ITC Carried forward for earlier assessment year can not be rejected on the ground that it has not been verified.

H.M. Steels Ltd. 25 STM 186 (PVAT Tri) 30-03-2015 

Where assessee, a civil contractor, made payments to transporters and sub-contractors in course of its business, in view of fact that assessee gave complete addresses and PANs of payees and, moreover, said payments had been made after deducting tax at source, impugned order rejecting assessee's books of account was to be set aside

V.V. Constructions[2015] 59 taxmann.com 368 (Pune - Trib.) JUNE  12, 2015 

For relevant assessment year, assessee-firm declared gross profit rate (GPR) of 25.38 per cent as against 29.5 per cent declared in immediate preceding year - Assessing Officer was not satisfied with assessee’s explanation regarding decline in GPR and, therefore, he rejected its books of account and applied GPR at 27 per cent which resulted in certain addition - On appeal, Commissioner (Appeals) deleted addition holding that Assessing Officer made addition without pointing out any specific defect in books of account - Tribunal upheld finding of Commissioner (Appeals) - Whether there was any perversity in order of Tribunal - Held, no

Om Overseas [2008] 173 TAXMAN 185 (PUNJ. & HAR.) HIGH COURT OF PUNJAB AND HARYANA MARCH 4, 2008

On assessee’s inability to supply addresses of purchasers who purchased goods on cash, ITO rejected assessee’s books of account showing result in respect of cash sale transactions, and made addition – AAC deleted additions but Tribunal restored ITO’s orders – Whether there was no necessity whatsoever for assessee to maintain addresses of cash customers – Held, yes – Whether, therefore, rejection of book results of assessee was unjustified – Held, yes – Whether, consequently, additions made to assessee’s income were liable to be deleted – Held, yes

R.B. Jessaram Fatehchand (Sugar Dept.)[1970] 75 ITR 33 (BOM. HIGH COURT OF BOMBAY JULY 30, 1969

FDR Interest is not Business Income

The Hon'ble Rajasthan High Court had held in the of Murli Investment Co v. CIT 167 ITR 368 (Raj.) that merely investing surplus funds instead of keeping them idle and obtaining interest thereon would not constitute business and therefore, the interest by the assessee would not be assessable as business income but assessable as income under other sources. The Hon'ble Kerala High Court in the case of CIT v. Venad Conductors (P) Ltd. 326 ITR 513 (Ker.) had held that income from short term deposit cannot be treated as income from business but it is income from other sources. Likewise, in the case of T.O. Abraham & Company v. Dy. CIT 325 ITR 201 (Ker.) It was held that interest income from bank deposits is assessable under the head "income from other sources" where the assessee is not engaged in money lending business. The Himachal Pradesh High Court in the case of Shanta Lal Chopra v. CIT 2008 214 CTR 420 (HP) had held that the interest on FOR pledged with bank for obtaining loan was assessable as income from other sources and not business income. Similar view was taken by the Hon'ble M.P High Court and Hon'ble Madras High Court respectively in the cases of Ferro Concrete Construction (lndia)(P) Ltd. v. CIT 290 ITR 713 (MP) and CIT v. Monark Tools (P) Ltd. 260 ITR 258 (Mad.). The Hon'ble Delhi High Court in their later on decisions had also taken the view that, interest income is assessable as income from other sources. In the case of CIT v. Shri Ram Honda Power Equip. (Delhi) 289 ITR 475 (Delhi), the Hon'ble Delhi High Court had held that where surplus funds are parked with the bank and interest is earned there on it can only be categorized as income from other sources. The other category is where the exporter is required to mandatorily keep monies in fixed deposits in order to avail of credit facility for the export business. Interest earned on fixed deposits for the purpose of availing of credit facility from the bank, does not have an immediate nexus with the export business and therefore has to necessarily be treated as income from other sources and not business income.
(Para 2.3 and Para 2.4 in Almac Corporation [60 taxmann.com 34][Ahd Trib]

Where Assessing Officer disallowed a part of remuneration payable by assessee-firm to its partners under section 40(b)(v) on ground that interest on FDRs was to be excluded for purpose of calculation of remuneration payable to partners, since no such adjustment had been made by him while computing income from business, impugned disallowance was to be deleted

