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Shri N. Viswanath and Others Versus The Deputy Commissioner of Income-tax, Central Circle-IV (1) , Chennai. And Vica-Versa

2015 (9) TMI 907 - ITAT CHENNAI

Addition to the closing stock adopting cost of goods at the year end instead of adopting cost or realizable value followed by the assessee - Held that:- The assessee has valued the unsold stock by discounting purchase price at fixed percentage considering the age of the stock. However, this method of reduction is not following year by year. As seen from the above table, in the assessment year 2009-10, the assessee adopted the reduction of value of purchase price at 25%, when the stock is one yea .....

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been followed the same method. However, consequent to search action, the assessee wanted to change the method of stock valuation for the first time, which is nothing but an after-thought so as to reduce the income which cannot be permitted at this point of time. - Decided against assessee.

Disallowance of lease commitment charges - Held that:- tThough the assessee pleaded that the expenses were incurred for the purpose of business, absolutely nothing on record to indicate that the as .....

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Mutharaman Temple, Palai and U & U Kattalai, Palai. The share of the assessee’s donation out of these, is ₹ 40,024/- and it cannot be allowed, as the same is added and the CIT(Appeals) has confirmed the same. Since, the assessee has not paid lease commitment charges, we reject this ground.- Decided against assessee.

Addition towards stock discrepancy - Held that:- The physical stock of goods lying in Vannarapettai shop and also town shop was taken with the active participation .....

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specific arguments relating to the figures of stock were raised except pointing out that the physical stock at Tirunelveli was mentioned in the tabulation reflecting the physical stock for the group as a whole. The said mistake was rectified by the AO while passing the order. The AO after considering the entire facts of the case, added ₹ 9,43,980/- as discrepancy found in the stock for this assessment year at Chennai Branch and determined at ₹ 1,11,827/- at Tirunelveli Branch and the .....

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mprovement has to be gone into. It is only on the aforesaid material, keeping in mind the principles enunciated in the judgments by the Supreme Court and keeping in mind section 37 and section 32 of the Act, that one has to determine whether the expenditure is revenue expenditure or capital expenditure. What would apply to civil work equally applies to electrical work or interior decoration. The assessee had not stated the nature of civil works constructed, the nature of interior decoration made .....

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ly to staff found to have been vouched by self-made vouchers - assessment u/s 153A - Held that:- While making the above additions, the AO has not established that there is incriminating material discovered during the course of search. Being so, in our opinion, when the original assessment has been completed u/s.143(3), the addition can be made on the basis of incriminating material found during the course of search. Admittedly, in this case, there is no mention of any incriminating material disc .....

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account of poor cash drawings of the assessee. In such circumstances, it is not possible to sustain the addition made by the AO and confirmed by the CIT(Appeals). - Decided in favour of assessee. - ITA Nos. 1769 to 1772/Mds/2014, ITA Nos. 1872 & 1873/Mds/2014, ITA Nos. 1773 to 1776/Mds/2014, ITA Nos. 1875 & 1876/Mds/2014, ITA Nos. 1777 to 1780/Mds/2014, ITA Nos. 1877 & 1878/Mds/2014 - Dated:- 28-8-2015 - SHRI CHANDRA POOJARI AND SHRI CHALLA NAGENDRA PRASAD, JJ. For The Assessees : Shri R. Vija .....

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her, heard together and disposed of by this common order for the sake of convenience. 2. First, we take up the appeals in ITA Nos.1773 to 1776/Mds/2014 : The first common issue in these appeals is with regard to confirming the addition to the closing stock adopting cost of goods at the year end instead of adopting cost or realizable value followed by the assessee. 3. We consider the facts as narrated in the case of M/s. Aremkay in ITA No.1773/Mds/14 for the assessment year 2006-07. The brief fac .....

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pleted the assessment after making disallowance of ₹ 3,60,638/- made towards valuation of closing stock by observing as under : Provision at fixed percentage on the actual cost made while valuing the closing Stock: 7. The search revealed seizure of document in the form of financial statements as Annexures to the return filed and the details of closing stock as per books of accounts relevant for the assessment year 2008-09. It was noticed that the closing stock reported in the return of inc .....

