2017 (11) TMI 1083 - HC - Income Tax

Trading addition - rejection of books of accounts - Held that - In view of the observations made by the Tribunal with regard to section 145(3), unless the books of accounts which have been found not genuine and the reasons for rejecting the books of account are just and proper, the view taken by the Tribunal is required to be upheld. In that view of the matter, the issue is answered in favour of the assessee. Eligibility to benefit of section 80-IA - Held that - As decided in CIT v. Bhawani Forge P. Ltd. 2014 (12) TMI 932 - GUJARAT HIGH COURT Tribunal after considering the material on record has rightly held that the assessee has satisfied all the conditions in order to avail benefit of section 80-IA of the Income-tax Act. Apart from that, learned advocate for the appellant-Revenue is not in a position to show how the findings of the Tribunal are bad in law and on facts. - Decided in favour of the assessee. Loan as advanced by the family members - Held that - We are convinced with the arguments of the learned authorised representative as to prevailing market rate for the loans of permanent in nature and long-term loans is between 18 per cent. to 24 per cent. whereas the cases compared by the Assessing Officer are pertaining to the loans of temporary in nature. Also the assessee has advanced the money for the purpose of business needs, is not under dispute. Therefore, in such circumstances and facts of the case, the Assessing Officer is not justified in considering the said payment of interest as excessive or unreasonable and the same is directed to be deleted. - Decided in favour of the assessee. Allowance of expenses of insurance relating to earlier year - Decided in favour of the assessee.

Summary

Issues Involved:
- Common questions of law and facts in multiple appeals challenging Tribunal's judgment
- Section 145(3) trading additions, deduction under section 80-IA, higher interest rate under section 40A(2)(b)
- Deduction under section 80-IB, reasons for Tribunal's decision without quoting earlier view
- Disallowed deduction under section 80-IB, addition of interest paid under section 40A(2)(b), insurance expenses

Analysis:
1. Section 145(3) Trading Additions: The Tribunal's decision on trading additions under section 145(3) was challenged by the appellant, arguing that the Commissioner of Income-tax (Appeals) and the Tribunal wrongly considered the issue. The counsel contended that the benefits under section 80-IA were not granted due to a shortfall observed by the Assessing Officer. Additionally, inconsistencies in the rate of interest paid to family members compared to others were highlighted, claiming an error in allowing these expenses.

2. Deduction under Section 80-IA: The Tribunal upheld the deduction under section 80-IA, citing precedents and confirming that the assessee satisfied all conditions for availing the benefit. The Tribunal's decision was supported by legal reasoning, and the appeal challenging this deduction was dismissed.

3. Higher Interest Rate under Section 40A(2)(b): The Tribunal justified the higher rate of interest allowed under section 40A(2)(b) to specified persons, emphasizing the purpose of the loans advanced for business needs. The Tribunal's decision to delete the excessive interest payment was based on market rates and the nature of the loans, ruling in favor of the assessee.

4. Insurance Expenses: The issue of insurance expenses was raised in one of the appeals, where the Tribunal disallowed the expenses pertaining to a previous year based on the accounting method followed by the assessee. The Tribunal's decision to uphold the disallowance of insurance expenses was supported by the assessment records and accounting principles.

5. Overall Decision: After thorough consideration of each issue, the High Court upheld the Tribunal's decisions in favor of the assessee, dismissing the appeals filed by the Department. The Court agreed with the Tribunal's reasoning and legal interpretations, leading to a final judgment in favor of the assessee across all issues raised in the appeals.