Almac Corporation [2015] 60 taxmann.com 34 (Ahmedabad - Trib.) APRIL  10, 2015 

Where Assessing Officer rejected books of account and estimated net profit on gross receipts, Commissioner could not invoke revisional power

Gopal Narayan Singh (Patna Trib) 4-07*-2014 53 taxmann.com 51

Section 145, read with section 263, of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts (Revision) - Assessment year 2007-08 - Assessing officer estimated net profit of assessee at 5.58 per cent of gross turnover from civil contract work - Commissioner invoked section 263 alleging that there was inability to produce evidences in support of assessee's claim of expenses and profit - It was found that in opinion of Assessing Officer, books of account were not reliable and, accordingly, he rejected books of account and estimated said profit of his own - Whether Commissioner could not invoke section 263 by mentioning that no proper enquiry had been made by Assessing Officer when nothing had been brought on record by Commissioner - Held, yes - Whether, therefore, Commissioner was not justified in cancelling assessment order - Held, yes [Para 5] [In favour of assessee]

AO couldn't make estimated additions without showing comparable case to justify higher rate of net profit

Section 145 of the Income-tax Act, 1961 - Method of accounting - Estimation of income (GP Rate) - Assessment year 2009-10 - Assessee - a partnership firm, was engaged in business of civil contractor and had furnished his income-tax return along with audit report and other information - Assessee declared a net profit of 5.38 per cent, subjected to interest and remuneration to partners - A perusal of order revealed that net profit rate in immediate preceding year was 5.02 per cent - Assessing Officer invoked provisions of section 145 and disallowed expenses amounted to Rs. 1.17 crores and determined net profit at 13.7 per cent - Commissioner (Appeals) sustained an ad hoc addition of Rs 10 lakhs - Tribunal reduced addition to Rs 5 lakhs - It was observed by Tribunal that though contract receipts had sharply increased from Rs 10.60 crores to Rs. 12.32 crores, net profit had increased from 5.02 to 5.38 per cent with addition of Rs 5 lakhs - Whether as Assessing Officer had failed to bring on record any comparable case so as to justify any estimation/addition, order of Tribunal was to be upheld - Held, yes [Paras 10 and 11] [In favour of assessee]
[2015] 59 taxmann.com 293 (Rajasthan)/[2015] 371 ITR 325 (Rajasthan)

Whether where amount of transport subsidy, interest subsidy, insurance subsidy and power subsidy would reduce cost of production of an industry and there is direct nexus between said subsidies and profits and gains derived by industrial undertaking, deduction under section 80-IC has to be granted in respect of subsidies so received

[2015] 59 taxmann.com 197 (Guwahati - Trib.)/[2015] 38 ITR(T) 186 (Guwahati - Trib.)/[2015] 168 TTJ 9 (Guwahati - Trib.)(UO) NOVEMBER  11, 2013 

Law to be applied for penalty

Law to be applied for penalty is the law, when default is committed and not the law for assessment year when return is filed. Like if income is concealed the offence is committed when return is filed. Hence law applicable on day of filing return to apply. Brij Mohan 120 ITR 1, Rameshwar 130 ITR 51.
If income concealed in original return and then in response to section 148, again same return filed, there is no fresh concealment. Hence penal Provision on original return to apply. (Ram Achal Ram Sewak 106 ITR 144(All))

As per Article 20 of the Constitution, no person shall be subjected to penalty greater than that which might have been inflicted under the law in force at the commission of offence.

having regard to sub clause (i) of Clause 8 of Circular issued by Government of India, if petitioner’s submission to effect that he was aged 70 years was correct then proceedings against him could be dropped

Kishan Lal (All) 179 ITR 206

Pre operative expenses of extension of business are revenue in nature in case of existing business

