TaxTMI 
TaxTMI 
2014 (8) TMI 162
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....(India) Ltd. vs. CIT reported in (2006) 284 ITR 323, the plea for admissibility of sums aggregating Rs. 3,78,67,703/ -taken for the first time at the stage of first Appellate Authority, was not maintainable; and (b) the said appeal [being appeal No. CIT(A)- I/345/DCIT-VI/2011-12] "not arising out of the impugned assessment". 2. BECAUSE reliance on the decision of Hon'ble Apex Court in the case of Goetz (India) Ltd. CIT reported (2006) 284 ITR 323, for dismissal the issue of admissibility of deduction of Rs. 3,78,67,703/-, is wholly misconceived as the said decision itself supports the maintainability of the "appellant's" claim for deduction at the appellate stage. 3. BECAUSE the "CIT(A)" came to be seized with the matter in pursuance of the direction given by the ITAT vide Para 5.1 of its order dated 05.02.2010 in ITA No.116/Luc/07 reading as under:- "5.1 As regards to the additional ground both the parties agreed that this issue may be sent to the Learned CIT(A) for adjudication since he had not adjudicated the same in spite of the fact that the assessee specifically raised this ground in the first appeal. We, therefore, accepting the contention of both the ....
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....ssessee in support of the issue raised by the assessee in appeal but at this juncture, a query was raised by the Bench as to how the assessee can be eligible for extra deduction in the present year when the assessment is being framed by the Assessing Officer u/s 143(3)/148 as per the judgment of Hon'ble Apex Court rendered in the case of Commissioner of Income-tax Vs Sun Engineering Works P. Ltd. as reported in [1992] 198 ITR 297 (SC) wherein it was held that in the reassessment proceedings, it is not open to an assessee to seek a review of the concluded item, unconnected with escapement of income. In reply, it was submitted by Learned A.R. of the assessee that this judgment of Hon'ble Apex Court is not applicable in the present case because the deduction in question has been claimed by the assessee in assessment year 2002-03 and while disallowing this claim for assessment year 2002-2003, it was held by the Assessing Officer in the assessment order for that year that it is evident that the liability in respect of this amount written off has crystallized in the accounting period relevant to assessment year 2001-02 and therefore, the same is not allowable in the present year.....
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....ized in assessment year 2001-2002 and there is no such direction given by the Assessing Officer that this claim has to be allowed in assessment year 2001-2002. Crystalisation of liability in the present year is not the only criteria to decide allowability of this deduction. There are various other aspects also on which the allowability of a deduction is dependent. It is admitted position that this deduction was not claimed in the present year in course of original assessment proceedings and this is also a fact that this is not connected with the alleged escaped income. 6. Now we find that in the present year, this appeal is arising out of the assessment order passed by the Assessing Officer u/s 143(3) read with section 147 of the Act on 27/07/2005. From this assessment order, we find that reopening was made only for the alleged escapement of income on account of income accrued on the advance made to the extent of Rs. 3,06,24,528/- because the assessee was following mercantile system of accounting and this income on advance was not offered for tax. Hence, now we have to see as to whether the deduction now being claimed by the assessee in appellate proceedings is connected with th....
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....dings under section 147 have neither been validly initiated nor concluded in accordance with the provisions of law, as a) the "reasons recorded" (copy appear at page 4 of the paper book) do not meet the requirement of law; and b) after the assessee had filed the "return" in compliance with notice under section 148 (as referred to in the opening Para of the assessment order itself, no notice under section 143(2) was issued by the Assessing Officer and served on the "appellant" and accordingly the assessment order dated 31.12.2008 captioned as order under section "143(3)/148 of the I.T. Act" deserves to be held as void ab-initio. WITHOUT PREJUDICE TO THE AFORESAID 2. BECAUSE the "CIT(A)" has erred in law and on facts in upholding the disallowance of Rs. 4,71,49,011/- representing the contribution made to Life Insurance Corporation of India under 'Group Gratuity Insurance Scheme' as had been framed by it (LIC), on the grounds that the scheme of Group Gratuity Scheme has not been approved by the Commissioner of Income-tax. 3. BECAUSE there was no "accrual" or "receipt" of any income chargeable to tax, on premia received/receivable from the entrepreneurs on all....