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deviation, if any from the method of valuation prescribed u/s.145A and the effect thereof on the profit or loss. 7.2. Tax Audit report filed for none of the assessment years reported any change in the method of valuation of closing stock. Therefore, the assessee was asked to reconcile the variance between the closing stock as per financial account and the closing stock as disclosed in the return of income. 7.3 The assessee explained that commencing from the accounting year ended 31.3.06 relevan .....

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valuing the stock is as under: Particulars Provision percentage AY 09-10 Provision percentage AY 08-09 Provision percentage AY 07-08 Provision percentage AY 06-07 Provision for unsold stock out of purchases of current year (yo) Nil Nil Nil Nil Provision for unsold stock out of purchases of one year before current year (y1) 25% 50% 25% 50% Provision for unsold stock out of purchases of two years before current year (y2) 50% 50% 50% 50% Provision for unsold stock out of purchases of three years be .....

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goods unsold; • to justify that the provision made is not excessive; • to substantiate that -the assessee has not resorted to postponing the tax liability through the process of ad-hoc provision; 7.6 The provision made was justified on the ground that through the process of ageing, the stocks were identified to the year of purchase and they were classified as either slow moving or non-moving and the valuation was done by effecting reduction on the basis of fixed percentages as pointed .....

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ve the claim. It is found that the assessee started making provision for stock out of purchases even one year before the relevant previous year. It is seen that major portion of the stocks in respect of which provision is made were found sold in the subsequent year. Therefore the claim such stocks are slow moving or non-moving is not correct. In fact, the percentage of stocks out of purchases of the earlier previous years was dwindling year by year. The policy of making provision @ 25%, 50% or 1 .....

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segment, are claimed to be made of pure zari. The claim that those items would fetch only a value of Rs. l00 at the end of three year period is not convincing. Since the assessee failed to substantiate that the provision made is not excessive, the same cannot be considered to be reflecting the realizable value of the goods unsold as at the end of the relevant previous year. Any provision made on an adhoc basis is not permissible under the provisions of law and has to be treated as an attempt on .....

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at Cost subject t to provision Provision made Disallowance Adjusted disallowance Effect income 2006-07 7,21,276 3,60,638 3,60,638 3,60,638 3,60,638- 2007-08 7,12,289 3,49,841 3,49,841 Nil -10,797 2008-09 18,25,950 9,03,668 9,03,668 5,53,827 5,53,827 2009-10 17,67,100 6,14,025 6,14,025 Nil -2,89,643 7.9. Taking into account the above set of data and the addition by way of adjustment to the closing stock on account of net provision made for the current year is ₹ 3,60,638. Aggrieved by this, .....

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luation has been a subject matter during the search and post search proceedings. Therefore, the assessee should not have raised the issue in appeal, as it has agreed for the differences in closing stock valuation at the time of search/post search proceedings. Further, the CIT(Appeals) observed that the assessee has raised this issue at the time of scrutiny also. According to the CIT(Appeals), the AO has successfully countered the arguments of the assessee advanced in this regard and arrived at a .....

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her observed that the AO during Remand proceedings stated that the issue of closing stock valuation has reached finality at the time of scrutiny proceedings itself and hence this issue does not require revisiting in the Remand proceedings. 4.1 Further, the CIT(Appeals) observed that while computing the stock difference the department has relied on the book stock as indicated by the assessee in its accounts. If the same is claimed to be incorrect, then the accounts maintained by the assessee in r .....

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O s action in making the addition of ₹ 3,60,638/- to the returned income in respect of valuation of closing stock. Against this, the assessee is in appeal before us. 5. We have heard both the sides and perused the material on record. The assessee has valued the unsold stock by discounting purchase price at fixed percentage considering the age of the stock. However, this method of reduction is not following year by year. For example, as seen from the above table, in the assessment year 2009 .....

