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Shri Allu Aravind Babu Versus The Assistant Commissioner of Income Tax, Non-corporate Circle-20 (1) , Chennai

2016 (8) TMI 68 - ITAT CHENNAI

Disallowance of notional expenditure u/s.14A - Held that:- The assessment year involved herein is 2006-07 and Rule-8D came into statutory book only with effect from 24.03.2008. Thus, the Rule-8D is applicable from assessment year 2008-09 only and not applicable to the assessment year 2006-07. Being so we direct the AO to disallow 2% of exempted income towards notional expenditure incurred for the purpose of earning this income. - Disallowance of compensation - Held that:- The amount of ͅ .....

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relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable : it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. - Addition made in respect of surrender value of Key Man Insurance Policy as income of assessee - Held that:- once there is an assignment of Key Man Insurance Policy by employer company to employee, insurance policy gets converted into an ordinary policy and hence, in that cas .....

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perquisite u/s. 17(3) of the Act for assessment year 2006-07. Subsequently, within a short time, the said policy was encashed at ₹ 97,03,083/- on 29.06.2006. In our opinion, the device adopted by the assessee by assigning the policy and encahsing the same is nothing but colorable device adopted to evade tax and we do not find any merit in the argument of assessee’s counsel - I.T.A.No.1253 & 1254 /Mds./2015 - Dated:- 15-7-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND Shri Duvvuru RL R .....

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of notional expenditure at ₹ 2,84,062/- u/s.14A of the Act. 4. The facts of the issue are that the AO had disallowed notional expenditure at ₹ 2,84,062/- u/s.14A of the Act. The assessee had invested in shares and had earned dividend income. The AO found that the assessee had not claimed any expenditure relatable to exempted income. There is total cumulative investment up to the end of financial year amounting to ₹ 5,68,12,236/-. Therefore, the AO had disallowed 0.5% of investm .....

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the assessee is in appeal before us. 5. We have heard both the parties and perused the material on record. The assessment year involved herein is 2006-07 and Rule-8D came into statutory book only with effect from 24.03.2008. Thus, the Rule-8D is applicable from assessment year 2008-09 only and not applicable to the assessment year 2006-07. Being so, placing reliance on the jurisdictional High Court in the case of Simpson & Co. Ltd. V. DCIT in Tax case No.2621 of 2006 dated 15.10.2002, we di .....

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anjali, Hyderabad vide development agreement dated 02.11.1998. As per the terms of agreement, the assessee had paid a sum of ₹ 30,00,000 towards security deposit, which shall be refunded by the landlord on satisfaction of the terms of the contract. As per terms of the contract, the assessee is under obligation to construct a pent house but due to non- approval of the permission from local authorities, the assessee could not construct the pent house. Hence, it is claimed that the landlord d .....

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ance thereof by the second party and in the case the penthouse is not constructed for want of permission the settlement is made as per condition mentioned in clause 7. 7. The second party has also agreed to construct a penthouse exclusively for the first party adineasuring 1250 sq.ft out of which 1000 sq.ft at its own cost and for the balance 250 sq.ft the cost of construction will be borne by the first and second• party equally. The construction of the penthouse by the second party shall b .....

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nd that it is a provision and the amount is still retained in the balance sheet of the assessee. Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). 8. On appeal, the Ld.CIT(A) observed that the balance sheet of M/s.Nest Foundation that is the proprietorship concern of the assessee clearly reflects ₹ 30 lakhs as provision for claims and compensation. The P&L A/c for the account year ending 31st March 2006, shows the same amount under t .....

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perused the material on record. The amount of ₹ 30 lakhs was still appearing in the balance sheet of assessee under the head provisions for claims and compensation and it was not written off in the books of accounts of assessee. Being so, it cannot be treated as bad debt in the assessment year under consideration. Accordingly, placing reliance on the judgement of Supreme Court in the case of M/s.T.R.F. Ltd., reported in [2010] 323 ITR 397(SC) wherein held that:- After the amendment of sect .....

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f the section 194I of the Act is not applicable. At the time of hearing, the ld.A.R has not pressed this ground. Accordingly this ground is dismissed as not pressed. 11. In the result, ITA No.1253/Mds./15 stands dismissed. Now we take up ITA No.1254/Mds./15 (A.Y. 2007-08). 12. The first ground in this appeal is with regard to reopening of assessment. At the time of hearing, the ld.A.R has not pressed this ground. Accordingly this ground is dismissed as not pressed. 13. The second ground in this .....

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nting to ₹ 58,74,752/- was offered as income taxable as perquisite u/s.173(3) of the Act in that year itself i.e. assessment year 2006-07. Subsequently, the assessee en-cashed the policy at ₹ 97,03,083/- on 29.06.2006. The AO has added the sum of ₹ 38,28,331(Rs. 97,03,083 - ₹ 58,74,752). Against this, assessee carried the appeal before the CIT(A). 15. On appeal, the Ld.CIT(A) observed that Section 10 is the first section in chapter III entitled Incomes which do not form p .....

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follow that sum received under a Keyman insurance policy is not to be excluded from total income and it would be treated as income. That is provided by clause (xi) of section 2(24). Explanation to clause (xi) states that Keyman insurance policy shall have the same meaning as assigned to it in Explanation to clause (10D) of section 10. This Explanation gives the meaning to Keyman insurance policy and that sum received under this policy would be treated as income. But to circumvent this provision .....

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inue the policy and does not pay further premiums, then he would get only surrender value; or (ii) employee continues the policy and pays subsequent premiums, then he would get full amount on maturity. in the case of Rajan Nanda supra, second situation has occurred as on assignment, the director assessee did not surrender the same to the LIC and chose to continue with the policy by making payment for remaining period of the policy. In that case the court held that the character of the insurance .....

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