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2017 (3) TMI 1053 - AT - Income TaxAddition on notional basis on account of interest accrued - capital contribution made by the assessee in the partnership firms namely Kamanwala Lakshachandi Todays Developers (KLTD) and Kamanwala Lakshachandi Todays Construction (KLTC) - assessee has offered the same to tax in assessment years 2012-13 & 2013-14 - Held that - It is a case of double assessment of same income. Such a situation is highly unjustified and not permitted under the provisions of income tax law. Therefore, keeping in view alternative prayer of the assessee, we direct that interest income offered in the subsequent years should be excluded from total income to remove the double addition. The AO is directed to pass requisite rectification order in Assessment Years 2012-13 & 2013-14 so as to give effect to our order. The assessee is also directed to furnish requisite details and documentary evidences to the AO to show that same interest income has already been offered in A.Y. 2012-13 and 2013-14. Thus, these grounds may be treated as allowed in accordance with the aforesaid directions. Under these circumstances, we do not find it necessary to adjudicate the other issues raised by the assessee with regard to these grounds. Disallowance on account of Sundry Debtors written off by the assessee during the year - Held that - CIT(A) has passed nonspeaking order without giving proper reasoning. We find it appropriate to send this issue back to the file of the AO. The assessee shall submit on record requisite details and evidences to justify its claim. The assessee is required to show that the impugned amount has already been included in its income in earlier years so as to claim the benefit of paid debts u/s 36(1)(vii). The AO shall decide this issue again after considering all the facts and circumstances, as may be brought on record by the assessee. The assessee is also permitted to make any alternative claim as may be permitted under the law. Disallowance of TDS written off during the year - Held that - Disallowance has been confirmed by the lower authorities without examining facts and figures. It was shown that these amounts were recoverable from the parties on account of TDS deposited by the assessee on behalf of these parties, but the payment in full was inadvertently made to these parties. However extra amounts paid could not be recovered from the said parties. Under these circumstances, these unrecovered amounts are of nature of loss incurred during the normal course of business. Complete details were shown to us by Ld. Counsel in this regard. Nothing wrong has been pointed out by the Ld. DR in this regard. Under these circumstances, we find that disallowance made by the AO was not justified under the law. Disallowance on account of rent paid u/s 40(A)(2)(b) - Held that - Assessee has been able to discharge its onus as was envisaged under the law, whereas the AO had wrongfully invoked provisions of section 40A(2)(b) and also erred in disallowing the expenditure in full. Thus, since disallowance made by the AO is contrary to law and facts, same is therefore deleted. Disallowance on account of write off of the investment made in Joint Venture - Held that - Evidences brought before us have not been properly examined by the lower authorities. The evidences do indicate that the debt had become but in absence of their examination in the light of facts of this case, no proper conclusion can be drawn by this stage. Further, requisite facts regarding subsequent recovery and its inclusion in the income of subsequent years have also not been properly brought on the records and anlysed by the lower authorities. Under these circumstances, in the interest of justice, we find it appropriate to send this issue back to the file of the AO. Disallowance of long term capital loss arising from sale of shares - Held that - It is true that since loss has been claimed by the assessee, therefore, primary onus lies upon the shoulders of the assessee to justify the same. But, it is equally true that no claim should be disallowed on the basis of mere surmises and conjecturers. It appears that in this case also both the parties lacked in their duties in terms of discharging respective onus lied upon them under the law. Therefore, we find it appropriate to send this issue back to the file of the AO. The assessee shall bring on record all the primary evidences to justify and substantiate the said claim. Addition u/s 14A - Held that - It is admitted case that no exempt income has been earned during the year, therefore, Ld. CIT(A) correctly deleted the disallowance made by the AO For A.Y. 2012-13 disallowance sustained by the Ld. CIT(A) u/s 14A is hereby confirmed. It is noted that exempt income has been earned by the assessee during the year under consideration. Nothing has been brought before us that why disallowance of 0.5% of average value of investments as envisaged under rule 8D(2)(iii) should not be made in the given facts of this case. Further, nothing incorrect has been pointed out in the order passed by Ld. CIT(A) while confirming the disallowance.
