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Showing 81 to 100 of 1494 Records
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2016 (6) TMI 1418
Valuation - inclusion of customization charges received by the assessee in turnover or not - HELD THAT:- Admittedly, customization charges to the software products sold by the assessee was received by the assessee after the sale was completed. The sale proceeds received by the assessee was also declared in the return filed by it. It is also admitted that for the customization charges received, the assessee had paid service tax. 'Sale price' has been defined to mean the valuable consideration received or receivable by a dealer for the sale of any goods less any sum allowed as cash discount, according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods or services at the time of or before delivery thereof, excise duty, special-excise duty or any other duty taxes except the tax imposed in the K.V.A.T. Act.
The customization charges are admittedly received by the assessee after the delivery of the goods to the customer. This, therefore, means that the levy of customization charges does not satisfy the requirements of the Act to classify it as part of sale price. If that be so, customization charges could not have formed part of the sale consideration of the assessee and for its non inclusion in its return, the assessee could not have been faulted.
Revision dismissed.
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2016 (6) TMI 1417
Penalty u/s 271(1)(b) - non-cooperative to the various scrutiny notices - HELD THAT:- There is no dispute about the facts narrated in the preceding paragraphs. The Assessing Officer as well as the CIT(A) for having committed default in responding to above stated scrutiny notices. We find from the lower appellate order that the assessee has duly explained its non appearance/adjournment applications.
Assessing Officer completed assessment on basis thereof on 29-12-2010 assessing total loss at ₹ 1,80,60,440/- raising nil tax demand. This is not the Revenue’s case that the Assessing Officer had not framed a regular assessment u/s 143(3) of the Act on the basis of assessee’s documents placed on record. We conclude that the assessee’s act cannot be treated as to have non-cooperative to the various scrutiny notices. We delete the impugned section 271(1)(b) penalty. Assessee’s appeal is allowed.
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2016 (6) TMI 1416
Exemption u/s 11 - Exemption denied by AO because assessee society is set up for religious activities while claiming charitable status which is clear violation of section 13(1)(b) - HELD THAT:- We find the issue to be covered in favour of the assessee by the decision of ITAT in assessee’s own case for assessment year 2009-10 [2012 (9) TMI 1198 - ITAT DELHI] allowing the claim for exemption u/s 11 - Decided in favour of assessee.
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2016 (6) TMI 1415
Assessment u/s 153A - as per assessee since no assessment proceedings was pending on the date of the search on 18.2.2009, the completed assessment on the date of search cannot be reopened for the purpose of making addition for the block period - HELD THAT:- In the case before us, the assessee has filed the return of income in the regular course before the date of search and the Assessing Officer completed the assessment u/s 143(3) of the Act by determining the total income - on the date of search on 18.2.2009, no assessment proceeding was pending for the assessment year 2006-07. The question arises for consideration is when no assessment proceeding was pending on the date of search, can the Assessing Officer frame the assessment u/s 153A of the Act in the absence of any material found during the course of search operation? This Tribunal is of the considered opinion that in the absence of any search material, no assessment can be made for the block period in respect of the income disclosed before the date of search and the assessment was already completed.
Therefore, in view of the language employed by the Parliament in sec. 153A of the Act, the Assessing Officer has to confine himself only to the material found during the course of search operation. Therefore, when the assessment proceeding was completed before the date of search, the Assessing Officer has no jurisdiction to frame block assessment u/s 153A of the Act in the absence of any material found during the course of search operation. Thus the orders of the lower authorities are set aside and the entire addition made by the Assessing Officer is deleted.
Valuation of closing stock - method of valuation of closing stock - assessee is valuing the closing stock depending upon the stock which remains unsold - HELD THAT:- The assessee is engaged in the business of readymade garments and other textile products. It is not in dispute that the fashion is changing very fast and the assessee has to stock the latest fashion textiles so as to meet the expectation of the customers. The only objection of the Revenue appears to be that the assessee is valuing the silk sarees at Rs. 100/-. The lower authorities have not classified the nature of the silk sarees. The silk product contains various varieties. Some of the silk sarees may contain pure zari and some of the silk sarees may contain artificial zari. Apart from pure silk, art silk also available in the market, hence, the valuation may differ from product to product. The silk sarees manufactured in one particular year may not be liked by the people after three or four years. Therefore, the assessee has to necessarily value the stock if it remains unsold for more than three years at the net realizable value or a value which could be estimated on adhoc basis. In this case, the assessee has estimated the same at Rs. 100/- or net realizable value in respect of the stocks which remains to be unsold for more than three years. The Assessing Officer has also found that it is not possible to identify the goods remained unsold in the showroom of the assessee. The fact remains that each and every product of the assessee was allotted by-number and it can be identified with reference to the by-number. Therefore, if the Revenue authorities wanted to identify the goods remained unsold for more than one year, two years or three years as the case may be, it can be verified and identified by referring to by-numbers. Hence, the Assessing Officer cannot doubt the valuation made by the assessee
This Tribunal is of the considered opinion that in view of the nature of business undertaken by the assessee and the change of fashion year by year, the goods remain unsold needs to be valued either at cost or net realizable value whichever is lower. Since the assessee has taken the net realizable value for valuing the closing stock, the Assessing Officer is not justified in making the addition. It is also not in dispute that the assessee has offered for taxation the difference between the actual sale price and the net realizable value estimated by the assessee for valuation of closing stock. Therefore, the Revenue cannot have any grievance on the method of valuation adopted by the assessee. In view of the above, we are unable to uphold the orders of the lower authorities and accordingly, the same are set aside. The Assessing Officer is directed to delete the disallowance.
Disallowance u/s 40A(2)(a) - assessee submitted that the assessee claimed payment of interest @ 18% to the specified persons provided u/s 40A(2)(b) assessee has also made advances to partners and collected interest only @ 13% - AO after considering the above facts, found that the payment of interest at 18% to the specified persons are excessive. Accordingly, he restricted the interest payment to 13% - HELD THAT:- This claim of the assessee is not in dispute. The assessee admittedly paid interest only @ 18%. Therefore, this Tribunal is of the considered opinion that when the assessee has paid interest less than the market rate of interest for the unsecured loan, the Assessing Officer is not justified in restricting the interest to 13%. Assessing Officer is not justified in restricting the payment of interest to 13%. Therefore, this Tribunal is unable to uphold the orders of the lower authorities and accordingly the same are set aside. The Assessing Officer is directed to delete the disallowance of interest u/s 40A(2)(a).
