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2017 (8) TMI 943 - AT - Income TaxAddition u/s 68 - sum received by the appellant through banking channels from Mr. Patrick Brian Joseph Curran (an UK citizen) and Mr. Gregory Douglas Strohfeldt (an Australian citizen) against fresh allotment of preference shares - Held that - AO/CIT(A) did not bring any evidence to rebut the evidences furnished by the assessee and made the addition on suspicion and speculations. It is settled law that, no addition can be made on the basis of surmises, suspicion and conjectures. It is well settled law by the judgment of the Apex Court in the case of ITO vs. Ch. Atchaiah reported in (1995 (12) TMI 1 - SUPREME Court) that the assessing officer has to only assess right person instead of wrong person. The appellant even at the cost of repetition, seeks to submit that despite appellant having discharged its initial onus to establish that the identity of the creditors, creditworthiness of the transaction and genuineness of the transaction, the addition has been sustained primarily on the ground the assessee has failed to establish the source of the source. In the instant case, the assessee has established even the source of the source by furnishing additional evidences, however, same has been rejected purely on technical consideration and the addition has been made and sustained on the aforesaid ground which is wholly unsustainable. - Decided in favour of assessee. Addition on expenditure on rent holding the same to be excessive - Held that - The appellant has furnished the complete details of the expenditure, which expenditure has been incurred for the purpose of its business and there is not even any allegation that expenditure incurred by the appellant not genuine, as such, disallowance made by the AO and sustained by the learned CIT(A) is directed to be deleted.- Decided in favour of assessee. Addition of notional amount on the ground of nondisclosure of correct rental income - Held that - As before the CIT(A), appellant filed its submissions and also enclosed the letter dated 31.08.2011 however learned CIT(A) without considering the aforesaid letter, merely on suspicion that agreement with Magnum did not provide for variation of rent, upheld the addition. In fact he has failed to appreciate that no such income accrued to the appellant as has been taxed. In view of the letter dated 31.08.2011, appellant has accepted the proposal of reduced rent receivable from the sister concern on account of commercial expediency and it is not a case that appellant has received a higher sum but has not declared the correct sum. Since the appellant has declared the actual rent received by it, and there is no material that appellant has received the higher sum over and above the declared sum, as such, addition made by the AO and sustained by the learned CIT(A) without taking cognizance of the factual substratum of the case and ignoring the commercial exigency be deleted. - Decided in favour of assessee. TDS u/s 194J - Addition made on account of alleged failure to deduct tax at source from amount of goodwill - appellant did not claim any deduction for the aforesaid amount in the books of accounts - Held that - The appellant did not claim any deduction for the aforesaid amount in the books of accounts or return of income for the relevant previous year, since the same was capitalized as intangible assets. Therefore, even assuming on the aforesaid sum, appellant was required to deduct tax at source, no addition can be made and at best a disallowance can be made by invoking section 40(a)(ia) of the Act, however such provision is wholly inapplicable, as aforesaid provision presupposes a deduction should have been claimed by the assessee on which expenditure no TDS has been deduction under chapter XVI1-B of the Act. Accordingly, the aforesaid addition made by the AO and sustained by the learned CIT(A) for alleged failure to deduct tax at source is beyond jurisdiction, and is directed to be deleted. - Decided in favour of assessee. Disallowance of stamp duty charges paid at the time of registration of rent agreement - Held that - Appellant had leased office premises at Kalkaji and Patparganj and sub-let part thereof to sister concerns. That learned disallowed the aforesaid sums by holding that such an expenditure is capital expenditure. Learned CIT(A) though admitted that registration charges paid on lease agreements cannot be held to be capital expenditure, however arbitrarily uphold the addition. It was submitted that since the stamp duty charges were payable in connection with the rental agreement, the same were in the nature of revenue expenses in the absence of any capital asset coming into existence in the hands of the appellant company as such, disallowance made by the AO and sustained by the ld. CIT(A) is directed to be deleted.- Decided in favour of assessee. Unabsorbed depreciation brought forward - Held that - The provisions relating to set off, carry forward and set off of unabsorbed depreciation are contained in Section 32(2) provides that where full effect cannot be given to depreciation allowance as per sub-section (1) in any previous year, then the allowance or part of such allowance, which cannot be so set off, is deemed to be part of the depreciation allowance for the subsequent year(s) and is accordingly allowed as deduction in such succeeding previous year and so on for the succeeding year(s). In view of the aforesaid statutory provision, the unabsorbed depreciation relating to assessment year 2009-10 which remained unadjusted on 01.04.2011, would merge with the depreciation of previous year relevant to the assessment year 2012-13 and the aggregate of such unabsorbed depreciation would be carried forward to succeeding years for indefinite period. Thus nabsorbed depreciation relating to assessment year 2009-10 is directed to be allowed to be carried forward. - Decided in favour of assessee.
