed before the Ld. CIT(A) -HELD THAT:- Since it is evident that fresh evidence was filed before the Ld. CIT(A) based on which the Ld. CIT(A) has held the issue in favour of the assessee, we are of the considered view that the Ld. AO should also be given an fair opportunity to examine the fresh evidence placed before the Ld. CIT(A) for the first time. Therefore in the interest of justice we hereby remit the matter back to the file of Ld. AO for de-nova consideration. Appeal of the Revenue is allowed for statistical purposes
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2017 (3) TMI 1937
Addition of MAT credit entitlement when computing the book profits u/s 115JB - submission that the assessee was entitled to the credit of the MAT against the current year’s tax liability - HELD THAT:- A perusal of the profit and loss account and computation of under Section 115JB clearly shows that the assessee is adding back the net amount debited to the profit and loss account. The same is what is expected of the assessee under the provisions of section 115JB. This view also finds support from the decision of the coordinate bench of this Tribunal, in the case the JK Paper limited [2016 (10) TMI 1393 - ITAT AHMEDABAD]. In the circumstances the addition as made by the Assessing Officer and as confirmed by the CIT (A) stands allowed. In the result Ground No. 2 of the Appeal stands allowed.
Disallowance u/s 14A read with Rule 8D - mandation of recording satisfaction - HELD THAT:- As perusal of the assessment order clearly shows that the Assessing Officer has not recorded the satisfaction u/s 14A(2) regarding the incurrence of expenditure. In the circumstances respectfully following the decision of the coordinate bench of this Tribunal in the case of the Sesa Goa Ltd. [2013 (9) TMI 233 - ITAT PANAJI]
Further as it is noticed that the assessee has substantial own funds far in excess of the investments which has generated the exempt income. Consequently, in view of the decision of HDFC Bank Limited [2014 (8) TMI 119 - BOMBAY HIGH COURT] as also the decision in the case of SBI–DHFL [2015 (11) TMI 399 - BOMBAY HIGH COURT] we are of the view that no disallowance of interest under Section 14A is called for in the hands of the assessee. Consequently the disallowance as made by the Assessing Officer by invoking of the provisions of section 14A read with rule 8D stands deleted. In the result Ground No. 2 of the cross objection stands allowed.
Disallowance of the dimunition in the value of the fertilizers bonds u/s 37 - It was a submission that the assessee had been claiming the loss in respect of the dimunition in the values of the fertilizer bonds every year and the differential actual loss was claimed in the year of sale of the fertilizer bonds - HELD THAT:- Admittedly the assessee has not shown these bonds as investments in its books of accounts. They are shown as current assets. The bonds have been received by the assessee admittedly in the course of its business. It is noticed that the learned CIT(A) has directed the AO to allow the real loss as and when the bonds are sold. The assessee has not been able to show as to how the said direction given by the learned CIT(A) is erroneous. This being so the finding of the learned CIT(A) on this issue stands confirmed.
Nature of expenses - expenditure on the revamping of the plant and the machinery - AO had treated the expenditure as capital in nature - HELD THAT:- A perusal of the assessment order shows that the Assessing Officer has held that the expenditure in respect of the revamping of the Ammonia and Urea plant has provided enduring benefit to the assessee and led to a major revamping in the Ammonia and Urea plants. Consequently he has denied the assessee‘s claim of the same as revenue expenditure and held that the assessee could capitalise the same. This being so the Assessing Officer is directed the grant the assessee the depreciation in respect of the said capitalised amount. In the result Ground stands partly allowed.
Short TDS credit - HELD THAT:- Assessee has claimed that there is a short credit of TDS, the issue is restored to the file of the Assessing Officer for re-adjudication after granting assessee adequate opportunity to produce all such evidences in respect of the claim of the short credit of TDS.
Disallowance of the interest expenditure u/s 36(1)(iii) - HELD THAT:- Admittedly the assessee has adequate non-interest bearing own funds far an excess of the gross of the advances made to the subsidiary and the gross of the investments in the shares. This being so we respectfully following the decision of Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] Wherein it has been held “if there were funds available both interest-free and overdraft and / or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments”, the Assessing Officer is directed to delete the disallowance of interest. In the result Ground of the Cross objection stands allowed.
