TaxTMI 
TaxTMI 
2012 (1) TMI 222
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....ross profit of Rs. 32,27,07,546/- on turnover of Rs. 3,25,37,85,015/- giving G.P. rate of 9.92% during the year as against gross profit of Rs. 26,29,38,228/- on turnover of Rs. 2,70,38,05,605/- giving a GP rate of 9.72% in the immediately preceding year. 5. During the course of assessment proceedings, AO raised various queries in respect of the trading results declared which were replied by the assessee. The queries raised & the reply furnished is reproduced in Para 4 (Page 2-6) of the assessment order. AO, however, as per Page 7-8 of the order pointed out the following discrepancies/irregularities/inconsistencies:- (i) The yield of mustard oil & mustard oil cake varies from 31.17% to 33.78% & 65.23% to 67.71% respectively even when the purchase of mustard seeds which is crushed to obtain the oil is centralized. Further, the yield of mustard oil & mustard oil cake shown by the sister concern, M/s Vijay Industries, is from 33.26% to 34.69% & 63.94% to 65.86% respectively from which it appears that there is a difference of nearly 2% which is not explainable by the assessee. (ii) No records are maintained for different quality of mustard seeds purchased, thereby faili....
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....declared trading results before the AO. The required details were never filed. Non furnishing of required details is itself a defect and can attract the provisions of section 145(3) of the Act. It has been further stated that every year is an independent year and principle of res judicata is not applicable in case of Income-tax proceedings. Reliance is also placed on the decision of Kotak Mahindra Finance Ltd., 265 ITR 114 and in case of New Jahangir Vakil Mills Co. ltd. vs. CIT, 49 ITR 137 (SC) and in case of CIT vs. Foss Electronics, 263 ITR 125 (Raj.) wherein it is held that every year is an independent year. Reliance is also placed on the decisions reported in 38 ITR 579, 210 ITR 406 and 59 ITR 733. 8. On the other hand, the ld. Counsel of the assessee firstly placed reliance on the order of ld. CIT (A). Further attention of the Bench was drawn on the copy of written submissions placed on record. The various observations made by the Assessing Officer for invoking provisions of sec. 145(3) are incorrect. The same is explained as under:- (i) The mustard seeds which are crushed to obtain the mustard oil & oil cake is an agricultural produce available in different qualities due t....
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....d by the assessee, & on the basis of past records or any other extraneous material, yield of Kattha could not be calculated to determine the undisclosed sales. The method adopted by the assessing authority in deriving the yield of Kattha from the Kher wood was not a sound method. Therefore, the addition made capriciously was not justified. (iii) So far as consumable store expenses are concerned, assessee submitted complete details before the lower authorities. They are fully vouched and it is not the case of the AO that expenses are bogus or have not been incurred. (iv) The quantitative/qualitative details of opening & closing stock of finished goods, raw material & WIP is at PB 10-12. The valuation of the same along with the basis of valuation was submitted during the course of assessment proceedings vide letter dt. 21.12.2008. Further, the observation of the AO regarding undervaluation of finished goods is without any basis. (v) The observation of the AO regarding purchases from sister concerns at prevailing market rate or not is devoid of any merit. He has not pointed out any instance where payment made towards purchases from sister concern is excessive or unreasonable....
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....ding addition of Rs. 50 lacs was made by the AO which was restricted by ld. CIT (A) at Rs. 20 lacs. However, the Tribunal deleted the entire addition while deciding the appeal in ITA No. 728/JP/2007 dated 31.12.2008, copy of order of Tribunal is placed on record. It is further seen that on similar basis in case of sister concern of assessee M/s. Deepak Vegpro Pvt. Ltd. similar trading additions were made. However, the Tribunal has deleted the entire addition made in that case also. Copy of order of Tribunal is placed on record. Facts and circumstances, in our considered view, are similar as were involved in earlier year. Therefore, in view of consistency, we hold that ld. CIT (A) was justified in deleting the trading addition of Rs. 75 lacs following the order of Tribunal for earlier year. Accordingly, we confirm the order of ld. CIT (A) on this issue. 12. Second ground in the appeal of the department is against deleting the addition of Rs. 10,20,73,725/- made on account of deemed dividend under section 2(22)(e) of the I.T. Act. 13. Brief facts of the case are that assessee company holds 39.10% shares (2,92,000/7,46,770*100) of M/s Deepak Vegpro (P.) Ltd. & 25.10% shares (2,47,50....
