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2015 (4) TMI 981 - DELHI HIGH COURT

2015 (4) TMI 981 - DELHI HIGH COURT - [2015] 378 ITR 197 - Hundi Discounting charges - ITAT deleted the addition - Held that:- Three conditions had to be satisfied to claim deduction in respect of interest on borrowed capital and that the expression "for the purpose of business" under Section 36(1)(iii) and Section 37 is wider than the expression “for the purpose of earning income, profits and gains” under Section 57(iii). Therefore, it was held that interest paid for the purpose of or in the co .....

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rrent assets of the manufacturing division transferred to its subsidiary company - ITAT deleted addition - Held that:- The entire net current assets too were valued and transferred. It was the aggregate of the book value and the net current value which constituted the sale price of ₹ 2,02,40,560/-towards which shares were in fact allotted. Given these facts, the AO appears to have assumed that the other liabilities and assets too had been transferred - which was an inaccurate assumption. T .....

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e contention that the advances were made from the assessee’s own funds and that in these circumstances, the CIT (A) fell into error in considering fresh materials. The submissions appear to be attractive considering that the CIT (A) has stated that the appellant placed before him copies of the relevant bank accounts. However, this Court sitting in second appeal against the decision of the lower authorities has to be circumspect in such matters. This ground does not appear to have been urged befo .....

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s not disputed by the Revenue that for the other years, the assessee’s treatment of such expenses has been in his favour and the Revenue has not chosen to challenge it. Even otherwise, we are of the opinion that such expenditure has to be allowed. - Decided in favour of the assessee - ITA 1136/2009 - Dated:- 16-4-2015 - S. Ravindra Bhat And R.K. Gauba JJ. For the Appellant : Mr. N.P. Sahni, Sr. Standing Counsel with Mr. Nitin Gulati, Jr. Standing Counsel. For the Respondent : Ms. Kavita Jha with .....

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he manufacturing division transferred to its subsidiary company? 3. Whether the ITAT erred in upholding the decision of Commissioner of Income Tax (Appeals) whereby the addition made by the Assessing Officer on account of notional interest amounting to ₹ 47,85,650/- was deleted? 4. Whether the ITAT erred in upholding the decision of Commissioner of Income Tax (Appeals) whereby the addition of ₹ 61,78,414/- made by the Assessing Officer on account of expenses on Brokerage and Commissi .....

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ce its construction work in Qutub Enclave Complex and consequently could not have been treated as revenue expenditure but had to be necessarily capitalised, since it went towards augmenting stock in trade. The CIT (Appeals) confirmed this decision. The ITAT in its order (para 45 and 45.1) was of the opinion that the view taken by the lower authorities was erroneous. In doing so, the ITAT was persuaded by the fact that for all previous years and subsequent years the hundi discounting charges were .....

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tions had to be satisfied to claim deduction in respect of interest on borrowed capital and that the expression for the purpose of business‟ under Section 36(1)(iii) and Section 37 is wider than the expression for the purpose of earning income, profits and gains under Section 57(iii). Therefore, it was held that interest paid for the purpose of or in the course of carrying on business is allowable in the year in which the liability arose. This Court is also of the opinion that given the di .....

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nd as a consideration allotted shares to the extent of the agreed value. The net fixed value of the assets (at book value) was ₹ 1,39,89,734/-. The net current assets were at ₹ 2,02,40,560/-. The total value of the assets thus was ₹ 3,42,30,294/-. As against these assets, a secured loan to the extent of ₹ 1,01,43,452/- existed in the assessee s books. The consideration, therefore, claimed from the sister concern - in lieu of which shares were allotted - was ₹ 2,40,8 .....

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n. The ITAT set aside the orders of the lower authorities on the basis of the following reasoning: - 51. We have heard both the parties at length and perused the papers documents referred to. We have carefully perused the orders of the AO and CIT (A) and the papers on record. The transaction has been done at cost i.e. book value. Income or profit accrues only if anything over and above the book value i.e. the cost is paid by the transferor to the transferee. Mere realisation of the assets or cha .....

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s case, the question of brining anything to tax does not arise. There is no evidence of anything more having passed between the parties than the consideration allotted as shares to the assessee. Accordingly, we delete the addition of ₹ 1,00,97,198/- made on this account. 4. This Court has considered the submissions of the parties. What appears to have escaped the attention of the AO is that at the stage of valuation of the assets transferred itself, the book value of the fixed assets trans .....

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these factors, no fault can be found with the ITAT s conclusion that regardless of how the assessee treated the transaction, i.e., either reflecting in the P&L account or omitting to do so, in sum, no gain or income arises which can be brought to tax. The question of law is answered in favour of the assessee and against the Revenue. Question No.3 5. The Assessing Officer added back the sum of ₹ 47,85,650/- during the assessment year on the ground that the assessee had not claimed any .....

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k accounts to show that these advances have not been made out of borrowed funds. There is no nexus between the borrowed funds on which the interest is being paid by the appellant and the moneys advanced to the subsidiaries. There cannot be any ground for charging and notional income to tax. However, the proportionate interest could be disallowed if the borrowed funds had been diverted for non-business purposes. This is not the case. The fact that even day-to-day expenses of these subsidiaries in .....

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ive considering that the CIT (A) has stated that the appellant placed before him copies of the relevant bank accounts. However, this Court sitting in second appeal against the decision of the lower authorities has to be circumspect in such matters. This ground does not appear to have been urged before the ITAT articulating that the CIT (A) omitted to give any opportunity to it to re-examine such materials. Such ground also does not appear to have been urged during the hearing. Furthermore, this .....

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