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TMI Blog2018 (4) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... n at the level of the AO whether the payees have disclosed these payments as receipts in their respective returns of income. - Decided in favour of assessee for statistical purposes. Addition u/s 40A(3) on account of cash payments exceeding 20,000/- - Held that:- Having examined the issue in depth and after looking to the facts and circumstances and nature of purchases, we are of the view that assessee should be given one more opportunity to bring out and forth circumstances necessitating the cash payments for the purchase of sand/water and the issue should be decided denovo. Accordingly, we set aside the issue to the file of the AO with a direction to decide the matter - Decided in favour of assessee for statistical purposes. Expenditure on account of refundable deposit to BMC and MHADA - revenue or capital exp - Held that:- CIT(A) has examined the issue at great length and reached a conclusion that the said deposits were given wholly and exclusively for the purpose of business of the assessee and are not capital of nature and covered under the provision of section 37(1) of the Income Tax Act. Having perused and examined the materials on record, we are in complete agreement with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. - Decided against revenue Applicability of section section 40(a)(ia) on assessee trust registered under section 12A and 80G - Held that:- As in view of the 2nd proviso to section 40(a)(ia) of the Act, we are of the view that if the trust has shown the receipts in its income and dealt with this income as per the provision, then the assessee can not be treated as assessee in default as regards non deduction at source are reached and the payment has to be allowed to the assessee but the same requires verification at the end of AO. Accordingly, we restore the issue to the file of the AO with a direction to see whether the case is covered under 2nd proviso to section 40(a)(ia) of the Act and decide the issue afresh Addition of deemed ALV of vacant flats which are lying in the stock in trade of the assessee’s books of account - Held that:- The issue is squarely covered in favour of the Revenue by the decision of Hon’ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd. (2013 (7) TMI 776 - DELHI HIGH COURT) wherein it has been held that even in the case of unsold flats held in stock in trade the income has to be assessed by way of deemed rent. X X X X Extracts X X X X X X X X Extracts X X X X ..... amanglam DBS Finance Ltd. which was debited under the head interest charges while no TDS was deducted on these payments. Upon an enquiry from the AO the assessee replied that the provisions of deduction of TDS at source as contained in section 194 of the Act are not applicable as NBFCs are carrying on banking business. The AO was not convinced with the reply of the assessee and added the said sum of ₹ 88,85,487/- on account of non deduction of TDS by applying the provision of section 40(a)(ia) of the Act which was also confirmed by the Ld. CIT(A) in the appellate proceedings by holding that the NBFCs are not exempted from the application of provisions of section 193 & 194 of the Act. 6. Having heard the Ld. D.R. and considering the facts on record, we find that the assessee has made payment of ₹ 88,85,487/- as per details extracted below which represented the payment of interest to non banking finance companies on which no TDS was deducted by the assessee. M/s. Religare Finvest Ltd. : Rs.11,27,176/- M/s. Reliance Capital Ltd. : Rs.47,12,509/- M/s. Indiabulls Hsg. Fin. Ltd. : ₹ 9,45,794/- M/s. Indiabulls Hsg. Loan : Rs.19,92,710/- M/s. Cholamandalam D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and consequently confirmed the addition. 11. Having heard the Ld. D.R. and perusing the materials on record, we find that the cash payment to the tune of ₹ 7,98,000/- was made for purchase of river sand and water which was claimed to be exempt under rule 6DD(f) of the Rules on the ground that the same are the products manufactured or processed without the aid of power in a cottage industry. According to the Ld. CIT(A) the same is not covered in that category. The Ld. CIT(A) also referred to the definition of cottage industry which is not available in the Income Tax Rules and finally dismissed the appeal of the assessee. Having examined the issue in depth and after looking to the facts and circumstances and nature of purchases, we are of the view that assessee should be given one more opportunity to bring out and forth circumstances necessitating the cash payments for the purchase of sand/water and the issue should be decided denovo. Accordingly, we set aside the issue to the file of the AO with a direction to decide the matter as per the facts and law after affording a reasonable opportunity of being heard to the assessee. Ground No.2 is allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 as to why the deposit should not be disallowed to the tune of ₹ 1,39,300/- which remained unresponded by the assessee. 16. In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under: "4.3 I have carefully considered the above submissions of the appellant. The above deposits have been given to BMC to ensure that the basement of the building is not used for illegal purpose or for storage of hazardous chemicals. Part of the deposit has also taken by BMC for removal of debris. These deposits are never returned by the BMC and hence consistently the appellant had been claiming the deposits as revenue expenditure. The appellant had not brought any instance of the deposits paid in the previous year's being received back from BMC. It is the submission of the appellant that in case if the same is received in future the same shall be assessed to tax. I find that no disallowance was made on this account in the earlier years and the claim was consistently accepted by the AO and hence he cannot ignore the principle of consistency. Since the above deposits were paid wholly and exclusively for the purpose of the business and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious types of parathas to the customers. Since Indian cuisine is served in this restaurant the business is popular and it got reasonably established and hence the material consumption is also reasonable. 