TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Assessee's Appeal Partially Allowed, Tribunal Upholds CIT(A)'s Decisions</h1> <h3>Aarvee Denims And Exports Versus DCIT, Cir. 1 (1) (1) Ahmedabad. And (Vice-Versa)</h3> Aarvee Denims And Exports Versus DCIT, Cir. 1 (1) (1) Ahmedabad. And (Vice-Versa) - TMI Issues Involved:1. Addition of interest on advance payment for land purchase.2. Quantum of interest calculation.3. Disallowance of employee’s contribution towards ESIC.4. Disallowance of deduction claimed under section 80IA.5. Disallowance under section 40(a)(ia) for non-deduction of TDS.6. Disallowance of excess depreciation on computer software.7. Disallowance of interest on Foreign Currency Convertible Bonds (FCCB).8. Addition under section 41(1) for cessation of liabilities.9. Disallowance of interest under section 36(1)(iii) for capital work-in-progress.Detailed Analysis:1. Addition of Interest on Advance Payment for Land Purchase:The assessee contested the addition of Rs. 1,97,17,500/- as interest on an advance of Rs. 13,14,50,000/- made for a land purchase that did not materialize. The AO presumed unaccounted consideration and added notional interest at 15%. The Tribunal found no evidence supporting the AO’s assumption and noted that the assessee had sufficient interest-free funds. The addition was deleted, and the ground of appeal was allowed.2. Quantum of Interest Calculation:Since the addition of Rs. 1,97,17,500/- was deleted, the alternative ground regarding the rate of interest calculation at 9.75% instead of 15% became infructuous and was dismissed.3. Disallowance of Employee’s Contribution towards ESIC:The assessee did not press this ground, and it was dismissed for want of prosecution.4. Disallowance of Deduction Claimed under Section 80IA:The AO disallowed the deduction under section 80IA, requiring set-off of earlier years' losses. The CIT(A) allowed the deduction, relying on judicial precedents. The Tribunal upheld the CIT(A)’s order, referencing the Madras High Court judgment in Velayudhaswamy Spinning Mills and the CBDT Circular No.1/2016, confirming that earlier losses set off against other income cannot be brought forward notionally.5. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS:The AO disallowed Rs. 15,22,527/- for non-deduction of TDS on payments to Naroda Enviro Projects Ltd. The CIT(A) directed verification of Form No.26A and deletion of the addition, referencing the Delhi High Court judgment in CIT Vs. Ansal Landmark Township. The Tribunal upheld the CIT(A)’s decision.6. Disallowance of Excess Depreciation on Computer Software:The AO allowed 25% depreciation on computer software, treating it as an intangible asset. The CIT(A) allowed 60% depreciation, treating it as part of the computer system. The Tribunal upheld the CIT(A)’s order, noting consistency with past assessments.7. Disallowance of Interest on FCCB:The AO treated Rs. 41,21,439/- as capital loss on redemption of FCCB. The CIT(A) allowed it as revenue expenditure, noting consistent treatment in past years. The Tribunal upheld the CIT(A)’s order, referencing the Rajasthan High Court decision in Secure Meters Ltd., confirming that debenture-related expenses are revenue in nature.8. Addition under Section 41(1) for Cessation of Liabilities:The AO added Rs. 1,12,263/- as deemed income under section 41(1). The CIT(A) deleted the addition, noting the liability was not written back and still existed in the books. The Tribunal upheld the CIT(A)’s order, referencing Gujarat High Court judgments confirming that unceased liabilities cannot be taxed.9. Disallowance of Interest under Section 36(1)(iii) for Capital Work-in-Progress:The AO disallowed Rs. 18,89,259/- interest, presuming use of interest-bearing funds for capital work-in-progress. The CIT(A) deleted the disallowance, noting sufficient interest-free funds. The Tribunal upheld the CIT(A)’s order, referencing judicial precedents confirming no disallowance when interest-free funds are sufficient.Conclusion:The assessee’s appeal was partly allowed, and the Revenue’s appeal was dismissed. The Tribunal upheld the CIT(A)’s decisions on most grounds, emphasizing the need for concrete evidence and consistency with judicial precedents.
TaxTMI 
TaxTMI 