SRF Ltd HIGH COURT OF DELHI [2015] 59 taxmann.com 180 (Delhi) JANUARY  15, 2015 (FY  2005-06) relying on Jay Engg. Works Ltd. v. CIT [2009] 311 ITR 405/[2008] 166 Taxman 115 (Delhi). further relying on  Veecumsees v. CIT [1996] 220 ITR 185 (SC) where the assessee ran a jewellery business and then commenced business in the exhibition of cinematographic films. The assessee obtained loans for building a cinema theatre and the question was whether the interest payable on the loans borrowed for the new business was a revenue expenditure or not. While answering the question in favour of the assessee, the Supreme Court found that the two businesses were composite in the sense that there was interconnection, interlacing or interdependence between the jewellery business and the cinema business. 
However w.e.f AY 2004-05 proviso to section 36(1)(iii) inserted a proviso:
"Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction" 

Since SC Judgement  itself is not applicable hence whether Delhi high court judgement relying upon that judgement can be relied ? Interestingly Delhi High Court in Jay Engg distinguished SC Judgement in Challapali Sugar which is itself a judgement holding that pre-operative interest to be capitalized

Section 115BBC is not applicable to institutions like that of assessee trust being a temple or shrine; provisions of this section are meant to check inflow of unaccounted/black money into system with a modus operandi to make out as a part of accounts of institutions like university, medical institutions where problem relating to receipt of capitation fees, etc. is generally highlighted.

Such type of offerings are made/put into the donation box by numerous visitors and its generally not possible for any such type of institutions to make and keep record of each of the donor with his name address etc. Even sometimes the donors out of their esteem, respect and regard and selflessness they do not want that their name be registered as a donor before the deity for whom them make the prayer in the belief that the deity is the ultimate giver of all the worth and virtues of their life.

Gurudev Siddha Peeth JULY  22, 2015  ITAT MUMBAI IT APPEAL NOS. 3466 AND 3467 (MUM.) OF 2012

Unreasoned Order of ITAT reducing addition for bogus purchases to 10% relying upon Coordinate Bench decision upheld by Gujrat High Court

Premkumar B. Rathi [2015] 59 taxmann.com 203 (Gujarat)

Case Laws on Requirement to pass reasoned order by ITAT: Gujrat High Court in Premkumar B. Rathi [2015] 59 taxmann.com 203 (Gujarat)

(1)		Omar Salay Mohamed Sait v. CIT [1959] 37 TR 151 (SC).
(2)		Board of Trustees of Martyrs Memorial Trust v. Union of India [2012] 10 SCC 734.
(3)		Real Estate Agencies v. State of Goa [2012] 12 SCC 170.

Hindustan Steel (1970) 25 STC 211 (SC) on Penalty

" ..................An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceedings and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in concious disregard of its obligation. Penalty will also not be imposed because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if minimum penalty is prescribed , the authority competent to impose penalty will be justified in refusing to impose penalty, when there is technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute......."

Supreme Court in J.K. Synthetics (1994) (SC)FB has held that if a dealer has deposited full amount of tax without willfully omitting any information but later an amount is found to be payable dealer would not be liable to pay interest on additional amount of tax deposited by him

Quoted in Suder Nagar Integrated Rural Development Associaiton 51 PHT 411 (HP TT)

Duplicate C forms request can not be rejected on account of delay .

In case of Amba Shakti Ispat Ltd. 51 PHT 408(HP TT) while dealing with issue of duplicate C forms, Tribunal held that request for duplicate C forms can not be rejected merely on the ground that application is made with delay of 3 to 5 years from date of transactions. C forms are required usually only at the time of assessment of selling dealer. The Court also made following observations:

a) Genuiness of transactions can be verified from entry at the barrier.

b) There is no PAN Indian Computer Network of verification of Statutory forms and verification is done through inquiry or correspondence.

c) Factor to be considered is genuiness of transaction and not the factor of delay in applying for C forms as the need arises at the time of assessment

Held by Supreme Court in Delhi Automobiles (P) Ltd. (1997) 104 STC 75 that where sufficient compliance with the provisions of Rule 12(3) has taken place, C forms should be Issued

Quoted in Amba Shakti Ispat Ltd. 51 PHT 408, 410(HP TT)