5.3.1. The Restaurants White and Zing Cafes were serving continental food and it did not appeal to the local customers and the appellant was struggling to achieve the break even because of higher material consumption. The Assessing Officer had failed to appreciate that consumption of material depends upon the recipe and the kind of cuisine. He has also not brought any material on record to show that the average 35% of the material consumption would be same to all kinds of cuisines. As far as 'Parathas and More' is concerned, the appellant had shown the material consumption as 36.52% which is comparable to the average consumption in the industry. The nature of material consumed is different in continental cuisines and hence the normal average of 35% cannot be applicable to this special kind of cuisines. The appellant had also furnished the consumption in the F.Y.2010-11 and 2011- 12 for both the cuisines. As far as Parathas & More is concerned, the average material cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase invoices and the entire payments were made only way of cash and hence genuineness of the expenditure incurred and the material consumed cannot be doubted. In view of the above, the addition made is hereby deleted. This ground of appeal is allowed." 21. We have heard the Ld. D.R. and perused the relevant material on record. The ld DR contended that the assessee has not maintained the stock records as consumption of materials in the restaurants and it was not possible for the AO calculate the income correctly and the ld CIT(A) has erred in not affirming the AOs reworking of loss which should be reversed. Perusal of assessment order reveals that AO has not pointed out any specific defect in the consumption but made a general observation that in absence of consumption records, the consumption can not be relied. The issue has been examined in depth by the Ld. CIT(A) and recorded a conclusion that entire purchases were vouched and therefore, the consumption of materials cannot be doubted and thus allowed the appeal. Since there is no infirmity in the order of the Ld. CIT(A), the same is hereby affirmed on this issue by dismissing the ground raised by the Revenue. 22. The third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25/- by Ld. CIT(A) as made by the AO on adhoc basis in respect of various expenses incurred in cash when the assessee failed to produce the necessary supporting evidences. During the assessment proceedings, the AO noticed that assessee has not maintained the bills and vouchers of expenses incurred in cash as regards miscellaneous expenses, telephone expenses, advertisement, sale promotion expenses and travelling expenses and thus disallowed 20% of the miscellaneous expenses, telephone expenses, advertisement and sale promotion expenses and 15% of travelling expenses and staff welfare expenses which worked out to ₹ 8,52,725/-in aggregate. 27. In the appellate proceedings, the Ld. CIT(A) deleted the addition by observing and holding as under: "72 I have careful ly considered the submi ssions made by the appel lant. During the course of assessment proceedings, the details such as copies of bills raised, the bank statement evidencing the payment in cheque were submitted in respect of travelling and telephone expenses and similarly with regard to the advertisement and sales promotion, the bills and vouchers were furnished before the Assessing Officer for his verification. Copie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- as care taking charges in his business M/s. S.D. Hospitality which were paid to Prabodhan Goregaon, a Public Charitable Trust registered with the Charity Commissioner and the Director of Income Tax (Exemption) u/s 12AA and 80G. It was submitted before the AO that the said payment was made under an agreement which provided for subletting of area in Ozone Club House for running the ancillary activities on care taker basis to the assessee. However, no TDS was deducted under section 194I of the Act as the payment was made to a trust which is registered under section 12AA of the Act. The assessee submitted before the AO that since the trust was registered under section 12A of the Act, the provisions of section 194I were not applicable in view of circular No.4 dated 16.07.02 by Board. However, the AO was not satisfied with the contentions of the assessee and added the same to the income of the assessee. 33. In the appellate proceedings, the Ld. CIT(A) confirmed the order of AO by holding that the said payment is covered by the provisions of section 194I of the Act and the provisions of section 40(a)(ia) of the Act were rightly invoked by the AO. 34. After hearing the Ld. D.R. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file of AO. 39. The issue raised in ground No.4 is against the confirmation of addition of ₹ 11,98,862/- by Ld. CIT(A) towards deemed ALV of vacant flats which are lying in the stock in trade of the assessee's books of accounts. The facts in brief are that the assessee has some unsold flats in the project as on 31.03.12 as per details given in para 6 of the assessment order. Accordingly, a show cause notice was issued to the assessee as to why the deemed rent should not be assessed qua these unsold flats which was replied by the assessee vide written submission dated 20.03.15 by submitting that these unsold flats were not let out during the year and therefore, no question of estimating deemed rental income under the head income from house property. The AO rejected the contentions of the assessee as not tenable and estimated the deemed rent at ₹ 17,12,660/- by relying on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Ansal Housing Finance & Leasing Co. Ltd. (2013) 29 taxmann.com 303 (Delhi) and added the same to the income of the assessee after allowing standard deduction at 30%. 40. In the appellate proceedings, the order of the AO was affirmed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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