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er is less and that should be consistent from year to year. The assessee is not disputed that it has been followed the same method. However, consequent to search action, the assessee wanted to change the method of stock valuation for the first time, which is nothing but an after-thought so as to reduce the income which cannot be permitted at this point of time. Accordingly, this ground in all these appeals is rejected. 6. The next ground in ITA No.1776/Mds/14 is with regard to disallowance of le .....

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9.4.2010 ₹ 77,20,348 The assessee admitted lower income in the revised return which was mainly on account of lease commitment charges of ₹ 15 lakhs for VPT parking lot and offered income of ₹ 75,000/- by way of sale of old newspapers, covers and pending accounting. During the course of assessment, the assessee was asked to substantiate the basis for the claim of deduction by way of lease commitment charges and how the same has been accounted for in the books of accounts. The as .....

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inal return. While filing the revised return, the same was claimed as a deduction. Since the Business Expediency Expense does not come under any specific clause attracting TDS the same is claimed in the adjustment account. Entries crediting the individuals and debiting the Lease commitment charges is being made in books of F.Y. 2009-10. If the A.O insists on allowing this expenditure only on deducting TDS the argument is the ultimate recipient are Trusts which do not have any Income Tax requirem .....

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ents for business expediency. Further, the assessee has submitted written submission, which is common in respect of similar claims by other firms of the Assessee Group reads as under: Lease Commitment charges Our firm has been carrying on the business of trading in textile goods at Tirunelveli Town since 1926. The firm which was started on a small scale which grew up well thanks to the goodwill and patronage enjoyed from the public in and around Tirunelveli. Our shop s neighbourhood used to thro .....

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e of land adjacent to the land we bought was offered to us on tenancy basis. The cultivator cum tenants of the property agreed to transfer the tenancy for a consideration. As it will be of immense use to our business we got the tenancy right transferred in our name. As these lands were originally dedicated to certain temples, with a charge on the income for performing certain pujas in a few temples HR&CE intervened and contended that the transfer of tenancy in our favour are void as tenants .....

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ded property behind this lease land through which got the necessary access. HR&CE issued threatening letters to not only revoke the right of tenancy but also dire consequences. Finally, being left with no option, we had to agree to whatever terms we were dictated. The HR&CE agreed, subject to our commitment to contribute to various temples, to lease the property on fresh terms refixing the rentals in addition to free rental deposit. We would like to submit that had we not agreed to their .....

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As we wanted to peacefully run the business and also ensure comfort to the public who wanted to do shopping in our outlets, we agreed and made contributions as directed by the HR&CE (copies of the orders no. 23000 & 23001 dated 31.05.2008, are enclosed herewith) after which the tenancy right was transferred in favour of RmKV group of concerns vide lease agreements dated 09.06.2008. The amount of expenditure incurred in this connection is legitimate genuine business expediency, incurred o .....

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iled accordingly. Please find enclosed various documents connected with the above expenditure. From the foregoing facts, it will be seen that the Lease Commitment Charges is a legitimate business expenditure incurred out of business expediency and deductible in computing the business income. Hence we submit that the same may be considered while computing the business income. We will be glad to provide any other clarifications in this regard, if necessary. The AO rejected the claim of the assesse .....

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ndividual partners, the cost of acquisition of tenancy rights itself to be treated as an expense incurred out of business expediency. This being the position, the payment to various institutions as directed by the HR & CE, Government of Tamilnadu should be held as genuine business expenditure of the assessee. After considering the contentions of the assessee and observations of the AO, the CIT(Appeals) confirmed the action of the AO and dismissed the ground of appeal. Against this, the asses .....

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rred wholly and exclusively for the purpose of business and it is to be allowed as business expenditure. Admittedly, in this case, the assessee has not incurred expenditure on its own. One Shri Mahesh paid ₹ 70 lakhs from the joint account along with the others maintained in Indian Bank and balance amount of ₹ 30 lakhs from RMKV & Sons. Out of this, the assessee claimed expenditure of ₹ 15 lakhs. 9.1 It is seen that certain lands dedicated to temples for carrying out charit .....

