TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 797
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....he learned CIT (A) has erred in law and on facts in sustaining the disallowance of overseas commission of Z 3,12,752/- made by the Assessing Officer u/s. 40(a)(ia) of the Act. 4. The learned CIT (A) has erred in law and on facts in concurring with the disallowance of Rs. 5,51,333/- made by the Assessing Officer u/s. 40(a)(ia) of the Act for want of details. The learned CIT (A) ought to have directed the Assessing Officer to verify and allow the claim if relevant details were produced before him in the proceedings to be conducted to give effect to the appellate order. 5. The learned CIT (A) has erred in law and on facts in agreeing with the disallowance of a sum of Rs. 8,78,599/- made by the Assessing Officer by treating repair expenditure as capital in nature for want of details. The learned CIT (A) ought to have directed the Assessing Officer to verify and allow the claim if relevant details were produced before him in the proceedings to be conducted to give effect to the appellate order. 6. The learned CIT (A) has erred in law and on facts in upholding the disallowance of expenditure of Rs. 1,63,048/- incurred on repairs to boundary wall by considering it as amount spent....
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....8 2 crores Centurion Bank 1,00,000 01.07.2004 The AO in view of such information, issued show cause notice to the assessee that, why in respect of similar properties rented to the Centurion Bank and Johnson & Johnson, the rent received was Rs. 20,000/- and Rs. 1 Lakh per month, while the property earlier occupied by Johnson & Johnson was given to Futura Polyester Ltd., @ Rs. 5 lakh per month. This shows that the market rate of the rent was much higher than the rent received. Further, the assessee had received deposits of Rs. 3.50 crores and Rs. 2 crores and if such deposits were not there, then these property would have fetched much higher rent. In response, assessee submitted a reply vide letter dated 15.12.2009, where the assessee had submitted the copies of agreement in respect of all the three companies and stated as under :- "We are enclosing copies of agreement with M/s Johnson & Johnson, Centurion Bank and Futura Polyester Ltd, for premises rented to them at Shangrila (Residential Bldg.). Before the Centurion Bank, the said property was rented to Organon (India) Limited at monthly rent of Rs. 25,000/- and Rs. 2.5 Crore Security Deposit, the copy of agreement ....
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....by flat rented to Futura Polyester and other factors. Thus, the ALV of Flat No. 5, at 4.5 lakh per month comes to Rs. 54 lakh as compared to Rs. 12 lakh declared by the assessee while the proportionate ALV of Flat No.5 for the period up to November, 2006 (for 8 month) comes to Rs. 36 lakh as compared to Rs. 1,60,000/- declared by assessee. Accordingly, for these two properties, the total ALV is enhanced by Rs. 76,40,000/- it may not be out of place to mention here that as per assessee's own submission, they have saved interest of Rs. 70-75 lakhs by using interest free deposits in the business clearly indicating that economic potential of the properties is certainly more than the rent received by assessee to the extent and thus, it indicates towards reasonableness of estimate of market value of rent of these two properties. The income from house property has been computed at Rs. 19,63,555/- in view of enhancement of ALV by Rs. 76,40,000/-, after allowing deduction @ 30% u/s 24 of the Income Tax Act. The addition to the income from house property declared by assessee would be Rs. 53,48,000/-". 6. The Ld. CIT(A) too confirmed the action of the AO in enhancing the ALV of the tw....
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.... Court and after giving due opportunity to the assessee to explain its case. Accordingly, ground no. 2 is treated as partly allowed for statistical purposes. 10. In ground no. 3, the assessee has raised the disallowance of overseas commission of Rs. 3,12,752/- made by the AO u/s 40(a)(ia). 11. The assessee made provision of commission of Rs. 3,12,752/- which was account of payment of overseas commission. The disallowance u/s 40(a)(ia) has been made by the AO on the ground that, assessee has not been able to bring anything on record that the said amount is not taxable in the hands of the recipient. Before us, the Ld. Counsel submitted that, with regard to the payment of Rs. 1,34,12,878/-, the Ld. CIT(A) has remanded back the matter to the AO with a direction to verify the claims and allow the corresponding expenses. However, with regard to the amount of provision for commission, no proper finding has been given either by the AO or by the Ld. CIT(A), therefore, matter should be restored back to the file of the AO. 12. On the other hand, Ld. DR relied upon the finding of the CIT(A). 13. After considering the relevant finding given in the impugned orders, we find that the AO has no....