Issues Involved:
1. Addition under Section 68 of the Income Tax Act. 2. Rejection of additional evidences under Rule 46A of the Income Tax Rules. 3. Disallowance of rent expenditure. 4. Addition of notional income for non-disclosure of correct rental income. 5. Addition for failure to deduct tax at source on goodwill. 6. Disallowance of stamp duty charges. 7. Disallowance of set-off of carried forward unabsorbed depreciation. 8. Charging of interest under Sections 234B/234D and withdrawal of interest under Section 244A. Detailed Analysis: 1. Addition under Section 68 of the Income Tax Act: The assessee received ?4,16,18,889 from two non-resident individuals towards allotment of preference shares. The Assessing Officer (AO) made an addition under Section 68, doubting the creditworthiness of the investors despite the assessee providing confirmations, bank statements, and other documentary evidence. The Tribunal held that the assessee had discharged its initial onus by establishing the identity and genuineness of the transactions. The AO did not bring any adverse material to rebut the evidence provided by the assessee. The Tribunal referenced multiple judicial pronouncements, including the Full Bench decision in Sophia Finance and the Supreme Court's judgment in Lovely Exports, to conclude that the addition under Section 68 was unwarranted and directed its deletion. 2. Rejection of Additional Evidences under Rule 46A: The CIT(A) rejected additional evidences furnished by the assessee under Rule 46A on technical grounds, despite the AO not disputing their genuineness in the remand report. The Tribunal noted that the additional evidences were relevant and should have been admitted to ensure substantial justice. The rejection of these evidences was deemed unwarranted. 3. Disallowance of Rent Expenditure: The AO disallowed ?89,114 out of total rent expenditure of ?27,89,114, claiming the amount was excessive. The assessee provided a detailed breakup of the rent expenses, including rent paid to various parties and service tax components. The Tribunal found that the assessee had adequately substantiated the rent expenses and directed the deletion of the disallowance. 4. Addition of Notional Income for Non-Disclosure of Correct Rental Income: The AO added ?4,40,050 to the assessee's income, alleging non-disclosure of correct rental income from sub-letting premises to sister concerns. The assessee provided evidence of reduced rent due to commercial exigencies and termination of agreements. The Tribunal held that the AO's addition was based on incorrect assumptions and directed its deletion. 5. Addition for Failure to Deduct Tax at Source on Goodwill: The AO treated ?99,72,783 paid for acquiring business as royalty under Section 9(1)(vi) and added it to the income for failure to deduct tax at source under Section 194J. The Tribunal noted that the payment was for outright acquisition of business, not for obtaining the right to use intangible assets. The Tribunal referenced judicial precedents to confirm that such payments do not constitute royalty and directed the deletion of the addition. 6. Disallowance of Stamp Duty Charges: The AO disallowed ?55,000 paid as stamp duty for rental agreements, treating it as capital expenditure. The Tribunal found that the stamp duty charges were revenue expenses incurred for business purposes and directed the deletion of the disallowance. 7. Disallowance of Set-Off of Carried Forward Unabsorbed Depreciation: The AO disallowed the set-off of ?7,07,187 of unabsorbed depreciation from AY 2009-10. The Tribunal held that the unabsorbed depreciation merges with the depreciation of subsequent years and should be allowed to be carried forward indefinitely. The disallowance was directed to be deleted. 8. Charging of Interest under Sections 234B/234D and Withdrawal of Interest under Section 244A: The Tribunal did not specifically address this issue in detail, but the overall decision to allow the appeal implies that the assessee's contentions regarding interest under Sections 234B/234D and withdrawal of interest under Section 244A were accepted. Conclusion: The Tribunal allowed the appeal of the assessee, directing the deletion of various additions and disallowances made by the AO and upheld by the CIT(A). The Tribunal emphasized the importance of substantial justice over technical considerations and relied on multiple judicial precedents to support its findings.
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