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....limited laid down in section 158BC, the return filed by the assessee after the expiry of said time limit would not only be not in conformity with law but also non est. It was held by the Tribunal that in this view of the matter, the Assessing Officer was not required to issue notice u/s 143(2) of the Act. The Bench raised a query that in the present case, what was the date on which the assessee was required to file the return of income in compliance of the notice issued by the Assessing Officer u/s 148 and what is date on which return was filed by the assessee. In reply, it was submitted by Learned A.R. of the assessee that notice u/s 148 was issued by the Assessing Officer on 25/05/2007 but he could not submit the date on which the return of income was filed by the assessee in compliance of this notice u/s 148 issued by the Assessing Officer on 25/05/2007. As per the assessment order, we find that it is noted by the Assessing Officer that in compliance to this notice dated 25/05/2007, the assessee submitted that the return already filed on 02/05/2005 should be accepted as return filed in compliance to the notice u/s 148. Hence, the date of filing of return of income or the date of....
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....bmitted that a petition for review of the said order is filed before the CIT and the same is pending since August, 2012. He further submitted that since no order for rejecting the order for review has been passed even after expiry of a long period, there is a deemed approval of the CIT. Reliance was placed by him on the judgment of Hon'ble Allahabad High Court rendered in the case of Society for the Promotion of Education Adventure Sport & Conservation of Environment vs. CIT & Ors as reported in [2008] 216 CTR 167, which was rendered in the context of approval u/s 12AA of the Act. Reliance was also placed on the judgment of Hon'ble Apex Court rendered in the case of CIT vs. Textool Co. Ltd. as reported in [2013] 216 Taxman 327 wherein it was held that for the reason that after making payment to LIC of India, the assessee has lost control over the fund, the assessee could not be denied deduction of payment made to LIC of India by way of annual premium. 12. An alternative contention was also raised by the assessee that even if the payment to LIC of India is not treated as payment towards gratuity, the same should be allowed as expenditure incurred by the assessee during th....
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....wed in respect of payment to LIC of India because after making the payment to LIC of India, the assessee has lost control over the fund and therefore, the assessee could not be denied deduction of payment made to LIC by way of annual premium. In this regard, we find that as per facts noted by Hon'ble Apex Court in this case, the assessee company's gratuity fund i.e. Textool employees Group Gratuity Fund was approved by CIT, Coimbatore with effect from 25/02/83. In fact, the Assessing Officer has also allowed deduction of Rs. 36,22,224/- u/s 40A(7) of the Act but deduction for the balance amount was disallowed on the ground that the payment towards gratuity fund was made directly to the LIC and not to the approved fund and therefore, deduction is not allowable. Hence, it is seen that the facts of that case are different. In that case, the gratuity fund was duly approved by CIT with effect from 25/02/1983 and the assessment year was 83-84 and therefore, from the first date of the relevant assessment year i.e. on 01/04/83, the gratuity fund was duly approved by CIT and the disallowance of part amount was made only on the basis of certain irregularity in respect of payment wher....
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.... written submissions of Learned A.R. of the assessee before us. In the written submissions, it has been submitted by Learned A.R. of the assessee that similar addition has been made in earlier year also and the same stands upheld from the stage of the Tribunal in all the years. He also submitted that the matter is not sub judice before Hon'ble Allahabad High Court but the assessee begs to plead that the matter required reconsideration in view of the facts and circumstances of the case. We do not find any merit in this submission of Learned A.R. of the assessee because when the matter is squarely covered against the assessee by the Tribunal decision in assessee's own case in earlier years, we do not find any reason to take a contrary view in the present year. Accordingly, this ground is also rejected by respectfully following the Tribunal decision in earlier year. 20. Regarding ground No. 4, It is submitted by Learned A.R. of the assessee that the average amount of investment was to the extent of Rs. 1259.25 lac as has been noted by Assessing Officer on page No. 8 of the assessment order. He also submitted that as can be seen on page No. 16 of the paper book, the own fund....
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....ot eligible for deduction u/s 80IA of the Act . As appearing on page No. 3 of the assessment order, it is seen that it includes various receipts of same nature, such as processing fee, misc. receipts, earnest money used and quotation charges in respect of two projects i.e. Tronica City, Industrial Model Town, Loni and Greater Noida Export Promotion Industrial Park. As per Para 10.3.7 and 10.3.8 of his order, the CIT(A) has held that these receipts have direct nexus with the assessee's business and therefore, he directed the Assessing Officer to recompute the deduction u/s 80IA without excluding these receipts. But in Para 10.3.7, the CIT(A) has noted down the amount of receipts in respect of only one project i.e. Greater Noida Export Promotion Industrial Park and he has not noted the receipts of similar nature in respect of other project i.e. Tronica City, Industrial Model Town, Loni. Since the receipts of both the projects are of similar nature, we fail to understand as to how the receipts of one project is allowable for deduction and similar receipts of other projects is not allowable. Hence, we direct the Assessing Officer to exclude the receipts of both these projects in th....
