TaxTMI Updates e-Newsletter
Dec 11,2021

Input Service - out-door catering services - input tax credit - personal use or consumption

Input Service - out-door catering services - personal use or consumption - input tax credit - Out-door catering services used primarily for personal use or consumption of employees are excluded from the definition of "Input Service" under Rule 2(1) (post 01.04.2011), and input tax credit in respect thereof cannot be availed. - HELD THAT: - The Court examined Rule 2(1) as amended post 01.04.2011 and held that the statutory definition of "Input Service" clearly excludes out-door catering services when such services are used primarily for the personal use or consumption of any employee. Applying that statutory provision, the Court found no error in the High Court's conclusion to deny input tax credit for the claimed out-door catering services. The Supreme Court concurred with the High Court's interpretation and reasoning, endorsing the exclusion of such services from "Input Service" and the consequent ineligibility for input tax credit.

High Court's denial of input tax credit upheld; out-door catering services used primarily for employees' personal consumption are not "Input Service".

Final Conclusion: Special Leave Petitions dismissed; High Court's decision denying input tax credit for out-door catering services (excluded from "Input Service" under Rule 2(1) post 01.04.2011) is affirmed.

Interpretation of the term "subsequently held" in relation to refund under Section 77 of the CGST Act and Section 19 of the IGST Act - availability of refund where the supplier himself subsequently determines a supply to be intra State or inter State - remand for fresh consideration in light of a clarificatory circular

Interpretation of the term "subsequently held" in relation to refund under Section 77 of the CGST Act and Section 19 of the IGST Act - availability of refund where the supplier himself subsequently determines a supply to be intra State or inter State - remand for fresh consideration in light of a clarificatory circular - Order of the appellate authority rejecting the refund claim was set aside and the matter remitted for fresh adjudication in light of the clarificatory circular dated 25.09.2021 concerning the meaning of "subsequently held" under Section 77 of the CGST Act and Section 19 of the IGST Act. - HELD THAT: - The Court noted that the departmental circular dated 25.09.2021 clarifies that the expression "subsequently held" in Section 77 of the CGST Act and Section 19 of the IGST Act covers both situations where (a) a supply made by a taxpayer as inter State or intra State is subsequently found by the taxpayer himself to be intra State or inter State respectively, and (b) a supply is subsequently found/held as such by a tax officer in any proceeding; refund is available in either situation provided the taxpayer pays the required tax in the correct head. In view of this clarification, the Court held that the impugned appellate order - which applied a narrower understanding of "subsequently held" and dismissed the taxpayer's refund claim for the tax period February, 2018 - could not stand without fresh consideration under the clarified position. The Court therefore set aside the impugned order and remitted the matter to the concerned appellate authority to decide the refund claim afresh under Rule 89(1) of the CGST Rules, 2017 and the relevant provisions of the CGST and IGST Acts in accordance with the circular and law. The Court expressly refrained from expressing any view on the merits of the refund claim.

Impugned order set aside and matter remitted to the appellate authority to decide the refund claim afresh in light of the clarificatory circular dated 25.09.2021; no opinion expressed on merits.

Final Conclusion: The challenge succeeds to the extent that the appellate order dated 25.06.2021 is set aside and the matter is remitted to the concerned appellate authority for fresh decision on the refund claim for February, 2018 in accordance with the clarificatory circular dated 25.09.2021 and applicable law; the Court has not adjudicated the merits of the claim.

Provisional attachment / freezing of bank accounts under Section 83 of the Goa GST Act - requirement of pending proceedings under Sections 62, 63, 64, 67, 73 or 74 for exercise of powers under Section 83 - appointment of an appropriate officer not constituting initiation of proceedings

Provisional attachment / freezing of bank accounts under Section 83 of the Goa GST Act - requirement of pending proceedings under Sections 62, 63, 64, 67, 73 or 74 for exercise of powers under Section 83 - Validity of the impugned order dated 1st October 2021 provisionally freezing the petitioners' bank accounts under Section 83 of the Goa GST Act in the absence of any proceedings or show cause notices against the petitioners. - HELD THAT: - The Court found that Section 83 of the Goa GST Act operates only when proceedings are pending under Sections 62, 63, 64, 67, 73 or 74. It is admitted and recorded that no proceedings under those provisions have been initiated against the petitioners and no show cause notices have been issued. In those circumstances, the authority had no power to provisionally attach or freeze the petitioners' bank accounts. The ledger fact that an appropriate officer had been appointed to determine tax liability did not amount to initiation of proceedings that would activate Section 83. Consequently, the impugned order effected a power exercise beyond the statutory scope and was illegal. [Paras 6, 7, 8]

The impugned order freezing the petitioners' bank accounts was quashed and set aside.

Appointment of an appropriate officer not constituting initiation of proceedings - Whether mere appointment of an appropriate officer for determining tax liability can by itself justify provisional attachment under Section 83. - HELD THAT: - The Court held that mere appointment of an officer to determine tax liability does not amount to initiation of proceedings under the statutory provisions that enable provisional attachment. Since no show cause notices or proceedings under the specified sections were pending, appointment alone cannot be a ground for freezing bank accounts under Section 83; such a step requires the statutory preconditions to be satisfied. [Paras 7, 8]

Appointment of an officer alone does not justify provisional freezing of bank accounts; the attachment was unjustified.

Final Conclusion: Writ petitions allowed; the order dated 1st October 2021 provisionally attaching the petitioners' bank accounts is quashed and set aside for lack of statutory foundation, and the bank accounts are to be de-frozen.

Transitional input tax credit - speaking order - remand for fresh consideration - service of notice - opportunity to be heard - principles of natural justice

Transitional input tax credit - speaking order - remand for fresh consideration - Validity of the impugned order assessing a specified amount without clear basis and whether it should be quashed and remitted for fresh consideration. - HELD THAT: - The Court found no clarity in the impugned order on the basis for determining the assessed amount and observed that the petitioner had not filed a reply to the notice dated 20.11.2020. The Court held that if the petitioner is able to establish that the transitional credit shown in TRANS 1 was the stated sum, that claim cannot be denied without proper consideration; conversely, any liability to pay tax requires detailed adjudication by the authority. In view of these defects, the impugned orders were quashed and the matter was remitted to the first respondent for a fresh, speaking decision after due compliance with the directions given by the Court.

Impugned orders quashed; matter remitted to the first respondent to pass a speaking order within 45 days after fresh consideration.

