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2014 (9) TMI 317 - AT - Income TaxAddition of notional interest accrual of interest - uncertainties exist - Benefit of circular dated June 20, 1978 - The interest income has been recognized in the books of accounts only to the extent of actual collection, which is the recommended/ recognized method as per Accounting Standard 9 of ICAI - Held that:- To arrive at a real income, accrual basis cannot be a justifying factor and the commercial and business realties of the assessee, should be considered - The interest income has been recognized in the books of accounts only to the extent of actual collection, which is the recommended/ recognized method as per Accounting Standard 9 of ICAI which lays down that when uncertainties exist regarding the determination of the amount or its collectability, the revenue shall not be treated as accrued and hence shall not be recognized until collection - for the purpose of determining whether there has been accrual of real income or not, recourse is to be made to ascertain the nature of business and character of the transaction and the realities and peculiarities of the situation - the income cannot be taxed on hypothetical basis, and it is only the real income that is to be brought to tax relying upon CIT vs. Godhra Electricity Co. [1997 (4) TMI 4 - SUPREME Court] - interest which had accrued on a "sticky" advance has to be treated as income of the assessee and taxable as such - ultimately, if the advance takes the shape of a bad debt, refund of the tax paid on the interest would become due and the same can be claimed by the assessee in accordance with law - The relevant circulars of the Central Board of Direct Taxes cannot be ignored - So long as such a circular is in force it would be binding on the departmental authorities in view of the provisions of section 119 to ensure a uniform and proper administration and application of the Income-tax Act the addition made by CIT(A ) is set aside Decided in favour of assessee. Rebate u/s 88E in respect of Securities Transaction Tax paid Held that:- Though furnishing of evidence as to payment of Securities Transaction Tax along with the return filed is prescribed by the statutory provisions, those provisions are only procedural, and non-furnishing of the same is not fatal to the claim for relief under S.88IE of the Act - the claim of the assessee for rebate u/s 88E is an off-shoot of conversion loss returned into positive income on account of additions made there was no justification for rejection of the assessees claim for rebate under S.88E of the Act the order of the CIT(A) is set aside and the AO is directed to verify whether the assessee had filed the required evidence in the prescribed with regard to provisions of S.88E of the Act - CIT(A) allowed similar claim in later year on which Revenue has come up in appeal - the assessee had made the payment of an amount of ₹ 27,07,315 towards Securities Transactions Tax during the previous year, the claim of the assessee for allowance of rebate under S.88E of the Act has to be considered in the light of the evidence furnished in that behalf Decided in favour of assessee. Expenses on earning of dividend income disallowed u/s 14A Held that:- Assessee contended that the CIT(A) failed to appreciate the legal position that Rule 8D was inserted w.e.f. 24.03.2008 and hence is not applicable to the facts of the case since it is held to be prospective in nature - The issue relating to retrospective nature of the provisions of Rule 8D has been decided in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] provisions of Rule 8D are not retrospective in nature - the provisions of Rule 8D are not applicable to the facts of the assessee's case for the AY 2005-06 - considering the volume of dividend income earned and the nature of the business of the assessee, the disallowance made by the AO estimating the expenditure relatable to dividend income at 10% of income is quite reasonable Decided against assessee. Interest expenses disallowed u/s 40(a)(ia) Held that:- The assessee has remitted all the amounts of TDS effected from the interest payments before the due date for the filing of the return u/s 139(1) of the Act - Following the consistent view taken by the coordinate benches of the Tribunal under identical circumstances where remittance of the TDS amounts were made into government account before the due date for the filing of the return u/s 139(1) as well as on the nature of amendment under Finance Act, 2010, there was no justification for the disallowance in terms of S.40(a)(ia) of the Act thus, the order of the CIT(A) is set aside and the AO is directed to delete disallowance after due verification of the claim of the assessee with regard to remittance of the amounts of tax deducted before the due date of filing of the return u/s 139(1) of the Act Decided in favour of assessee. Reopening of assessment u/s 147 - mere change of opinion Held that:- The CIT(A) noted that the disallowance made u/s 14A of the Act in the original assessment order was subject matter of adjudication by the CIT(A) and on that very issue further appeal against the disallowance sustained by the CIT(A) was also pending before the Tribunal - the reopening of the assessment is based on the very same material which was already available on record at the time of completion of the original assessment - Since the AO after detailed analysis of the material already available on record at the time of completion of original assessment, made certain disallowance in terms of S.14A of the Act, and such disallowance made by the AO having been contested by the assessee on appeal, it was also examined and adjudicated upon by the first appellate authority, the findings of the CIT(A) is upheld that reopening of assessment in this case is based on mere change of opinion Decided against revenue.
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