Expenditure incurred towards feasibility study report u/s 37(1) - AO had held that the expenditure was a capital expenditure - HELD THAT:- Admittedly when the assessee filed its returns the assessee did have the bonafide belief that it was going to proceed with the business expansion and diversification. However it has been admitted by the assessee that due to the market condition it was not feasible to proceed with business expansion and diversification and consequently the project has been dropped. As it is noticed that the assessee has dropped its intention of proceeding with the project of expansion and diversification the expenditure incurred on the feasibility study in respect of the Greenfield Urea Fertilizer Project cannot be treated as the revenue expenditure. Consequently the finding of the Assessing Officer and the learned CIT(A) in holding the said expenditure as the capital expenditure stands confirmed. Decided against assessee.
Disallowing the set off of loss arising out of the sale of the preference shares in sister concerns - HELD THAT:- Admittedly a perusal of the assessment order “nature of business” shows that the Assessing Officer has not recognised assessee as being in the business of purchase of sale in the shares.
A perusal of the balance sheet and Profit & Loss account of the assessee for the relevant assessment year as also earlier assessment year show that these preferential shares in respect of the sister concerns namely Zuari has been shown by the assessee only as investments. Further there is nothing on record to show that the assessee is in the business of purchase and sale of the preferential shares to hold that the explanation to section 73 of the Act was to apply to treat the loss as speculation loss.
As following the decision of Shri Gautamship Breaking Industries Limited [2010 (12) TMI 1213 - ITAT AHMEDABAD] AO is directed to allow the set off of loss on the sale of the preferential shares in sister concerns against long term capital gains as disclosed by the assessee. In the result ground of the assessee’s appeal stands allowed.
Addition u/s 41(1) on account of cessation liability - submission that there were certain trade liability which was being carried forward for substantial number of year - HELD THAT:- Admittedly these are trade creditors. The assessee does not have liberty to write off the creditors until and unless the creditors themselves write off the amount. In any case these are not liabilities which can be treated as being barred by limitation on account of the efflux of time leading to the expiry of period of limitation. As long as the liabilities are shown in the books the period of limitation does not expire. In the circumstances respectfully following the principle laid down by Bhogilal Ramjibhai Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT], CIT vs. Jain Exports Pvt. Ltd. [2013 (5) TMI 690 - DELHI HIGH COURT], CIT Vs Nitin Garg [2012 (5) TMI 30 - GUJARAT HIGH COURT] and CIT vs. Hotel Excelisior Ltd. [2010 (12) TMI 1080 - ITAT DELHI], the addition as made by the Assessing Officer and as confirmed by the learned CIT(A) on account of the cessation of liability under Section 41(1) stands deleted
Disallowance on expenses claimed on account of participation in social activities around factory and on account of gifts to business associates under section 37(1) - HELD THAT:- Admittedly the assessee has not been able to place before us the details of the persons to whom the gifts have been given. In fact even the Assessing Officer has disallowed the same only on the ground that the assessee has failed to submit the details as to whom the gifts were given. This being so the finding of the learned CIT(A) and that the Assessing Officer in respect of the disallowances stands confirmed.
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2017 (3) TMI 1935
Condonation of delay filing appeal before CIT(A) - assessee filed the appeal before the CIT (Appeals) after a delay of 1460 days - assessee has submitted that this is a case of wrong advise and the assessee filed the appeal against the assessment order after the penalty u/s 271(1)(c) was levied - as submitted that the assessee accepted the addition / disallowance on the condition that no penalty would be levied as the assessee did not want his business effected due to involvement of multiple litigation but as assessee did not challenge the assessment order however subsequently the AO levied the penalty u/s 271(1)(c)
HELD THAT:- It is the case of the assessee that since the assessee accepted the proposed addition made by the Assessing Officer with the belief that no penalty u/s 271(1)(c) will be levied by the A.O. Assessee decided not to challenge the assessment order. However, when the Assessing Officer levied the penalty under Section 271(1)(c) of the Act, the assessee challenged its decision and then filed the appeal. This change of decision based on the order passed by the AO u/s 271(1)( c ) cannot be a reasonable explanation for such inordinate delay of 1468 days in filing the appeal.
