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2016 (2) TMI 572 - BOMBAY HIGH COURT

2016 (2) TMI 572 - BOMBAY HIGH COURT - TMI - Addition u/s 41 - cessation or remission of liability - Held that:- There are concurrent findings of fact that the lease for the air crafts has been extended for further period and liability of expenses at the time of redelivery of the aircrafts has not ceased. Thus, the same would have to be provided for, as it is likely to be incurred when the lease expires and said four air crafts are redelivered. Section 41(1) of the Act has application only when .....

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- AO held it to be a part of prior period income - Held that:- The Tribunal, on examination of the order of the CIT(Appeals) upheld the same as the amount of ₹ 68.50 lacs was erroneously shown as prior period income and had rectified the same subsequently. We find that both the CIT(Appeals) as well as the Tribunal have arrived at concurrent findings of fact. The Revenue has not been able to show that the same is in any way perverse and/or arbitrary.

Disallowance of business expe .....

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ome was a valid return. In that view of the matter, the Assessing Officer was not justified in not considering the claim only on the ground that the claim of ₹ 25.22 crores for expenditure was made only in the revised return of income. It is not disputed before us that the expenditure as claimed is eligible for deduction under Section 37(1) of the Act as it has been expended exclusively for the business of the Respondent-Assessee. - INCOME TAX APPEAL NO.2111 OF 2013 - Dated:- 11-1-2016 - M .....

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circumstances of the case and in law the Tribunal is justified in deleting the addition made on account of prior period expenses at ₹ 1,48,73,553/-? 2) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in deleting the addition made on account of leave encashment in computing the book profit u/s.115JB of the Act at ₹ 11,79,38,279/-? 3) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in deleting .....

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deleting the addition made on account of accumulated provision on account of redelivery of aircraft acquired on operating lease at ₹ 3,28,55,249/- 6) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in deleting the addition of 19,47,65,816/- made by the Assessing Officer on account of treating the provision for obsolescence of as contingent liability while computing profit u/s 115JB? 7) Whether on the facts and in the circumstances of the case .....

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account of repair of premises, furniture and fixtures as capital expenditure by the Tribunal at ₹ 2,85,09,245/-? 10) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in deleting the addition made on account of prior period expenses at ₹ 68,50,425/-? 11) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in deleting the addition made on account of Directors personal expenses at ₹ 11,65,950 .....

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in the circumstances of the case and in law the Tribunal is justified in deleting the addition made on account of aircraft taken on finance lease at ₹ 25,22,07,223? 15) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in deleting the addition made on account of sale and lease back of five aircrafts at ₹ 100,52,85,728/- u/s. 41(1) of the Act? 3 Regarding Question 1:- (a) According to the Respondent, it had disputes with the parties in res .....

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es are allowable as held by it in Toyo Engineering India Ltd v/s JCIT reported in (2006) 5 SOT 0616) and also by this Court in the case of Commissioner of Income Tax, Delhi v/s Nagri Mills Co. Ltd reported in 1958 (33) ITR page 681. The issue was therefore restored to the Assessing Officer for verification. (c) The grievance of the Revenue is that as no evidence was produced before the authorities, the prior period expenses should have been disallowed. (d) We find that the impugned order of the .....

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p to 31st March, 2005 in respect of expenses likely to be incurred on redelivery of the four air crafts taken on lease. During the relevant assessment year, the lease period in respect of the four aircrafts was to expire. However, the lease of the four air crafts was extended/renewed for a further period. As a result, the Respondent was not required to redeliver the four aircrafts to the lessor during the subject assessment year. On the basis of the above, the Assessing Officer invoked Section 4 .....

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s and the provision made continues. Thus, there was no occasion to invoke Section 41(1) of the Act and the addition was deleted. (c) On further Appeal by the Revenue, the Tribunal upheld the findings of the CIT(Appeals). The Tribunal by the impugned order holds that as a matter of fact the period of lease has been extended in respect of the four air crafts, and therefore, the provisions made for redelivery expenses could not be said to have ceased for the purposes of invocation of Section 41(1) .....