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....Ld. A.R reproduced above) that in case where the premium is paid in one lump- sum at the time of allotment, there is no charge of interest by the assessee. In this fact of the matter, such interest income earned by the appellant cannot be said to be "derived from" the eligible business. An income could be said to be "derived from" only when the nexus between the source of the income and the income is of the 1 st degree. In the instant case, when appellant leases out the industrial plots to the prospective entrepreneurs, the appellant is entitled to "premium", which has been considered by the appellant as capital receipts. The receipts which have been shown by the assessee company as "income" from such leasing out of the plots is actually the interest income earned on installment granted (as discussed above). Earning of interest on installments granted may be said to have some link with the business, but such receipts cannot be said to income "derived from" such eligible business since it has no 1st degree nexus with the eligible business. In this regard, reference is invited to the decision of the Hon'ble Supreme Court in the case of CIT v/s. Raja Bahadur Kamakhaya Narayan Sing....
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....961, must be understood as something which has direct or immediate nexus with the appellant's industrial undertaking. Although electricity may be required for the purposes of the industrial undertaking, 'the deposit required for its supply is a step removed from the business of the industrial undertaking. The derivation of profits on the deposit made with Electricity Board cannot be said to flow directly from the industrial undertaking itself." 10.3.2 Similarly, in the case of Orissa State Warehousing Corporation v/s CIT [237 ITR 589 (SC)], the Hon'ble Supreme Court has observed that income received by state warehousing corporation from interest on fixed deposits, income from procurement of grains from FCI/State Govt. and misc. income are not entitled to exemption since such incomes are not derived from the 10.3.3 In Maharaj Kumar Gopal Saran Narain Singh V/s. CIT [3 ITR 237 (PC)] which was a case wherein the assessee had conveyed the greater portion of his estate. The consideration for such transfer was, inter-alia, an annual payment of Rs. 2.4 lakh to the assessee for life. The Hon'ble Privy Council held that this annual payment was not agricultural income a....
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....ance by way of granting installments, it cannot be said that income from both the activities is eligible for deduction u/s 80IA of the Act. In the present case, the assessee company has mixed its both the activities by way of granting installments in respect of premium and hence, in our considered opinion, such interest income cannot be considered as income of eligible business for the purpose of computing deduction allowable to the assessee u/s 80IA of the Act. Hence, in our considered opinion, none of the judgments cited by Learned A.R. of the assessee is rendering any help to the assessee because the fact remains that interest income is not an income derived from the eligible business and the provisions of sub section 1 of section 80IA itself specify that for any profit and gains derived by an undertaking or enterprises from any business referred to in sub section 4 i.e. eligible business, deduction is allowable. The business of the assessee company is covered by sub clause (iii) of clause 'C' of sub section 4 of section 80IA of the Act. As per this sub clause 23 (iii), it is seen that any undertaking which develops, maintains, operates an industrial park or Special E....
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....9;s own case. In the judgment, it was held by Hon'ble Allahabad High Court that contribution made by the assessee to Udyog Bandhu was rightly allowed as business expenses and it was incidental to the business u/s 37 of the Act. Hence, respectfully following this judgment, we decline to interfere in the order of CIT(A) on this issue. Accordingly, ground No. 1 of the Revenue is rejected. 33. Ground No. 2 of the appeal is as under: "2. The Ld. CIT(A) has erred in law and on facts in deleting the addition made on account of income from accrued interest without appreciating the fact that the assessee had not disclosed interest income amounting to Rs. 3,63,72,915/-deemed to have accrued during the current year." 34. Learned D.R. of the Revenue supported the assessment order whereas Learned A.R. of the assessee supported the order of CIT(A). He also submitted that this issue is squarely covered in favour of the assessee by the Tribunal decision in assessee's own case for assessment year 2001- 02 in I.T.A. No.116/Lkw/07 dated 05/02/2010, copy of which is available on page No. 149 to 167 of the paper book and the relevant portion is available on page 164 to 167 of the paper....
