9911796707
TMI Blog2012 (11) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany to amalgamated company and on such transfer, there cannot be any capital gain or capital loss because there is no transfer as per Section 47(vi). But in the present case, the loss was claimed by the assessee on subsequent sale by the amalgamated company, and shares received by it from the amalgamating company. The transaction of sale of shares is found to be genuine, therefore, the dis-allowance of long term capital loss is held to be not proper and the same is deleted. Dis-allowance of commission expenses as not genuine – Held that:- It is noted by CIT(A) that there is an agreement regarding payment of commission to this party and the sale of the assessee has increased considerably. Also, payment of commission has been approved by the Board of Directors and the agent has shown the commission income in its return of income. Commission had been paid on the basis of orders procured as per clause (3)(d) of the agreement. In view of aforesaid, CIT(A) rightly deleted the addition Addition on account of unaccounted investment – difference in purchase figure - Held that:- CIT(A) decided this issue on the basis of credit note for rate difference. Since relevant credit notes we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the allegation of the A.O. and the Ld. D.R. that the assessee is not maintaining any office and warehousing facility and absence of evidence of movement of goods are not conclusive because the situations are the same in the preceding year also in which assessee has declared huge profits in similar transactions with similarly related parties. Books are not rejected by the A.O. and no defect has been pointed out by the A.O. in purchase price or sales price of the goods traded by the assessee, hence, dis-allowance stands deleted Dis-allowance u/s 14A – Held that:- A.O. has made dis-allowance in respect of interest expenditure and other expenses. Since no interest expenditure is attributable for these investments out of total interest expenditure, dis-allowance should not include any amount in respect of interest expenditure and hence, the dis-allowance can be of balance administrative expenditure - I.T.A. No. 2097, 2098, 2099/ Ahd/2008 - - - Dated:- 20-7-2012 - Shri A. K. GARODIA and Shri KUL BHARAT, JJ. Appellant by: Shri Rahul Kumar, SR. DR Respondent by: Shri Bandish Soparkar, AR ORDER PER SHRI A. K. GARODIA, AM:- All these three appeals a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2007. Ld. D.R. could not show that the certificate given by the assessee in the paper book is not correct and hence, ground No.2 of the revenue s appeal is devoid of any merit and rejected accordingly. 2.1.3 Regarding ground No.1, we find that since the date of realization of export proceeds is enhanced by RBI, the same has to be considered for the purpose of computation of deduction allowable to the assessee u/s 80HHC as per the provisions of sub-section (2) and its Explanation to Section 80HHC. Hence, ground No.1 of the revenue is also rejected and at the same time A.O. is directed to consider only those receipts which are realized up to 31.07.2001 for which extension is granted by Reserve Bank of India. 2.2 Ground No.3 is as under: 3. The Ld. CIT(A) has erred in law and on the facts of the case in deleting the disallowance of claim of long term capital loss of Rs.5,23,41,9827-. 2.2.1 The brief facts of this issue till assessment stage are noted by Ld. CIT(A) in para 5 of his order and the same is reproduced below: 5. The ground of appeal no.6 is against disallowance of claim of Long-term capital loss of Rs.5,23,41,982/- . The Assessing Officer has disallowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Medicals Limited 5) Sun Energy Limited 6) Medical Technologies Limited These shares were originally acquired and held by Stumbh Financial Pvt. Ltd. and on amalgamation of that company with the appellant, the appellant became owner of the shares. These shares were sold by the appellant company and on sale there was loss of Rs.5,23,41,962/-. For the purpose of computation of capital loss on sale of shares by the appellant company, cost of acquisition had been taken keeping in view the provisions of Section 49 (1) (e) of the I.T. Act. It was submitted that the transaction of sale of shares of companies being genuine; the long term capital loss arising from such genuine transaction cannot be disallowed. 