Disallowance of contribution to LIC Gratuity Fund - assessee has contributed towards LIC Gratuity Fund of the employees - Assessing Officer disallowed the claim of the assessee on the ground that the fund was not approved by the prescribed authority - HELD THAT:- As the assessee has made contribution to LIC Gratuity Fund. It is also not in dispute that the assessee has already paid the money and the payment has gone out of the hands of the assessee. Therefore, this Tribunal is of the considered opinion that the judgment of the Apex Court in Textool Company Ltd.. [2009 (9) TMI 66 - SUPREME COURT] is squarely applicable to the facts of the case. When the money has gone out of the hands of the assessee, this Tribunal is of the considered opinion that the same has to be allowed even though the LIC Gratuity Fund was not approved by the concerned CIT in view of the judgment of the Apex Court in Textool Company Ltd.(supra). In view of the above discussion, we set aside the orders of the lower authorities and the Assessing Officer is directed to delete the addition towards contribution to LIC Gratuity Funds.
Disallowance of donation - HELD THAT:- Admittedly, the assessee has not produced the original receipts before the Assessing Officer for scrutiny. When the assessee has not produced the original receipts for making claim u/s 80G of the Act, this Tribunal is of the considered opinion that the Assessing Officer has rightly disallowed part of the claim. This Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the same is confirmed.
Disallowance of pooja expenses - HELD THAT:- The expenditure incurred by the assessee is not in dispute. It is the belief of each individual to garland God Almighty and start his business. If the assessee incurred expenditure for flowers, incense sticks, decorative items etc. for doing pooja, this Tribunal is of the considered opinion that the same is for business purpose. Hence, the Assessing Officer is not justified in disallowing the claim of the assessee. When the assessee starts its business by performing pooja, this Tribunal is of the considered opinion that the expenditure incurred for performing pooja is for business purpose, therefore, the same has to be allowed while computing the total income. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition made.
Disallowance towards repairs - HELD THAT:- It appears from the assessment order that the assessee has not produced any material to support the claim of expenditure towards repair. However, the assessee filed certain bills and vouchers before the CIT(A) and the CIT(A) called for the remand report from the Assessing Officer - AO after verifying the material filed by the assessee, found that the claim made by the assessee is correct except to the extent of Rs. 64,54,309/-. When the Assessing Officer found that the claim made by the assessee is correct, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the order of the Assessing Officer. In the absence of any other material available on record to prove the genuineness of the claim to the extent of Rs. 64,54,309/-, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the order of the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the CIT(A)
Expenditure claimed by the assessee for renovation of the showroom - whether the assessee can claim the expenditure as revenue in nature? - HELD THAT:- This issue was specifically considered by this Tribunal in the assessee’s own case for assessment year 2002-03 when the assessee challenged the order of the Administrative Commissioner u/s 263 of the Act. This Tribunal found that the similar expenditure can be allowed as revenue in nature. Since the Co-ordinate Bench has already opined that the expenditure is revenue expenditure and merely because the Revenue’s appeal against the order of this Tribunal is pending before the High Court, this Bench cannot take a different view. Moreover, the Kerala High Court in the case of Joy Alukkas India Pvt. Ltd [2014 (6) TMI 80 - KERALA HIGH COURT] had an occasion to consider an identical issue. In the case before the Kerala High Court the assessee took a premises on lease and incurred expenditure for renovation. The object of the assessee was to establish a showroom in the course of its business activity. The Kerala High Court, after considering the relevant case laws on the subject, found that the similar expenditure is revenue in nature.
Disallowance of lease commitment charges and donations - HELD THAT:- donations were paid from the account of the assessee-firm and after receiving donation by the respective temples, the Executive Officer executed the lease deed in favour of Shri K. Mahesh. Therefore, it is obvious that the assessee-firm made the payments in the form of donation as per the direction of HR&CE for obtaining the lease hold lands. Even though initially the lease deed was executed by Shri K. Mahesh and the legal heirs of the erstwhile tenants, the lease was subsequently taken from the temples directly consequent to the order of the HR&CE Department. Therefore, this Tribunal is of the considered opinion that the lease commitment charges which was disclosed as donation in the books of account is for the purpose of obtaining lease holding interest of the land in question. Since the donation was made as per the direction of HR&CE for the purpose of obtaining lease of the land for business purpose, this Tribunal is of the considered opinion that the payment is revenue in nature. Therefore, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition made towards lease commitment charges
Addition towards stock discrepancy - HELD THAT:- Assessing Officer himself admits that he could not identify the stock with reference to by-number provided by the assessee. If the Assessing Officer could not identify the stock with reference to by-number allotted by the assessee, this Tribunal is of the considered opinion that the method of taking inventory by the Revenue may not reflect the correct position of closing stock. When the assessee is maintaining stocks systematically by allocating by-number and also providing a system of tracking through the computer, this Tribunal is of the considered opinion that the authorities below ought to have examined the method adopted by the assessee in a detailed manner and an opportunity shall be given to the assessee to explain how the method works. However, without considering all these factors, the Assessing Officer simply came to the conclusion that there was a discrepancy. This Tribunal is of the considered opinion that the discrepancy was due to stocks remain unsold for more than one year and the assessee valued the same at the net realizable value or cost whichever is less, therefore, the CIT(A) is not justified in confirming the addition made by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition.