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....sidered the rival submissions. We find that CIT(A) has decided the issue on the basis that no part of interest payment can be attributed to investment made in shares and he restricted the disallowance to the estimated expenditure at Rs. 1 lac as administrative cost for these shares held as investment. This is also held by CIT(A) that the assessee is having small borrowing and whatever borrowing has been made by the assessee, it is in respect of specifically earmarked projects and in addition to that, the assessee has been earning huge income over the year in addition to own funds. On this basis, it was held by CIT(A) that no disallowance is justified out of interest expenditure. Considering the facts of the present case, we do not find any reason to interfere in the order of CIT(A) on this issue. Accordingly, this ground is also rejected. 41. In the result, the appeal of the Revenue stands dismissed. 42. Now we take up the appeal of the Revenue for assessment year 2004-05 i.e. I.T.A. No.297/Lkw/2011. 43. Ground No. 1 is as under: "1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 38,38,745/- made on account of contribution made to Udyog Ban....
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.... 49. In the result, the appeal of the Revenue stands dismissed. 50. Now we will take up the assessee's appeal for assessment year 2004- 05 i.e. I.T.A. No. 383/Lkw/2011. In this appeal the assessee has raised the following grounds: 1. BECAUSE the proceedings under section 147 have neither been validly initiated nor concluded and the reassessment order dated 31.12.2008 captioned as "143(3)/148 of the I.T. Act" purported to have been made in pursuance of such proceedings, is bad in law. 2. BECAUSE the "CIT(A)" has erred in law and on facts in holding that the narration reading as "since the return was filed quite late, proceedings u/s 147 were initiated and a notice u/s 148 was issued on 25.05.2007" (quote from the assessment order) constituted "the reasons recorded" and the same are "adequate and self explanatory and there is no infirmity as such in recording of the reasons" and in upholding validity of action taken by the Assessing Officer. 3. BECAUSE scope of reassessment proceedings was strictly circumscribed by the "reasons recorded" and accordingly the disallowances/additions as per particulars given below:- (i) Disallowance out of group gratuity scheme 61,....
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.... BECAUSE to entertain "reason to believe" that any income chargeable to tax has escaped assessment falls within the exclusive jurisdiction of the Assessing Officer and the "CIT(A)" has erred in substituting and/or supplementing the "reason to believe", (as had been entertained by the Assessing Officer at the time of initiation of proceedings under section 147) by his 'opinion' and in directing the Assessing Officer to exclude interest earned by the "appellant" from the entrepreneurs, from the computation of eligible profits. 11. BECAUSE such a direction resulted into reduction in the quantum of exemption/relief under section 80-1A which was beyond the scope of initiation of proceedings under section 147. 12. BECAUSE in any case, the "appellant's" claim for relief under section 80IA, as per the computation given by it, cannot be said to be defeated even by the decision of Hon'ble apex court in the case of CIT vs. Raja Bahadur Kamakhaya Narayan Singh reported in 16 ITR 325 as also by various other decisions, as have been referred to and relied upon by the "CIT(A)" as the same had been delivered in an altogether different context and on the facts dissimilar to th....
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....This issue has been decided by CIT(A) as per Para 12.2 of his order, which is reproduced below for the sake of ready reference: "12.2 Discussion & Decision: On perusal of the details (appearing on page 28 of the compilation), I find that out of total expenditure claimed (Rs.36,53,718/-) a sum of Rs. 25,76,358/- is on account of interest accrued but written back. It was explained that this interest had been offered to tax and subsequently, same was written off. Thus, it was in the nature of bad-debt. As regards, the other expenditure, the Ld. A.R has not lead any evidence viz-a-viz allowability of these expenditure in the year under consideration. Thus the case taws relied upon by the Ld. A.R can be of assistance only when there is evidence that the liability to pay such expenses had incurred during the year. Since evidence in this regard is lacking, no benefit of the case laws can be given. Accordingly, the A.O is directed to call for details of the interest amount written off and if he is satisfied that the conditions of section 36(2) of the Act have been met by the appellant company in this regard, he would allow the interest written off while other items of prior period ex....
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....ment year 2004- 05, this issue has been decided by us in favour of the assessee as per Para 44 of this order and accordingly, this ground of the Revenue is decided in favour of the assessee and this ground is rejected. 61. In the result, the appeal of the Revenue stands dismissed. 34 62. Now we take up the appeal of the assessee for assessment year 2005-06 i.e. I.T.A. No.540/Lkw/2011. In this appeal, the assessee has raised the following grounds: "1. BECAUSE on a due consideration of the facts and circumstances of the case and law applicable thereto, particularly that (i) the "return" filed by the "appellant" under section 139(1) on 30.10.2005 cannot be said to have been validly picked up and selected for scrutiny assessment, owing to lack of opinion being expressed by the Assessing Officer as per clause (ii) of sub-section (2) of section 143 of the Act.; and (ii) in any case the notice under section 143(2) could not be said to have been validity issued and served in accordance with the law, as per information available on record, the "CIT(A)" should have deleted the entire variation between the "returned income" and the "assessed income", as had been contested in ap....
