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TMI Blog2022 (9) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... re under the head income from other sources. Accordingly, the Ground No. 1 raised by the assessee is partly allowed. Disallowance of depreciation being the correct amount (though wrongly disallowed by AO) on assets purchased from Iping Technologies Pvt Ltd. - HELD THAT:- It is a fact on record that the assessee had actually paid consideration to Iping for purchase of assets. It is also a fact on record that the said consideration has been shown as receipt in the books of Iping, which fact is also confirmed by them in response to notice u/s 133(6) of the Act directly filed before the ld. AO. We hold that without the usage of the assets acquired from BPO division of Iping, the assessee could not have earned any revenue from BPO services during the year under consideration and offered business income thereon. Hence it could be safely concluded that the assets acquired from Iping had been duly put to use and utilized by the assessee for the purpose of its BPO services and hence depreciation would be eligible for the same to the assessee. The entire transactions have been duly confirmed by Iping directly before the ld. AO in response to notice u/s 133(6) - Even if all the allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made the claim of brokerage as deduction in the return of income under the head income from business. During the course of assessment proceedings, the assessee had only sought to shift the head of income from income from business to income from capital gains , as the brokerage would be eligible for deduction u/s 48 of the Act as expenses on transfer while computing capital gains. The bill for brokerage submitted contained even the PAN of the broker. In view of the aforesaid observations there is no question of doubting the said expenditure on brokerage. Hence we direct the ld. AO to grant deduction for brokerage in the sum as expenditure incurred on transfer of capital assets and recompute the capital gains accordingly. The Ground raised by the assessee is allowed. - ITA No.6574/Mum/2019 And ITA No.6575/Mum/2019 - - - Dated:- 7-9-2022 - Shri Vikas Awasthy, Judicial Member And Shri M.Balaganesh, Accountant Member For the Assessee : Shri Aditya Ajgaonkar For the Revenue : Shri Samuel Pitta ORDER PER M. BALAGANESH (A.M): These appeals in ITA No.6574/Mum/2019 6575/Mum/2019 for A.Yrs.2012-13 2013-14 arise out of the order by the ld. Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Memorandum of Understanding (MOU in short) agreed to purchase 8 shops and 2 flats from Jamshri Ranjitsingji Spinning Weaving Mills Co. Ltd (Jammill in short) for a total consideration of Rs 98,10,300/-. The MOU for Shop purchase dated 31.3.2011 is enclosed in pages 19 to 21 of the paper book filed before us. The MOU for flat purchase dated 31.3.2011 is enclosed in pages 22 to 241 of the paper book filed before us. These MOUs were executed on a stamped document of Rs 100 and acted upon by both the parties. Out of the above 8 shops and 2 flats, the assessee sold 7 shops and 1 flat during the year under consideration and continue to hold unsold 1 shop and 1 flat as stock in trade as on 31.3.2012. The details of opening stock, flats / shops sold and closing stock as on 31.3.2012 are tabulated as under:- Shop/Flat No. Cost of Purchase Date of Sale Sale Value Closing Stock as on 31/03/2012 Shop B-1 7,26,900 N.A. N.A. 7,26,900 Shop B-2 7,60,200 09.01.2012 11,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of acquisition of shops and flats from Jamshri and sales thereon. The ld. CIT(A) during the course of appellate proceedings called for a remand report on the following issues :- a) Whether there was an actual sale of the shops or flat ? b) Whether cost was incurred by the assessee towards purchase of the shops and flat so sold ? c) Verification of source through which acquisition of shops was made during the year. 3.5. The ld. AO submitted the remand report by stating as under:- a) That the MOUs were neither registered nor stamped. b) There were no terms as to how the payment was to be made in the MOU. c) It was also verified that the purchases were made by adjusting amounts of loan outstanding and that the purchases were shown in Asst Year 2011-12. d) It was also mentioned that the confirmation of accounts were produced by the assessee. e) That the sale agreements were made by Jamshri Spinning Weaving Mills Co. Ltd and third party. The said sums were received by Jamshri and then transferred to the assessee through their bank account. f) The profit from the trading transaction was shown in the audited financial statement for the said year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich income is earned by the assessee. Hence the reliance placed by the ld. AR on the decision of Hon ble Jurisdictional High Court in the case of Central Provinces Manganese Ore Co. Ltd vs CIT reported in 80 taxmann.com 59 (Bom HC) does not advance the case of the assessee, as in that case, the loans were advanced in the regular course of business as an organized activity and the resultant income or loss was directed to be assessed under the head income from business. We have already held that the activity of purchase and sale of shops / flats would not be construed as an organized activity of carrying on business supra. Moreover, merely because the assessee had shown the closing stock of flats / shops as stock in