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2016 (6) TMI 1414
Maintainability of application - time limitation - Were the Courts below justified in dismissing the application filed under Order IX Rule 13 of Code of Civil Procedure on the ground of the delay of 431 days in filing the miscellaneous petition? - HELD THAT:- Both the Courts below failed to notice that the suit filed is in respect of immovable property and the rights of the parties should not be deprived only on the ground of technicality. When substantial justice and technical considerations are pitted against each other, only the substantial justice should prevail. Admittedly, in the present case there is delay of 431 days in filing the miscellaneous petition and if the delay is condoned it will no way prejudice the rights of plaintiff-respondent by giving right to the appellant to put forth his case and the petition will be decided on merits.
In the present case, the appellant-defendant has explained the delay of 431 days in filing necessary application under Section 5 of Limitation Act stating that due to the ignorance of law and due to the fact that their advocate has been retired from the case without informing the stage of the suit and thereafter, the trial Court proceeded to pass an ex-parte judgment and decree, which clearly indicates in the judgment of the trial Court that the defendant was absent. The Courts below ought to have given an opportunity to the appellant-plaintiff to put forth his case by condoning the delay and decide the rights of the parties on merits. Mere dismissing the Misc. Petition on the ground of delay of 431 days would result in throwing out the appellant at the very threshold without considering the case on merits resulting in cause of justice being defeated - Admittedly in the present case, the mistake committed by the counsel for the defendant, the defendant should not suffer because of the default of his advocate.
The Hon'ble Supreme Court in the case of RAFIQ AND ANOTHER VERSUS MUNSHILAL AND ANOTHER [1981 (4) TMI 255 - SUPREME COURT] while considering the delay in filing the application on account of the fault committed by the advocate on record has held that parties should not suffer.
Admittedly, in the present case, the delay is 431 days and the rights of the parties in respect of immovable properties are involved and hence, the rights of the parties cannot be defeated by way of technicality - Therefore, the substantial question of law is answered in the negative holding that the Courts below were not justified in dismissing the Misc. Petition on the ground of delay - Application allowed.
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2016 (6) TMI 1413
Disallowance of expenditure - only objection of the Revenue before this Tribunal is that the Assessing Officer has not said anything in the remand report about the other expenditure even though he has objected about the professional and consultancy charges, customs duty penalty, discarded assets written off, ROC filing fees and financial expenses - HELD THAT:- This Tribunal is of the considered opinion that when the CIT(A) has called for a specific remand report on the basis of the material on record in respect of the expenditure and the Assessing Officer found that only the expenditure relating to rent charges, professional and consultancy charges, customs duty penalty, discarded assets written off, ROC filing fees and financial expenses cannot be allowed which comes to the extent of ₹ 3,66,23,924/-. In respect of other expenditure, he has not made any comments. Therefore, the presumption is that the Assessing Officer has nothing to comment on the remaining expenditure. In other words, the Assessing Officer has satisfied about the expenditure claimed by the assessee.
Share capital advance - assessee has not filed the names and addresses of the persons who paid the capital advance, therefore, the AO made addition - HELD THAT:- As rightly submitted by the ld. Counsel for the assessee, there is no allegation that the share application money was emanated from the corpus of the assessee. The assessee has filed the names and addresses of the share applicants. Therefore, it was for the Assessing Officer to examine further. Merely because the share applicants are from Andhra Pradesh, that cannot be a reason to disallow the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the same is confirmed.
Reopening of assessment u/s. 147 - HELD THAT:- It is an admitted fact that the assessee has not filed the return of income in the regular course. Therefore, the Assessing Officer issued a notice u/s. 148 on 8.2.2010. Subsequently a notice u/s. 142(1) of the Act was also issued. Consequent to the notices issued by the Assessing Officer u/s. 148 and 142(1) of the Act, the assessee has filed the return of income on 7.12.2010 disclosing a loss. In those circumstances, this Tribunal is of the considered opinion that the Assessing Officer has rightly reopened the assessment.
Addition u/s 40(a)(ia) - rent and professional and consultancy charges paid by the assessee - HELD THAT:- As rightly found by the CIT(A), rent and professional and consultancy charges paid by the assessee was not subjected to TDS, therefore, the same has to be disallowed u/s. 40(a)(ia) - The assessee has not filed any material either before the Assessing Officer or before this Tribunal the nature of the penalty paid by the assessee to the customs Department.
Penalty for contravention/violation of law cannot be allowed as business expenditure. The discarded assets to the extent was also disallowed by the AO. The details of discarded assets are not available on record. It is not known whether the discarded assets are stock-in-trade or capital asset used as tool for carrying on the business.
In the absence of any supporting material and the details of the machinery/assets discarded, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside in respect of disallowance of discarded assets and remand back to the file of the Assessing Officer for reconsideration. The Assessing Officer shall reexamine the issue and bring on record the nature of the assets discarded and thereafter decide the issue in accordance with law after giving reasonable opportunity to the assessee.
No material is available on record with regard to the claim of financial expenses. Therefore, the CIT(A) has rightly confirmed the financial expenses. This Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed.
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2016 (6) TMI 1412
Stay petition - stay was granted by the Tribunal for a period of 180 days with a condition that the assessee should make payment of 50% of the total demand - HELD THAT:- We find that on earlier occasion stay was granted by the Tribunal subject to payment of 50% of the outstanding demand i.e ₹ 3.46 Crores and the assessee had made this payment. Appeal was fixed for hearing on 05- 01-2016 and that day hearing could not take place for some reasons not attributable to the assessee and therefore, we feel it proper to grant extension of stay for a further period of 180 days from the date of expiry of earlier stay order or till the disposal of the appeal whichever is earlier.
We want to make it clear that the assessee should not seek adjournment during the course of hearing of this appeal without any valid and compelling reasons and if the assessee seeks adjournment without any valid and compelling reasons then the stay should stand automatically vacated.
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2016 (6) TMI 1411
Addition u/s 68 - CIT(A) discussed each and every cash credit entry and found the advances by 13 creditors as genuine and accordingly restricted the addition made on account of unexplained cash credit - appeal preferred by the Revenue against the order passed by the CIT(A) stands dismissed by the ITAT - HELD THAT:- CIT(A) discussed the creditworthiness and genuineness of each and every individual transaction and found 13 creditors as genuine - ITAT has arrived at the finding that the assessee has established the creditworthiness of the creditors to the extent he is obliged under the law to do so.