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....s assessment order on page number 14 in para number (v) that at some point of time, the balance was debit and at some point of time the balance was credit. A list of instance wherein such balances are in debit have also been given by the appellant and mentioned in the order (supra). Under this scenario, it is imperative to determine the nature of such entries whether; these are the loan or advances or business transaction. The provision of section 2(22)(e) of the Income-Tax Act' 1961 are attracted only under the circumstances, when the transactions are in the nature of loans or advances and not otherwise. It is also seen that the nature of the business of the assessee company and Deepak Vegpro (P.) Ltd. & Saurabh Agrotech (P) Ltd are the same. All these three companies are engaged in the crushing of mustard seed, purchase and sale oil and oil cake. All these three companies are having the business transaction inter-se, which fact has remained undisputed and have also been accepted by the Assessing officer in his assessment order. It is found on verification of the account and on fact that the account of the assessee with the Deepak Vegpro (P) Ltd. and Saurabh Agrotech (P) Ltd a....
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....2(22)(e) of the Act." I also had an occasion to lay my hands on the recent decision of Hon'ble Delhi High Court in the case of DCIT Vs. Gaharda Chemicals Limited 2011 TIOL 127 ITAT Mum. decided on 07.01.2011, wherein while following the decision of CIT Vs. Raj Kumar (2009) TIOL 247 (Del.)& CIT Vs. Ambassador Travels (P) Limited (2008) 173 Taxman 407 (Del.) have concluded that the commercial transaction between two companies could not be brought within the purview of the provision of the s. 2(22)(e) of the Income Tax Act, 1961. Therefore by following the above decision, I have no hesitation to come to the conclusion that the transaction entered into between the assessee company and the Deepak Vegpro (P) Ltd. and the Saurabh Agrotech (P) Ltd , which have been considered by the Assessing Officer are in the nature of business and trade transaction entered into the regular and normal course of business and are not in the nature of loans or advances, therefore the provision of section 2(22)(e) of the Income-Tax Act' 1961 are not applicable upon such transaction and the Assessing Officer has erroneously considered the same to be covered u/s 2(22)(e) of the Income-Tax Act' 1961. Wh....
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....bility towards the group companies and has also received cheques. The AO has analyzed copy of account of the assessee with M/s. Deepak Vegpro Pvt. Ltd. wherein daily balance of outstanding due towards M/s. Deepak Vegpro Pvt. Ltd. was calculated and on the basis of which it was found that till 14.06.2005 the assessee was having debit balance and thereafter the position changed and at some point of time the balance was in debit and at some point of time the balance was in credit. The maximum credit balance was Rs. 6,77,22,753/- on 16.3.2006. The same was treated as deemed dividend as M/s. Deepak Vegpro Pvt. Ltd. was having accumulated profit as on 31.3.2005 and 31.3.2006 at Rs. 8,89,81,472/- and Rs. 11,15,40,081/- respectively. It was further explained that AO has also observed that the balance was not due to trading transaction as assessee company has received back more than Rs. 100 crores from M/s. Deepak Vegpro Pvt. Ltd. whereas the purchases made from M/s. Deepak Vegpro Pvt. Ltd. to the tune of Rs. 30 crores or odd and similarly sale to M/s. Deepak Vegpro Pvt. Ltd. was Rs. 22 crores or odd. Accordingly, it was explained that the assessee company has received back Rs. 100,94,33,4....