Outotec India Pvt. Ltd vs. ACIT (ITAT Delhi) Articles 13 & 15 of DTAA: Law on whether if a sum cannot be assessed as "fees for technical services" under the "make available" clause of Article 13, it can still be assessed as "Independent personal services" under Article 15 explained The assessee’s contention that since the services contracted for the by the assessee with non-residents fall within the meaning of Article 13 but get excluded because of not `making available’ any technical knowledge etc., then such services cannot be once again considered under Article 15 is not acceptable. The precise question is that which of the two Articles, namely, 13 or 15, should have primacy in the facts and circumstances as are instantly prevailing?

 para 1 of Article 15 of the DTAA, we find that the income derived by a resident of Finland in respect of professional services or other independent activities of a similar character performed in India can be taxed in India if he is present in India for a period or periods aggregating to 90 days or more in the relevant fiscal year or has a fixed base regularly available to him in India for the purpose of performing his activities. It is noticed that the CIT(A) has computed the period of 90 days by considering the presence of these persons in India from 24.11.2008 to 24.4.2009. The AR contended that the CIT(A) has considered total period of stay of all the five persons taken together without considering it on individual basis. We find force in the submission of the ld. AR in this regard. Once it is held that five individuals from Finland were not representing IPS and, in fact, there was no valid agreement between the assessee and IPS, then, what remains to be examined is such five residents of Finland on individual basis. The amounts payable to each of such five persons satisfying the duration test on individual basis would enable the ultimate triggering of Article 15 of the DTAA. In other words, only those Finland residents out of such five persons who independently and individually satisfy the condition about their presence in India for a period of 90 days or more in the relevant fiscal year or having a fixed place regularly available to them in India for the purpose of performing the supervisory functions, can be brought within the purview of Article 15. If, however, this condition is found wanting qua some individuals, then the amount payable to such individual residents of Finland, would cease to be chargeable to tax in terms of Article 15 of the DTAA notwithstanding its taxability under section 9(1)(vii) read with section 5 of the Act.

A licensee who is in full control of the building and can exercise the rights of the owner in his own right is entitled to depreciation

CIT vs. Bharat Hotels (Delhi High Court)

(i) Explanation (1) to Section 32 of the Act also acknowledges that depreciation would be claimed by assessee who carries on business “in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work or in relation to……. the building.” In such event, Section 32 (1) would apply “as if the said structure or work is a building owned by the assessee.

Having held that the sundry creditors are not payable and fictitious, the next question that comes up for our consideration is the year in which the amount is taxable under what provisions of law either under Section 41(1) or 68 of the Act. We are required to examine whether this amount should be brought to tax in the year in which credit was made first time in the books of account or in the year in which these are found not payable. An identical issue had come up for consideration before the Hon’ble Gujarat High Court in the case of CIT Vs Bhogilal Ramjibhai Atara in Tax Appeal No. 588 of 2013, dated 04.02.2013, in which it was held that that even if the debt itself is found to be non-genuine from the very inception there was no cessation or remission of liability and that therefore, the amount in question cannot be added back as a deemed income under section 41(1) of the Act. The Jurisdictional High Court in the case of CIT Vs. Shri Vardhman Overseas Ltd., (2012) 343 ITR 408 (Del), has dealt with the issues of taxability under section 41(1) of the Act in a case where long outstanding sundry creditors were treated as taxable. The High Court after referring to the decisions of Hon’ble Supreme Court in the cases of CIT(Chief) Vs. Kesaria Tea Co. Ltd., (2002) 254 ITR 434(SC) and CIT Vs. Sugauli Sugar Works P. Ltd (1999) 236 ITR 518 (SC, has held that such amounts cannot be brought to tax under Section 41(1) of the Act. The Hon’ble Suprme Court in the case of CIT Vs. Sugauli Sugar Works P. Ltd. (supra) held that a unilateral action cannot bring about a cessation or remission of the liability because a remission can be granted only by the creditor and a cessation of the liability can only occur either by reason of operation of law or the debtor unequivocally declaring his intention not to honour his liability when payment is demanded by the creditor, or by a contract between the parties, or by discharge of the debt. (ii) Applying the ratio in the cases mentioned supra, the amount in question cannot be brought to tax in the year under appeal under the provisions of Section 41(1) of the Act. It is trite law that an addition under Section 68 can be made only in the year in which credit was made to the account of the creditors in the books of account maintained. Kindly refer to the Supreme Court in the case of Damodar Hansraj Vs. CIT, (1969) 71 ITR 427 (SC). Admittedly, in this case the credit to the account of creditors was made in the earlier years and therefore, the amount even cannot be brought to tax under Section 68 in the year under appeal. However, it is open to the Department to levy tax on such amount by resorting to the remedies available under the provisions of Act by duly following the procedure known to the law.