ITAT found that the creditors have accepted that they had advanced their respective credits to the assessee and also given the details of the sources of the deposit. ITAT opined that the assessee cannot be burdened with proof of 'source of source' and the cash credit cannot be held to be ingenuine by stretching the ingredients of Section 68 too far. We are of the considered opinion that the findings arrived at by the CIT(A), affirmed by the ITAT regarding identity of the creditors and creditworthiness and genuineness of the transactions remain findings of facts, which do not give rise to any substantial question of law. - Decided against revenue.
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2016 (6) TMI 1410
Addition u/s 40A(3) for cash payments made exceeding ₹ 20,000/- per day - HELD THAT:- In the case of the assessee, it is apparent that each and every transporter delivers the raw materials from the supplier in the factory premises of the assessee and collects transport charges at the place of delivery by cash. Further, most of the expenses relate to transportation cost such as fuel expense, driver expense etc., which has to be settled then and there in cash. The lorry drivers will not be able to refuel the lorry if he accepts cheque which would take some time for withdrawal of cash.
Most of the lorry drivers would not be having bank account to en-cash cheque. In these circumstances, payment by cash is inevitable - there is nothing on record to establish that the transport charges are paid to a single person above ₹ 20,000/- in cash in the case of the assessee. The genuineness of the payment is also not in dispute. Based on these facts and the detailed observations made by the learned Commissioner of Income Tax (Appeals), he has deleted the additions made under section 40A(3).
Disallowance under section 14A r.w.r 8D - investments made for acquiring the shares of the assessee’s sister concerns - HELD THAT:- As relying on LAKSHMI RING TRAVELLERS, COIMBATORE [2012 (3) TMI 464 - ITAT CHENNAI] we remit the issue back to the file of the learned Assessing Officer to verify as to whether the assessee had invested out of its non-interest bearing funds in its sister concerns or associate concerns for strategic reasons and if found so delete the addition made on that regard, however if found otherwise, pass appropriate orders as per merit & law, after affording sufficient opportunity of being heard to the assessee. It is ordered accordingly for all the relevant assessment years.
Addition u/s. 68 being unexplained cash credits - HELD THAT:- The source of advances is established in the case of the assessee. The advances are made to petty land owners for purchase of land from them. Since the assessee was not agreeable to the price determined by the State Govt., for acquiring those lands, the project was dropped and the advances made were returned and the same was re-deposited in the assessee’s bank account. The names & address of the intermediaries are also furnished by the assessee. All these facts could have been easily verified by the Revenue by examining the coordinators and the land owners of that area. Revenue has miserably failed to make any enquiries even at the preliminary level. Revenue has failed to prove the onus caste upon it for rebutting the explanation made by the assessee. In this situation, we are of the considered view that CIT (Appeals) has rightly given relief to the assessee by directing the learned Assessing Officer to delete the addition.
Deduction under section 80IA had to be granted on the income derived from the undertaking after all disallowances made by invoking the provision of Section 40A(3), 14A & 68 - HELD THAT:- It is needless to mention that section 80IA of the Act is a provision with fiction by which the benefit of deduction is granted towards the income earned by the assessee. Hence, for the purpose of computing deduction under section 80IA of the Act, section 40A(3) and 14A cannot be given effect. Therefore, to that extent the deduction will not be available to the assessee. Further, section 68 provides that any sum which is credited to the books of the assessee against which no explanation is satisfactorily offered, such sum so credited, will be charged to income tax as the income of the assessee. Thus the statute clearly provides that irrespective of any other factors this amount will be brought into the ambit of tax as a distinct income which is not disclosed. Further Section 68 of the Act is also provision with legal fiction, wherein the unexplained credit in the books of accounts of the assessee is deemed to be the unexplained income of the assessee. Therefore, we do not find any merit in this ground raised by the learned Authorized Representative. Accordingly, this ground raised by the assessee is hereby dismissed.
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2016 (6) TMI 1409
TDS u/s 194A - Co-operative Bank liability to deduct tax on the interest paid to its members - Non deduction of TDS - Whether the Tribunal is right in law in overlooking the established principle of ‘generalia specialibus non derogant’ vis-à-vis the specific provisions of Sec.194A(3)(viia)(b) and general provisions of Sec.194A(3)(v)? - HELD THAT:- We find that, the issues which arise for consideration in the present appeal are already covered by the decision of this Court in case of The Commissioner of Income Tax and others Vs. The National Co-operative Bank Limited [2016 (6) TMI 1118 - KARNATAKA HIGH COURT] we hold that the Assessee which is a co-operative society carrying on banking business when it pays interest income to a member both on time deposits and on deposits other than the deposits with such co-operative society need not deduct tax at source Under Section 194A by virtue of the exemption granted vide Clause (V) of Sub Section (3) of the said section.
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2016 (6) TMI 1408
Deduction u/s. 80IA(4)(i) - Assessee is engaged in the business of providing cargo facilities at Bangalore International Airport(BIAL) - whether the company ought to comply with the condition that it should be developing, operating and maintaining any “infrastructural facilities? - CIT(Appeals) accepted the contention of the assessee that BIAL is a statutory body for the purpose of section 80IA(4)(i)(b), being an entity established under the laws for the time being in force - HELD THAT:- As decided in assessee's own case [2015 (11) TMI 401 - ITAT BANGALORE] the appellant is entitled to the benefit of deduction u/s 80IA(4), since all the conditions set out by the section are fulfilled in the cargohandling operations under a BOT arrangement with BIAL being carried on by it. The addition made by the AO by rejecting the claim is cancelled, and the AO is directed to allow the deduction to the appellant u/s 80IA(4)(i).
As the very same grounds on which this Tribunal has held that BIAL is not a statutory body, have been considered by the Hon’ble High Court and have been accepted that it is a statutory body. Therefore, respectfully following the Hon’ble Hon'ble jurisdictional High Court Order, we do not see any reason to interfere with the order of the CIT(A).