trade in its balance sheet, it would not amount to carrying on business by the assessee. It is not in dispute that the assessee is not the owner of the flats / shops. In any case, entries in the books of accounts are not determinative of taxable income under the Act. Reliance in this regard is placed on the decision of Hon ble Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd reported in 82 ITR 363 (SC) and Taparia Tools Ltd vs JCIT reported in 372 ITR 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Technologies Pvt Ltd submitted its explanation with supporting evidences. The ld. AO however observed that these assets were purchased from related party i.e. Iping Technologies Pvt Ltd, the provisions of section 40A(2) of the Act would be applicable and accordingly proceeded to disallow the entire depreciation of Rs 23,38,870/- in the assessment. 4.2. We find that during the financial year 2011-12, Iping Technologies Pvt Ltd, which were hitherto engaged in the business of rendering BPO services, had transferred all assets of their BPO divison at Solapur to the assessee for a total consideration of Rs 92,59,500/-. Iping also permitted assessee to use their logo Iping Technologies while rendering services from acquired BPO division at Solapur in order to ensure continuity of services to existing clients and for that purpose, even the employees were deputed to the assessee for an initial period of 3 months on reimbursement of actual salary to them. Hence during this period, there were occasions where certain invoices of assessee were signed by Iping Technologies by the employees of Iping. Regarding ownership details of building situated at Solapur, it was submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot justified the rates at which assets were acquired to be at fair market price in view of the fact that the said assets were purchased from related party within the meaning of section 40A(2) of the Act. e) Iping has set off the Short Term Capital Gains of Rs 19,15,841/- on sale of depreciable assets against its business losses thus declaring Nil income. On the other hand, the assessee has claimed depreciation on those assets. Hence the entire arrangement between two related concerns is only a method adopted to avoid tax and the said arranged transaction could not be considered as bonafide and genuine. 4.6. The assessee made rejoinder to the remand report by making both factual and legal submissions before the ld. CIT(A) which are reproduced in para 7.5. of his order. 4.7. We find that the ld. CIT(A) had ultimately confirmed the disallowance of depreciation on fixed assets on the following grounds:- a) no sales tax was levied / paid on the sale of assets by Iping to the assessee; b) the consideration paid by the assessee to Iping is excessive for acquiring the assets from Iping; Hence he concluded that fixed assets were not actually transferred to assessee by Ipin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard the rival submissions and perused the materials available on record. As stated in Ground No. 2 supra the assessee had requested Iping to provide support to it for an initial period of 3 months for smooth transition of BPO business. The break up of expenses reimbursed to Iping by assessee were provided to ld. CIT(A) which is also reproduced in page 32 of the order of ld. CIT(A). It is an undisputed fact that the employees of Iping are deputed to the assessee company for continuity in BPO services and also to ensure that the customers get accustomed to assessee . This is done for smooth transition of BPO business from Iping to assessee. It is a fact on record that assessee had earned revenue from BPO services during the year at Rs 1,79,056/-. The assessee categorically stated that the entire infrastructure of BPO division of Iping together with its assets were transferred to assessee by Iping and hence certain expenditure like to telephone bill, rent for diesel generator, security services, etc were used by the assessee which had to be reimbursed to Iping apart from the salaries , incentives , PF / ESI contributions etc of employees deputed to assessee. It was specifically pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation, if any, of provisions of section 194C of the Act. We hold that the provisions of section 194C of the Act cannot be applied for actual reimbursement of expenses without any mark up. Hence we hold that the ld. CIT(A) grossly erred in this aspect in his order. Further, the ld. CIT(A) had observed that the second proviso to section 40(a)(ia) and 201 of the Act would be applicable only from 1.7.2012 onwards and cannot be applied for Asst Year 2012-13. In this regard, we find that the Hon ble Delhi High Court in the case of CIT vs Ansal Landmark Township (P) Ltd reported in 377 ITR 635 (Del) had categorically held that the second proviso brought in section 40(a)(ia) and section 201 of the Act need to be applied retrospectively. Accordingly, even on this count, no disallowance u/s 40(a)(ia) of the Act could be made in the instant case. Hence the Ground No. 3 raised by the assessee is allowed. 6. The Ground No. 4 raised by the assessee is challenging the action of ld. CIT(A) in confirming the disallowance of brokerage of Rs 6,00,000/- incurred in relation to sale of capital assets as deduction u/s 48 of the Act. 6.1. We have heard the rival submissions and perused the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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