Service of notice - opportunity to be heard - principles of natural justice - Whether the petitioner should be granted an opportunity to file replies and be heard in view of alleged non receipt of notice and lockdown constraints. - HELD THAT: - The Court accepted that the petitioner did not respond earlier and noted assertions about non receipt of notice at the head office and lockdown related inability to participate. Exercising supervisory jurisdiction, the Court granted the petitioner liberty to file an appropriate reply to the notice within 15 days and directed personal appearance before the first respondent on the specified date to make oral submissions. The Court expressly required the first respondent to decide the matter after affording an opportunity of hearing and in accordance with the principles of natural justice.

Petitioner permitted to file reply within 15 days and to appear and make oral submissions; first respondent to hear and decide after compliance with principles of natural justice.

Final Conclusion: Writ petitions allowed: impugned orders quashed and remitted for fresh adjudication; petitioner given liberty to file reply and to be heard; first respondent directed to pass a speaking order within 45 days after affording opportunity in accordance with natural justice; no order as to costs.

GST on royalty - reverse charge mechanism - supplier definition including agent - authority to collect GST as forward charges - quashing of administrative order

GST on royalty - authority to collect GST as forward charges - reverse charge mechanism - Validity of the Finance (Tax) Department letter dated 08.11.2017 authorising Royalty Contractors to collect GST as forward charges on royalty collected on behalf of the Government - HELD THAT: - The writ petitions challenged the departmental letter which authorised ERCC (Royalty) Contractors to collect GST @ 18% as forward charges. The respondents conceded that the Royalty Contractors are appointed only to collect royalty on behalf of the Government and that the liability to pay GST on royalty is governed by the reverse charge mechanism, under which lease-holders are required to discharge GST. In view of the respondents' stand accepting the applicability of reverse charge mechanism and that contractors merely collect on behalf of the Government without supplying the mineral, the impugned letter purporting to entitle contractors to collect GST as forward charges was inconsistent with the accepted position and could not be sustained. The Court therefore found no need for further adjudication once the reverse charge position was accepted by the State and other respondents. [Paras 11, 12]

The letter dated 08.11.2017 issued by the Finance (Tax) Department authorising Royalty Contractors to collect GST as forward charges is quashed; any consequent letters issued pursuant thereto shall also stand quashed.

Final Conclusion: Writ petitions allowed; the departmental communication dated 08.11.2017 (and any letters issued consequentially) authorising collection of GST as forward charges by Royalty Contractors is quashed in view of the respondents' acceptance that GST on royalty is payable under the reverse charge mechanism and that the contractors only collect royalty on behalf of the State.

Import of services - Place of supply - Intermediary - Reverse Charge Mechanism - Section 13 of the IGST Act - place of supply rules

Import of services - Place of supply - Intermediary - Reverse Charge Mechanism - Advance ruling questions on whether services (performed outside India by professionals/technicians engaged by a foreign entity) amount to import of services and whether such services attract GST under reverse charge were not answered. - HELD THAT: - The Authority examined the submissions that the services would be performed entirely outside India for foreign recipients and that the applicant would not be an intermediary but would receive no benefit in India. The Authority found that the applicant failed to specify the nature of the services, the identity and location of the true recipient and supplier, and the manner in which the applicant claims to supply on its own account. The Authority noted that Section 13 of the IGST Act governs place of supply where supplier or recipient is outside India, and that intermediary treatment depends on facts showing arrangement to facilitate supply. The applicant did not produce evidence or clear factual particulars to establish that the place of supply is outside India or that the applicant is not an intermediary; despite being asked at final hearing to provide detailed explanation and records, no further material was filed. For want of necessary evidentiary material and clarity on critical facts (nature of service, recipient, supplier role and supply chain), the Authority was unable to reach any conclusion on whether the transactions constitute import of services or attract reverse charge. [Paras 5]

No answer is given to the applicant's questions for want of requisite factual and evidentiary material; the application is left undecided.

Final Conclusion: The Advance Ruling Authority did not answer the applicant's questions on import of services and applicability of reverse charge owing to insufficiency and ambiguity of facts and absence of supporting evidence; no determination was made.

Exemption for pure services provided to Governmental authorities by way of activities in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W - characterisation of State Urban Development Agency (SUDA) as a Governmental/State agency for GST purposes - tax deduction at source under Section 51 as indicia of a deductor being a Government department/agency

Exemption for pure services provided to Governmental authorities by way of activities in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W - characterisation of State Urban Development Agency (SUDA) as a Governmental/State agency for GST purposes - functions listed in the 11th and 12th Schedules (Article 243G/243W) - Consultancy and project management services rendered by the appellant to SUDA and for PMAY are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution of India. - HELD THAT: - The Appellate Authority examined SUDA's memorandum of association, its role as the State nodal agency for PMAY(U), the scheme objectives and the functions enumerated in the 11th and 12th Schedules. SUDA's objectives (identification and upliftment of the urban poor, scheme implementation, review of execution, setting up services for urban poor) and its statutory/administrative links (Chairman being Secretary, audit by CAG, restriction on distribution of surplus, GST registration describing SUDA as a 'Government Department') demonstrate that the services relate to matters such as urban poverty alleviation, slum improvement, planning for economic and social development and other municipal/panchayat functions. The Authority further noted SUDA's role under PMAY and the contractual scope tying the appellant's deliverables to these assigned functions. On this basis the services were held to fall within activities entrusted to Panchayats/Municipalities under Articles 243G/243W. [Paras 15]

Services to SUDA and for PMAY relate to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G.

Exemption for pure services provided to Governmental authorities by way of activities in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W - distinction between pure services and works contract/composite supplies involving supply of goods - The services supplied by the appellant (DPR preparation and Project Management Consultancy) qualify as pure services (excluding works contract or composite supplies involving supply of goods) and are eligible for exemption under the notification cited. - HELD THAT: - The Authority reviewed the contractual scope for DPR and PMC - including surveys, data collection and verification, architectural/engineering designs, stakeholder consultations, assistance for approvals, MIS entry and supervision, quality control, reporting, beneficiary assistance, geo-tagging and administration of project progress - and concluded these activities are professional/consultancy in nature without supply of goods that would convert the transaction into a works contract or composite supply involving goods. Having held that the services relate to functions entrusted to Panchayats/Municipalities, the Authority applied the exemption entry for pure services provided to Governmental authorities in relation to such functions and held the services eligible for exemption from CGST/UPGST. [Paras 17]

The appellant's DPR and PMC services qualify as pure services and are exempt under the relevant notification when provided to SUDA/for PMAY.

