TaxTMI 
TaxTMI 
2012 (6) TMI 384
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....peal. 3. Being aggrieved by the order of the ld. CIT(A), the assessee and Revenue both are in appeal before us. ITA No.646/Mum/2009 (by assessee) 4. Grounds of appeal No.I taken by the assessee reads as under : "1. On the facts and circumstances of the case and in law, the CIT(A),erred in upholding the action of the Additional Commissioner of Income Tax, Range 1(1), Mumbai ("the A.O.") in disallowing a sum of Rs. 7,54,200/- being 50% of the expenditure in nature of Legal & Professional Expenses on the alleged ground that expenses were not incurred for the purpose of business." 5. Briefly stated facts of the above issue are that the AO noted that the assessee company has claimed deduction for expenses incurred for Lalbaugh property to the tune of Rs. 15,08,400/- under the head "Legal and Professional expenses" . When asked to explain the nature of this expenses, the assessee submitted that " Company has claimed expenses as Lalbaugh property. The Co. was a 50% partner in a firm M/s Gas Property developers formed in 1986 with M/s Mittals. The Co. contributed a piece of land at Lalbaugh, Parel into the Firm as its contribution towards capital in the year 1986. Thereafter....
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.... and any expenditure incurred in this regard cannot be the expenditure of the appellant. In the absence of the exact break up of expenses, he reduced the disallowance to 50%. In the absence of any contrary material placed on record by the ld. Counsel for the assessee against the findings of the ld. CIT(A) we are of the view that the ld. CIT(A) was fully justified in sustaining the disallowance to 50% and accordingly, the order passed by the ld. CIT(A) does not call for any interference. The ground taken by the assessee is, therefore, rejected. 9. Grounds of appeal No.II taken by the assessee reads as under : "1. On the facts and circumstances of the case and in law, the CIT(A) erred in upholding the action of the A.O. in assessing the Income received in the form of Rent and service charges from sub-lease under the head "Income form House property" instead of "Income from Business" on the alleged ground that provisions of Section 27 (iii) (b) r.w.s.269UA(f) of the Income tax Act ("the Act") relating to deemed ownership is attracted." 10. The Brief facts of the above issue are that the AO found that the assessee had credited the following rental income to the P&L account: ....
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....ial available on record, we find merit in the plea of the parties that the issue is covered against the assessee and in favour of the Revenue by the order of the Tribunal, wherein it has been held vide paragraph 10.1 of the order of the Tribunal as under : "10.1 In view of the above discussion, we hold that the lower authorities have rightly treated the assessee as deemed owner u/s 27(iiib) of the Act and subsequently treated the rental income from State Bank of Indore as income from house property. Accordingly, this ground of the assessee is dismissed." 14. In the absence of any contrary material brought on record by the assessee, we respectfully following the order of the Tribunal (supra), decline to interfere with the order passed by the ld. CIT(A) on this account. Accordingly, the ground taken by the assessee is rejected. 15. Ground No.III taken by the assessee reads as under : "1. On the facts and circumstances of the case and in law, the CIT(A) erred in directing the AO to work out the disallowance u/s 14A of the Act for expenditure attributable to the exempted income by applying Rule 8D." 16. Brief facts on the above issue are that the assessee claimed the sha....
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....4A are applicable in circumstances as are prevailing presently and the disallowance has to be worked out by the AO on some `reasonable basis' and not under rule 8D. Under such circumstances, we set aside the impugned order and restore the matter to the file of the AO for deciding the quantum of disallowance, as per the afore-noted judgment, after allowing a reasonable opportunity of being heard to the assessee. The ground taken by the assessee is, therefore, partly allowed for statistical purposes. 19. Ground No.IV taken by the assessee reads as under : "1. On the facts and circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO in treating the income from sale of scrap of Rs. 22,500/- as income from other sources instead of income from business and profession." 20. Brief facts of the above issue are that the AO from the profit and loss account observed that the assessee has received Rs. 22,500/- on account of sale of scrap. The said amount has been shown as income from other sources. The assessee was required to show cause why the same should not be treated as income from other sources. The assessee has not replied to this query. Therefore....
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....- to M/s Blue Chip Business Centre Pvt. Ltd. towards advance received in earlier years. That party was in requirement of funds and agreed to accept Rs. 85 lacs as full and final settlement of the dues. The difference amount of Rs. 35,67,817/- has been transferred to capital reserve. This cannot be treated as income for the current year as it was not a cessation of trading liability. This liability was in respect of a loan which ceased to exist and as such was credited as a capital receipt. Referring to the provisions of section 41(1) the assessee pleaded that this section specifically covers only trading liability and not any other liability. In the assessee's case, it was not a trading liability. The decision of the Hon'ble Delhi High Court in the case of CIT V/s Phool Chand Jiwan Ram reported in 131 ITR 37 and the decision of the Hon'ble Allahabad High Court in the case of Motilal and Sons V/s CIT, 101 ITR 177 was cited in this regard. The assessee also referred to section 28(iv) which covers profits and gains from Business or profession to suggest that this section applies to benefit or perquisite whether convertible into money or not. Further reference was made in the decision ....