Cheil India Pvt. Ltd vs. ITO (ITAT Delhi)

The ITAT directed that the assessee be granted sufficient opportunity to rebut the evidence used by the Assessing Officer regarding the addition of Rs.89,39,92,188 made by the Assessing Officer on account of alleged short receipts declared in the profit and loss account violating the principles of natural justice. In compliance, the Assessing Officer made the assessment on the issue afresh under sec. 254 read with 143(3) of the Act making the addition of Rs.4,55,41,557 out of Rs.89,39,92,188 which was questioned before the CIT(Appeals). The CIT(Appeals) not only upheld the addition of Rs.04,55,41,557 made on account of short receipts declared in profit and loss account but enhanced the income by directing the Assessing Officer to disallow payments made by the assessee under sec. 40(a)(ia) of the Act. The assessee claimed that by directing the Assessing Officer to make the disallowance of payments made by the assessee under sec. 40(a)(ia) of the Act, the CIT(Appeals) has introduced in the assessment a new source of income, which is not allowed in an assessment which was made by the Assessing Officer strictly in compliance of the order of the ITAT for reconsideration of addition of Rs.89,39,92,188 after examining the evidence and upholding opportunity of being heard to the assessee. HELD by the Tribunal:

(i) The direction to the Assessing Officer by the CIT(Appeals) to disallow payments made by the assessee under sec. 40(a)(ia) of the Act was a question of taxability of income from a new source of income which has not been considered by the Assessing Officer, hence it was exceeding of jurisdiction by the CIT(Appeals) in a set aside matter by the ITAT in the present case. Though the CIT(Appeals) has co-terminus powers as of the Assessing Officer and is empowered to do what an Assessing Officer can do for the assessment, the directed disallowance was new source of income, which was not the subject matter of setting aside order by the ITAT, in compliance of which assessment under sec. 254 read with section 143(3) was framed.

(ii) The power of the CIT(Appeals) to set aside assessment, which does not involve a proposal for enhancement cannot be used for the purpose of expending the whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under sec. 147/148 of the Act and section 263 of the Act, if requisite conditions are fulfilled. It is inconceivable that in the presence of such specific provisions, a similar power is available to the appellate authority (CIT vs. Sardari Lal & Co. – 251 ITR 864 (Del) followed).

Unclaimed liabilities to creditors, even if fictitious and bogus, cannot be assessed u/s 41(1) in the absence of a write-back. The bogus credits can be assessed u/s 68 only in the year the credits were made and not in the year they are found to be not payable

Perfect Paradise Emporium Pvt. Ltd vs. ITO (ITAT Delhi)

 Having held that the sundry creditors are not payable and fictitious, the next question that comes up for our consideration is the year in which the amount is taxable under what provisions of law either under Section 41(1) or 68 of the Act. We are required to examine whether this amount should be brought to tax in the year in which credit was made first time in the books of account or in the year in which these are found not payable. An identical issue had come up for consideration before the Hon’ble Gujarat High Court in the case of CIT Vs Bhogilal Ramjibhai Atara in Tax Appeal No. 588 of 2013, dated 04.02.2013, in which it was held that that even if the debt itself is found to be

Loss suffered on account of forex derivative contracts (Exotic Cross Currency Option Contracts cannot be treated as speculative loss to the extent that the derivative transactions are not more than the total export turnover of the assessee. If the derivative transaction is in excess of export turnover, the loss in respect of that portion of excess transactions has to be considered as speculative loss because the excess derivative transaction has no proximity with export turnover

M/s. Majestic Exports vs. JCIT (ITAT Chennai)July 24, 2015 (Date of pronouncement)