Final Conclusion: The Appellate Authority allowed the appeal, holding that the appellant's consultancy and project management services to SUDA and under PMAY fall within activities entrusted to Panchayats/Municipalities under Articles 243G/243W and qualify as pure services, thereby attracting the exemption under the relevant notification from levy of CGST and UPGST.

Reopening of assessment on reasons to believe - Validity of notice under Section 148 - Requirement of tangible material for formation of reasons to believe - Return processed under Section 143(1) and non applicability of proviso to Section 147 - Compliance with Section 144B and requirement of personal hearing - Quashing of assessment for willful disobedience of court order / contemptuous conduct

Reopening of assessment on reasons to believe - Requirement of tangible material for formation of reasons to believe - Return processed under Section 143(1) and non applicability of proviso to Section 147 - Validity of the notice dated 26th March 2019 issued under Section 148 for A.Y.-2012-2013. - HELD THAT: - The Court held that the reasons recorded by the Assessing Officer - namely information received in February 2019 indicating the petitioner had traded in two penny stock scrips and was a beneficiary of transactions characterised as non genuine/accommodation entries - cannot be described as illusory, hypothetical or conjectural. Given that the petitioner's return for A.Y.-2012-2013 was processed under Section 143(1) (and not assessed under Section 143(3)), the proviso to Section 147 does not apply; the Assessing Officer therefore need only have reasons to believe supported by tangible material. On the material before the Court, there was no ground to quash the notice under Section 148. [Paras 1, 2, 3]

Notice dated 26th March 2019 under Section 148 held valid; no interference with the reopening at that stage.

Compliance with Section 144B and requirement of personal hearing - Quashing of assessment for willful disobedience of court order / contemptuous conduct - Validity of the assessment order dated 13th May 2021 and the appropriate remedial direction. - HELD THAT: - The Court found that although the notice under Section 148 was valid, the Assessing Officer proceeded to complete the reassessment and pass the assessment order despite an ad interim stay granted by this Court and express internal advice (Confirmatory Check List) to keep the reassessment in abeyance. The completion of assessment in these circumstances amounted to gross disobedience of the Court's order. Further, the Assessing Officer failed to comply with the procedural requirements of Section 144B. In consequence, the assessment order was quashed. The matter was remitted to the stage of the notice under Section 148 with directions that the Assessing Officer shall consider the petitioner's submissions afresh and, within six weeks of upload of the order, pass a fresh order after strictly complying with Section 144B, including affording a personal hearing to the petitioner. [Paras 6, 7]

Assessment order dated 13th May 2021 quashed for breach of the Court's stay and non compliance with Section 144B; matter remanded for fresh decision with directions including personal hearing within six weeks.

Quashing of assessment for willful disobedience of court order / contemptuous conduct - Consequences for the Assessing Officer's disobedience of the Court's order. - HELD THAT: - The Court concluded that the Assessing Officer's conduct in completing assessment despite the interim order and internal advice to keep the case in abeyance amounted to willful disobedience. Instead of initiating contempt proceedings, the Court directed a compensatory measure: the Assessing Officer shall pay by personal funds a donation to the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM CARES) and file proof of payment by affidavit within two weeks of the order being uploaded. Failure to file the affidavit entitles the petitioner's advocate to seek appropriate mention for compliance. [Paras 6, 8]

Directed payment of Rs. 25,000 by the Assessing Officer to PM CARES from personal account and filing of affidavit of proof of payment within two weeks; liberty granted to seek enforcement if affidavit is not filed.

Final Conclusion: The High Court upheld the validity of the reopening notice for A.Y.-2012-2013 but quashed the assessment order dated 13th May 2021 for willful disobedience of the Court's interim order and non compliance with Section 144B; the matter is remanded to the Assessing Officer to decide afresh after giving a personal hearing within six weeks, and the Assessing Officer is directed to make a personal donation to PM CARES and file proof within two weeks.

Charitable purpose - medical relief - registration under Section 12AA - nature and genuineness of institution - surplus/profit not disqualifying registration

Medical relief - charitable purpose - registration under Section 12AA - Activities of the Trust comprising sale/purchase of medicines and operation of pathological, X ray and polyclinic services fall within medical relief as a charitable purpose for the purpose of registration under Section 12AA. - HELD THAT: - The Tribunal examined the nature and conduct of the Trust's activities and concluded that the polyclinic and ancillary diagnostic services are rendered as part of providing medical services to the public at large. Reliance was placed on authorities holding that the prescribed authority, when considering an application for registration, must look to the nature, activities and genuineness of the institution and that the mere carrying on of revenue generating activities incidental to the charitable object does not convert the activity into a disqualifying business. The High Court found no error in the Tribunal's conclusion that the activities qualify as medical relief within the definition of charitable purpose and thereby justify registration under Section 12AA. The Court noted and accepted the line of decisions cited by the assessee, including Oxford Academy For Career Development -versus- Chief Commissioner of Income Tax , relying on American Hotel and Lodging Association Educational Institute -versus- CBDT , and decisions to the like effect, which support examining nature and genuineness rather than excluding institutions for incidental receipts.

Tribunal's finding that the Trust's activities constitute medical relief and amount to a charitable purpose for registration was upheld.

Surplus/profit not disqualifying registration - nature and genuineness of institution - The Tribunal's finding that the existence of marginal or negligible profit/surplus does not disentitle the Trust from registration was legally sustainable and not vitiated by lack of evidence. - HELD THAT: - The Court accepted the Tribunal's approach that the presence of surplus arising from the conduct of charitable activities, used to sustain those activities, is not by itself a ground to deny registration. The Tribunal's conclusion was founded on examination of the activities and their genuineness rather than on conjecture; the High Court found no basis to hold that the Tribunal acted on irrelevant material or reached a conclusion inconsistent with the evidence. Precedents referred to by the assessee, including St. Lawrence Educational Society (Regd.) -versus- Commissioner of Income Tax and Aditanars Educational Institution -versus- Addl. CIT , were treated as supporting the principle that quantitative surplus alone is not a disqualifying condition for exemption.

Tribunal's conclusion that incidental surplus/profit did not disqualify the Trust from registration was affirmed.

Final Conclusion: The appeal is dismissed. The Tribunal's order granting registration under Section 12AA was upheld; the substantial questions of law are answered against the Revenue and the stay application is dismissed.