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as donation to the above temples, whose tenancy rights Sri Mahesh purchased earlier, to make clear the title of the property from any litigation. Thereafter, separate lease deeds were entered into. The lease deed is for a period of 3 years and the demised premises were permitted to be used for commercial purposes. The lease was subject to renewal, if the lessor at the time of expiry of the lease period is of the opinion that it is beneficial to do so on enhancement of the lease rentals agreed up .....

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o straighten the claim and therefore dismissed as afterthought. • Sri Mahesh only obtained the demised premises for valuable consideration of ₹ 45,50,000 by getting the tenancy rights transferred in his name from the legal heirs of the original tenancy right holder. The funds required for payment of admitted consideration for transfer of tenancy rights was paid by the principal firm, RmKV & Sons which debited the current A/c. of Mahesh to the extent of ₹ 35,00,000 as an adva .....

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asset acquired by Sri Mahesh was found to be defective, the same was sought to be cured through a process of dialogue and negotiation with HR&CE. • In consequence thereof to regularize the transaction of acquisition of tenancy rights, lump sum amount of ₹ 70,00,000/- was paid by Sri. Mahesh out of his share of sale proceeds received on transfer of a property. Another sum of ₹ 30,00,000/- was paid by the M/s RMKV & Sons by treating the same as donation and including the .....

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movable property is a transfer of the right to enjoy such property made for a certain time, express or implied or in perpetuity in consideration for price paid or promised to the transferor who accepts the transfer on such terms. Such lease of the immovable property from year to year or for a term exceeding one year can be made only by a registered instrument. Thus grant of lease involves transfer of rights and as the rights transferred in favour of lessee by the lessor is a capital asset and th .....

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ium paid in lump sum for transfer of lease, which is apart from the subsequent lease rentals and ten months rentals as advance ( which is a common feature) • Therefore the sum of Rs. one crore paid can at best be treated only as • Expenditure incurred to cure a title to a capital asset • Premium paid for acquiring lease rights • Donation simpliciter 9.3 Further, though the assessee pleaded that the expenses were incurred for the purpose of business, absolutely nothing on reco .....

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akhs to two temples, viz., Mutharaman Temple, Palai and U & U Kattalai, Palai. The share of the assessee s donation out of these, is ₹ 40,024/- and it cannot be allowed, as the same is added and the CIT(Appeals) has confirmed the same. Since, the assessee has not paid lease commitment charges, we reject this ground. 10. The next ground is with regard to stock discrepancy at the time of search. This ground is discussed infra in ITA No. 1780/Mds/2014. 10.1 In the result, ITA Nos. 1173 to .....

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tment charges of ₹ 15 lakhs and donations of ₹ 40,024/-. 14. We have dealt with this issue in ITA No.1776/Mds/2014. For the reasons stated in paragraph 9.3 and 9.4 above, we reject this ground of appeal. 15. The next ground in ITA No.1780/Mds/2014 is with regard to addition towards stock discrepancy. 16. The facts of the case are that during the course of search u/s.132 of the IT Act, separate physical inventory of stock found in the business premises at Chennai and at Triunelveli on .....

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4.86%, the value of unrecorded sales is determined at 144.86% of the deficit stock quantified as above. Therefore, the addition called for on this score is ₹ 9,43,980/-. 16.2 The claim of the assessee with regard to stock found at Tirunelveli which resulted in the excess stock being determined at ₹ 1,11,827/- is not considered on the basis of the uniform stand taken with respect to the discrepancy of stock found on the day of search with regard to all the concerns treating the subseq .....

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riations between physical inventory as per the search party and the book stock as confirmed by the assessee on the date of search, it is impossible to reconcile the book stock with inventory details provided by the search party. The assessee further contended before the CIT(Appeals) that the AO is not justified in rejecting the arguments advanced through stock reconciliation provided by the assessee which had established that the variation was less than 0.6% of the total inventory of the assesse .....