5.2 I have considered the submissions of the A.R. carefully. The provisions of section 47(vi) refer to only transaction of capital assets on amalgamation of companies. But in the case of the appellant the shares held by Stumbh Financial Pvt. Ltd were transferred in the name of the appellant company at the purchase cost on amalgamation of Stumbh Financial Pvt. Ltd with the appellant company. The shares have been actually sold by the appellant during the year and although there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the genuineness of the payment and has not furnished evidences in support of services rendered by the commission recipient and the role of the commission recipient. The A.O. also observed that the burden is on the appellant to prove the genuineness of the payment. Further he observed that the appellant has shown resale of goods from sister concern and has entered into paper transactions to divert the income to the group concern. Therefore, the A.O. treated the commission expenses as not genuine and disallowed the same. 3.1.2 Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) who decided this issue in favour of the assessee and deleted this disallowance and now, the revenue is in appeal before us. 3.1.3 Ld. D.R. supported the assessment order. He further submitted that the details of services rendered were never provided and the agent is sister concern and, therefore, the order of Ld. CIT(A) on this issue should be reversed and that of the A.O. should be restored. As against this, Ld. A.R. supported the order of Ld. CIT(A). 3.1.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference is called for in the order of Ld. CIT(A) on this issue. We, therefore, reject this ground. 3.2 Grounds No.3 4 are also interconnected which are as under: 3. The Ld. CIT(A) has erred in law and on the facts of the case in deleting the addition of Rs.89,28,672/- on account of unaccounted investment 4. The Ld. CIT(A) has grossly erred in admitting fresh evidence in violation of Rule 46A of the I.T Rules on the basis of which the Ld C!T(A) deleted the addition made by the Assessing Officer on account of unaccounted investment. The assessee though specifically called for, has not submitted such details before the A.O during the course of assessment proceedings. 3.2.1 Brief facts of this issue till the assessment stage are noted by Ld. CIT(A) in para 5 of his order which is reproduced below: 5. The ground of appeal no.7 is against addition on account of unaccounted investment of Rs.89,28,672/-. The A.O. observed at Para 5 of the order that the appellant company has shown purchases during the year to the tune of Rs.19,07,97,190/-. However, in Auditor's report the purchases have been shown as Rs.19,97,25,862/- and there is difference of Rs.89,28,672/- between the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et aside the order of Ld. CIT(A) on this issue and restore the matter back to the file of the A.O. for fresh decision after considering various submissions made by the assessee be fore Ld. CIT(A) along with credit notes of Rs.165 lacs for rate difference and other purchases of Rs.75,71,328/-. We would like to make it clear that the burden is on the assessee to produce these documents before the A.O. and thereafter, the A.O. shall decide the issue as per law after providing adequate opportunity of being heard to the assessee. If it is found that the claim of these other purchases of Rs.75.71 lacs and credit notes of Rs.165 lacs is genuine and there is no difference after considering these two amounts, then no addition is called for on this issue. These grounds of the revenue are allowed for statistical purposes. 3.3 Grounds No.5 6 are also interconnected which are as under: 5. The Ld, CIT(A) has erred in law and on the facts of the case in deleting the addition of Rs.1,28,28,072/- made on account of writing back of loan liability. 6. The Ld. CIT(A) has grossly erred in admitting fresh evidence in violation of Rule 46A of the I.T Rules on the basis of which the Ld CIT(A) del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Finance Ltd. as per understanding between the companies. The appellant paid Rs.1.36 crores to Kotak Mahindra Finance Ltd and the balance amount of Rs.1.28 crores was squared off. In the case of the appellant it is found that it is not a remission of trading liability, rather it is a reduction of loan liability and it has not been claimed as expenditure in earlier, years therefore, it can not be taxed u/s.41(l) as cessation of trading liability. As it is on capital account relying on the decision of the Hon'ble Gujarat High Court in Chetan Chemicals Pvt. Ltd the remission of unsecured loans is held as not taxable u/s.41(l) therefore, the addition made by the A.O. is held to be not justified and the same is deleted . 3.3.6 We find that Ld. CIT(A) has decided this issue in favour of the assessee by following the judgment of Hon ble Gujarat High Court rendered in the case of Chetan Chemicals Pvt. Ltd. (supra) and as per the provisions of Section 41(1) of the Income tax Act, 1961. As per this judgement of Hon ble Gujarat High Court, no addition can be made u/s 41(1) of the Income tax Act, 1961 in respect of remission of any loan liability for which no deduction was allowed to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. CIT(A) has erred in law and on the facts of the case in deleting the disallowance of Rs.1,05,030/- made out of interest expenses. 3.4.1 Brief facts of this issue till the assessment stage are noted by Ld. CIT(A) in para 7 of his order which is reproduced below: 7. The ground of appeal no. 9 is against disallowance of Rs.1,05,030/- out of interest. The A.O. observed that the appellant has diverted interest bearing funds to its sister concerns and has not shown interest income from the funds diverted to its group company and therefore, the A.O. disallowed the interest expenses of Rs.1,05,030/- pertaining to the amount advanced to M/s. Catalys Ventures Caps Ltd. 3.4.2 Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) who deleted this disallowance and now, the revenue is in appeal before us. 3.4.3 Ld. D.R. supported the assessment order whereas Ld. A.R. supported the order o Ld. CIT(A). 