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2016 (10) TMI 319 - ITAT AHMEDABAD

2016 (10) TMI 319 - ITAT AHMEDABAD - TMI - Change in system of accounting - bonafide change - Held that:- As decided in assessee’s own case for AY 2002-03 wherein the Tribunal, following the decision in the case of Kishan Discretionary Family Trust vs. ACIT [2007 (11) TMI 622 - ITAT AHMEDABAD] held that the assessee has right to adopt the changed system of accounting and by changing the system of accounting from mercantile to cash was a bona fide change. Respectfully following ITAT judgment in a .....

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t Pvt Ltd, which requires to be verified at the Assessing Officer’s level alongwith other relevant facts and circumstances of the case alongwith the case law relied by the assessee in the case of UTI Bank Ltd (2013 (8) TMI 238 - GUJARAT HIGH COURT). Therefore, in the interest of substantial justice, we set aside this issue to the file of the ld. Assessing Officer with a direction to decide the same afresh in accordance with law, after providing due opportunity of being heard to the assessee. Thu .....

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ively against the order of the Commissioner of Income-tax (Appeals)-II, Ahmedabad dated 27.03.2008 for AY 2004-05. ITA No. 2273/Ahd/2011 is the appeal filed by the assessee against the order of the ld. Commissioner of Income-Tax (Appeals)-XI, Ahmedabad dated 17.06.2011 for AY 2002-03. Since all these appeals involve common issues, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. At the time of hearing before us, at the outset, ld. Cou .....

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s in deleting the addition of accrued interest on the deep discount bonds/debentures without considering the amendment in section 145 brought in with effect from 01.04.1997 that the assesses is required to follow either mercantile or cash system of accounting and no mixed system of accounting is permissible. 3. The CIT(A) has erred in law and on facts in not considering the vital fact that the assessee company was following mercantile system of accounting as was evident from the record and the t .....

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f Kisan Discretionary Family Trust and others, the cash system of accounting was followed and hence the addition was deleted, but in the case of assessee on hand , the mercantile system of accounting was regularly followed. 5. The CIT(A) has erred in law and on facts in not following the correct legal position as held by the Hon'ble ITAT, Ahmedabad in the case of Sarabhai Holdings Pvt Ltd vide order dated 08.08.2005 in ITA No.1617/Ahd/1999 wherein it was held that corporate assessee were req .....

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s of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in confirming disallowance of ₹ 2,86,937 u/s .14A of IT Act out of interest expenses. 3. In law and in facts and circumstances of the Appellant's case, the Commissioner or Income-tax (Appeals) has grossly erred in confirming disallowance of ₹ 37,37,962/- u/s 14A of IT Act out of administrative expense and payment to employees. 4. In law and in facts and circumstances of the Appellant .....

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is addition for the accrued interest on Deep Discount Bonds (DDBs)/Debentures of various companies in which the investment was made by the assessee, relying upon the CBDT Circular No.2/2002 dated 15.02.2002. On appeal, ld. CIT(A) after considering the submissions of the assessee-company, deleted the addition relying on the decision of ITAT, Ahmedabad in the case of Kishan Discretionary Family Trust dated 02.11.2007 for AY 2003-04, by observing as under:- 4.3 I have considered the assessment orde .....

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tive relied on the order of Assessing Officer. 4.3 Ld. Counsel for the assessee, on the other hand contends that this issue is covered in favour of the assessee by the decision of the Tribunal in assessee s own case for AY 2002-03 in ITA No.1244/Ahd/2006, wherein it was held as under:- 5.4.1. At this point of time, we would like to recall that a similar issue to that of the present issue has been considered by the earlier Bench of this Tribunal in the case of Kishan Discretionary Family Turst vs .....

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ent years, we see no reason as to why the assessee s choice/preference to adopt the changed system of accounting be not accepted. In view of the totality of the facts and circumstances of the case as well as settled provisions of laws discussed hereinbefore, we are of the opinion that the assessee had right to adopt the changed system of accounting and by changing the system of accounting from mercantile to cash was a bona fide change. 5.4.2 In conformity with the findings of the co-ordinate Ben .....

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No. 1850/Ahd/2007 dated 02.11.2007, held that the assessee has right to adopt the changed system of accounting and by changing the system of accounting from mercantile to cash was a bona fide change. Respectfully following ITAT judgment in assessee s own case (supra), we uphold the order of the ld. CIT(A) in this regard. Accordingly grounds in this behalf and the appeal of the Revenue are dismissed. 5. Coming to assessee s appeal for AY 2004-05, the first ground is general in nature. 6. The seco .....

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to explain the purpose and utilization of the funds borrowed and the details of interest charged on the advances made to sister concerns and intercorporate deposits. In response, the assessee explained that interest of ₹ 2,16,098/- and ₹ 70,839/- were paid to Nirma Soap & Detergents Pvt Ltd and Navin Detergents Pvt Ltd respectively. These expenses were in respect of funds used for investment in shares. Therefore, the Assessing Officer held that such interest is not admissible as .....

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y the order of the Assessing Officer, the assessee went in appeal before the ld. CIT(A) who, after considering the submissions of the assessee-company, upheld the additions made by Assessing Officer; however, directed him to verify the claim of the assessee w.r.t. exempted income, by following observations:- 5.2 I have considered the assessment order and the above submissions. In my view when the appellant itself has explained before the AO that the interest of ₹ 8,61,050/- was relating to .....

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im that the exempted income computed in the assessment order is not correct. The AO is directed to verify this claim after verification and if it is found to be in order, he may modify the disallowance. 6.3 Aggrieved, the assessee-company is in appeal before us. 6.4 The ld. Counsel for the assessee contends that the ld CIT(A) was not justified in confirming the disallowance u/s 14A of the IT Act as the company had share capital and reserves more than the tax free investments. Revised working of .....

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