Assessment without issuance of draft assessment order and show cause notice - Section 144B procedure - obligation to consider assessee's reply and request for hearing - principles of natural justice - withdrawal of assessment orders passed in violation of principles of natural justice

Assessment without issuance of draft assessment order and show cause notice - Section 144B procedure - Challenge to the final assessment order dated 8th September, 2021 for Assessment Year 2018-19 on the ground that the order was passed without issuance of a draft assessment order and a Show Cause Notice as mandated by Section 144B. - HELD THAT: - The petition contends that the National Faceless Assessment Centre issued the final assessment order without first issuing the draft assessment order and Show Cause Notice and without considering the assessee's reply or request for hearing, thereby contravening the procedure prescribed under Section 144B. The Court issued notice on the petition and recorded the petitioner's grievance; the Court did not adjudicate the merits of the assessment or determine the correctness of the assessment itself at this stage. The order notes the statutory position that assessment orders not made in accordance with the procedure laid down in Section 144B would be non est, but the Court has not pronounced a final finding on the validity of the impugned assessment on merits.

Notice issued; merits of the challenge not decided and matter directed to be placed for further consideration.

Obligation to consider assessee's reply and request for hearing - principles of natural justice - withdrawal of assessment orders passed in violation of principles of natural justice - Direction to the Principal Chief Commissioner, NaFAC, to examine institutional measures and the possibility of withdrawal of final assessment orders passed without compliance with Section 144B and without observance of principles of natural justice. - HELD THAT: - On hearing, the Principal Chief Commissioner, NaFAC appeared by video link and undertook that NaFAC would introduce systems of alerts and checks to ensure that no final assessment order is passed without prior issuance of a Show Cause Notice and draft assessment order and without considering the assessee's reply or request for hearing. The Court directed the Principal Chief Commissioner to examine, in consultation with the CBDT and officers, whether NaFAC should withdraw any final assessment orders passed in violation of principles of natural justice or without following the procedure under Section 144B, and to file an affidavit recording the steps proposed and the outcome of that examination within three weeks. This is a judicial direction for institutional review and reporting, not a final adjudication on individual orders.

Principal Chief Commissioner to file an affidavit within three weeks after consultation; NaFAC to examine withdrawal of non-compliant orders and to implement procedural safeguards; matter listed on 24th December, 2021.

Final Conclusion: The Court issued notice on the petition challenging the final assessment order for AY 2018-19, recorded the petitioner's contention that Section 144B procedure and principles of natural justice were not followed, and directed the Principal Chief Commissioner, NaFAC, to examine systemic safeguards and the question of withdrawing non-compliant assessment orders and to file an affidavit within three weeks; the merits of the impugned assessment were not finally adjudicated and the matter is listed for further hearing on 24th December, 2021.

Deduction under Section 80IB(10) of the Income Tax Act, 1961 - Aggregation of built-up area for eligibility under Section 80IB(10)(c) - Substance over form in treatment of ancillary utility/servants quarters - Concurrent factual findings and appellate interference

Deduction under Section 80IB(10) of the Income Tax Act, 1961 - Aggregation of built-up area for eligibility under Section 80IB(10)(c) - Whether deduction under Section 80IB(10) was admissible where two separately documented residential units sold to the same buyer each had built-up area under 1,500 sq. ft. - HELD THAT: - The Court examined the material and concurrent findings of the Assessing Officer, the CIT(A) and the Tribunal and held that the question was essentially factual. The Tribunal found, on the evidence including agreements and conveyance, that in 73 cases flats were sold together with utility/servants quarters and that on taking inner measurements the combined area exceeded 1,500 sq. ft., thereby attracting the embargo in Section 80IB(10)(c). The High Court reviewed the indenture of conveyance and the antecedent agreements and agreed that the utility/servants quarters formed an integral part of the residential unit, so that the area had to be aggregated for the purpose of the statutory limit. Given these concurrent factual findings and the documentary record, no substantial question of law arose for interference.

The claim for deduction under Section 80IB(10) was rejected on the basis that the combined area of the flats and attached utility/servants quarters exceeded 1,500 sq. ft.; the appellate court declined to interfere with the factual findings.

Substance over form in treatment of ancillary utility/servants quarters - Concurrent factual findings and appellate interference - Whether the built-up area of an ancillary unit (servants quarters) can be disregarded or treated separately because separate conveyance/agreements were executed. - HELD THAT: - The Tribunal found that the servants quarters/utility rooms were not capable of independent sale separate from the flat and that separate documentation did not alter the substance of the transaction. The High Court affirmed that substance must prevail over form, noting the antecedent agreements and the conveyance which demonstrated that the utility rooms formed part of the residential unit. As these were factual conclusions supported by documentary material, the court held there was no substantial question of law warranting interference with the concurrent findings.

The Court upheld the conclusion that the servants quarters formed an integral part of the residential units and could not be treated as independently excluded from the area aggregation; separate deeds did not change the substance.

Final Conclusion: The appeal is dismissed. The concurrent factual findings that the flats together with the attached utility/servants quarters resulted in combined built-up area exceeding the statutory limit, and hence denial of deduction under Section 80IB(10), are maintained; no substantial question of law arises for interference.

Income from house property vs business income - allowability of provision for unascertained liability under Section 40(a)(ia) of the Income tax Act - treatment of provision for commission as deductible business expenditure - liberty to prove actual payment and revision of assessment on subsequent year evidence - capital versus revenue nature of foreign exchange gains on cancellation of forward contracts - application of Section 43A and relevant accounting standards to unrealised foreign exchange gains on imported capital assets

Income from house property vs business income - The Tribunal was right to treat the disputed receipts as income from house property and not as business income for the assessment year in question. - HELD THAT: - The Court accepted the parties' concession that the questions raised here are similar to those decided against the assessee in respect of Assessment Year 2003-04 and accordingly followed that earlier reasoning. Applying the same reasoning, the Court found no substantial question of law warranting interference with the findings recorded by the Tribunal, and answered the contention against the assessee. [Paras 4]

Answered against the assessee and in favour of the Revenue.