The Mumbai High Court in CIT vs. M/s SMSL-UANRCL (JV) has held that even if contract is awarded to the Joint Venture, the income is assessable only in the hands of the person which has executed the work - [2015-ITRV-HC-MUM-120]

The Mumbai High Court in CIT vs. Hariram Bhambhani has held that the entire unaccounted sales cannot be assessed as undisclosed income particularly if the purchases have been accounted for. Only the net profit on such unaccounted sales can be taken as income - [2015-ITRV-HC-MUM-115]

The Mumbai ITAT in Vardhman Developers Ltd vs. ITO has held that expenditure towards repair and renovation of leased premises is capital in nature. It has also explained the method for allocation of common expenses to different WIP projects of a builder - [2015-ITRV-ITAT-MUM-111]

The Mumbai ITAT in Fardeen Khan vs. ACIT has held that land ceases to be a capital asset on date of application for conversion into N. A. land. Pursuant to amendment to s. 53A of TOP Act , non-registered development agreement does not result in transfer u/s 2(47)(v). Law in Chaturbhuj Dwarkadas Kapadia 260 ITR 461 (Bom) does not apply after amendment to s. 53A - [2015-ITRV-ITAT-MUM-121]

The Pune ITAT in M/s. Chakrabarty Medical Centre vs. TRO has held that property introduced by a partner into firm becomes the asset of the firm even if there is no registered deed. Though the asset is held by the firm as a depreciable asset and though the investment in s. 54EC bonds is made in the names of the partners, the firm is eligible for s. 54EC exemption - [2015-ITRV-ITAT-PUNE-110]

The Delhi High Court in CIT vs. Taikisha Engineering India Ltd has held that no disallowance can be made u/s 14A if AO does not record satisfaction with reference to accounts that assessee's claim is improper. However, if Rule 8D applies, assessee's claim that interest is not disallowable on ground of "own funds" is not acceptable - [2015-ITRV-HC-DEL-118]

The Pune ITAT in Kul Foundation vs. CIT has held that CIT, while granting registration or renewal u/s 12AA / 80G(5), can only look at the nature of activities and is not concerned with potential violation of s. 11(5) or s. 13. Registration cannot be denied on ground that activities have not commenced - [2015-ITRV-ITAT-PUNE-112]

The Mumbai High Court in Rashmikant Kundalia vs. UOI holding the constitutionally valid the levy of fee u/s 234E has held that the late filing of TDS returns by the deductor causes inconvenience to everyone and s. 234E levies a fee to regularize the said late filing. The fee is not in the guise of a tax nor is it onerous - [2015-ITRV-HC-MUM-114]

The Delhi High Court in CIT vs. M/s Muthoot Financiers has held that transaction of loan between a firm and its partner does not attract s. 269SS. If other High Courts have taken a consistent view, that should be followed even if opposite view is possible - [2015-ITRV-HC-DEL-109]

The Mumbai High Court in CIT vs. Fine Jewellery (India) Ltd has held that fact that assessment order is silent on a point does not mean that there is no application of mind by AO u/s 263 if he has raised a query during the assessment proceedings and assessee has replied - [2015-ITRV-HC-MUM-116]

The Mumbai High Court in CIT vs. State Bank Of India has held that uniformity in treatment is the basis premise of rule of law. The Dept cannot arbitrarily pick and choose which orders of the ITAT should be challenged in the High Court. If ITAT has followed an order which is not challenged by the Dept then an affidavit must be filed explaining the distinguishing features which warrants the different view - [2015-ITRV-HC-MUM-117]

The assessee received 45% of total sale consideration for sale of immovable property and offered the same for capital gains. However, he took cost at 50%, which he accepted as done mistakenly. The other co-owner had offered balance 55% towards tax. The sale consideration in the hands of assessee can not be taken at 50%

ANIRUDHA V. PATEL AHMEDABAD TRIBUNAL Jul 17, 2015 (2015) 44 CCH 0359 AhdTrib

Amount deposited in bank account can not presumed to have been taken from buyer of the property as excess consideration over sale deed. It is for vendor to prove the deposit