It is a clear case that the assessee decided not to file the appeal against the assessment order till the penalty u/s 271(1)(c) was passed Thus the assessee never wanted to challenge the assessment order and therefore there is no reason/cause which has prevented the assessee from filing the appeal before the CIT (Appeals). The only explanation of the assessee is that the assessee consented to the addition made in the assessment order with the condition that the AO would not levy any penalty however such a condition cannot be imposed on the assessment authorities and therefore it cannot be taken as a reasonable cause for not filing the appeal before the CIT (Appeals).
When the assessee was not prevented by any circumstances or reasons which were beyond the control of the assessee to file the appeal then the reason explained by the assessee for such an inordinate delay cannot be considered as prudent or bona fide or reasonable cause for not filing the appeal. The decision in the appeal against the penalty order will not change the character of the reasons explained by the assessee. Accordingly, no interference is called for in the impugned order of the CIT (Appeals) for not condoning the delay. Appeal of assessee dismissed.
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2017 (3) TMI 1934
Disallowance u/s. 14A - sufficiency of own funds - submission of the assessee that the said investment was made by the assessee company out of non-interest bearing funds comprising share capital & reserves - HELD THAT:- As perused the judicial pronouncement of CIT v Corrtech Energy (p) Ltd [2014 (3) TMI 856 - GUJARAT HIGH COURT] held that as per section 14A of income Tax Act 1961 read with rule 8D of the income tax rules 1962 expenditure incurred in relation to income not includable in income in a case assessee did not make any claim for exemption of any income from payment of taxes, in that case disallowance u/s 14A of the act could not be made.
It is crystal clear that the jurisdictional High Court has decided to attract the provision of section 14A it is required that assessee should have earned an exempt income, if the assessee has not earned an exempt income and not claimed so in the return of income then the provision of section 14A are not applicable. We find that during the year under consideration the assessee company has not earned any exempt income and has not claimed any such exempt income in the return of income therefore as per our considered opinion the provision of section 14A are not applicable. - Decided in favour of assessee.
Unsecured loan u/s. 68 - identity, genuineness and creditworthiness of the unsecured loan providers not proved - HELD THAT:- We have noticed that in the case of the assessee, the confirmation with the name, address, copy of ledger account, copy of balance sheet and profit and loss account, copy of income tax returns and computation of total income in respect of all the parties were filed before the assessing officer.
As perused the judicial pronouncement in the case of CIT-Rajkot v Ayachi Chandrashekhar Narsangji [2013 (12) TMI 372 - GUJARAT HIGH COURT] held that in case the loan amount has been repaid by the assessee in the immediate next financial years that indicate that the department has accepted the repayment of loan without proving into it. We have also observed that it was undisputed fact that the assessee had repaid considerable amount of the loans to the lenders in the next year along with the interest amount.
The assessment records of all the lenders are available with the income tax department and the assessing officer could have easily verify the same. We have also noticed that not any lender has made denial of not extending any loan to the assessee company.
All the transactions have been made through proper banking channels. The submission made by the assessee that the net worth of the lending companies were very high, the identity, creditworthiness, genuineness of the transactions have not been disproved by the assessing officer with cogent and concrete supporting evidences. The amounts in question had been received by way of account payee cheques. Having regard to the fact that the permanent account numbers and the income tax returns of all the investors had been furnished by the assessee, the Assessing Officer could have easily verified the same.
We have noticed that all the transactions of advances received were made through bank only and the assessing officer should have verified these transactions with the relevant banks and should have made further inquiries in this regard, which she has failed to do so. In all the cases the lenders were filing their returns on regular basis and copies of the returns of income were produced for verification in support of his case.
Not any evidence had been brought on the record which even remotely indicated that the money originally belonged to the assessee and it had returned back to the assessee again. We observed that during the assessment proceedings the assessee had furnished the details of the persons from whom loan had been received stating, name and the address, PAN, copy of account confirmation, copy of acknowledgement of ROI, copy of relevant portion of their bank account and the copies of the audited annuals accounts. Further we have noticed that the assessing officer had issued notices u/s 133(6) of the act and all the notices were duly complied by the lenders. Thus, from the facts noted hereinabove, it is evident that the assessee had produced all relevant details in its possession, namely, names, permanent account numbers, income tax returns, and bank statements of all the investors. The lower authorities have made findings mostly on the basis of assumption based on own analysis without disproving the supporting and evidences produced by the assessee as elaborated supra in this order. Decided in favour of assessee.