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tance of the staff of the assessee and subsequently the same was verified with the Managing Partner of the assessee firm. Further, the CIT(Appeals) observed that the assessee is, at this juncture, seeking for the complete details of data regarding the physical stock which shows the assessee s delaying tactics in keeping the issue prolonged. Accordingly, he confirmed the addition of ₹ 9,43,980/- towards unrecorded sales and sustained the addition made u/s.69B towards excess stock of ₹ .....

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or taxation as income in the financial year relevant to the assessment year. The assessee admitted the difference in stock value at the time of search action on 17.2.2009 in Chennai and Tirunelveli. It is also brought on record by the AO that Shri Ponanand in his statement on 19.2.2009 admitted the excess stock found as compared to the stock as per books of account on the date of search which stood at ₹ 1,96,21,842/- and in answer to question No.10, he stated that there are duplicate entri .....

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the value of excess stock found during the course of search to be out of their unrecorded income and agreed to pay the income-tax due on such income for the year. During the course of investigation vide letter dated 10.8.2009 submitted to the ADIT (Investigation) by Sri Shiva Kumar, no specific arguments relating to the figures of stock were raised except pointing out that the physical stock at Tirunelveli was mentioned in the tabulation reflecting the physical stock for the group as a whole. Th .....

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nd in ITA No.1776/Mds/ 2014 also on the same reasoning. 19. Now, we take up Departmental Appeals in ITA Nos. 1875, 1876, 1877 & 1878/Mds/2014. The first common ground in these appeals is with regard to allowing the claim of repairs on hired building as revenue expenditure though it is capital expenditure. 20. The facts of the issue as narrated in ITA No.1875/Mds/2014 are that for the year ended 31.3.2008, under the head repairs and maintenance , the assessee debited ₹ 1,44,66,189/- wit .....

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repairs booked from capital work in progress . The said account was closed with transfer to repairs Et maintenance a/c. with narration repairs booked for Vannarapettai as per final bill for interior fit out works carried out by Parankar Kale Construction Pvt. Ltd. The supporting invoice was called for. The invoice is dated 15.3.2008 and the bill of quantity (BOQ) attached describes in detail the nature of the work carried out with the rates agreed. The AO pointed out that the above capital expen .....

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lease, the assessee (the lessee) was allowed to carry out suitable modification to suit its business requirements and those expenditure cannot be termed as capital expenditure . The CIT(Appeals) observed that the assessee constructed a warm shell into a shopping complex, leased for a longer time (20 years). Therefore, the expenditure so incurred is capital in nature, since the structure i.e. a shopping complex, is an enduring asset. Reliance in this regard is placed on the following case law in .....

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the Tribunal has followed the decision rendered by the Jurisdictional High Court in the case of Hari Vignesh Motors Pvt. Ltd. (282 ITR 338). Accordingly, following the decision of the Tribunal, the CIT(Appeals) deleted the addition of ₹ 1,33,04,126/- made to the returned income. Against this, the Revenue is in appeal before us. 22. We have heard both the parties and perused the material on record. Similar issue was considered by the Tribunal in ITA No.1384/Mds/13 dated 29.5.2016, wherein .....

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supra as held by the Kerala High Court. For settling the controversy, we have to go through the Explanation 1 to sec. 32(1) of the Act which was inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 1.4.1988 which deals with the situation where the expenditure has been incurred by the assessee on construction of any structure on leasehold premises. The Explanation 1 is reproduced herewith below: Explanation 1. Where the business or profession is carrie .....

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ambit of Explanation 1 questions which are to be answered are: (i) Whether the assessee is carrying on business or profession in a leased building or other rights of occupancy? (ii) Whether the assessee has incurred any capital expenditure for the purpose of business on the construction of any structure or doing of any work in or in relation to and by way of renovation or extension or improvement in the building. 9. If the answer to the aforementioned questions is in affirmative, the assessee fa .....

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er to support his case has relied on the judgment of the Madras High Court in the case of TVS Lean Logistics Ltd. (supra). In the said case, the assessee had constructed a building on the leased land for the business advantage. The Court held that the entire cost of construction is admissible as revenue expenditure. Explanation 1 categorically states that the business or profession is carried on in a leased building and not on land. The High Court in para 4.4 of the judgment further held as unde .....