LATE SHRI JASRAJ MULTANMAL JAIN AHMEDABAD TRIBUNAL Jul 17, 2015 (2015) 44 CCH 0387 AhdTrib
Assessee had purchased a piece of land for consideration which was mortgaged with the bank before the sale— Vendors paid Rs. 65 lacs to the bank and get the property released—AO held a belief that assessee must have paid unaccounted money over and above the consideration stated in the sale deed to the vendors which was ultimately deposited in bank and got released the land—AO had assumed that assessee has made unexplained investment in purchasing the property on the ground that vendors have got the property released from the bank and it was sold to the assessee and for same assessee had paid undisclosed sum—It was for the vendors to explain the source of what amount which they have discharged towards their loan liability and it cannot be presumed that it must be taken from the assessee in cash over and above the amounts stated in the sale deed—But AO had failed to make reference of any evidence which demonstrate that assessee has made unexplained investment—There was no direct co-relation between the discharge of loan liability vis-à-vis sale of plot—No evidence was with the AO to suggest that assessee had made unexplained investment in the purchase of the property—Revenue’s appeal dismissed

For Computing Rental Income of Trust registered u/s 12A, actual expenditure incurred shall be allowed as deduction and not the deductions u/s 23 and S. 24

Anjuman-E-Himayath-E-Islam [2015] 59 taxmann.com 379 (Chennai - Trib.) JUNE  2, 2015 

Treatment of Excess of Expenditure over Income in Trust

Where expenditure of trust exceeds its income, the excess can not be carried forward for application in subsequent years. While Computing excess, 15% of Income also not to be set aside. However, since excess expenditure is met out of corpus, loans, sundry creditors, the application in subsequent years shall be considered in the year of repayment of loan etc. Anjuman-E-Himayath-E-Islam [2015] 59 taxmann.com 379 (Chennai - Trib.) JUNE  2, 2015

 However in Maharashtra Industrial Development Corporation, ITA 6129/MUM/2013, dtd 05-03-2015, ITAT Mumbai relying upon assessee’s on case in (ITA No. 6752/Mum/2011 dated 15.03.2013) decided that excess of expenditure over income can be carried forward relying upon decision of Bombay High Court in Institute of Banking Personnel Selection 264 ITR 110

Issues relating to Job worker of dyeing of fabric resolved in : A.P. PROCESSORS vs.ASSISTANT COMMISSIONER OF INCOME TAX Jul 17, 2015 (2015) 44 CCH 0384 DelTrib

1. Job Worker not maintaining the record of receipt and dispatch of the goods because of the fact that the ownership of the fabric received for processing is not of the assessee, nor the shortage due to shrinkage, etc. of the fabrics belong to the assessee. Rejection of books of accounts quashed

2. Following shrinkage in dyeing  accepted

Cambric – shrinkage – 5% and further – 2% to – 5%. If it is further required residual shrinkage as zero.

Crapes – 10% and further – 2% if it required line dry (dry in air).

Other than the above shrinkage, there is another loss of fabric by 2% on account of grey and dyed fabs.

3. Fire Insurance claim received by Job Worker can not be treated as income of the Job worker not mainstaining stock records, where he produced all the relevant documents relating to insurance claim before the AO during the assessment proceedings along with FIR lodged before the Police; and report of Verifier (Valuation and Loss Assessor).

4. Hon’ble Supreme Court decision in Empire Industries Ltd. Vs. Union of India (3 Judges Bench) reported as 162 ITR 846 held that textile dyeing and printing amounts to manufacturing. Hence Additional depreciation of 20% u/s 32(1)(iia) is available to Job Worker engaged in dyeing of fabric

No addition u/s 68 can be made in the hands of person engaged in business of accommodation entries. Addition should be made in the hands of beneficiaries. Person providing accomodation entries can only be assessed to commission income.

ZENITH ESTATE LTD Jul 20, 2015 ITA No. 3419/Del/2014 (2015) 44 CCH 0396 DelTrib

No addition can be made in current year for opening balance of liability not deposited/paid

KISAN SAHKARI CHINI MILL LTD. LUCKNOW TRIBUNAL ITA No. 130/LKW/2014 (2015) 44 CCH 0393 LucknowTrib

Payment of Subscription to federation not covered by 194J and hence not hit by 40(a)(ia).