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2017 (3) TMI 1933
Computation of deduction u/s 10A - HELD THAT:- We find that this issue is covered by the Jurisdictional High Court’s decision in CIT v Tata Elxsi [2011 (8) TMI 782 - KARNATAKA HIGH COURT]. It clearly lays down the principle that while computing deduction u/s 10A, if the export turnover is calculated after excluding certain expenses, such expenses should also be excluded in computing the total turnover. Since the DRP’s decision is in accordance with the ratio of the jurisdictional High Court, supra, we confirm it. Therefore, the Revenue’s appeal grounds fail.
TP Adjustment - comparable selection - HELD THAT:- Comparables, ICRA Techno Analytics Ltd, Infosys Techologies Ltd, Kals information Systems Ltd (Seg) and Tata Elxsi Ltd (Seg) are functionally different, thus be excluded.
R S Software (India) Ltd be included as company is engaged in the provision of software development services. Onsite development should not be a criteria to judge comparability. Onsite revenue is not one of the filters adopted by the TPO in the order.
Persistent Systems & Solutions Ltd be included as per notes to accounts, the company is predominantly engaged in providing software development services to its global customers. As per revenue recognition, the company derives income from software services.
Nature of Donation - operating or non operating - assessee submitted that donation is not closely linked to the business operations and should be considered as nonoperating in nature - HELD THAT:- As decided in the case of M/s. Capital One Services India P. Ltd [2015 (4) TMI 1359 - ITAT BANGALORE] wherein it has been held that donation is not in the nature of normal business activity and hence should not be considered as operating. Following the decision, the AO is directed to treat donation as non operating one.
Risk adjustment seeked on the basis of additional ground - assessee submitted that suitable adjustment should be provided to account for differences in risk profile of the comparables - HELD THAT:- AR submitted that the TPO is not against granting any risk adjustment but the risk has to be established by the assessee . In the facts and circumstances, this issue is remitted back to the TPO/AO shall re-adjudicate it in accordance with law.
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2017 (3) TMI 1929
Taxability post scheme of merger - Recovery of tax statutorily due from the transferor or transferee company or any other person who is liable for payment of such tax due - HELD THAT:- As decided in [2015 (8) TMI 475 - SC ORDER] Income Tax Department is entitled to take out appropriate proceedings for recovery of any tax statutorily due from the transferor or transferee company or any other person who is liable for payment of such tax due.
We accordingly dispose of the appeal recording that the Income Tax Department would be entitled to take out appropriate proceedings for recovery of any tax statutorily due from the transferor or transferee company or any other person who is liable for payment of such tax due.
Needless to state if the Income Tax Department initiates any proceedings the respondents would be entitled to raise all issues and defences of law and facts.
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2017 (3) TMI 1928
Disallowance u/s 2(24)(X) r.w. Section 36(1)(va) - late payment of employees’ contribution to PF and ESI - HELD THAT:- As assessee had deposited the employees’ contribution to PF and ESI beyond the due date prescribed in the relevant Act but the same were duly remitted by the assessee before the due date of filing of return of income u/s 139(1) of the Act and accordingly CIT(A) by following the decision of M/s. Vijay Shree Ltd [2011 (9) TMI 30 - CALCUTTA HIGH COURT] held CIT(A) has failed to appreciate the fact that the assessee is not entitled to deduction of the employees’ contribution to provident fund & ESI which was paid after the due date as specified in Explanation to section 36(1)(va) of the Act, as section 43B cannot be pressed into service because section 43B comes into play only when a deduction is otherwise allowable under the Income-tax Act. Decided in favour of assessee.