Issues Involved:
1. Addition of interest income on capital contribution in partnership firms. 2. Disallowance of sundry debtor write-off. 3. Disallowance of TDS written off. 4. Disallowance of rent paid under Section 40A(2)(b). 5. Disallowance of investment in joint venture written off. 6. Disallowance of long-term capital loss on sale of shares. 7. Charging of interest under Sections 234B and 234C. 8. Invocation of penalty under Section 271(1)(c). 9. Disallowance under Section 14A read with Rule 8D. Detailed Analysis: 1. Addition of Interest Income on Capital Contribution in Partnership Firms: The assessee argued that no interest had accrued during the year under consideration and thus was not credited in the books. However, the AO added ?4,07,30,483/- as interest income. The CIT(A) upheld this addition but did not address the issue of double addition. The Tribunal found that the same interest income had already been offered to tax in subsequent years (A.Y. 2012-13 & 2013-14). Thus, it directed the AO to exclude the interest income from the total income of the subsequent years to avoid double addition. 2. Disallowance of Sundry Debtors Write-off: The AO disallowed ?9,79,200/- written off as sundry debtors, as the assessee could not substantiate the claim. The CIT(A) upheld this disallowance. The Tribunal noted that the CIT(A) passed a non-speaking order and remanded the issue back to the AO for proper verification of facts and directed the assessee to provide requisite details to justify the claim. 3. Disallowance of TDS Written Off: The AO disallowed ?1,99,905/- written off as TDS, which was confirmed by the CIT(A). The Tribunal found that the amounts were recoverable from parties on account of TDS deposited by the assessee but were not recovered. It concluded that these were business losses and directed the deletion of the disallowance. 4. Disallowance of Rent Paid Under Section 40A(2)(b): The AO disallowed ?9,24,000/- paid as rent to related parties, suspecting it was not for business purposes. The CIT(A) upheld this disallowance. The Tribunal found that the assessee had provided sufficient evidence of the business use of the premises and that rental income was assessed in the hands of the payees. It noted that the AO did not demonstrate that the rent paid was above market rates and thus deleted the disallowance. 5. Disallowance of Investment in Joint Venture Written Off: The AO disallowed ?87,50,000/- written off as investment in a joint venture, considering it a capital expenditure. The CIT(A) upheld the disallowance. The Tribunal remanded the issue back to the AO for proper examination of the evidences and facts, including subsequent recovery and its inclusion in income. 6. Disallowance of Long-term Capital Loss on Sale of Shares: The AO disallowed ?24,01,139/- as long-term capital loss on the sale of shares, doubting the valuation and related party transaction. The CIT(A) confirmed the disallowance. The Tribunal remanded the issue back to the AO, directing the assessee to substantiate the claim with evidence and clarified that Section 40A(2)(b) was not applicable in this context. 7. Charging of Interest Under Sections 234B and 234C: The CIT(A) confirmed the charging of interest under Sections 234B and 234C. The Tribunal did not specifically address this issue separately in the detailed analysis. 8. Invocation of Penalty Under Section 271(1)(c): The CIT(A) confirmed the invocation of penalty under Section 271(1)(c). The Tribunal did not specifically address this issue separately in the detailed analysis. 9. Disallowance Under Section 14A Read with Rule 8D: The AO disallowed ?1,51,05,130/- under Section 14A read with Rule 8D for A.Y. 2011-12. The CIT(A) deleted the disallowance, noting no exempt income was earned during the year. The Tribunal upheld the CIT(A)’s decision, referencing various judicial precedents supporting no disallowance in the absence of exempt income. Conclusion: The Tribunal provided detailed directions for each issue, remanding some issues back to the AO for further examination and verification while allowing or deleting disallowances where sufficient evidence was provided by the assessee. The appeal by the Revenue was dismissed, and the assessee's appeals were partly allowed.
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