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....on under section 80IA, from Rs. 6,09,25,317/- to Rs. 4,55,16,031/- is based on erroneous assumption of facts and non- appreciation of law applicable thereto, and such disallowance is not at all sustainable. 9. BECAUSE the "appellant's" claim for relief under section 80IA, as per the computation given by it, cannot be said to be defeated even by the decision of Hon'ble apex court in the case of CIT vs. Raja Bahadur Kamakhaya Narayan Singh reported in 16 ITR 325 as also by various other judicial pronouncements, as have been referred to and relied upon by the "CIT(A)". 10. BECAUSE the order appealed against is contrary to the facts/ law and principles of natural justice." 63. It was agreed by both the sides that ground No. 1 of the assessee's appeal is identical to ground No. 1 & 2 of the assessee's appeal for assessment year 2004-05 and hence, the same can be decided on similar lines in the present year also. In assessment year 2004-05, this issue has been decided against the assessee as per Para 51 of this order and accordingly in the present year also, this issue is decided against the assessee. Accordingly, this ground of the assessee is rejected. 64. I....
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....e assessee has requested that the amount is allowable as deduction u/s 40A(3) read with section 43B of the Act. Section 40A(3) is in respect of disallowance in those cases where the payment is made for a sum exceeding Rs. 20,000/- otherwise than by an account payee cheque drawn on bank. We fail to understand that how section 40A(3) is relevant for the purpose of deciding this issue. Hence, this ground of the assessee is rejected in view of the above discussion. 69. Regarding ground No. 6 to 9, it was submitted by Learned A.R. of the assessee that in assessment year 2003-04, it was held by CIT(A) that the receipts on account of processing fee, rent received from factory, corporation house rent and sale of publication etc. are having direct nexus with the running of the eligible business and, therefore, these receipts are to be included in the profit of the business for the purpose of computing the deduction allowable to the assessee. He also submitted that in that year this issue has been raised by the assessee as per ground No. 5 because while deciding this issue by CIT(A) as per Para 10.3.7 and 10.3.8 the CIT(A) has noted such receipts in respect of one project and therefore, t....
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.... assessment year 2005-06 the same can be decided on similar lines in the present year also. In assessment year 2005- 06, this issue has been decided in favour of the assessee as per Para 60 of this order and accordingly in the present year also, this issue is decided in favour of the assessee and this ground of the Revenue is rejected. 75. Ground No. 2 is as under: "2. The Ld. CIT(A) has erred in law and on facts in deleting the addition made on account of income from accrued interest without appreciating the fact that the assessee had not disclosed interest income amounting to Rs. 2,87,11,618/- deemed to have accrued during the current year." 76. Both the sides agreed that this issue is identical to ground No. 2 raised by the Revenue in assessment year 2004-05 and the same can be decided on similar lines in the present year also. In assessment year 2004- 05, this issue has been decided in favour of the assessee as per Para 53 of this order and accordingly in the present year also this issue is decided in favour of the assessee. Accordingly, this ground of the Revenue is rejected. 77. Ground No. 3 is as under: "3. The Learned CIT(A) has erred in law and on facts in d....
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....ected. 84. Both the sides agreed that ground No. 7 is identical to ground No. 7 raised by the assessee in assessment year 2004-05 and the same can be decided on similar lines in the present year also. In assessment year 2004- 05, this issue has been decided against the assessee as per Para 54 of this order and accordingly in the present year also, this issue is decided against the assessee. Accordingly, ground No. 7 of the assessee is rejected. 85. Regarding ground No. 8, it was submitted by Learned A.R. of the assessee that the FDRs were purchased in course of eligible business and, therefore, interest income should be allowed as deduction u/s 80IA of the Act. 86. Learned D.R. of the Revenue supported the order of learned CIT(A). 87. We have considered the rival submissions. We find that the deduction u/s 80IA is allowed to the assessee in respect of development of industrial park/SEZ and hence interest income on FDRs of Rs. 7,79,373/- cannot be said to be an income derived from such eligible business and, therefore, in our considered opinion, this interest income is not eligible for this deduction and on this issue, we do not find any reason to interfere in the order ....