TMI Blog2016 (10) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the findings in the said order in the case of that assessee and also in our considered view the same principles apply. Accordingly, we hereby delete the disallowance. Further we also hold that there is no jurisdiction in disallowing being the provisions made in the accounts especially when the assessee has been consistently adopting mercantile system of accounting. - Decided in favour of assessee. Addition being the F.M. Radio License fee paid by the assessee - Held that:- By a scheme of demerger the F.M. Radio License neither to be exploited by the assessee was transferred to another company by name of M/s. Muthoot Broadcasting (P) Ltd. For a period of 9 months, during this financial year the assessee has exploited the license and has included the income thereof. This has been mentioned by the Assessing Officer at page 5, para 5 of assessment order. The reason stated by the assessee for demerger was that the assessee company approached SEBI for public issue and as per their requirement this radio business was to be demerged from the company. Up to a period of 9 months, since the license has been exploited and income thereof taken into account, we are of the considered vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s come to the finding that the gold loans and stagnant advances which were not recoverable for long, the gold was put to auction to recover the value of loan. Since the sale proceeds of such gold ornaments would basically go to reduce the principal amount of loan and any interest realizable on that. Such amount would be basically repayment of loan and hence the same cannot be treated as income of the assessee. In view of this , we uphold the findings of the Ld. CIT(A) on this issue also.- Decided in favour of assessee. - I.TA No. 89/Coch/2015, I.TA No. 175/Coch/2015 - - - Dated:- 26-9-2016 - Shri B. P. Jain, AM And George George K., JM Assessee By Shri R. Sreenivasan, FCA Revenue By Shri A. Dhanaraj, Sr. DR ORDER Per B. P. Jain, AM These two appeals filed by the assessee and by the revenue are directed against the order of the Commissioner of Income Tax (Appeals)-II, Kochi dated 15-11-2014 for the assessment year 2010-11. 2. We shall take up first the assessee s appeal in I.T.A. No. 89/Coch/2015. The following grounds have been raised:- i) The officers below are not justified in denying and confirming disallowance of ₹ 1,02,29,239/- under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermanent or temporary establishment in India. Consequently, the provision of tax deduction at source are not applicable in view of the Board Circular in this regard. In fact, income if any earned by these companies are taxable in United Kingdom. According to the officer the recipient entity is a Non-resident one and as per the provisions of the Income Tax Act with specific reference to section 9(1)(i) certain income shall be deemed to accrue or arise in India directly or indirectly through or from any business connection in India or through or from any property in India or through or from any asset or source of income in India. According to the officer, in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. She is of the opinion that the above description clearly states that income of the business relatable to such part of the income as reasonably attributable to the operations carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 61,88,642/- representing gold loans which have become fully bad during the financial year 2009-10. These loans were advanced against the security of stolen gold pledged by thieves by cheating the company and later seized by the police as property of crime during the year. The company will not get insurance cover on these loans, so also repayment/recovery from the borrowers is also not possible in these cases. There is no likelihood of recovering the gold seized by the police. Even if the ultimate owners of the gold are found, this will have to be returned as most of them would have filed criminal cases against the theft. Therefore, this loss is incidental expenditure to the business activities and do not get covered by insurance claim. Money or money s worth as far as financing company is concerned, is stock in trade and loss of stock in trade due to theft has been rightly claimed as revenue expenditure. 9. The above issues along with other issues have been carried in appeal by the assessee before the Ld. CIT(A) and the Ld. CIT(A)-II, Kochi by her order dated 15/.11/2014 granted partial relief to the assessee and hence the assessee is in appeal before us. 10. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the accounts especially when the assessee has been consistently adopting mercantile system of accounting. 12. The next issue pertains to addition of ₹ 70.51 lakhs being the F.M. Radio License fee paid by the assessee. By a scheme of demerger the F.M. Radio License neither to be exploited by the assessee was transferred to another company by name of M/s. Muthoot Broadcasting (P) Ltd. For a period of 9 months, during this financial year the assessee has exploited the license and has included the income thereof. This has been mentioned by the Assessing Officer at page 5, para 5 of assessment order. The reason stated by the assessee for demerger was that the assessee company approached SEBI for public issue and as per their requirement this radio business was to be demerged from the company. Up to a period of 9 months, since the license has been exploited and income thereof taken into account, we are of the considered view that once income of a particular business carried on by the assessee is taken into account the expenses attributable to earn such income should also be taken into account. The fact being so, we hereby delete the addition made of ₹ 70,51,200/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 36(1)(va). 4. Whether on facts and circumstances of the case, the CIT(A) was right in deleting the amount realized from the borrowers account on sale of gold ornaments in public auction? The learned Commissioner of Income Tax(A) should have at least sustained the interest on loan collected through the sale of gold ornaments. 5. For these and other grounds that may be urged at the time of hearing, it is requested that the order of the Commissioner of Income tax(Appeals) may be set aside and that of the Assessing Officer restored. 17. Ground Nos. 1 5 are general in nature and therefore do not require any adjudication. Ground Nos. 2 and 3 relate to disallowance of staff welfare expenditure relating to staff welfare scheme. At the outset the Ld. Representative appearing on behalf of the assessee company brought to our notice that this tribunal has considered the same issue in assessee s own case for AY 2004-05 and 2006-07. Copy of the order for 2006-07 has also been filed. We extract below the relevant findings of the ITAT. 13. According to the AO, the said Staff Welfare scheme would fall in the category of any other fund for the welfare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not inclined to interfere with the order of the Ld. CIT(A) on this issue. Thus Ground Nos. 2 3 of the Revenue are dismissed. 19. Ground No. 4 of the revenue s appeal relates to decision of the amount realized from borrowings on sale of gold in public auction. The Ld. AR contended that the Ld. CIT(A) should have at least sustained the interest on loan collected on sale of ornaments. As rejoinder, the Ld. DR submitted that in the assessment made the Assessing Officer has taken the entire sale proceeds on auction of gold ornaments as income of the assessee. According to him, since the auctioned gold were very old it did not fetch the market value or at least the value to the extent of gold loan advanced. The assessee has already offered the interest on such loans year after year on mercantile basis and they were not able to realize any portion of interest. According to him there is no surplus realized on auction over and above what was advanced on the pledge of gold. In fact the auction has resulted in a loss to the assessee. It was the stand of the department that the entire sale proceeds is assessable and now they have come down to the point of sustaining interest portion. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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