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2015 (9) TMI 1228 - AT - Income TaxDisallowance u/s 14A r/w rule 8 - CIT(A) deleting part of the addition - Held that - As perused the Balance-sheet of the Assessee it is noticed that the investments are carry forward investments right from 2008-09. There is no new investment during the relevant assessment year. The assessment order for the A.Y 2008-09 was also found which also says there is no disallowance made u/s 14A. Further, it is noticed that the Assessee does not have any exempt income much less dividend income. Consequently, we are of the view that in view of the decision of Delite Enterprises 2009 (2) TMI 498 - BOMBAY HIGH COURT no disallowance u/s 14A can be made in the hands of the Assessee. - Decided in favour of assessee. Disallowance of expenditure of interest paid on loans taken at interest and advances to sister concerns without charging any interest - CIT(A) deleting the addition - Held that - As it is noticed that the advances to the associates has actually reduced during the relevant assessment year when compared to the earlier assessment year, it shows that these advances were of the earlier years and substantial portion of the advances have been returned. Admittedly, there is no disallowance on this count in the earlier year also. In the circumstances, following the principles of consistency, no disallowance can be made for this year also in view of the decision of the Hon ble Karnataka High Court in the case of Sridev Enterprises 1991 (1) TMI 52 - KARNATAKA High Court - Decided in favour of assessee. Disallowance of interest paid to the partners and relatives by invoking the provisions of Sec. 40A(2) - CIT(A) deleting the addition - Held that - Admittedly, when invoking the provisions of Sec. 40A(2) of the Act comparable case is one of the requirement. Here, in the present case the AO has not been able to show any comparable case where the interest payments were lower than the rates paid by the Assessee. In the circumstances, we are of the view that the finding of the ld. CIT(A) was on a right footing and does not call for any interference. - Decided in favour of assessee. Addition on account of taxing of profits on the basis of percentage completion method on the construction of villas - Assessee was booking profits of villas by following the completed contract method - CIT(A) in deleting the addition - Held that - CIT(A) has followed the decision of V.S. Dempo & Co. Pvt. Ltd. 1993 (9) TMI 346 - BOMBAY HIGH COURT wherein held that the completed contract method is an acceptable method and that consistency is to be followed and also the decision of Realest Builders and Services Ltd. 2008 (5) TMI 6 - SUPREME COURT and as the Assessee has offered the income on the completion of the villas and this fact is not disputed by the Revenue, we are of the view that the order of the ld. CIT(A) on this issue is on a right footing and does not call for any interference - Decided in favour of assessee.
Issues involved:
1. Disallowance under section 14A r/w rule 8D 2. Disallowance of interest paid on loans to sister concerns 3. Disallowance of interest paid to partners and relatives under Sec. 40A(2) 4. Taxing profits based on percentage completion method vs. completed contract method 5. Disallowance of brokerage claimed for sale of villas Analysis: Issue 1 - Disallowance under section 14A r/w rule 8D: - The Revenue challenged the deletion of part of the addition on account of disallowance under section 14A. The Assessee argued that no disallowance was warranted as there was no exempt income. Relying on various court decisions, it was contended that no disallowance under section 14A could be made. The tribunal found that the Assessee had no exempt income, and investments were carry-forward from previous years. Citing relevant court decisions, the tribunal dismissed the Revenue's appeal on this ground. Issue 2 - Disallowance of interest paid on loans to sister concerns: - The Revenue contested the deletion of disallowance of interest paid on loans to sister concerns. The Assessee argued that the advances to associates had reduced compared to the previous year and no disallowance was made in earlier assessments. Relying on the principle of consistency and a relevant court decision, the tribunal dismissed the Revenue's appeal on this ground. Issue 3 - Disallowance of interest paid to partners and relatives under Sec. 40A(2): - The Revenue challenged the reduction of disallowance of interest paid to partners and relatives under Sec. 40A(2). The Assessee argued that no comparable case was presented to prove excessive interest payments. The tribunal noted the absence of comparable cases and upheld the decision of the CIT(A) to reduce the disallowance, dismissing the Revenue's appeal. Issue 4 - Taxing profits based on percentage completion vs. completed contract method: - The Revenue disputed the deletion of addition based on taxing profits using the percentage completion method instead of the completed contract method for the construction of villas. The Assessee maintained consistency in following the completed contract method. Citing relevant court decisions, the tribunal upheld the CIT(A)'s decision, as the Assessee offered income on completion of villas, dismissing the Revenue's appeal on this ground. Issue 5 - Disallowance of brokerage claimed for sale of villas: - The Revenue raised concerns regarding the genuineness of brokerage claimed for the sale of villas. The CIT(A) directed to allow the brokerage when corresponding income is offered for taxation. The tribunal removed the direction, allowing the AO to verify the genuineness of the expenditure claimed, partially allowing the Revenue's appeal on this ground. In conclusion, the tribunal dismissed the Revenue's appeal in ITA No. 321/PNJ/2014, dismissed the Assessee's Cross objection in CO No. 43/PNJ/2014, and partly allowed the Revenue's appeal in ITA No. 426/PNJ/2014.
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