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....submission made before the CIT(A) as incorporated in para 5.2 of the appellate order. The expenditure which has been confirmed by the CIT(A) is on account of construction of a boundary wall however the construction cost of boundary wall was only Rs. 1,63,048/- and that also cannot be held to be capital expenditure but only repairs, because old wall was to be replaced. 18. On the other hand, Ld. DR strongly relied upon the order of the CIT(A). 19. After considering the relevant submissions and on perusal of the impugned order, we find that no specific finding with regard to the expenditure aggregating to Rs. 8,78,595/- has been given by the CIT(A) when the cost of construction of boundary wall itself was only Rs. 1,63,048/-, which was the basis for the disallowance by the Ld. CIT(A). Hence, in the interest of justice, we feel that this matter should also be restored back to the file of the AO to decide the issue afresh after calling for the details and examine the nature of the expenditure aggregating Rs. 8,78,595/-. If such expenditure are purely for repairs without creating any capital asset of enduring nature, then such expenditure should be allowed as revenue expenditure. Acco....
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....avened the conditions laid down under sub section 3 of section 35 of the I.T. Act. 2(i) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that provisions of section 145(3) is not attracted in the case of the assessee without appreciating that information in respect of excess / shortage in stock in physical verification of the goods, the scrap generated were not recorded in the books. 2(ii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) failed to appreciate that the books of accounts of the assessee were incorrect, incomplete and not in consonance with the accounting standard as notified under sub section 2 of section 145 of the I.T. Act". 25. Brief facts qua the issue raised in ground no. 1 is that, the assessee had incurred an expenditure of Rs. 86,89,000/- which was claimed as deduction u/s 35AB(2AB). The Auditors had made a remark in the Audit Report that assessee has certified that the impugned claim has been incurred on the Scientific Research for which it has made an application for in-house approval in R & D Unit to the Department of Scientific and Industrial Research (DSIR) and has also comple....
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....om the perusal of the section 35(2AB)(i), it is evident that the expenditure on Scientific Research on In-house R&D facilities is allowable as deduction if it has been approved by the Prescribed Authority. Thus, if the entire expenditure incurred by the assessee on development of facility has been approved then the said expenditure to be allowed for the purpose of weighted deduction. The approval here in this case was granted during the previous year relevant to the assessment year, thus the assessee was entitled to claim weighted deduction in respect of the entire expenditure incurred under section 35AB of the Act. Nowhere it has been provided under the section that R&D facility is to be approved from a particular date and then only it would be allowable from that date only. This proposition finds support from the decisions of Hon'ble Gujarat High Court in the case of CIT vs Claris Lifesciences Ltd. and in case of CIT v M/s Wheels India Ltd (supra), wherein it has specifically held as under :- "... The legislative intent of the section was to encourage the development of the facility by providing deduction of weighted expenditure. Since the development facility was to be promote....
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....t. Looking into the reasons forwarded by the Assessing Officer, the Appellant's offence, the governing principles of section 145, principles of accounting and the specific facts of the Appellant's case, I do not agree with the Assessing Officer that the deficiencies and inadequacies pointed out by him call for rejection of the books of account. To this end, in the first place, on the Assessing Officer's observation on the exclusive method of CENVAT and VAT followed by the Appellant. I find that there were valid and practical reasons for not being able to correlate every item of the stock with the corresponding CENVAT and VAT credit available. As I note, the Appellant's products are numerous and accordingly, item to item correlation was not really feasible. Under the circumstances, when the details of opening and closing stock, quantity, value rate were otherwise available and which were subjected to checks and audit by various authorities, the inability to correlate alone cannot affect the correctness and completeness of the accounts. Further, apart from pointing out procedural flaw, no specific fault on the details submitted has been brought to notice by the Assessing Officer. Bes....
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.... cannot be taken as an inadequacy, which can call for rejection of books of account. The comparison of Appellant's profit with SKF and FAG also cannot attract rejection of the books. In the first place, the profit shown by the Appellant is better than that shown by SKF. Further, the Appellant's profile, status and volume of business is not comparable with that of FAG and accordingly, the comparison is incompatible. Although the Assessing Officer has brought out his own issues on this comparison, the fact remains that when seen against the totality of accounts such comparison thus, does not render the correctness and completeness of the books faulty. Books of account cannot be rejected on the basis of difference in perspective. Besides, the GP rate shown by the Appellant being 32.20% from the present year are higher than the earlier years. In line with the foregoing, in essence, I find that the discrepancies noted by the Appellant are procedural and marginal and when seen against the facts stated above do not make the correctness and completeness of accounts questionable as i) they stand explained and ii) the requisite information as discussed above, otherwise stand disclosed, whe....