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Commissioner of Income Tax, Delhi-21 Versus Om Prakash Khaitan

2015 (7) TMI 785 - DELHI HIGH COURT

Income recognition - whether monies kept invested by the Assessee in the mutual funds in the name of the Assessee had to be treated as income in his hands - Held that:- The issue of lawyers accepting monies from clients on account to defray the expenses and appropriating fees as income only upon completion of a case has been examined in the past and a consistent view has been taken by the ITAT. This has been adverted to in the impugned order of the ITAT. The principles on the basis of which thos .....

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enue.

Disallowance under Section 14A - ITAT deleted addition as AO had not recorded any finding that any expenditure incurred by the Assessee was attributable for earning the exempt income - Held that:- In order to disallow the expenditure there must be a nexus between the expenditure incurred and the income not forming part of the total income. Consequently, the disallowance under Section 14A of the Act was rightly deleted by the CIT (A) and affirmed by the ITAT.- Decided against rev .....

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the Income Tax Act, 1961 ( Act ) is to an order dated 30th May 2014 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No. 360/Del/2013 for the Assessment Year ( AY ) 2009-10. 4. The Assessee is proprietor of M/s. O.P. Khaitan and Company, a firm of Solicitors and Advocates. The Assessee follows the cash system of accounting since inception and this has been consistently accepted by the Department since 1990. The Assessee receives advances from its clients for various legal matters for .....

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reditors. 5. For the year under consideration, the Assessing Officer ( AO ) made an addition of ₹ 10,78,01,478 representing balances outstanding on 31st October 2011 out of the total credit balance of ₹ 20,79,97,695 as on 31st March 2009. The AO held that since the Assessee adopted the cash system of accounting, the taxing of the income could not be deferred to the subsequent years. Income had to be taxed in the year in which it was received. Since the above amount had not been retur .....

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,738. 6. The Assessee s appeal was allowed by the Commissioner of Income Tax (Appeals) [CIT (A)] and the above addition of ₹ 10,78,01,478 was deleted. As regards the disallowance under Section 14 A of the Act read with Rule 8D of the Rules, the CIT (A) restricted it to ₹ 94,721 on the ground that no direct or indirect expenses were incurred for earning the exempt income. 7. In the consequent appeal by the Department, the ITAT noticed inter alia that the addition for the AY under cons .....

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TAT acknowledged that although res judicata was not applicable to income tax proceedings the principle of consistency requires that unless facts or law have/has undergone a change, the view taken earlier under similar circumstances needs must be followed. 8. Learned counsel for the Department has not questioned the above exposition of the law. The only ground urged before the Court is that the monies were kept invested by the Assessee in the mutual funds in the name of the Assessee and, therefor .....

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