Agreement entered with BIAL is for development, operation and maintenance of infrastructure facility u/s. 80IA(4) of the Income-tax Act. - Decided against revenue.
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2016 (6) TMI 1407
Deduction u/s 35(1)(iv) - expenditure incurred by the assessee for development of software products - Whether this expenditure pertains to the R & D activity of the assessee as per the provisions of section 35(1)(iv) r.w.s. 43(4)(ii)(a) of the Act wherein the definition of scientific research has been provided? - HELD THAT:- Since the proper record and other details are not available before us in respect of the actual nature of the expenditure in question therefore we cannot give a conclusive finding regarding the real nature of the expenditure incurred by the assessee whether it is incurred on R&D activity of the assessee or not.
In the facts and circumstances of the case, as well as in the interest of justice, we set aside this issue to the record of CIT (Appeals) for limited purpose of verifying the real nature of the expenditure incurred by the assessee whether it is for the R & D activity of the assessee. The CIT (Appeals) has to decide this issue after verification and examination of the relevant record and in the light of the decision of Hon'ble jurisdictional High Court in the case of Talisma Corporation Pvt. Ltd. [2013 (12) TMI 1419 - KARNATAKA HIGH COURT]. Needless to say the assessee shall be afforded an opportunity of hearing.
Nature of expenses - software application - revenue or capital expenditure - CIT- A allowed claim - HELD THAT:- There is no dispute that the assessee claimed the said expenditure was incurred for acquiring the application software to enable carrying on its business more efficiently and smoothly.The finding of the learned CIT (Appeals) is contrary to the claim of the assessee and further the learned CIT (Appeals) has not referred any specific evidence or record on the basis on which he has come to the conclusion that the application software in question is a stock in trade and was actually exported to the clients. In view of the above facts and circumstances, we set aside this issue to the record of the learned CIT (Appeals) for proper verification of the record and giving a specific finding on this issue. Needless to say the assessee be afforded an opportunity of hearing.
Deduction under Section 10A - DR submitted that when the assessee did not claim the deduction under Section 10A in the return of income then, after expiry of the limitation for making such declaration under Section 10A(8), the assessee is not eligible to claim the deduction - HELD THAT:- There is no dispute that initially the assessee did not claim the deduction under Section 10A as it has filed return of income by declaring loss. Subsequently when the Assessing Officer proposed to make certain addition, the assessee withdrew the declaration under Section 10A(8) and the claim of deduction under Section 10A on the positive income assessed by the Assessing Officer. The revenue is taking a technical objection that after the expiry of the time period provided under Section 10A(8) the assessee cannot withdraw the earlier declaration and make a claim of deduction under Section 10A - There are precedents on this issue and the Delhi Bench of the Tribunal in the case of Moser Baer India Ltd.[2006 (11) TMI 245 - ITAT DELHI-D]held that the time limit provided under Section 10A(8) is only directory if the claim made during the assessment proceedings is legally admissible then the same cannot be denied merely because it was not made in the return of income. The eligibility of the assessee in the case on hand to claim exemption under Section 10A of the Act is not denied otherwise being a software export unit registered with STPI. Therefore, we do not find any error or illegality in the order of the learned CIT (Appeals), the same is upheld.
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2016 (6) TMI 1406
Assessee is not interested to prosecute the matter - addition u/s 68 - Addition notice sent to the assessee at the address mentioned in Form No. 36 as well as the impugned order was returned back by the Postal Authority with the remarks “left” - HELD THAT:- The law aids those who are vigilant, not those who sleep upon their rights. This principle is embodied in well known dictum, “VIGILANTIBUS ET NON DORMIENTIBUS JURA SUB VENIUNT’. Considering the facts and keeping in view the provisions of rule 19(2) of the Income-tax Appellate Tribunal Rules as were considered in the case of CIT vs. Multiplan India Ltd. [1991 (5) TMI 120 - ITAT DELHI-D] we treat this appeal as unadmitted.
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2016 (6) TMI 1405
Interest receivable by the assessee from its Associate Enterprises (AEs) - calculated at the rate of 18% on the credit period beyond 180 days - assessee did not charge any interest on Exports Payments received after 180 days (overdue) from AE - Assessee pleaded though the Tribunal in principle agreed that if the assessee has to make the payments of imports some party then, receiving delayed export realization cannot be said to be bearing interest as assessee is already owing much more amount to its AEs on account of import payments - also contended that when the assessee is adopting a uniform policy of neither to receive the interest nor to pay the interest to its AEs, then, not only the parties or the dates on which the payment was receivable by the assessee is to be considered but the matter should be considered as a whole and the netting off of the interest payable and receivable be made - HELD THAT:- We find force in the above contention of the Ld. A.R. The matter is to be examined by the AO as a whole and if bench mark of 180 days is to be taken as the credit period without levy of interest then the AO should adopt the same criteria also in relation to the payments payable by the assessee to its AEs. Thereafter, the AO should do netting off of the interest payable and receivable and to make adjustments of the resultant amount of interest, if any, found, receivable by the assessee. With the above modified directions, the matter is restored to the file of the AO to examine and verify the facts and adjudicate the same as per the directions given above. Assessee appeal allowed for statistical purposes.
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2016 (6) TMI 1404
Exemption u/s 11 - Charitable activity u/s 2(15) - Scope of amendment to section 2(15) basis for cancellation of registration granted earlier u/s 12AA - HELD THAT:- Trust was carrying out activities in accordance with the statute under which it was created the same could be still considered to be non charitable in nature as per section 2(15) - we find has remanded the issue to the Tribunal for fresh examination of this aspect and has further categorically stated that anything observed in the order shall not be taken to be an expression on the merits of the controversy.
At this juncture it is pertinent to point out that even the CBDT has vide its Circular No. 21/2016 dt. 27/05/2016 clarified that registration of a charitable institution granted u/s 12AA should not be cancelled merely on account of the proviso to section 2(15) coming into play.
Sections 11 and 12 exempt income of charitable trusts or institutions, if such income is applied for charitable purpose and such institution is registered under section 12AA of the Act.