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....g fiction whereby payment of any sum by way of loan or advance is deemed as dividend. Therefore, this provision needs to be construed strictly. For applicability of this section, following conditions should be satisfied:- (i) There should be a payment (ii) Payment should be of a sum (iii) Such payment should be by way of loan or advance Unless & Until all the above conditions are satisfied, deeming fiction would not be attracted. In the present case, the nature of business of M/s Deepak Vegpro (P.) Ltd. & M/s Saurabh Agrotech (P.) Ltd. is also similar to that of the assessee's company business i.e. trading & manufacturing of mustard oil and oil cake. In the course of such business, these companies have entered into a series of trade transactions of purchase, sale, making payment & receiving payment. The respective entries are made in their respective books of accounts in single & consolidated account. (i) The brief of the transactions in the books of assessee company with M/s Deepak Vegpro (P.) Ltd. of purchase, sale, payment made & payment received during the year under consideration is as under:- (PB 49-147) Purchases from M/s Deepak Vegpro (P.) Ltd. (Cr.) Rs. 3094.93 lacs....
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....e is in debit as is evident from the daily balancing statement placed at PB 45-48 & 148-151 respectively. These transactions are in respect of purchase or sale or composite payment received from the parties against sale or composite payment made to the parties against purchase or transfer of amount where there is availability of limit etc. Such mutual, open, current, running & trade account transactions made in normal course of business can by no stretch of imagination partake the character of a payment by way of loans or advances. The deeming provisions of law contained in section 2(22)(e) being very much confined & limited to the particular purpose for which it has been enacted cannot assume any role beyond the said restricted & confined limit & it can never interfere in the normal business of the companies carried out in the ordinary course because if so it will create an anarchic situation whereby no concern can enter into normal business transactions. In order to cover any amount within the provisions of section 2(22)(e) of the I.T. Act, 1961, it is necessary that the amount involved should either be "loan or advance". (i) The word "advance" has not been defined. Howe....
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....ssion "advance" was defined as payment of cash or the transfer of goods for which accounting must be rendered by the recipient at some later date. Loan and advances could only be considered "deemed dividend" for the purpose of section 2(22)(e). It is, therefore, sine qua non, to ascertain the correct nature of the payments. In the present case the assessee company received application money for the allotment of shares. There is nothing on record to indicate that application money was received or allotment of shares was made contrary to the provisions of Companies Act, 1956. The amount was reflected as such in the Balance Sheet. Accounts were prepared perfectly in accordance with the norms set out under the Companies Act, 1956. These were filed with the Registrar of Companies. The chief ingredient of s. 2(22)(e) is that one should be shareholder on the date the loan was advanced to him. Where such ingredient is not established, the advance could not be taken as deemed dividend under s. 2(22)(e). It is settled rule of interpretation of a fiction that the court should ascertain for what purpose the fiction is created and after ascertaining the purpose, the court has to assume all fact....
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....o the Ld. CIT (A) has taken into consideration various case laws relied upon before him which are also relied on here before the Tribunal and then only concluded that the addition made by AO was not justified. The Ld. CIT D/R except placing reliance on the order of AO and placing reliance on the decision of Hon'ble Madras High Court could not controvert the finding of Ld. CIT (A). The Ld. CIT D/R could not bring any material that how the transaction entered into between the assessee and the other companies are akin to loan and advances. The nature of transaction clearly established that they related to purchase and sale entered into between the parties or on account of running account. After going through the chart of transaction, we find that this transaction cannot be treated as payment or any sum paid or payable and this payment are not by way of loan or advances and until these conditions are satisfied, provisions of section 2(22)(e) cannot be attracted. The nature of transaction of both the companies is trading and manufacturing of mustard oil and oil cake. In the course of business, both these companies had entered into a series of trade transactions of purchase, sale, ma....