KISAN SAHKARI CHINI MILL LTD. LUCKNOW TRIBUNAL ITA No. 130/LKW/2014 (2015) 44 CCH 0393 LucknowTrib

Followed  Tribunal decision in the case of ACIT, Sitapur vs. Kisan Sahkari Chini Mill Ltd. Sampurnanagar, Lakhimpur Kheri in I.T.A. No.406 to 409/Lkw/2013 dated 29/11/2013

Sale of Property- unsigned agreement seized- Decided in favour of assessee

SARAL TALWAR (2015) 44 CCH 0391 HydTrib Jul 22, 2015

 It needs to be mentioned, assessee from the very initial stage of the proceeding has denied of receiving any cash amount from Mr. Suresh Chand Agarwal towards the sale of property. It is also evident that apart from the receipts and the unsigned document, there is no other evidence in the possession of the department to conclusively prove that the assessee has actually received the amount of Rs.2.66 crores from Mr. Suresh Chand Agarwal.

Adhoc disallowance of 50% of expenditure incurred in earning commission income, for the reason that assessee has not been able to explain fully that the expenditure claimed was wholly and exclusively laid out for the purpose of business. Assesee furnished names, cheque numbers and amounts of commission paid. Adhoc disallowance held not sustainable.

SARAL TALWAR (2015) 44 CCH 0391 HydTrib Jul 22, 2015

Software License Fee claimed as revenue expenditure , however, treated as capital by the department and allowed depreciation @ 60% under computer during 143(3). Later department reopened to allow depreciation @ 25% under intangibles. Held that since there is no failure to disclose material facts , no reassessment can be made.

[HCL TECHNOLOGIES LIMITED 16.07.2015 W.P.(C) 7948/2013 & CM 16840/2013 HIGH COURT OF DELHI]

Followed Haryana Acrylic Manufacturing Co. v. CIT: 308 ITR 38 (Delhi)

Wel Intertrade Private Ltd.[2009] 308 ITR 22 (Delhi) 

 Punjab and Haryana High Court in the case of Duli Chand Singhania [2004] 269 ITR 192

Good will is eligible for Depreciation as Intangible

Supreme Court in the case of SMIFS Securities Ltd., 348 ITR 0302 followed in

St. Angelo’s Computers Ltd. ITA No.6874/Mum/2011 Date of Pronouncement 22/07/2015

Tyssenkrupp elevator (India) (P) Ltd., 167 TTJ 131(Del);  

Worldwide Media Pvt. Ltd., 30 ITR (Trib) 181;

M/s PPG Asian Paints Pvt. Ltd., ITA No.2919/Mum/2013, dated 15-4-15 

M/s Toyo Engineering India Limited, ITA No.3279/Mum/2008, dated 13-10-2014; Birla Global Asset Finance Co. Ltd., 221 Taxman 176(Bombay); 

 KEC International Ltd., Order dated 7-2-2013(Bombay High Court)

In case a transporter hires trucks from any other transporter or truck owner on day-to-day requirement basis, such an arrangement cannot be said to be a result of written or oral contract.This is so because the liability fastened on the transporter (contractor) under a contract with a party for transporting its goods is never fastened either on the transporter or the truck owner from whom the trucks are hired

CHANDRAKANT THACKAR (2009) 28 CCH 0702 CuttackTrib

Credit sales not reflected in books of account—Total unrecorded sales cannot be regarded as the profit of the assessee—Net profit rate has to be adopted—Once a net profit rate is adopted, it cannot be said that there is perversity of approach—Whether the rate is low or high would depend upon the facts of each case Held

 BALCHAND AJIT KUMAR (2003) 71 CCH 0380 MPHC. 

President Industries Gujrat High Court Concurred with

Tribunal held that entire sales could not be added as income of assessee but addition could be made only to the extent of estimated profits embedded in sales for which net profit rate was adopted—There is no finding or material about suppression of investment in acquiring the goods which are subject of undisclosed sales—No referable question of law arises

PRESIDENT INDUSTRIES (2002) 124 TAXMAN 0654 (1999) 67 CCH 0259 GujHC