TaxTMI 
TaxTMI 
2014 (6) TMI 569
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....ees have been shown nor amounts have been returned back to the clients by the assessee. 3. In the facts and circumstances of the case the ld. CIT (A) grossly erred in deleting the addition made by the AO on account of 'Sundry Creditors' not appreciating the facts that the most of the amounts shown as sundry creditors has been invested by the assessee in the Mutual Funds and properties. 4. In the facts and circumstances of the case the ld. CIT (A) grossly erred in deleting the addition made by the AO on account of 'Sundry Creditors' not appreciating the facts that total gross receipts during the year was shown at only Rs. 6,46,18,678/- and advance professional fees was shown at Rs. 20,76,97,695/- as sundry creditors which was very unusual. 5. In the facts and circumstances of the case the ld. CIT (A) grossly erred in deleting the addition made by the AO on account of 'Sundry Creditors' not appreciating the facts that the principle of res-judicata is not applicable to the income tax proceedings as held by various courts. 6. In the facts and circumstances of the case the ld. CIT (A) erred in restricting the disallowance u/s 14A to Rs. 94,721/- as against Rs. 8,92,738/- mad....
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....elf. 5. By virtue of the impugned order, the ld. CIT (A) deleted the addition. 6. The ld. DR has contended that the ld. CIT (A) has erred in deleting the addition correctly made by the AO on account of sundry creditors; that while doing so, the ld. CIT (A) has failed to appreciate that the assessee is following the cash system of accounting, according to which, the income is taxable on receipt basis; that the ld. CIT (A) has also failed to consider that the amount of Rs. 10,78,01,478/- represented current liabilities of the assessee, which had neither been returned, nor shown as professional fee and that this was actually advance professional fees received from the clients and as per the system of accounting followed by the assessee himself, this amount had to be taxed in AY 2009-10 itself; there being no system of deferring it to the subsequent years under the cash system of accounting. 7. The ld. Counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. Besides, reliance has also been placed on composite Tribunal order dated 23.05.08, in the assessee's own case for 2001-02 and 2003-04 (copy at APB B-45 to B-47). 8. We have heard bo....
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....uch in the year of receipt under the cash system of accounting. It was in this context, the Supreme Court in KCP Ltd. (supra) held that if a receipt is a trading receipt, the fact that it is not so shown in the account books of assessee would not prevent the assessing authorities from treating it as a trading receipt. Thus, the emphasis of the Supreme Court was on the principle that the receipt must be a trading receipt. In the instant case, the advance received by the assessee does not bear the character of a professional fee. It is merely an advance out of which many expenses may have to be incurred before the matter gets finally concluded. These expenses may be in the form of court fees, photo copying expenses, counsel's fees etc. At times, it may so happen that the entire advances may be consumed for expenses. In that event, it would be improper to attach the characteristic of an income to the advance receipt. If part of the advances is consumed for expenses and if a portion is adjusted as fees, then it is only that portion which is characterized as fees, can be taken as income. The characterization of the receipt can take place only at the time of appropriation i.e., in case o....
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....pellant has relied upon the judgment by Hon'ble ITAT Mumbai in the case of Justice Sam P Bharucha vs. Addl. Commissioner of Income Tax, Mumbai (2012) 25 Taxmann.com 381 (Mum). Where it has been held that Section 14A has within it implicit notion of apportionment in the cases where the expenditure is incurred for the composite/inadvisable activities in respect of which taxable and nontaxable income is received. But when it is possible to determine the actual expenditure in relation to the exempt income or when no expenditure has been incurred in relation to the exempt income, then principle of apportionment embedded in section 14A has no application. 5.2 In order to disallow the expenditure under section 14A, there must be a live nexus between the expenditure incurred and the income not forming part of total income. A notional expenditure cannot be apportioned for the purpose of earning exempt income unless there is an actual expenditure in relation to earning the income not forming part of total income. If the expenditure is incurred with an aim to earn taxable income and there is apparent dominant and immediate connection between the expenditure incurred and taxable income, the....
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.... on the impugned order. Besides reiterating that the assessee had not incurred any direct or indirect expenses towards exempt income and that the only expenditure which requires to be disallowed u/s 14A of the Act is Rs. 94,721/-, i.e., the management fee paid to portfolio managers, M/s Alchemy Management, the ld. Counsel for the assessee has stated that the AO had not pointed out any expenditure pertaining to investments; and that therefore, no disallowance ought to have been made. Reliance has been placed on 'Justice Sam P. Bharucha vs. ACIT' (supra) (APB B-66 to B-70) and 'CIT, Jalandhar I vs. Deepak Mittal', 38 Taxmann.com 83 (P&H) (copies filed). 16. While deleting the disallowance, the ld. CIT (A) relied on 'Justice Sam P. Bharucha (supra). 17. In the case of 'Justice Sam P. Bharucha' (supra), it was held, inter alia, that when it is possible to determine the actual expenditure in relation to the exempt income, or when no expenditure had been incurred in relation to exempt income, the principle of apportionment embedded in Section 14A of the Act has no application; that to disallow the expenditure u/s 14A of the Act, there must be a live nexus between the expenditure in....