Disallowance u/s 14A r.w. Rule 8D - AO applied the provisions of second and third limb of the Rule 8D(2) of the Rules and made the disallowance - CIT(A) deleted the disallowance - HELD THAT:- The issue in dispute is covered by the decision of this Tribunal in the assessee own case, which has been subsequently approved by the Hon’ble Calcutta High Court M/S. REI. AGRO LTD. [2014 (4) TMI 713 - CALCUTTA HIGH COURT] - CIT(A) had rightly followed the said decision while directing the Ld. AO to re-compute the disallowance. Hence, we do not find any infirmity in the order of the Ld. CIT(A) in this regard. Accordingly, the grounds raised by the Revenue in this regard is dismissed for both the assessment years.
Appeals of the Revenue are dismissed.
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2017 (3) TMI 1922
Nature of expenditure - revenue or capital expenditure - expenditure on account of payment for compensation as per exclusive data supply agreement for compensating the 2/3rd cost at WDV for the PMS meters becoming obsolete and consequently holding cost of severance of personal of ORG redundant consequent to PMS technology becoming obsolete - HELD THAT:- We are of the view that it has not acquired any asset by paying the aforesaid amounts to ORG for the cost of write off of PMS as the PMS meters were rendered obsolete and as a part of the arrangement for supply of data to INTAM the payment had to be made. In fact, the PMS meters remained with ORG and not acquired by INTAM and not used by INTAM as the Picture Matching Technology became obsolete.
Any payment made for writing off the PMS meters borne by INTAM was of revenue nature as no asset was acquired by it. Similarly, the compensation paid to ORG for the severance of the personnel engaged in collecting data by PMS technology was also of revenue in nature, as no asset was acquired by the assessee on payment of such amount. If the expenditure did not result in the acquisition of any asset or advantage of enduring benefit, such expenditure cannot be considered as capital in nature and the same is necessarily of revenue in nature.
What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would he disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is. therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. This issue of the assessee’s appeal is allowed.
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2017 (3) TMI 1921
Unaccounted cash receipts - Revenue carried out search and seizure operation u/s. 132 - reliability of the loose sheets - interpretation given by the Assessing Officer to the noting made in the loose papers - HELD THAT:- We have noticed earlier that the assessing officer has taken the figures noted in these loose sheets as representing “lakhs” - A careful perusal of the same would show that a sum of Rs.50.0 was withdrawn on 18.9.07 with the narration “Drawings”. The drawings could not be normally in lakhs, but only in thousands. Hence the statement given by Shri Vinod Faria, in our view, would stand corroborated by this entry. Hence we are of the view that the tax authorities are not justified in interpreting the figures as “in lakhs”. When this point was put to Ld D.R, he also admitted that the possibility of taking the figures in thousands is more in the facts and circumstances of the case. Hence the aggregate amount for consideration should be taken as Rs.65,000/- and not Rs.65,00,000/- as presumed by tax authorities.
Nature of payment - contention of the assessee is that he has not received any payment as alleged by the tax authorities - There is no evidence to show that there were certain business transactions which resulted in payment of any income by Shri Vinod Faria to the assessee. Hence, even if it is considered for a moment that the payments have been made to the assessee under the name “Milan bhai”, yet the question would remain as to whether those payments can be considered as assessee’s income?. In the absence of any other material to show that these payments have been made towards business dealings, we are of the view that the alleged payments cannot be considered as income of the assessee.
In any case, the noting made in page no.16 pertains to the period relevant to AY 2008-09 as per the dates noted against other transactions. Hence, on a conspectus of the matter, we are of the view that the transactions noted in these loose sheets cannot be considered as representing income of the assessee. In view of our finding given above, we do not find it necessary to go into the question of reliability of the loose sheets. Decided in favour of assessee.
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2017 (3) TMI 1920
Disallowance made of fabrication charges - Addition made to the income of the assessee holding the fabrication charges to be bogus and in-genuine - onus of proving the necessary facts in order to avail deduction u/s 37(1) - assessee contended that the disallowance on the basis of human probability and preponderance of probability cannot be made without bringing any evidence or material on record to substantiate the findings - CIT (Appeals) also held that the bills of fabrication charges were not signed by the contractors who had also denied receipt of any fabrication charges which clearly established that the fabrication charges were not genuine - HELD THAT:- We are in complete agreement with the Ld. CIT (Appeals) that the onus of proving the necessary facts in order to avail deduction u/s 37(1) is on the assessee and if the assessee fails to establish the facts necessary to support his claim, then the said claim for deduction of expenditure is not admissible.
