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2019 (3) TMI 561 - AT - Income TaxUnexplained cash credit u/s 68 - Disallowance of interest - assessee could neither furnish the loan confirmation nor offered any explanation about the nature and source of the loan - HELD THAT - It is evident, assessee wanted to sell one of its property in Delhi to USG Buildwell Pvt. Ltd. since it needed finance for its business activities. It is also a fact on record that since the assessee could not hand over the possession of the property within the agreed period, it paid the interest on the advance received as per the terms of the agreement. Therefore, there is factually no dispute on the issue of payment of interest by the assessee. Therefore, once the nature and source of amount of ₹ 2 crore received by the assessee is accepted, the disallowance of interest made by the Assessing Officer by treating the advance received as unexplained cash credit has to be deleted. - Decided in favour of assessee Disallowance made on account of payment of club entry fee - allowable business expenditure - HELD THAT - We find that the issue has been settled in favour of the assessee by the decision in United Glass Manufacturing Co. Ltd. 2012 (9) TMI 914 - SUPREME COURT wherein held that club membership fee incurred by the assessee for its employees is purely a business expenditure, hence, allowable under section 37(1) of the Act. - Decided in favour of assessee Computation of deduction u/s 80HHD - AO relying upon the assessment order passed in assessee s own case for assessment year 2002 03 has included the payment made to other hoteliers in the total receipts for computing deduction under section 80HHD - HELD THAT - As decided in favour of assessee in assessment years 2002 03 held that for the amounts, the assessee has issued certificate in Form 10CCAC cannot be treated as a receipt for the purpose of total business and accordingly directed the AO to exclude the receipt passed on by the assessee to other hotel and travel agent. For second/other receipt it was held that the said amount of foreign currency realized after 30.09.2009 have not entered the numerator i.e. receipt earned by assessee from rendering service to foreign tourist which would not enter the denominator in the formula and directed the AO to exclude the same. We have noted that finding of ld. CIT(A) in accordance with Explanation 1 to sub-section (2), sub-section (2) and sub-section (3) of section 80HHD. - Decided in favour of assessee Claim of deduction u/s 80HHD in respect of foreign exchange fluctuation gain - addition as foreign exchange fluctuation holding that it does not emanate from the services provided by the assessee to foreign tourist- HELD THAT - As decided in favour of assessee in assessment years 2002 03 as held foreign exchange gain forms part and partial of foreign exchange sale proceed and cannot be excluded while computing deduction under section 80HHD. Unexplained expenditure under section 69C - assessee s claim alleging non furnishing of supporting evidence / confirmations by the assessee - HELD THAT - AR as submitted before us that the outstanding amount appearing in the books of account represent the amount payable to the Hotels at Goa on account of booking of books on behalf of customers and in this context he has drawn our attention to the statement of accounts of the Hotels, however, the assessee has to substantiate its claim through proper supporting documentary evidences. Considering the allegation of the departmental authorities that the assessee has not furnished any supporting evidence to substantiate its claim, we are inclined to restore the issue to the Assessing Officer for de novo adjudication for enabling the assessee to substantiate its claim through proper documentary evidences - Grounds of assessee allowed for statistical purposes.
Issues Involved:
1. Deletion of disallowance of interest amounting to ?12,50,000. 2. Deletion of disallowance made on account of payment of club entry fee amounting to ?3,60,000. 3. Exclusion of ?27,10,05,528 from total receipts for computation of deduction under section 80HHD. 4. Deduction under section 80HHD in respect of foreign exchange fluctuation gain of ?1,42,03,378. 5. Addition of ?77,24,237 under section 68 of the Act. Issue 1: Deletion of Disallowance of Interest Amounting to ?12,50,000 The Revenue challenged the deletion of disallowance of interest of ?12,50,000. The assessee, a travel agent and tour operator, had shown a loan of ?2 crore from USG Buildwell Pvt. Ltd., New Delhi, on which it claimed to have paid interest at 15%. The Assessing Officer (AO) treated the loan and interest as unexplained cash credit under section 68 of the Act due to lack of confirmation from the lender. However, during remand proceedings, the AO accepted the amount as an advance for the sale of land, not a loan, and thus the transaction was explained. The Commissioner (Appeals) deleted the disallowance of the interest component. The Tribunal upheld this decision, noting the interest was paid due to delay in handing over possession of the property, which was used for business purposes. Issue 2: Deletion of Disallowance Made on Account of Payment of Club Entry Fee Amounting to ?3,60,000 The Revenue challenged the deletion of disallowance of club entry fee of ?3,60,000. The AO disallowed the expenditure as capital in nature. The Commissioner (Appeals) deleted the disallowance, following the Tribunal's decision in DCIT v/s Bank of America Securities (India) Pvt. Ltd. The Tribunal upheld this decision, referencing the Supreme Court's ruling in CIT v/s United Glass Manufacturing Co. Ltd., which held that club membership fees for employees are business expenditures allowable under section 37(1) of the Act. Issue 3: Exclusion of ?27,10,05,528 from Total Receipts for Computation of Deduction under Section 80HHD The Revenue contested the exclusion of ?27,10,05,528 from total receipts for the computation of deduction under section 80HHD. The AO included this amount in the total receipts, relying on the assessment order for the year 2002-03. The Commissioner (Appeals) allowed the exclusion, consistent with decisions in previous years. The Tribunal upheld this, referencing its own prior decision in the assessee's case, which concluded that payments made to hotels and travel agents should be excluded from total receipts for deduction purposes under section 80HHD. Issue 4: Deduction under Section 80HHD in Respect of Foreign Exchange Fluctuation Gain of ?1,42,03,378 The Revenue challenged the allowance of deduction under section 80HHD for foreign exchange fluctuation gain of ?1,42,03,378. The AO disallowed the claim, following the assessment order for 2002-03. The Commissioner (Appeals) allowed the claim, consistent with his decision for 2002-03. The Tribunal upheld this, citing its earlier decision which referenced various High Court rulings that foreign exchange gains related to business transactions are allowable deductions under section 80HHD. Issue 5: Addition of ?77,24,237 under Section 68 of the Act The assessee appealed against the addition of ?77,24,237 under section 68 of the Act. The AO treated this amount as unexplained expenditure under section 69C, while the Commissioner (Appeals) treated it as unexplained cash credit under section 68. The assessee claimed this amount was payable to hotels in Goa for room bookings. The Tribunal noted that the assessee should be given an opportunity to substantiate its claim with proper evidence and remanded the issue to the AO for de novo adjudication, directing the AO to provide reasonable opportunity for the assessee to present supporting documents. Conclusion: The Revenue's appeal was dismissed, and the assessee's appeal was allowed for statistical purposes, with the Tribunal providing detailed reasoning for each issue based on existing legal precedents and factual findings.
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