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2015 (10) TMI 401 - PUNJAB AND HARYANA HIGH COURT

2015 (10) TMI 401 - PUNJAB AND HARYANA HIGH COURT - TMI - Addition on account of advance against order - nexus between sending of money as against sale was not established and no service was rendered by the foreign buyer/receiver of the money and that too without deduction of tax at source as required under section 40(a) - ITAT deleted addition - Held that:- The loss has been caused to the appellant due to the fraud which he fell victim to in the course of his business. The Hon'ble P&H High Cour .....

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operation and incidental to carrying on of the business, the same has to be allowed as a deduction. Therefore, keeping in view the facts of the case and also the ratio of Hon'ble Punjab and Haryana High Court decision in the case of CIT vs. Pukhraj Wati Bubber (supra) the loss so incurred is held to be an allowable business loss. The addition made by the Assessing Officer is therefore deleted - Decided in favour of assessee.

TDS liability on forfeiture of advance security against ren .....

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and circumstances When assessee made the payment of refundable security, as per circular, he was not supposed to deduct the tax at source. The security was paid in order to cover such type of unforeseen circumstances. The landlord has forfeited it and adjusted it towards the rent. Thus, it was a revenue expenditure in the hands of the assessee and it did not deserve to be disallowed. We allow this ground of appeal and delete the disallowance - Decided in favour of assessee. - ITA No.185 of 2015 .....

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ment year 2007-08, claiming following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in deleting the addition of ₹ 45,03,927/- made by the AO on account of advance against order when the nexus between sending of money as against sale was not established and no service was rendered by the foreign buyer/receiver of the money and that too without deduction of tax at source as required under section 40(a) of In .....

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namely M/s Jindal Enterprises and M/s Indosun Global. For the assessment year 2007-08, he filed his return on 31.10.2007 declaring total Income at nil. After hearing the assessee, the Assessing Officer passed assessment order under Section 143(3) of the Act on 31.12.2009. He determined the taxable Income of the assessee at ₹ 52,64,659/-. The following additions/disallowances were made by the Assessing Officer:- i) Addition on account of advance against order Rs.45,03,927/- ii) isallowance .....

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mentioned at Sr.No.1 but confirmed the additions at Sr.Nos.2 to 6. Before the Tribunal, the revenue challenged the deletion of addition of ₹ 45,03,927/- at Sr.No.1 whereas the assessee challenged confirmation of additions by the CIT(A) at Sr.Nos. 2 to 6. The Tribunal vide order dated 18.5.2012, Annexure A.III dismissed the appeal filed by the revenue and partly allowed the appeal filed by the assessee. Hence the instant appeal by the revenue. 4. We have heard learned counsel for the appell .....

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for the domestic market and was also carrying the job work for the exporters since 1997. M/s Indosun Global was established by him during previous year 2005-06 for carrying out the export business of home furnishing items and had obtained EC Code number for the said purpose. The assessee had become member of 'Export Promotion Council for Handicrafts'. The assessee had paid the amount of ₹ 45,03,927/- towards Attorney fees, Bid security amount, EU taxation and Locked Fund Insurance. .....

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t has submitted that TDS was not deductible from these remittances as the amount in question was towards the attorney fees, taxation etc. which is not taxable as per the provisions of the Act. It has been stated that the security amount was refundable as per the contract and thus no income had arisen to the beneficiary. Similarly, in the case of locked fund insurance the funds were transferred for insurance policy and thus there was no income to the beneficiary. In case of EU taxation, the funds .....

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a permanent establishment situated therein. 4.11 As per the appellant, no TOS was required as the beneficiary does not have permanent establishment in India. Therefore, in view of the above submission of the appellant, the contention of the Assessing Officer that tax should have been deducted at source is also held to be not supported by facts. 4.12 Thus, the various reasons given by the Assessing Officer to disallow the loss incurred by the appellant due to the sham order do not have any merit .....

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g up the issue with the embassy of Spain. The various e-mails exchanged between the appellant and the United National Children Fund, the alleged prospective buyer indicate that such transaction took place. The appellant has also placed on record the newspaper cutting supporting his case that he was the victim of the fraud. After appraising the varied documentary evidence, it is held that the appellant was victim of fraudulent transaction. Having held so now the question is whether the loss arisi .....

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h the appellant has also relied, while allowing the loss caused due to embezzlement observed as under:- 'The liability to tax is on profits or gains of business computed in accordance with sections 30 to 43 of the Income tax Act, 1961 (for short, the Act ). Though there is no provision for allowing deduction of a trading loss on account of embezzlement, section 37 of the Act provides for any expenditure for the purpose of business and there has to be nexus between the business operation and .....

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und of appeal is allowed. The Tribunal affirmed the said findings. In the absence of any illegality or perversity demonstrated by learned counsel for the revenue, no legal issue arises for consideration in this Court. 7. Next taking up the issue of ₹ 5,00,000/- disallowed under section 40(a)(ia) of the Act, the Tribunal had set aside the order of the Assessing Officer and the CIT(A). It was recorded that the security deposit was refundable and therefore, in view of circular, no tax at sour .....

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