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ed for the purpose of business or the profession of the assessee in a land taken on lease by the assessee. 10. Thus it is clear that the ratio laid down by the Madras High Court in the said judgment does not support the case of the assessee. 11. In the present case, the assessee has taken building on lease and made certain interior decoration. It is the case that the assesse has beautified the leased building. The High Court has further held in the aforesaid case that the language employed in a .....

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ase of Madras Auto Service (P) Ltd., 233 ITR 468 while dealing with a similar controversy has observed as under: 5 In order to decide whether this expenditure is revenue expenditure or capital expenditure, one has to look at the expenditure from a commercial point of view. What advantage did the assessee get by constructing a building which belonged to somebody else and spending money for such reconstruction? The assessee got a long lease of a newly constructed building suitable to its own busin .....

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nt case did not get any capital asset by spending the said amounts. The assessee therefore could not have claimed any depreciation. Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure. 13. Thereafter, the Apex Court referring to several cases decided held as under: 11. All these cases have looked upon expenditure which did bring about some kind of an enduring benefit to the company as a revenue expenditure wh .....

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t the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the high Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure. 14. From the above judgment, we can conclude that it is essential that the expenditure incurred on the construction of any structure on the leased premises should result in enduring benefit. That any exp .....

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ping in mind the principles enunciated in the judgments by the Supreme Court and keeping in mind section 37 and section 32 of the Act, that one has to determine whether the expenditure is revenue expenditure or capital expenditure. What would apply to civil work equally applies to electrical work or interior decoration. The assessee had not stated the nature of civil works constructed, the nature of interior decoration made to the leasehold premises and also the nature of electrical work underta .....

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Nos.1875 to 1878/Mds/2014 are partly allowed for statistical purposes. 24. ITA Nos. 1769 to 1772/Mds/2014 : The first ground in ITA No.1769/Mds/2014 is with regard to validity of assessment in the absence of incriminating material, which is an additional ground, where the assessee stated that the assessment year under consideration (2006-07), would fall under the category of completed assessment i.e. assessments already completed would not be abated by the provisions of sec.153A of the Act. The .....

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round stating that this is a legal issue and failed to raise this ground before the lower authorities. Since the issue is a legal one and the assessee has given reasonable explanation for not raising the issue before the lower authorities, this ground is admitted. 26. In this case, there was a search u/s.132 of the Act on 18.2.2009 and notice u/s.153A was issued to the assessee on 23.2.2010. On earlier occasion, regular assessment was made u/s.143(3) of the Act on 30.12.2008, wherein ad-hoc addi .....

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al discovered during the course of search. Being so, in our opinion, when the original assessment has been completed u/s.143(3), the addition can be made on the basis of incriminating material found during the course of search. Admittedly, in this case, there is no mention of any incriminating material discovered during the course of search warranting addition, placing reliance on the order of the Special Bench in the case of Cargo Global Logistics Ltd. vs. DCIT (137 ITD 287), we are inclined to .....

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he assessee. Similar issue was considered in ITA Nos.1773 to 1776/Mds/2014 in the above paragraphs and for the reasons stated therein, we dismiss this ground of appeal in ITA Nos. 1770 to 1772/Mds/2014. 27. The next ground in ITA No.1770/Mds/2014 is with regard to confirming the addition of ₹ 2,31,500/- as unexplained expenditure u/s.69C of the Act. 28. The facts of the issue are that the AO has estimated the probable expenditure of the assessee and on verification, found that the withdraw .....

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ted the surplus out of poor cash drawings of the assessee. The assessee further contended that in the absence of any material evidence to the contrary the AO should have accepted the fact that he would be in position to estimate the personal and domestic expenses of the assessee. Further, it was contended by the assessee before the CIT(Appeals) that the AO is not justified in escalating the personal and domestic expenses @ 15% every year, according to Government statistics was below 8% and index .....