Allowability of provision for unascertained liability under Section 40(a)(ia) of the Income tax Act - treatment of provision for commission as deductible business expenditure - matching principle and ascertained liability - The disallowance of the year end provision for commission (treated as an unascertained liability) was upheld and correctly disallowed as not being an allowable deduction for the assessment year under consideration. - HELD THAT: - On the facts the provision claimed was an estimate without identification of the payees or ascertainment of amounts payable. The Tribunal, after re examination, recorded that the assessee adopted inconsistent stances - treating the provision as an accrued liability for claiming deduction but contending the deductees were not identifiable for TDS purposes - and that the liability and identity of payees were not sufficiently ascertained. The Court concurred with the reasoning of the Assessing Officer and the Tribunal that a mere ad hoc provision not representing an ascertained liability is not allowable in that assessment year. [Paras 5, 6]

Disallowance sustained; question answered against the assessee and in favour of the Revenue.

Liberty to prove actual payment and revision of assessment on subsequent year evidence - The assessee was granted leave to prove actual payment of commission in a subsequent year and, if substantiated, the Assessing Officer was directed to pass a revised assessment for the year in question. - HELD THAT: - While upholding the disallowance for the assessment year, the Court limited its finding to that year and observed that if the assessee can produce evidence of actual payments of commission made in a later year, the Assessing Officer should be permitted to consider that proof and pass a revised assessment. This does not reverse the disallowance for the year under appeal but affords a procedural route for the assessee to seek relief upon production of subsequent year evidence. [Paras 7]

Liberty granted to the assessee to place proof of subsequent actual payments; Assessing Officer to revise assessment if such proof is furnished.

Capital versus revenue nature of foreign exchange gains on cancellation of forward contracts - preclusive effect of earlier decision between same parties - The Tribunal's observation treating the interest component of the forex gain as a revenue receipt was set aside; the gain on cancellation of forward contracts connected with foreign loans for purchase of capital assets is to be treated as capital in nature as already held in the parties' earlier decision. - HELD THAT: - The Court noted that an earlier decision between the parties had concluded that gains on cancellation of forward contracts connected with foreign borrowings for capital assets are capital receipts and that finding has become final. The Tribunal's contrary observation treating the interest related fluctuation as revenue was therefore erroneous and was set aside; the substantive finding in paragraph 31 that the gain is capital in nature was affirmed. [Paras 10]

Observation treating interest component as revenue set aside; question answered in favour of the assessee and against the Revenue.

Application of Section 43A and relevant accounting standards to unrealised foreign exchange gains on imported capital assets - adjustment of carrying cost pending actual payment under unamended Section 43A - The Tribunal and revenue authorities erred in disallowing the assessee's adjustment of unrealised foreign exchange gain arising on forward contracts relating to capital assets; the claim was allowed. - HELD THAT: - The Court found that the authorities misappreciated both the accounting treatment recorded in Schedule IX and the effect of Section 43A (as interpreted by higher authority) applicable to the relevant period. The assessee had adjusted the notional forex gain in its accounts, thereby reducing the expense and claiming a corresponding tax effect in the computation; when the actual event occurred in the subsequent year the tax consequence was recognised. Having regard to the accounting treatment, the statutory provision and the authorities relied upon (including interpretation of unamended Section 43A), the Court held that the assessee's approach was permissible and allowed the claim. [Paras 11, 14]

Question answered in favour of the assessee and against the Revenue; disputed unrealised forex gain treated in accordance with Section 43A and the accounting treatment adopted by the assessee.

Final Conclusion: Appeal allowed in part: substantial questions (a) to (c) answered against the assessee and in favour of the Revenue (with liberty to the assessee to produce subsequent year proof of actual commission payments for revision of assessment), and substantial questions (d) and (e) answered in favour of the assessee and against the Revenue.

Best judgment assessment - maintenance of books of account - reasonableness of estimation in best judgment assessment - estimation of gross profit for turnover assessment - judicial reduction of addition on revision

Best judgment assessment - reasonableness of estimation in best judgment assessment - estimation of gross profit for turnover assessment - judicial reduction of addition on revision - Whether the gross profit percentages adopted (70% for 2010-11 and 65% for 2011-12) under best judgment assessment were excessive and required reduction on revision. - HELD THAT: - The assessing officer validly resorted to best judgment assessment because the assessee wilfully omitted to produce books of account for the two years. While an assessing officer is entitled to make reasonable estimates and may enter into some degree of conjecture in a best judgment assessment, such estimations must have an intelligible basis and cannot be arbitrary. The Tribunal confirmed differing high percentages for the two years, but the Court found that the assumption that a three star hotel necessarily earns huge profits cannot be universally applied; multiple factors determine profit margins. Having regard to the facts of these two assessment years and the absence of reliable accounts, the Court concluded that the percentages adopted were excessive. Exercise of judicial discretion in revision to moderate an excessive addition is permissible where the assessment lacks a reasonable foundation. Applying that reasoning, the Court reduced the estimated gross profit to 55% of the purchase value of liquor and beer for both assessment years as a justifiable and proportionate adjustment. [Paras 10]

Gross profit for assessment years 2010-11 and 2011-12 to be estimated at 55% of the purchase value of liquor and beer; revision petitions allowed to that extent.

Maintenance of books of account - estimation of gross profit for turnover assessment - Whether the earlier Tribunal direction in respect of assessment year 2005-06 could be relied upon to uphold the higher percentages in the present assessments. - HELD THAT: - The Court noted that for 2005-06 the Tribunal had directed adoption of a 45% gross profit against the same assessee, but the factual matrix for that year differed because books were maintained (albeit imperfectly). Consequently, the earlier order could not be adopted as a controlling precedent for the two impugned years where no books were produced. The Court therefore declined to treat the Annexure-B order as determinative for the present assessments. [Paras 9]

Annexure-B (Tribunal order for 2005-06) cannot be relied upon to support the percentages adopted in the assessments for 2010-11 and 2011-12.

Final Conclusion: The revision petitions are allowed to the extent that the sales turnover from liquor and beer for assessment years 2010-11 and 2011-12 shall be estimated by adding gross profit at 55% of the purchase value; this reduction is exercised on the facts of the case and is not to be treated as a precedent for other cases or assessment years.

