9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (9) TMI 250 - HC - Income TaxDeduction u/s 10A - sez unit - proof of manufacturing activity for manufacture of gold medallions - Consumption of minimum units of electricity and non claiming of labour charges - Held that - ITAT rejected the contentions of the revenue - We do not think that the Tribunal drew an incorrect legal inference from these materials. It recorded that there are books of account produced which demonstrate consumption of electricity there are other materials which would evidence consumption of units in the months of September and October and the general assertion of the assessee that this process is not so complicated requiring heavy machinery or the deployment of existing machinery and plant for days and months together. It is not a complex or complicated procedure. The manufacturing process is simple. It was the Revenue which was therefore obliged to falsify this version and particularly when similar claim of deduction under Section 10A was made in the earlier assessment year and not denied. The Revenue having failed to discharge this burden and obligation on it by law that the Tribunal concluded that the assessee s version deserves to be accepted - Decided against the revenue. Addition u/s 69C/68 - addition pertains to cash transported by road from branches outside Ahmedabad - Held that - As far as the cash transported from Ahmedabad is concerned it accepted the plea of the assessee and found that there were no contrary materials to conclude that the sum of 1, 90, 56, 727/ that related to the transport of cash from Ahmedabad to Kandla cannot be brought in a few hours. That distance of 250 kms. was found to be reachable.- Decided in favour of assessee. Addition u/s 68 on account of the settlement of liabilities of 3 debtors - Held that - The sum as above was finally received by the assessee from M/s. Joshi Bullion Gems and Jewelry Pvt. Limited (JBGJPL) headed by one Mr. Jayesh Desai. The sum was not directly received from the three parties who owed the money to the assessee. That is because the assessee and the said M/s. JBGJPL had entered into an assignment agreement. It is in these circumstances that the Tribunal extensively referred to all the three debtors and their debts how they were settled and how the 3rd party M/s. JBGJPL came into picture. - No additions u/s 68 - Decided against the revenue. Addition in respect of the stock sold by the assessee on 24th October 2008 - Held that - Tallying of the stock register in the absence of the discrepancies enables the Tribunal to reverse the concurrent finding when it was proved that the relevant materials have been ignored or brushed aside in rendering such concurrent findings then the Tribunal has duly performed its duty as a last fact finding authority though exercising a power of appeal. No substantial question of law. Disallowance of loss in diamond trade business - Held that - The study of the transaction revealed that the real intention of the assessee was to earn interest arbitrage differences in the rates of interest. The moment the export sales are received the assessee deposited the same with the bank and earned bank interest @ 8 to 9%. The same appears to be profitable to the assessee even after payment of guarantee commission and other incidental charges made to the bank. The fixed deposits help the assessee to avail buyers credit facility with the bank which is also a business decision. If the transaction is looked at holistically then it involves purchase and export of diamonds advance or immediate realizations of the export realizations investment in fix deposits availing buyer s credit against FDRs interest rates and commission rates foreign exchange gains/losses. If this is a practice followed (arbitrage transactions) and the same does not violate any law then this ground of the assessee deserves to be allowed. - Decided against the revenue. Disallowance u/s 40A(2) - taking loans from sister concerns on interest @6% to 7% and giving loans on interest further @4% - Held that - ITAT directed the AO to calculate direct interest over and above 4% and that be treated as unreasonable and excessive. This is part allowing of ground No.12 and not in its entirety. The reasoning in that behalf we do not see how such reasoning which once again performs a balancing act and only allows a partial claim based on satisfactory explanation of the assessee can give rise to a substantial question of law. Disallowance of interest expenses - assessee received huge interest free loans and advances - Held that - The Tribunal has found that the assessee received interest free loans and advances and has also paid interest on other loans and advances. The funds position has also been noted and with relevant details. It is in these circumstances that the nexus was held to be established. No substantial question of law. Forward contract loss - speculation loss or not - trading of gold and bullion - Held that - The Tribunal then terms the findings of fact as consistent with the legal provisions and the materials on record to conclude that the impugned loss amounts to hedging loss and constitutes business loss. The Commissioner of Income Tax (Appeals) has rightly examined this matter from this angle and by applying such legal principle. Whether the loss amounts to hedging loss or is a speculation loss has been examined by the Commissioner and in all details. Once there is such an exercise carried out to grant benefit of Section 43(5) of the IT Act to the assessee then the above grounds arising from the Revenue s Appeal are also not substantial questions of law - Decided against the revenue.