3.4.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that this issue has been decided by Ld. CIT(A) as per para 7.2 of his order which is reproduced below: 7.2 I have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against addition on account of interest on Fixed Deposit of Rs.66,77,658/-. The A.O. observed that no income has been shown by the appellant on fixed deposits of Rs.14 crores made with bank as margin money/Security Deposit for import letter of credits and in the balance sheet, interest accrued on deposit is reflected as Rs.66,77,6557- , but the appellant has not offered such interest for taxation and the appellant did not furnish any breakup or details regarding interest income . Hence the A.O. made addition to the income. 3.5.2 Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) who has deleted this addition and now, the revenue is in app el before us. 3.5.3 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A). 3.5.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. This issue has been decided by Ld. CIT(A) as per para 8.2 of his order which is reproduced below: 8.2 I have considered the "submissions of the A.R. carefully. It is found that the appellant has already offered interest income of Rs.1.03 crores as interest on fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be carried forward. 4.1.2 Being aggrieved, the assessee carried the mater in appeal before Ld. CIT(A) who has deleted this addition and now, the revenue is in appeal before us. 4.1.3 Ld. D.R. supported the assessment order. He also submitted that there is no evidence about movement of goods and, therefore, order of Ld. CIT(A) should be reversed and that of the A.O. should be restored. 4.1.4 Ld. A.R. of the assessee supported the order of Ld. CIT(A). On requirement of the bench, he also submitted itemwise, monthwise and partywise details of purchases and sale along with quantity. He submitted that quantities are tallying of the purchases and sales. He also submitted that as per these details, there is profit in respect of local sales and imported items. He also submitted that there is also profit in respect of export of items out of domestic purchase and the loss is only in respect of domestic purchases and domestic sales. He further submitted that in the preceding year, i.e. assessment year 2001-02, there was similar domestic purchase and sale and there was profit of Rs.514 lacs during that year. He submitted that if there is profit in one year and loss in another year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. had not found any defect in the books of the assessee and the books of account were audited and the same were not rejected by the A.O. This finding is also given that the purchases and sales were properly vouched and the A.O. has not given any finding that the purchase price had been inflated. This finding is also given by him that the A.O. has not detected any bogus purchases. We have seen from the details filed before us that the quantity of purchase and sales are tallying and there is profit in respect of imported purchases and local sales and local purchases and export and there is loss only in respect of domestic purchase and domestic sales. In similar transaction, in the preceding year, i.e. assessment year 2001-02, there was profit of Rs.514 lacs. Under these facts, we are of the considered opinion that merely because the assessee has incurred loss in the present year, it cannot be said that such loss is bogus merely because the transaction of purchase and sales are with related parties without bringing any adverse material on record to show that either the purchase prices are inflated or the sales prices are deflated or that the transaction is bogus. On similar tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained that the investment was made keeping in view the expediency of business and larger business interest of the company and non receipt of dividend cannot be a reason for making disallowance out of expenses particularly so when the appellant has not incurred any expenditure in relation to the said investment which is obvious from the Profit Loss Account and Balance Sheet. As regards the investment in share application of Rs. 16.04 Crores, it was explained that the appellant company has not received any interest on the same and that it has not incurred any expenditure in relation to the said investment. The A.O. however did not accept the explanation of the appellant and disallowed an amount of Rs. 1,00,000/- by invoking the provisions of Section 14A of the I.T, Act. The AO observed that the provisions of Section 14A clearly provide that expenses incurred for earning exempted income are not allowable. 4.2.2 Being aggrieved, the assessee carried the matter in appeal before ld. CIT(A) who has deleted this addition and now, the revenue is in appeal before us. 4.2.3 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A). 4.2.4 We have ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