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ly in view of the social standing of the family. However, the CIT(Appeals) held that the AO is justified in making the said addition of ₹ 2,31,500/- as the expenditure per month shown by the assessee does not realistically reflect the actual state of affairs. Accordingly, he dismissed this ground of appeal. Against this, the assessee is in appeal before us. 30. We have heard both the sides and perused the material on record. This is a search assessment. The AO made an estimation of drawing .....

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pairs at ₹ 10,73,710/- on the reason that the assessee has not produced supporting bills. The assessee s contention is that most of the payments were made by cheque or draft and the same was accepted by the AO during the course of remand proceedings. Therefore, the assessee contended that the addition to be deleted. 32. After going through the records and the orders of the lower authorities, we find that there is no discussion by the CIT(Appeals) regarding this aspect. Since main issue rel .....

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this ground was raised by the assessee before the lower authorities, which was not considered by the CIT(Appeals). Therefore, we direct the AO to consider the same afresh. Accordingly, this issue is remitted back to the file of the AO for fresh consideration, if it is valid to be decided. 35. The next ground in ITA No.1772/Mds/14 is with regard to disallowance of lease commitment charges. 36. We have considered similar issue in ITA No.1776/Mds/2014 and for the reasons stated therein, we dismiss .....

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found variance in the inventory as per books of account and the physical inventory taken. Further, it was found that the value of inventory taken at Chennai for the group as a whole was ₹ 18,87,41,177/-. However, it was found that the closing stock as per books of account as on 17.2.2009 for the group as a whole was ₹ 20,15,05,458/-. Thus, the physical inventory of stock was found to be less as compared to the stock as per books of account to the aggregate extent of ₹ 1,27,64,2 .....

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assessee s contentions and response to the AO s remand report, the CIT(Appeals) held that the AO has arrived at the conclusions in the assessment order after analysing the facts and materials available on record. The CIT(Appeals) has not accepted the contentions of the assessee on the ground that as the stock inventory was taken with the assistance of the staff of the assessee and subsequently the same was verified with the Managing Partner of the assessee firm. Further, he observed that the as .....

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Mds/2014 is with regard to confirming the addition of ₹ 12,47,295/- as unexplained money u/s.69A of the Act. 42. Regarding this issue is concerned, the AO observed as under: 14. During the course of search in their residence at No.29B, Water Tank, South Street, C-Colony, Perumalpuram, Tirunelveli , cash of ₹ 16,68,610 found was inventorised as per Annexure KS/Cash/F dated 18.2.2009. Out of the cash found, ₹ 12.25 lakhs was seized as per Ann KS/Cash/S. 14.1 In answer to Q.No.4, .....

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: During the search operation conduced at my residence on 18/02/09 out of the cash of ₹ 16.68 lacs, a sum of ₹ 12.25 lacs was seized. At the time of search itself the searching officials were informed that a sum of ₹ 1,47,915 represents gifts received on the occasion of the marriage of my son N.Manickavasagam in Feb 09 and ₹ 2,43,600 belonged to my daughter Sowbagyalakshmi who had come on a visit from US and ₹ 29,800 my wife s domestic savings and the balance out of .....

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of search. The claim of cash gifts is also conceded in view of the proximity of the event with the date of search. The balance of rs12,47,295 is sought to be explained with reference to the estimate of family expenditure for the AY 2003-04 to 2009-10 and the assumption of idle cash in hand of ₹ 4,80,OOO. The claim of initial cash in hand has been rejected for the detailed reasons mentioned while examining the claim of pure cash drawings to meet out family expenditure. Therefore the explana .....

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ult of search. 43. On appeal, the CIT(Appeals) after considering the observations of the AO and the contentions of the assessee held that the assessee has failed to explain the sources for the cash found at the residence of the assessee with any cogent evidence before the AO during the scrutiny proceedings, even before him in the appellate proceedings. Therefore, he confirmed the addition of ₹ 12,47,295/- made by the AO and dismissed the ground of appeal. 44. We have heard both the sides a .....

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