As in the case of CIT Vs. Calcutta Agency Ltd. [1950 (12) TMI 4 - SUPREME COURT] has settled the aforestated legal proposition. But having said so, we, however, do not agree with the Ld. CIT (Appeals) that the assessee in the present case before us has failed to discharge its onus.
Assessee had given detailed explanation of the circumstances which led to the employment of its own workers as contractors. Assessee had explained that it was manufacturing machinery parts and accessories thereof for reputed companies on tailor made basis as per the specifications of the customers. Designs and drawings for the job were supplied by the customers which were covered under the confidentiality clause and to maintain the secrecy of the drawings the assessee had evolved modus operandi of getting fabrication work done at its own premises with its own machinery using his own workers and technical staff who were otherwise technically competent to undertake the work after the regular working hours on contract basis.
Assessee had incurred fabrication charges and had duly discharged it onus of proving the same. Further we find that no anomaly in the above evidences and explanations was pointed out by the Revenue. None of the above facts have been controverted by the Revenue except that the bills were not signed. The Revenue has not denied that the assessee had to incur fabrication charges in the course of its manufacturing process.
The only anomaly pointed out by the Department is that the bills were unsigned. Considering the voluminous evidences and explanations filed by the assessee, we do not consider the non-signing of the bills to be a factor major enough to displace the other evidences filed by the assessee and proving conclusively that fabrication charges incurred were bogus.
Sole basis for holding the impugned expenses as bogus is the statement of two contractors recorded by the Assessing Officer, which as per the Revenue has evidentiary value since it was recorded on oath. On this aspect, we are in agreement with assessee that since no opportunity of cross examination was afforded to the assessee despite specific request made by the assessee in this behalf, the evidentiary value of such statement given at the back of the assessee have no value.
Thus we hold that the assessee had discharged its onus of proving that the fabrication charges were incurred by it for the purpose of its business and there was no reason to deny any portion of the expenses to the assessee at all. In view of the above, the entire expenses incurred on fabrication charges are allowed to the assessee.
Addition of unaccounted scrap at the rate of 0.5% of the total turnover - CIT-A deleted the addition - HELD THAT:- No infirmity in the order of the Ld. CIT (Appeals) deleting the disallowance made on account of unaccounted scrap. It is not denied that in the preceding year scrap generated had been estimated by the AO - AO in the impugned year had adopted the same basis for calculating the scrap generated without taking into consideration the fact that there were differences in the facts of the two years, the turnover in the preceding year being much lower than the turnover in the current year. More importantly the addition is based only on estimates and no other evidence was brought on record by the Revenue to suggest that scrap, more than what was shown by the assessee, was generated during manufacturing process by the assessee in the impugned year. In view of the same, we uphold the order of the CIT (Appeals) on this account deleting the disallowance made on account of unaccounted scrap - Decided against revenue.
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2017 (3) TMI 1919
Exemption u/s 11 - registration u/s 12AA - application seeking review of our judgment [2017 (1) TMI 1006 - ALLAHABAD HIGH COURT] - review-applicant submitted that this Court has observed that admittedly no registration certificate under Section 12A was granted to review-applicant - HELD THAT:- As office of CIT confirmed to review-applicant that registration certificate u/s 12A was granted on 22.09.1987 but despite repeated query, no such copy of registration certificate has been placed before us.
No such certificate was available before Tribunal or other Revenue Authorities when the matters were decided and when we decided this appeal at that time also, no such certificate was produced. Today also no such certificate has been placed before us.
Review-applicant contended that this letter should be deemed to be registration certificate but its language is very clear and this shows registration certificate was granted on 22.09.1987 but as a matter of fact no such registration certificate is shown to exist at all. No ground of review of our judgment.
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2017 (3) TMI 1918
Validity of Settlement Commission orders u/s 245 D (4) - as admitted by Settlement Commission that it is not in a position to pass any appropriate order for proper settlement - HELD THAT:- Since Settlement Commission has passed order u/s 245 (D) (4A) without any proper settlement observing that it is not practicably possible to examine records and investigate the case, it cannot be said that there is a valid order passed by Settlement Commission and, therefore, matter could have been sent to Commission to pass fresh order in accordance with law, but since order itself is not under challenge, reliefs prayed in this petition, which relates only to assessment, cannot be granted.