Tax deduction at source under Section 194LA - compulsory acquisition - negotiated settlement - character of acquisition - obligation to deduct tax at time of payment

Tax deduction at source under Section 194LA - compulsory acquisition - negotiated settlement - character of acquisition - Whether Section 194LA applies to amounts paid as compensation or consideration arrived at by negotiated settlement after initiation of land acquisition proceedings. - HELD THAT: - The Court held that Section 194LA applies where compensation or consideration becomes payable in the course of compulsory acquisition proceedings under the Land Acquisition Act, irrespective of whether the monetary amount is agreed by negotiated settlement. The determinative legal reasoning is that initiation of acquisition proceedings renders the transfer compulsory in character; the landowner's assent to a negotiated amount flows from compulsion to avoid litigation and does not convert the transaction into a voluntary sale. Reliance was placed on the Supreme Court's decision in Balakrishnan v. Union of India, which held that settlement as to quantum does not change the compulsory character of acquisition and overruled earlier contrary decisions. Consequently, when payment is made pursuant to acquisition proceedings the person responsible for payment is obliged to deduct tax at source under Section 194LA, subject to the statutory exceptions in the provision. [Paras 7, 8, 9, 11]

Section 194LA applies to compensation or consideration paid pursuant to acquisition proceedings even if the amount is fixed by negotiated settlement; the Single Judge's contrary view is set aside.

Obligation to deduct tax at time of payment - Tax deduction at source under Section 194LA - Consequences where TDS was not deducted before payment pursuant to the Single Judge's order, and where TDS was deducted prior to payment. - HELD THAT: - The Court observed that because there was no stay of the Single Judge's order, in many cases compensation would already have been paid without deduction. The appellate ruling restores the obligation under Section 194LA; accordingly, amounts of tax that were in fact deducted before payment must be remitted to the Income Tax Department. Where payment was made without deduction in consequence of the earlier judgment, that factual position stands as the earlier order had worked itself out in those cases. [Paras 5, 12]

TDS actually deducted before payment is liable to be deposited with the Revenue; payments made without deduction pursuant to the earlier judgment remain unaffected insofar as they have already been disbursed.

Final Conclusion: The Single Judge's orders restraining deduction under Section 194LA in respect of negotiated settlements are set aside; Section 194LA applies where acquisition proceedings have been initiated and the obligation to deduct TDS at the time of payment is restored, with deducted tax to be remitted to the Income Tax Department while payments already made without deduction pursuant to the earlier order remain as disbursed.

Deduction under Section 80P(2)(a)(i) - Deduction under Section 80P(2)(d) - Interest income from non-members / non co-operative banks - Requirement of disclosure of basis and quantification for disallowance - Remand for fresh adjudication - Application of judicial precedent in re adjudication

Deduction under Section 80P(2)(a)(i) - Deduction under Section 80P(2)(d) - Interest income from non-members / non co-operative banks - Requirement of disclosure of basis and quantification for disallowance - Remand for fresh adjudication - Application of judicial precedent in re adjudication - Validity of the Assessing Officer's exclusion from deduction claimed under Section 80P(2)(a)(i) on account of interest receipts from banks and the consequent remand for fresh consideration. - HELD THAT: - The Tribunal found that the Assessing Officer did not disclose the exact interest amount earned from nationalised banks nor the basis and computations by which he apportioned and excluded portions of the claimed deduction under Section 80P(2)(a)(i). The AO's formulaic computation in the assessment orders was not discernible and basic facts and granular quantification were not recorded. The Tribunal observed that interest earned from co-operative banks may qualify under Section 80P(2)(d) and therefore directed re-adjudication. The matter is remitted to the Assessing Officer to re-examine and quantify the exclusion, to record and disclose the exact figures, expenditure and reasoning, and to decide afresh in accordance with law and keeping in mind the Gujarat High Court decision in State Bank of India v. CIT and the provisions of Section 80P(2)(d). The Tribunal emphasised that its observations are for guidance and shall not prejudice the parties; the AO must re-adjudicate the issue afresh in accordance with law. [Paras 6, 7, 8]

Both appeals are allowed for statistical purposes and the issues are remitted to the Assessing Officer for fresh adjudication in accordance with law and the guidance given by the Tribunal.

Final Conclusion: The Assessing Officer's apportionment and exclusion from deduction under Section 80P(2)(a)(i) lacked disclosed basis and quantification; both appeals are allowed for statistical purposes and the matter is remitted to the Assessing Officer for fresh adjudication, with directions to consider Section 80P(2)(d) and the cited High Court authority.

Deduction under Section 80P(2)(a)(i) of the Income tax Act - Deduction under Section 80P(2)(d) of the Income tax Act - Interest income from deposits with banks - Distinction between interest received from cooperative banks and nationalised banks for 80P relief - Attribution of profits to non members - Precedential application of High Court and Supreme Court decisions

Deduction under Section 80P(2)(a)(i) of the Income tax Act - Interest income from deposits with banks - Distinction between interest received from cooperative banks and nationalised banks for 80P relief - Attribution of profits to non members - Whether interest income earned by the assessee from deposits with nationalised banks is eligible for deduction under Section 80P of the Act and whether the CIT(A)'s disallowance was sustainable. - HELD THAT: - The Tribunal examined the findings of the CIT(A), which allowed deduction in respect of interest received from a co operative bank under the provision applicable to co operative societies but disallowed interest earned from nationalised banks, restricting the disallowance to the amount attributable to interest from nationalised banks. The CIT(A)'s approach was founded on the decision of the jurisdictional High Court in State Bank of India v. CIT which held that interest earned from nationalised banks is not eligible for deduction under Section 80P, and that an assessee wishing to secure such benefit should deposit surplus funds with a co operative bank to qualify under the co operative bank provision. The assessee relied on the Supreme Court decision in Mavilayi Service Co operative Bank Ltd. v. CIT, which recognises that cooperative credit societies engaged in lending are entitled to deduction under Section 80P(2)(a)(i) but excludes profits attributable to advances to non members. The Tribunal held that Mavilayi does not warrant complete allowance of interest from nationalised banks; it only precludes absolute denial of 80P relief where attributable profits to non members are to be excluded. Applying these precedents, the Tribunal found no infirmity in the CIT(A)'s conclusion to allow deduction for interest from the co operative bank while disallowing the portion of interest earned from nationalised banks, and declined to interfere with the appellate order. [Paras 5, 8, 9]

The CIT(A)'s order upholding disallowance of interest income from nationalised banks (while allowing interest from a co operative bank) is affirmed and the assessee's appeal is dismissed.

Final Conclusion: The Tribunal upholds the CIT(A)'s partial disallowance of interest income - allowing deduction for interest from a co operative bank but denying deduction for interest from nationalised banks - and dismisses the assessee's appeal for Assessment Year 2016 17.