Issues Involved:
1. Deduction under Section 10A of the IT Act. 2. Addition under Section 69C/68 of the IT Act. 3. Addition under Section 68 of the IT Act on account of settlement of liabilities. 4. Addition in respect of stock sold. 5. Commission payment. 6. Disallowance of loss in diamond trade business. 7. Disallowance under Section 40A(2) on interest paid to sister concern. 8. Disallowance of interest expenses. 9. Forward contract loss. 10. Addition made u/s 40(a)(ia) on account of short deduction of TDS. Issue-wise Detailed Analysis: 1. Deduction under Section 10A of the IT Act: The Tribunal examined whether the assessee had brought sufficient materials before it in terms of Subsection (4) of Section 10A. The Revenue argued that the assessee did not carry out manufacturing activities in the SEZ unit, citing discrepancies in electricity consumption and production timelines. The Tribunal found that the Revenue failed to produce material evidence to disprove the books of account that demonstrated electricity consumption and other relevant details. The Tribunal concluded that the Revenue did not discharge its burden of proof, and the assessee's claim under Section 10A was accepted. 2. Addition under Section 69C/68 of the IT Act: The Tribunal considered the addition of ?2.33 crores related to cash transported from branches outside Ahmedabad. The assessee claimed the cash was for customs duty payments at SEZ, Gandhidham. The Tribunal found that the assessee had adequate cash balances in its books and that the cash payments were made towards customs duty. However, the Tribunal upheld the addition of ?2.33 crores due to insufficient documentation but accepted the assessee's explanation for the remaining amount. 3. Addition under Section 68 of the IT Act on account of settlement of liabilities: The Tribunal examined the addition of ?141.24 crores related to the settlement of liabilities of three debtors. The Tribunal found that the assessee received the sum from M/s. Joshi Bullion Gems and Jewelry Pvt. Limited (JBGJPL) through an assignment agreement. The Tribunal concluded that the objections of the Assessing Officer and the Commissioner of Income Tax (Appeals) were not sustainable and accepted the assessee's explanation. 4. Addition in respect of stock sold: The Tribunal found that there was enough material on record to support the assessee's claim regarding the stock sold on 24th October 2008. The Tribunal noted that there were sale invoices, labour charges bills, and book entries that corroborated the transaction. The Tribunal reversed the concurrent findings of the lower authorities and allowed the assessee's ground. 5. Commission payment: The Tribunal noted the rival contentions and found substance in the assessee's arguments. The Tribunal remanded the matter to the Assessing Officer for re-adjudication, allowing the assessee to furnish all transactions and establish the nexus. 6. Disallowance of loss in diamond trade business: The Tribunal found that the assessee's transactions in diamond trading were legitimate business decisions aimed at earning interest arbitrage. The Tribunal noted that the special auditors did not find any infirmity in the transactions and that the assessee had not availed any export benefits. The Tribunal allowed the assessee's claim for the loss incurred in the diamond trade business. 7. Disallowance under Section 40A(2) on interest paid to sister concern: The Tribunal found that the interest rate paid to the sister concern was higher than that paid to other parties, attracting the provisions of Section 40A(2)(b). The Tribunal directed the Assessing Officer to calculate the interest over 4% as unreasonable and excessive, partially allowing the assessee's ground. 8. Disallowance of interest expenses: The Tribunal noted that the assessee had sufficient interest-free funds to cover the interest-free loans advanced. The Tribunal found that the Commissioner of Income Tax (Appeals) had correctly applied the binding judgment of the High Court, and the Tribunal upheld the deletion of the addition made by the Assessing Officer. 9. Forward contract loss: The Tribunal examined the genuineness of the forward contract loss and found that the transactions were linked to the assessee's business activities. The Tribunal concluded that the loss constituted a hedging loss and was allowable as a business loss, rejecting the Revenue's contention that it was a speculative loss. 10. Addition made u/s 40(a)(ia) on account of short deduction of TDS: The Tribunal's decision to delete the addition made under Section 40(a)(ia) on account of short deduction of TDS was admitted as a substantial question of law for consideration. Conclusion: The appeal was dismissed for all other questions proposed by the Revenue, except for the question regarding the addition made under Section 40(a)(ia) on account of short deduction of TDS, which was admitted for consideration.
|