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41(1) of the Act has application only when there is cessation and/or remission of liability incurred (which has been duly paid and/or provided for) in the subsequent years, consequent of which some benefit in cash or in any other manner were obtained by the party whose liability has ceased. In this case, in fact, there is no cessation or remission of liability nor any benefit obtained by the Respondent-Assessee for the purposes of Section 41(1) of the Act to be invocable. (f) Accordingly, the qu .....

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dingly, reduced that amount from the prior period income. The Assessing Officer did not accept the reduction of an amount of ₹ 68.50 lacs by rectification and held it to be a part of prior period income which he subjected to tax. (b) Being aggrieved, the Respondent preferred an Appeal to the CIT(Appeals). The CIT(Appeals) on examination of the facts noted that the Appellant had subsequently realized that the amounts which were written back on account of provision for inventory were excessi .....

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issue in Appeal to the Tribunal. The Revenue before the Tribunal did not controvert the findings of the fact arrived at by the CIT(Appeals). The Tribunal, on examination of the order of the CIT(Appeals) upheld the same as the amount of ₹ 68.50 lacs was erroneously shown as prior period income and had rectified the same subsequently. We find that both the CIT(Appeals) as well as the Tribunal have arrived at concurrent findings of fact. The Revenue has not been able to show that the same is .....

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the expenses had been incurred in respect of fuel for staff vehicle, hotel accommodation, parking charges, foreign travel, car hire charges, business promotion expenses, driver's expenses, telephone expenses, repair and maintenance expenses etc. On examination, the CIT(Appeals) found that they were allowable as business expenditure, and therefore, deleted the addition of ₹ 11.65 lakhs. (c) On further Appeal by the Revenue, the Tribunal upheld the findings of CIT(Appeals) and inter alia .....

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eliance upon the order of the Assessing Officer and pleads that the appeal be admitted. (e) We find that the CIT(Appeals) as well as the Tribunal have arrived at findings of fact that the expenses of ₹ 11,65,950/- were incurred for the purposes of Respondent's business. The concurrent finding of fact has not been shown to be in any way perverse and/or arbitrary to give rise to any substantial question of law. Accordingly, above question is not entertained. 7 Regarding Question No.14:- .....

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satisfy the condition of Section 37(1) of the Act. The CIT(Appeals) further holds that the said expenditure has been allowed in the earlier years by the Assessing Officer i.e. for the Assessment year 2004-2005, and therefore, deleted the addition of ₹ 25.22,70,223/-. (c) On further Appeal by the Revenue, the Tribunal upheld the findings of the CIT (Appeals), as the only reason for not allowing these expenses on the part of the Assessing Officer was that it was claimed only in the revised .....

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claim only on the ground that the claim of ₹ 25.22 crores for expenditure was made only in the revised return of income. It is not disputed before us that the expenditure as claimed is eligible for deduction under Section 37(1) of the Act as it has been expended exclusively for the business of the Respondent-Assessee. (e) In the above view, the question as framed does not give rise to any substantial question of law. Accordingly, not entertained. 8 Regarding Question No.15:- (a) During the .....

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of the Act. Thus, made an addition of the benefit of ₹ 100.52 Crores a result of the difference between sale consideration received and installment payable which is now not payable. This benefit of ₹ 100.52 Crores being chargeable to tax under Section 41(1) of the Act. (b) Being aggrieved, the Respondent-Assessee preferred an Appeal to the CIT(Appeals). By an order dated 30th March, 2011, the CIT(Appeals) held that the Respondent-Assessee was the owner of the said aircrafts as held i .....

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e Revenue, the Tribunal by the impugned order upheld the findings of the CIT(Appeals) holding that the Respondent-Assessee was the owner of these five air crafts and that depreciation has been allowed in the earlier years. The ownership of the Respondent-Assessee in respect of these aircrafts had been upheld up to the Tribunal in order passed in the earlier years. This was not the case of cessation of any liability. In the above view, the Tribunal upheld the order of the CIT(Appeals) and held th .....

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