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Pr. Commissioner of Income Tax-11 Versus Indian Farmers & Fertilizers Co-Operative Ltd.

2017 (8) TMI 422 - DELHI HIGH COURT

Exercise of jurisdiction by Principal CIT u/s 263 - proof of adequate enquiries - Assessee having claimed tax credit on account of deemed dividend taxable in Oman - Held that:- Revenue had consistently permitted the Assessee to avail tax credit on the deemed dividend during AYs 2006-07 to 2009-10. The ITAT after going through the entire record came to the following conclusion that “in respect of the current assessment year i.e. AY 2010-11 which is the subject matter of revision and appeal before .....

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As regards the issue concerning the capitalization of interest, the Court finds again that the ITAT took note of the fact that detailed enquires were made by the AO in regard to the major additions to the fixed assets, capital work in progress, the manner in which the depreciation was claimed and the details of both secured as well as unsecured loans. The audited financial statements of the Assessee were also compiled, for the earlier AYs including the AY in question, and placed before the AO. T .....

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ons stated in the application, the delay of 30 days in re-filing the appeal is condoned. The application is disposed of. ITA 597/2017 2. This is an appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 ( Act ) against the order dated 19th September, 2016 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No. 2487/Del./2016 for the Assessment Year ( AY ) 2010-2011. 3. Although, in the memorandum of appeal, the Revenue has urged as many as 21 questions of law, only on .....

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t of the dividend income received by its branch in Oman from Fertilizer Company SAOC ( OMIFCO ) under the laws of Oman. The other question concerned the capitalization of interest in terms of the proviso to Section 36 (1) (iii) of the Act. 5. The case of the Revenue is that the order of the AO, for the AY in question, was erroneous and prejudicial to the interest of the Revenue and, therefore, in terms of Section 263 of the Act and, more particularly, in view of the Explanation-2 inserted in the .....

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ndings of the ITAT is that the Revenue had consistently permitted the Assessee to avail tax credit on the deemed dividend during AYs 2006-07 to 2009-10. The ITAT after going through the entire record came to the following conclusion that in respect of the current assessment year i.e. AY 2010-11 which is the subject matter of revision and appeal before us the Assessing Officer has adopted the same view in consonance with the view adopted in the past years and for which detailed queries and inquir .....

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e Assessing Officer at the time of the original assessment proceedings with regard to the tax credit on deemed dividend which would have been payable in Oman but for the exemption granted the assessee had filed detailed replies in response to the query which were duly considered by the Assessing Officer before allowing tax credit. (b) That. such credit was allowed by the Revenue for all the earlier years i.e. A.Ys.2006- 07 to 2009·'10, therefore, we have no hesitation in holding that .....

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d in exercising the power under Section 263 of the Act. 10. As regards the issue concerning the capitalization of interest, the Court finds again that the ITAT took note of the fact that detailed enquires were made by the AO in regard to the major additions to the fixed assets, capital work in progress, the manner in which the depreciation was claimed and the details of both secured as well as unsecured loans. The audited financial statements of the Assessee were also compiled, for the earlier A .....

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fficer had made detailed inquiries and examined the entire block of fixed assets. A brief note on capital work in progress was also filed and queries regarding the manner in which the depreciation was claimed was also raised. Further the assessee is following a settled accounting policy/principle for capitalization of expenses including interest expenses to both the fixed assets as well as capital work in progress. This method was forming part of the audited financial statements which were filed .....

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ere merely 10% of the interest-free funds available with the assessee society. We also find that a consistent view has taken by all the judicial authorities that in the event of availability of interest-free funds a presumption would be that investments would be out of interest assessee. In this respect, reliance was placed on the decision of the Bombay High Court in the case of CIT v. Reliance Utility and Power Ltd. 313 1TR340. 16.1 In light of the above discussions as well as factual matrix, w .....

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