Validity of notice under section 274 read with section 271(1)(c) - omnibus show cause notice and vagueness - non application of mind in issuance of penalty notice - strict construction of penal provisions and principles of natural justice - quashing of penalty proceedings for failure to specify the relevant limb of section 271(1)(c)

Validity of notice under section 274 read with section 271(1)(c) - omnibus show cause notice and vagueness - non application of mind in issuance of penalty notice - strict construction of penal provisions and principles of natural justice - Penalty orders passed under section 271(1)(c) for the specified assessment years are invalid because the statutory notices did not specify which limb of section 271(1)(c) (concealment or furnishing inaccurate particulars) was invoked and thus were omnibus and vague. - HELD THAT: - The Tribunal examined the statutory notices issued under section 274 read with section 271(1)(c) and found that the Assessing Officer did not strike out or otherwise specify the inapplicable limb, leaving the notice to allege both concealment and furnishing of inaccurate particulars. Relying on the Full Bench decision of the Hon'ble Bombay High Court in Mohd. Farhan A. Shaikh v. ACIT, the Tribunal held that a penalty proceeding must stand on its own via a clear statutory notice and that an omnibus notice betrays non application of mind and suffers from vagueness. Penal provisions are to be construed strictly and compliance with principles of natural justice is mandatory; therefore, a failure to specify the relevant charge in the notice vitiates the penalty proceedings. Applying that ratio to the facts, the Tribunal quashed the penalty orders for the assessment years in question and declined to decide the merits of other grounds as academic. [Paras 5, 7]

Penalty orders under section 271(1)(c) for A.Ys. 2007-08 to 2011-12 quashed.

Consequence of quashing penalty order - The revenue's appeal challenging reduction of penalty for A.Y. 2008-09 becomes infructuous following quashing of the underlying penalty order. - HELD THAT: - Since the Tribunal quashed the Assessing Officer's penalty order for A.Y. 2008-09, the Department's appeal against the Commissioner (Appeals)' order (which had reduced the penalty) no longer has any live controversy to adjudicate. The appeal is therefore dismissed as infructuous. [Paras 8]

Revenue appeal in ITA No.6216/Mum/2018 (A.Y. 2008-09) dismissed as infructuous.

Final Conclusion: Following the principle that penalty proceedings require a clear, non ambiguous statutory notice specifying the relevant limb of section 271(1)(c), the Tribunal quashed the penalty orders for A.Ys. 2007-08 to 2011-12 for defective omnibus notices; the revenue appeal relating to A.Y. 2008-09 is dismissed as infructuous.

Exemption under Sections 11 and 12 - charitable purpose - advancement of any other objects of general public utility - interpretation of Section 2(15) - application of precedent and stare decisis

Exemption under Sections 11 and 12 - charitable purpose - advancement of any other objects of general public utility - interpretation of Section 2(15) - application of precedent and stare decisis - Whether the assessee-trust was entitled to exemption under Sections 11 and 12 for A.Y. 2015-16 despite receipts from IPD, medical services and rents and income exceeding the threshold in view of the amended definition in Section 2(15). - HELD THAT: - The Tribunal noted that the factual matrix for A.Y. 2015-16 was identical to earlier years in which the Tribunal had held that the AO was not justified in denying exemption under Sections 11 and 12, a view upheld by the Hon'ble Uttarakhand High Court in the assessee's own case and consequent SLP dismissal by the Supreme Court. The CIT(A) followed his predecessor and the coordinate Bench decisions for earlier years, applying those precedents to the present year. In light of these binding and consistent decisions on the same facts, the Tribunal found no reason to reverse the CIT(A)'s allowance of exemption and declined to disturb the accepted view that the activities qualified for exemption under Sections 11 and 12 despite the receipts and the threshold contention based on Section 2(15). [Paras 4, 5, 8]

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s direction to extend exemption under Sections 11 and 12 to the assessee for A.Y. 2015-16.

Final Conclusion: The appeal filed by the Revenue is dismissed; the CIT(A)'s order allowing exemption under Sections 11 and 12 for A.Y. 2015-16 is upheld in view of identical facts and binding earlier decisions in the assessee's case.

Reopening of assessment - Reassessment proceedings based on new material - Hawala/bogus purchases and disallowance - Profit element inclusion in taxable income - Reduction of disallowance to 10% following jurisdictional High Court precedent

Reopening of assessment - Reassessment proceedings based on new material - Validity of initiation of reassessment proceedings and issuance of notice under section 148 culminating in framing of reassessment under section 143(3) r.w.s.147 - HELD THAT: - The Tribunal upheld the action of the Assessing Officer in initiating reassessment proceedings and issuing notice under section 148 on the basis of information received from the Sales Tax Department which disclosed a racket of hawala dealers issuing bogus invoices and identified the assessee as a beneficiary of such transactions. The Tribunal accepted the First Appellate Authority's finding that this information constituted new tangible material not available at the time of the original assessment and that the Assessing Officer had formed a prima facie belief that income had escaped assessment to the extent of the bogus purchases. There was no infirmity, perversity or illegality in the reassessment initiation or the consequent framing of reassessment, and the CIT(A)'s confirmation of those actions was upheld. [Paras 6]

Reopening and reassessment proceedings were valid; Ground No.1 dismissed.

Hawala/bogus purchases and disallowance - Profit element inclusion in taxable income - Reduction of disallowance to 10% following jurisdictional High Court precedent - Extent of addition to be made where purchases are found to be bogus but goods were consumed - whether entire purchases or only profit element should be added - HELD THAT: - The Tribunal examined the facts that the assessee had consumed the goods obtained through hawala/bogus invoices and noted that treating the entire purchase amount as disallowance was not appropriate where sales out of such purchases were accounted for and accepted. Relying on the decision of the jurisdictional High Court in Pr. CIT v. Paramshakti Distributors Pvt. Ltd., which sustained addition at 10% as the profit element, and subsequent Tribunal decisions following that ratio, the Tribunal held that it was reasonable to restrict the addition to 10% of the amount of bogus purchases. The CIT(A) had imposed a higher disallowance of 25%, which the Tribunal found excessive in light of the cited precedent and therefore reduced the addition to 10% of the impugned purchases. [Paras 12]

Addition reduced and sustained at 10% of the bogus purchases; Grounds Nos.2-4 partly allowed.

Final Conclusion: The appeal is partly allowed: the reassessment initiated under section 148 and the consequent reassessment order are upheld, while the addition on account of bogus/hawala purchases is reduced to 10% of the impugned purchases as the profit element.