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....herefore section 2(22)(e) is not attracted. The gist of these decisions is as under:- NH Securities Ltd. Vs. DCIT 11 SOT 302 (Trib.) (Mum.) (2007) As per the Schedule to the Limitation Act, 1963 and as per Articles 1 & 19 thereto, the limitation period prescribed in the case of mutual, open and current account is three years from the close of the year in which the last item is admitted or proved as entered in the account. On the other hand, in case of a loan, the limitation period is three years from the date on which the loan is made. This throws light on the characteristic feature of a running account and a loan account in a subtle manner. The Limitation Act, 1963 recognizes the running character of a mutual, open and current account by taking the last acknowledged transaction as the starting point of limitation. But in case of the loan, once for all and single transaction, that single transaction itself is the starting point of the limitation. This statutory distraction reflected in the Limitation Act, 1963 is a pointer towards the basic difference between a running account and a loan account. Whenever payments made by a Ltd. Co. to its shareholder is proved by the cha....
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.... advances. Therefore, payments made by a company in the course of carrying on of its regular business through a mutual, open & current account to a related party does not come under the purview of section 2(22)(e). CIT Vs. Ambassador Travels (P.) Ltd. 318 ITR 376 (Del.) (HC) Assessee engaged in the business of travel agency entered into certain business transactions with M/s Holiday Resort (P) Ltd. & M/s Ambassador Tours (India) (P.) Ltd. As a result of these business transactions, there were some financial transactions but the AO came to the conclusion that because of the shareholding pattern, these financial transactions would fall in the category of deemed dividend u/s 2(22)(e) of the I.T. Act. This view was upheld by CIT(A). Tribunal was of the view that there is nothing on record to show that the amount considered by the AO were in any manner advances or loans in the account of the assessee. Being a travel agency, it had regular business dealings with the above two concerns dealing with holiday resorts & tourism industry. Therefore, since the transactions were normal business transactions, they can not be described as loans or advances which form a distinct category of fina....
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....terest is charged & in these facts it was held that the deposits & withdrawal of money from the current account could not be considered as loan or advance. Muthoot M. George Brothers Vs. ACIT 47 TTJ 434 (Cochin) (Trib.) In this case it was held that bonafide transactions between sister concerns with centralized accounts & management do not attract provisions of section 269SS & section 269T. The transactions between the sister concern & the assessee are to be examined. There are transfer of funds from and to the sister concerns. There is no evidence to show that the money was loaned or kept deposited for a fixed period or repayable on demand. Further, the sister concerns and the assessee are owned by the same family group with a common managing partner with centralized accounts under the same roof. Transfer of funds has taken place in a whimsical manner. Therefore, it is rather difficult to say that the transactions are in the nature of the deposits or loans with certain conditions attached to them, either as regards the period of such deposits or loans or with regard to their repayments. From the copies of the accounts furnished all that can be gathered is that funds have been tra....
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....It was held that where the amount outstanding from assessee director to the company is on account of transaction entered into during the regular course of business between them, it can no be treated as deemed dividend u/s 2(22)(e). There is no prohibition against any business transaction between a shareholder & his company. Section 2(22)(e) is a deeming provision on the basis of a legal fiction. In constructing a legal fiction, it will be proper & necessary to assume all those facts on which alone the fiction can operate & as held by Apex Court in case of Mancheri Puthusseri Ahmed Vs. Kuthiravattam Estate Receiver AIR 1997 SC 208, in so constructing the fiction, it is not to be extended beyond the purpose for which it is created or beyond the language of the section by which it is created. By enacting section 2(22)(e), the legislature has created a fiction & has made the payments referred to therein "dividend" for the purpose of income tax, but the fiction cannot be extended further or so interpreted as to go beyond the legislature's intention in creating the fiction. CIT Vs. Creative Dyeing & Printing P. Ltd. 318 ITR 476 (Del.) (HC) The assessee-company was engaged in the busines....