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....e Hon'ble Bombay High Court in the case of Mahindra & Mahindra Ltd Vs CIT (2003) 261 ITR 501 (Bom) and the decision of the Tribunal in Prism Cement Ltd. V/s JCIT (2006) 285 ITR (AT) 43 ITAT(Mum) held that the AO was not justified in making addition to the appellant's income and hence he deleted the same. 27. At the time of hearing, the ld. DR while relying on the order of the AO submits that it is a case of cessation of trade liability, therefore, the ld. CIT(A) has erred in deleting the addition of Rs. 35,67,817/ made by the AO u/s 41(1) of the Act. The reliance was also placed on the decision of the Tribunal in Schenectady Specialities Asia (P) Ltd V/s ACIT (2009) 29 SOT 1 (Mum) and the decision of the Hon'ble Bombay High Court in the case of Solid Containers Ltd. V/s DCIT & Anr (2009) 308 ITR 417 (Bom). He, therefore, submits that the addition made by the AO be restored. 28. On the other hand, the ld. Counsel for the assessee submits that the assessee received loan from M/s Blue Chip Business Centre Pvt. Ltd. from 31.12.1997 on words and it was credited to the ledger account of the company appearing at pages 26 to 32 of the assessee's paper book. He further submits that th....
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....r deduction has been made is in existence in that year or not." 30. We have refrained from reproducing the rest of the section which is not relevant for the purpose of the present controversy, before us. 31. Thus to invoke the provisions of s. 41(1), the following conditions must be fulfilled : (i) In the assessment of the assessee, an allowance or deduction has been made in respect of loss, expenditure or the trading liability incurred by the assessee. (ii) The assessee must have subsequently (i) obtained any amount in respect of such loss or expenditure or (ii) obtained any benefit in respect of such trading liability by way of remission or cessation thereof. In case either of these events happen, the deeming provision enacted in closing part of sub-s. (1) comes into play. (iii) The amount obtained by the assessee or the value of benefit accruing to him is deemed to be profits and gains of the business or profession and it becomes chargeable to income-tax as an income of that previous year. 32. Further on a plain reading of s. 41(1) of the Act, it is also clear that the provisions contained in s. 41(1) do not make any distinction between any contractual trading ....
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....is loan was for trading purpose and was treated as such from the very beginning in the books of account, as per T.V.Sundaram Iyengar and Sons Ltd's case (supra), the waiver thereof may result in the income more so when it was transferred to Profit and Loss account. 35. It is also settled law that when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice. 36. The decision relied on by the ld. DR in the case of Schenectady Specialities Asia (P) Ltd (supra), has since been reversed by the Hon'ble Jurisdictional High Court in the case of SI Group India Ltd. V/s ACIT (2010) 326 ITR 117 (Bom) wherein it has been held (headnote) : "Held,..... Having regard both to the order passed by the Sales Tax Tribunal and the notice of demand, it was not possible for the court to accept the contention that there was a remission or cessation of liability. The record before the court did not disclose that there was a remission or cessation of liability, one of the requirements spelt out for the a....
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..... According to him the facts of the case as for old loans are concerned are similar to the facts in preceding years and accordingly he disallowed interest component on old loans amounting to Rs. 15.96 lacs. On appeal, the ld. CIT(A) while observing that there is no dispute that the facts relating to the disallowance of interest are the same as in the earlier years, followed by the order of the Tribunal in the assessee's own case for the assessment years 1996-97 and 1997-98 and deleted the disallowance made by the AO. 43. At the time of hearing, the ld. DR supports the order of the AO. 44. On the other hand, the ld. Counsel for the assessee very fairly submits that the Tribunal in the assessee's own case for the assessment year 2003-04 has set aside the issue to the file of the AO, therefore, following the same the issue may be set aside to the file of the AO. 45. We have carefully considered the submissions of the rival parties and perused the material available on record. We find merit in the plea of the ld. Counsel for the assessee that the Tribunal in the immediately preceding year i.e. assessment year 2003-04 in assessee's own case in M/s Bombay Gas Co.Ltd. (supra) has....
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....y. On appeal, the ld. CIT(A) relying on the decision of the Special Bench of Kolkata Tribunal in Jt.CIT V/s Usha Martine Industries Limited, (2007)104 ITD 249[Kol.](SB) and the decision of the Hon'ble Supreme Court in the case of CIT V/s . HCL Comnet Systems & Services Ltd. [2008] 305 ITR 409 (SC) has held that the AO was not justified to add back the amounts claimed towards the write off of fixed assets and write off of miscellaneous assets for the purpose of computing book profit u/s 115JB and accordingly deleted the addition made by the AO. 49. At the time of hearing, the ld. DR while relying on the order of the AO also relied on the decision of the Tribunal in the case of M/s Sumer Builders Pvt.Ltd. V/s DCIT in ITA Nos. 2512 to 2514/Mum/2009 (AYs. 2003-04 to 2005-06) dated 13.1.2012 for the proposition that the AO can make adjustments to the profit u/s 115JB of the Act. He, therefore, submits that the order passed by the ld. CIT(A) in deleting the addition made by the AO be reversed and that of the AO be restored. 50. On the other hand, the ld. Counsel for the assessee submits that the assessee has actually written off the fixed assets Rs. 72.06 lakhs in its profit and lo....