Composite rent - section 56(2)(iii) of the Income-tax Act, 1961 - income from house property (section 22) - deduction under section 24 - allowability of interest expense - construction/fit-out obligation under Leave and Licence Agreement

Composite rent - section 56(2)(iii) of the Income-tax Act, 1961 - construction/fit-out obligation under Leave and Licence Agreement - Whether the receipts from letting of the commercial unit constituted 'composite rent' attracting section 56(2)(iii) or were income from house property taxable under section 22. - HELD THAT: - The Tribunal upheld the view of the CIT(A) that the assessee had purchased bare office space in a bare shell condition and, under the Leave and Licence Agreement and Deed of Adherence, all fit-out works including furniture, fittings and fixtures were to be executed by the licensee. On that factual and contractual foundation the Tribunal held there was no separate rent element attributable to furniture, fittings or fixtures and the receipts were properly characterised as rental income from house property. Consequently, the finding of the Assessing Officer invoking section 56(2)(iii) on the basis of a claimed composite nature of receipts was rejected and the receipts were held to fall within income from house property (section 22)

The addition under section 56(2)(iii) was not sustained; receipts were held to be income from house property.

Deduction under section 24 - allowability of interest expense - income from house property (section 22) - Whether the deductions claimed under section 24 (standard deduction) and interest expense were allowable against the rental income of the assessee. - HELD THAT: - Having concluded that the receipts were rental income from house property, the Tribunal agreed with the CIT(A)'s acceptance of the assessee's claim for interest expense and the standard deduction to the extent allowed by the CIT(A). The Assessing Officer's disallowance of those claims on the premise that the receipts were composite and taxable under section 56(2)(iii) could not be sustained. The Tribunal noted that the CIT(A)'s findings as to the terms of the Leave and Licence Agreement and absence of a rent element for fit-outs were supported by the contractual documents and no contrary evidence was placed on record before the Tribunal or earlier authorities. [Paras 7, 8]

Deductions under section 24 and interest expense as allowed by the CIT(A) were upheld; the addition made by the AO was deleted to the extent accepted by the CIT(A).

Final Conclusion: The revenue's appeal and the assessee's cross-objection were dismissed; the CIT(A)'s characterisation of the receipts as income from house property and the consequent allowance of deductions permitted by the CIT(A) were confirmed.

Disallowance of non-genuine purchases - estimation of profit element in unverifiable purchases - distinguishing precedent reliance and contextual application of authority - effect of accepted sales on scope of purchase disallowance

Disallowance of non-genuine purchases - estimation of profit element in unverifiable purchases - effect of accepted sales on scope of purchase disallowance - distinguishing precedent reliance and contextual application of authority - Whether the Commissioner of Income Tax (Appeals) was correct in enhancing the disallowance to 100% of purchases from M/s. Geeta Bright, and the correct manner of computing the disallowance when purchases are alleged to be non-genuine but sales are accepted as genuine. - HELD THAT: - Tribunal held that the Ld.CIT(A) was not justified in enhancing the disallowance to 100% of the purchases by reliance on Shoreline Hotels Pvt. Ltd., the decision being in a different factual and statutory context and therefore distinguishable (paras 6-7). The Tribunal noted that sales derived from the purchases have been accepted as genuine; therefore the entire purchases cannot be treated as non-genuine and taxed in full. Citing decisions which hold that where purchases result in genuine sales only the embedded profit element is taxable, the Court directed that the disallowance should be limited to a reasonable estimation of the profit element (para 8). Applying these principles to the facts, and having regard to the nature of the assessee's trading business, the Tribunal considered 12.5% as a reasonable estimate of the profit element embedded in the unverifiable purchases and directed the Assessing Officer to restrict the disallowance accordingly and compute income (para 9). [Paras 7, 8, 9]

Ld.CIT(A)'s enhancement to 100% of purchases set aside; disallowance restricted to estimated profit element of 12.5% on the unverifiable purchases and Assessing Officer directed to compute income accordingly.

Final Conclusion: Appeal partly allowed; disallowance reduced from 100% to an estimated profit element of 12.5% of the purchases from M/s. Geeta Bright for computation of income for A.Y.2010-11.

Interest under Section 220(2) with reference to demand after reassessment - effect of setting aside assessment on original demand notice - remand under Section 254 and computation of interest - prior period expenses deductible if wholly and exclusively for business - ascertainment of real profits on commercial and trading accounting principles

Interest under Section 220(2) with reference to demand after reassessment - effect of setting aside assessment on original demand notice - remand under Section 254 and computation of interest - Levy of interest under section 220(2) cannot be charged with reference to an original assessment order which has been set aside; interest is to be computed only from expiry of 30 days from service of demand notice pursuant to the fresh assessment order after remand. - HELD THAT: - The Tribunal accepted the view expressed in Circular No. 334/1992 and the earlier Tribunal decision in Hindalco that where an assessment order is cancelled or set aside and that cancellation becomes final, the original demand notice issued pursuant to the vacated assessment ceases to operate. Consequently, interest under section 220(2) cannot be made to relate back to the date of the assessment order that stood set aside. On remand under section 254 the assessing authority may levy interest only after expiry of 30 days from service of the demand notice arising from the fresh assessment, and not with reference to the withdrawn original demand. The Tribunal found no illegality in the CIT(A)'s reliance on these principles and upheld his conclusion dismissing Revenue's ground on interest. [Paras 6, 7]

Findings of the CIT(A) upheld; Revenue's ground on levy of interest dismissed.

Prior period expenses deductible if wholly and exclusively for business - ascertainment of real profits on commercial and trading accounting principles - Deductions for prior period expenses (bonus and repairs and maintenance) allowed as wholly and exclusively for business and deductible in assessment year 2004-05. - HELD THAT: - The Tribunal accepted the factual findings of the CIT(A) that the bonus payments relating to January-March 2004 and the repairs and maintenance expenditure (supported by invoices for the imported module) were incurred wholly and exclusively for the purpose of business and were paid/pertained to the previous year relevant to AY 2004-05. Applying the principle in Kedarnath Jute Manufacturing Co. that assessable profits must reflect real profits determined by ordinary commercial and trading accounting principles, the Tribunal found the CIT(A)'s allowance of these prior period expenses to be legal and regular and declined Revenue's challenge. [Paras 10, 11, 12]

CIT(A)'s allowance of the prior period expenses upheld; Revenue's ground dismissed.

Final Conclusion: The appeal is dismissed; the findings of the Commissioner (Appeals) upholding that interest under section 220(2) cannot be charged with reference to the vacated original assessment and allowing the prior period business expenses are affirmed.