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2017 (3) TMI 1914
Gratuity liability - Accrual of liability - assessee was following mercantile system of accounting - whether there was no accrual of such liability during the year under consideration? - As per CIT-A accrued gratuity liability was not disallowable u/s. 36(1)(v), 43B and 40A(7)(a) or Rule 103 and 104 of the IT Rules, thus deleted the addition - HELD THAT:- We find that the issue is covered by order of this Tribunal in assessee’s own case for A.Y 2004-05 held that section 36(1)(v) nowhere speaks of the actual liability incurred during the year on account of retirement of the employees during the year itself. Such liability accrued during the year is taken care of in section 40A(7)(b) and the operation of section 40A(7)(a) is subject to section 40A(7)(b)
Section 40A(7)(b) that provision made by the assessee for the purpose of payment of any gratuity, that has become payable during the year is allowable which means that the liability which has actually accrued during the year is allowable. CBDT has also clarified the introduction of section 40A(7) that the provision made for payment of gratuity that has become payable during previous year is allowable. Therefore the liability accrued on account of the gratuity which became payable during the year on account of the employees who retired during the year itself is allowable.
Section 43B also speaks of the contribution of any gratuity or other fund and not to the liability accrued as above.
Rule 103 and 104 also speaks of the contribution or initial contribution to any gratuity fund and not for the actual liability accrued during the year. As relying on principles laid down in Kedarnath case [1971 (8) TMI 10 - SUPREME COURT] mentioned above are fully applicable and the assessee is entitled to the deduction of the accrued liability as claimed by it in the computation of the income. - Decided in favour of assessee.
Disallowance of Employees’ contribution to the “Labour Welfare Board” and PF - AR submits that though payments were not made in due date, but paid within grace period - CIT-A deleted the addition - HELD THAT:- We find support from the decision of Ganapathy Mills [1999 (2) TMI 26 - MADRAS HIGH COURT] wherein it held that the deduction can be allowed if the payments are made within the grace period. - Decided in favour of assessee.
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2017 (3) TMI 1906
Penalty imposed u/s 271D - necessity of recording of satisfaction regarding initiation of penalty proceedings - HELD THAT:- As find that in the Assessment Order there is no mention about initiation of any penalty proceedings in connection with the impugned penalty. In this view of the matter and respectfully following the Hon’ble Supreme Court’s judgment in the case of CIT vs. Jai Laxmi Rice Mills [2015 (11) TMI 1453 - SUPREME COURT] wherein it is held that recording of satisfaction regarding initiation of penalty proceedings under section 271E is a condition precedent for imposing the said penalty, we delete the impugned penalty. Assessee appeal is allowed.
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2017 (3) TMI 1904
Addition of income from shareholder’s funds credited directly to the shareholder’s Account - Whether CIT-A erred in his interpretation of Act, the Insurance Act 1938, the IRDA Act and the IRDA (preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations 2002, the IRDA (Assets, Liabilities and Solvency Margin of Insurers) Regulations 2000? - HELD THAT:- Issue decided against the assessee by the decision of this Tribunal in assessment year 2009-10 [2013 (6) TMI 377 - ITAT MUMBAI] basic question to be decided in that appeal was whether the assessee could be said to be in default u/s.115-Q of the Act on account of non-payment of tax on distributed profits u/s.115-O of the Act in respect of payment made to central government out of the surplus profit.
After discussing facts of the case and the provisions of the sections 115-O and 115-Q of the Act, Tribunal held that payment made by the assessee to the Central Government could not be treated as dividend within the ambit of definition clause 2(22) of the Act, that provisions of section 115-O of the Act were not applicable, that assessee could not be declared as assessee in default u/s.115 Q of the Act. In our opinion, in the case relied upon by the AR of the assessee, question of taxability of particular items of income under the head income from other sources was not before the Tribunal. Therefore, upholding the order of the FAA we decide Ground of appeal against the assessee.
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