An entity, pursuing advancement of object of general public utility, could be treated as a charitable institution in one year and not a charitable institution in the other year depending on the aggregate value of receipts from commercial activities, The position remains similar when the first and second provisos of section 2(15) get substituted by the new proviso introduced w.e.f. 01-04-2016 vide Finance Act, 2015, changing the cut-off benchmark as 20% of the total receipts instead of the fixed limit of ₹ 25,00,000/- as it existed earlier.
The temporary excess of receipts beyond the specified cut-off in one year may not necessarily be the outcome of alteration in the very nature of the activities of the trust or institution requiring cancellation of registration already granted to the trust or institution. Hence, section 1 of the Act has been amended vide Finance Act, 2012 by inserting a new sub-section (8) therein to provide that such organization would not get benefit of tax exemption in the particular year in which its receipts from commercial activities exceed the threshold whether or not the registration granted is cancelled. This amendment has taken effect retrospectively from 1st April, 2009 and accordingly applies in relation to the assessment year 2009- 10 onwards.
It shall not be mandatory to cancel the registration already granted u/s 11 to a charitable institution merely on the ground that the cut-off specified in the proviso to section 2(15) of the Act is exceeded in a particular year without there being any change in the nature of activities of the institution. If in any particular year, the specified cut-off is exceeded, the tax exemption would be denied to the institution in that year and cancellation of registration would not be mandatory unless such cancellation becomes necessary on the ground(s) prescribed under the Act.
The cancellation of registration without justifiable reasons may, therefore, cause additional hardship to an assessee institution due to attraction of tax-liability on accreted income. The field authorities are, therefore, advised not to cancel the registration of a charitable institution granted u/s 12AA just because the proviso to section 2(15) comes into play. The process for cancellation of registration is to be initiated strictly in accordance with section 12 (3) and 12AA(4) after carefully examining the applicability of these provisions.
We hold that amendment to section 2(15) of the Act cannot be the basis for cancellation of registration granted earlier under section 12AA of the Act. Thus we set aside the order under appeal and hold that CIT was not justified in canceling the registration in the present case. Appeal of assessee is allowed.
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2016 (6) TMI 1403
Exemption u/s 11 - charitable activity u/s 2(15) - HELD THAT:- We hold that the assessee trust is carrying out charitable activity of advancement of public utility and the business activity carried out by it are incidental to the attainment of its main object and thus the proviso to section 2(15) is not attracted in the assessee case. Assessee is entitled to claim exemption u/s. 11 and the surplus earned by the assessee cannot be subjected to tax as income of the assessee.
Following the decision in the case of Hoshiarpur Improvement Trust [2015 (9) TMI 902 - ITAT AMRITSAR] has allowed the appeal of the assessee and directed that assessee will be eligible to get exemption under section 11 of the Income Tax Act. - Decided against revenue.
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2016 (6) TMI 1402
Expenditure of foreign travel to subsidiary companies - HELD THAT:- We are not convinced with the indirect beneficiary contribution by the subsidiary company in the progress of the assessee company on global business activities - expenditure of foreign travel to subsidiary companies shall be separately allocated to cost of project of subsidiary company and holding company and upheld the order of the CIT (A) on this ground as the CIT (Appeals) discussed the issue and gave finding on subsidiary company and restricted the disallowance. As the balance amount was not adjudicated, we remit the issue to the file of Assessing Officer to verify the genuineness of transaction and allow the claim. The ground of the assessee is partly allowed.
Addition paid by the assessee to Bombay Stock Exchange in connection to the amalgamation of business - HELD THAT:- The assessee company incurred this expenditure to merge M/s. Elgi Industrial Products Ltd for the smooth conduct of business and prime face this fees is paid once in life time for amalgamation of the company with enduring benefits we are of the opinion the expenditure has to be apportioned and transferred to profit and loss account as per the provisions of Sec. 35DD and we direct the ld. AO to allow apportioned claim in the previous year being the first year and this ground of the assessee is partly allowed.
Disallowance of expenditure as legal and professional charges paid to overseas parties - HELD THAT:- The expenditure is in the nature of legal and professional fee paid for services of translation, documentation, corporate matters and associated filing and such expenditure is wholly and exclusively for the business purpose and expenditure is genuine and relied on the decision of Apex Court. Assessee company acquired of Shares of M/s. Belair SA at Paris is for conducting business in Europe region and activity does relate to investment for enduring value and the expenses on acquisition of shares of foreign company directly or indirectly takes the character of capital in nature and shall be part of Business acquisition. Therefore, considering the apparent facts, necessity of expenditure and overseas payment, we are of the opinion that the professional charges paid to M/s. Stehlin & Associates, Paris in connection with acquisition is capital expenditure and we upheld the order of CIT() on this ground and the ground of the assessee is dismissed.
Remand report as laid out under Rule 46A of Income Tax Rules, 1962 while adjudicating the issue of foreign travel expenses - HELD THAT:- CIT (Appeals) has elaborately discussed on breakup of expenditure and business activities and granted partial relief. Assessee has submitted information before CIT (Appeals) which the ld. AO could not verify and ld. CIT (Appeals) has not called for comments or remand report and not complied the provisions of Rule 46A. We therefore, set aside the disputed issue to the file of the ld. Assessing Officer for limited purpose to verify the genuineness of statements filed in the appellate proceedings and the ld. Assessing Officer shall provide adequate opportunity of being heard to the assessee before passing the orders and the ground of the Revenue is allowed for statistical purpose.
Holyroyd Machinery replaced comes under ''Repairs and Maintenance'' - allowable expenditure u/s.37 - whether it is clearly a new machinery installed? - HELD THAT:- As explained that the replacement of parts play a important role in machinery and can work independently and shall provide perpetual enduring benefit and increase the life of existing machine. AR substantiated his arguments with evidence of photographs of units and also upgrade proposal of the company and relied on judicial decision of Apex Court. Apparent facts, functional test, submissions and judicial decisions set aside the order of CIT (Appeals) and remit the entire disputed issue to the file of AO as the assessee has submitted photographs and material before us and which need to be examined with technical report and pass the order on merits after providing adequate opportunity of being heard to the assessee and the ground of the Revenue is partly allowed for statistical purpose.
Allowance of carry forward depreciation loss - Whether CIT (Appeals) erred in not deciding the issue and remitting it back to the ld. Assessing Officer in violation of the provisions of Sec. 251(1)(a)? - HELD THAT:- We considered the findings of the ld.CIT(A) on the judicial decisions of Hon'ble High Court and Supreme Court and ld. CIT (Appeals) has only directed the ld. AO to examine the claim and allow as per law. CIT (Appeals) has only directed the ld. AO with a condition to verify and the power of Commissioner of Income Tax (Appeals) are co-terminus with AO and we considering the facts are of the opinion that the action of Commissioner of Income Tax (Appeals) is justified and we dismiss the ground of the Revenue.
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2016 (6) TMI 1401
Disallowance of payment incurred for the transfer of land paid to the Bank of Baroda and payment of workmen compensation for settlement - Company is in the process of winding up - HELD THAT:- It cannot be disputed that the property in dispute was mortgaged with Bank of Baroda. They also taken the symbolic possession of the assets charged to them under the provisions of SARFAESI 2002 which is evidenced from the letter dated 7.7.2007 kept. Further, they have also given possession notice vide letter dated 7.7.2007 which is kept on record at page 3 of the paper book. Thus, it cannot be disputed that unless the assessee had settled the dispute with Bank of Baroda, the sale transaction with M/s. Alliance Mall Developers Co. Pvt. Ltd. vide sale deed dated 11th June, 2008 could not have materialized, there would perhaps have no question of capital gains.
The expression “in connection with such transfer” is, in our opinion, certainly wider than the expression “for the transfer”. Once again, we are of the view that any amount the payment of which is absolutely necessary to effect the transfer will be an expenditure covered by this clause. In other words, if, without removing any encumbrance, sale or transfer could not be effected, the amount paid for removing that encumbrance will fall under clause (i). In this case, sale of transfer could not be effected and the amount paid for removing that encumbrance will fall under clause (i) of sec.48 of the Act.
We are of the opinion that the above two payments to be allowed. It is needless to say that had the assessee not paid to the workmen, who had taken the possession of factory premises of the assessee could not be allowed to transfer the said capital asset. However, if the assessee had claimed any amount out of this, in any assessment year , same to be reduced from this amount by AO while giving effect to this order. Accordingly, the grounds relating to these issues are allowed.
Disallowance of commission payment - contention of the ld. DR is that these payments are not properly vouched and doubted the services rendered by the recipient - HELD THAT:- CIT(Appeals) has given a finding that the assessee has not produced brokers to show that they have rendered services. The power of the CIT(Appeals) is coterminous that of the AO and he should have issued summons, once the assessee has furnished the names and addresses of the parties. This exercise has not been done by the revenue authorities. Hence, out rightly disallowing the entire commission payment is not appropriate. However, there is lapse on the assessee also as noticed by the AO as mentioned in earlier para. In our opinion, the payment of commission is very excessive. As per trade practice, when the transaction of such volumes took place, usually in real estate field, commission payment is at one percent of the sale value of the property would be paid. Accordingly, we direct the AO to allow one percent of the total sale value of the property as commission payment towards transfer of property. This ground is partly allowed.
Disallowance of claim of set off of business expenditure against long term capital gains - According to the revenue authorities, the assessee has stopped manufacturing of yarn since 1993 and the liabilities and expenditure relating to those earlier years have been claimed as expenditure in the assessment year 2009-10 - HELD THAT:- There is nothing on record to show that the assessee has completely closed the business of the assessee. However, the copy of the assessment order for the assessment year 2012-13 to show that wherein the AO taxed the cessation of liability u/s.41(1) of the Act. The ld. AR submitted that the expenditure claimed by the assessee was capitalized in the assessment year under consideration. Being so, in our opinion, this issue requires re-examination by the AO. Since the above evidence was brought on record, we suggest that the company only withhold the business activity due to strike and other factors and there was no intention to carry on the business activity, for the time being and it was not wound up the business. Therefore, issue is to be reexamined by the AO, whether it is reasonable or excessive. Accordingly, he is directed to disallow only that portion of the expenditure if he finds any amount excessive or unreasonable. Further, regarding the claim of bad debts, the same to be examined in terms of sec.36(1)(vii) r.w.sec. 36(2) of the Act. With regard to statutory liability like sales tax, ESI, PF etc., is to be allowed on actual payment basis in the assessment year under consideration in terms of sec.43B of the Act. Hence, we remit this issue to the file of the AO for fresh consideration.
Business income in the form of interest receipts - business loss arising out of the business activities should be set off against the capital gain on sale of business assets - HELD THAT:- The assessee deposited certain fund out of the amount received from sale of land and interest earned from that deposit as income from other sources and in view of the judgment in the case of Tuticorin Alkali Chemicals And Fertilizers Ltd. v. CIT [1997 (7) TMI 4 - SUPREME COURT] wherein it was held that interest earned by the assessee on short term deposit in bank out of term loan is income under the head ‘other sources’. Hence, this issue is dismissed.
Disallowance of the claim of expenditure towards payment of commission at 100% and site clearing charges at 75% while calculating long term capital gains - HELD THAT:- The assessee had to engage personnel specially skilled in doing such kind of jobs who were illiterate and working in an unorganized manner. These personnel did not normally come and work regularly but were coming and working erratically. Besides they had to be paid in cash only. However the CIT (A) has allowed only 25% of the expenditure for the cleaning charges. The CIT (A) ought to have allowed fully the expenditure. According to the ld. AR the CIT (A) wrongly allowed only 25% Learned Assessing Officer has grossly erred in disallowing all the claims of the Assessee on the commission payment made to facilitate conclusion of the sale of immovable property u/s 48(i) and site clearing charges also under sec. 48(i) of the Act, drawing untenable non-existent inference, purely based on suspicions, surmises, conjectures, presumption of bad faith etc., which runs contrary to the facts obtaining very much from the return of income and explanations offered.
Disallowance of expenses which was no nexus with manufacturing of yarn - HELD THAT:- This issue is remitted to the AO to disallow only the expenditure which he finds excessive or unreasonable.
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2016 (6) TMI 1400
Sanction of Amalgamation Scheme - HELD THAT:- In the event, the petitioners supply a legible computerized printout of the scheme and the Schedule of assets in acceptable form to the department, the department will append such computerized printout, upon verification, to the certified copy of the order without insisting on a handwritten copy thereof.
Affidavit of service, notice to petition and paper publication filed in Court be kept on record - Petition disposed off.
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2016 (6) TMI 1399
Taxable income - interest income credited to Work-in- process (i.e. WIP) (on the ongoing phase) - as attributable to the WIP, and should be reduced from amount of WIP of the project undertaken by the assessee in its proprietorship unit namely M/s Silver Developers - HELD THAT:- Impugned interest is a period item. Under these circumstances, it can clearly be said that assessee had earned pre-decided amount of interest as the time passed. It is further noted by us that factually also GIPL had paid interest to the assessee as was stipulated in the agreement and that too after deducting tax at source. The said amount of TDS has been admittedly claimed by the assessee in its return of income.
As clearly establish that the impugned interest amount should be treated as income of the assessee for the period under consideration. It is also noted that with respect to interest amount received from M/s Industrial Finance Securities Pvt Ltd, Ld. Counsel fairly stated during the hearing that this company is an independent party unconnected with this project, and therefore this interest income is not relatable to WIP, but it was inadvertently reduced from WIP, but it should be separately taxed as business income. We uphold the order of the Ld. CIT(A) for treating the total interest income as taxable in the year under consideration and also uphold his action in treating same as ‘income from business’ in the given facts and circumstances of the case. Thus, this ground is dismissed.
Addition on account of interest expenses holding the same as business expenditure as against the capital expenses attributable to WIP - HELD THAT:- As already held in earlier part of our order that interest income is not part of WIP and it was assessable separately as business income of the period under consideration. Thus, drawing same analogy, we find that interest expense is also not part of WIP but business expense of the assessee for the period under consideration. The AO had also unfortunately followed double standards while passing the assessment order. When he had treated the ‘interest income’ as separate income and did not choose to reduce it from the cost of WIP, then there was no justification on his part to treat ‘interest expense’ as part of WIP and disallow the same. Thus, taking into totality of facts and circumstances of the case, we find that order of Ld. CIT(A) is well reasoned and thus Ld CIT(A) is justified in treating the interest expenses as having been incurred in the regular course of business and deductible in full as business expense of the period under consideration. We do not find any need to interfere in the findings of the Ld. CIT(A) and the same are upheld. This ground of revenue is dismissed.
Notional interest attributable to interest free deposits while computing the income under the head House Property of the assessee during the year - HELD THAT:- AO nowhere held that actual rent received by the assessee was not annual let out value and nowhere he had given any other comparables to determine the ALV. Actual rent received was required to be accepted as ALV. The law does not permit the addition of notional interest on the ground of interest-free deposits received from the tenant. The law in this regard has been clearly explained in the various judgments as has been relied upon by the CIT(A), as reproduced above. No contrary judgment was brought to our notice by the Ld. DR. Under these circumstances, we do not find any reason to interfere in the order of Ld. CIT(A) and therefore same is upheld ground no.2 of revenue’s appeal is dismissed.
Treatment to hire charges income received - “income from house property” or “income from other sources” - AO treated the rent receipts towards amenities from the tenant in the form of hire charges as income from other sources as the assessee had entered into separate agreements for the hiring amenities and therefore the amount received by the assessee was towards utilization of amenities and not for the utilization of house property - HELD THAT:- The perusal of particulars of items provided under the amenities, as has been discussed by the Ld. CIT(A) in his order, show that these amenities are of the nature that they constitute integral part of the house building e.g. Electrical Panels, AHU rooms and fire control system, water tanks, elevator, etc. In our considered view, all these items are nowadays considered as items of basic necessities. It has been contended before us that the impugned premises could not have been put to use without these amenities. In any case, the main intention of the assessee was stated to be for exploiting the property and not to render any service with the help of these amenities. We do not find anything indicating that services provided with the help of these amenities were in any manner distinct from letting out of the property. Under these circumstances, hire charges need not necessarily be separately assessed from rental income. Thus, both of these can be assessed under the head “income from house property” as part of total rental income. We find that the order of Ld. CIT(A) is justified on facts and law both.
Proportionate disallowance of expenses which would have been incurred towards the property which was either let out or gifted - AO made disallowance @ of 25% of the total expenses on the basis of area occupied by the let out properties - HELD THAT:- CIT(A) has made item wise analysis of all the expenses and found that none of these expenses were related to the let out properties or gifted properties. If any expenses were incurred on such type of properties then the same were recovered. It is further noted that Ld. CIT(A) has analysed other expenses also for example professional fee and various other expenses before giving the factual findings that none of these expenses related to let out properties.
Denial of natural justice - addition debited under the head purchases deleted by CIT-A - CIT(A) had considered additional evidences in violation of Rule 46A of Income Tax Rule 1962 - HELD THAT:- During the course of hearing, it was put to the Ld. DR by point out that what are those additional evidences which have been referred by the Ld. CIT(A) in his order. Ld. DR was not able to point out any additional evidences. Even on merits Ld. DR was not able to controvert or contradict the factual findings given by the Ld. CIT(A). It is seen that Ld. CIT(A) has analysed entire facts and similar expenses have been allowed in earlier year A.Y. 2008-09 in the order passed u/s 143(3) by the AO himself. It was further found by the Ld. CIT(A) that the impugned expenses were not related to the joint venture project and therefore there were no reasons for transferring these expenses to the WIP account. Under these facts, we find that Ld. CIT(A) has rightly deleted the disallowance made by the AO. We do not find any reasons to interfere in the findings recorded by the Ld. CIT(A) and therefore these are upheld and consequently ground no.1 of Revenue’s appeal is dismissed.
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