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....cord, we find that on identical facts similar addition was made in case of M/s. Deepak Vegpro Pvt. Ltd., a sister concern of the assessee. In this case, an addition of Rs. 1,84,15,499/- was made on account of deemed dividend in terms of section 2(22)(e) of the Act. The ld. CIT (A) deleted the addition and on second appeal the Tribunal after considering the issue in detail found that the addition deleted by ld. CIT (A) was in order. For the sake of clarification, we would like to reproduce the findings of the Tribunal recorded in para 33 to 35.2 at pages 12 to 26 as under :- "33. We have heard rival submissions and considered them carefully. After considering the submissions and perusing other material on record, we find that there is no infirmity in the finding of ld. CIT (A). Detailed written submissions which are similar to the written submissions filed before ld. CIT (A) are as under :- " (1) Section 2(22)(e) is attracted when any payment is made by a closely held company of any sum by way of loans or advances to a beneficial shareholder holding not less than 10% of the voting powers. This is a deeming fiction whereby payment of any sum by way of loan or advance is deemed as ....
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....s in credit & on some other day the balance is in debit as is evident from the daily balancing statement placed at PB 29-32. These transactions are in respect of purchase or sale or composite payment received from the parties against sale or composite payment made to the parties against purchase or transfer of amount where there is availability of limit etc. Such mutual, open, current, running & trade account transactions made in normal course of business can by no stretch of imagination partake the character of a payment by way of loans or advances. The deeming provisions of law contained in section 2(22)(e) being very much confined & limited to the particular purpose for which it has been enacted cannot assume any role beyond the said restricted & confined limit & it can never interfere in the normal business of the companies carried out in the ordinary course because if so it will create an anarchic situation whereby no concern can enter into normal business transactions. In order to cover any amount within the provisions of section 2(22)(e) of the I.T. Act, 1961, it is necessary that the amount involved should either be "loan or advance". (i) The word "advance" has not....
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....h Edn.), the expression "advance" was defined as payment of cash or the transfer of goods for which accounting must be rendered by the recipient at some later date. Loan and advances could only be considered "deemed dividend" for the purpose of section 2(22)(e). It is, therefore, sine qua non, to ascertain the correct nature of the payments. In the present case the assessee company received application money for the allotment of shares. There is nothing on record to indicate that application money was received or allotment of shares was made contrary to the provisions of Companies Act, 1956. The amount was reflected as such in the Balance Sheet. Accounts were prepared perfectly in accordance with the norms set out under the Companies Act, 1956. These were filed with the Registrar of Companies. The chief ingredient of s. 2(22)(e) is that one should be shareholder on the date the loan was advanced to him. Where such ingredient is not established, the advance could not be taken as deemed dividend under s. 2(22)(e). It is settled rule of interpretation of a fiction that the court should ascertain for what purpose the fiction is created and after ascertaining the purpose, the court has....
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..... This throws light on the characteristic feature of a running account and a loan account in a subtle manner. The Limitation Act, 1963 recognizes the running character of a mutual, open and current account by taking the last acknowledged transaction as the starting point of limitation. But in case of the loan, once for all and single transaction, that single transaction itself is the starting point of the limitation. This statutory distraction reflected in the Limitation Act, 1963 is a pointer towards the basic difference between a running account and a loan account. Whenever payments made by a Ltd. Co. to its shareholder is proved by the characteristic as other than loan/advance; in other words, the payment is for the purpose of repayment of loan or such other existing liability, the question of s. 2(22)(e) applying, does not arise. The nature and character of the payments made by a company is very important in examining whether a payment made by the company falls u/s 2(22)(e) or not. Where a company pays to its shareholder any amount against repayment of an existing loan or advance or against purchase or availing of service or paying on account on any other grounds, such payment....
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....usion that because of the shareholding pattern, these financial transactions would fall in the category of deemed dividend u/s 2(22)(e) of the I.T. Act. This view was upheld by CIT(A). Tribunal was of the view that there is nothing on record to show that the amount considered by the AO were in any manner advances or loans in the account of the assessee. Being a travel agency, it had regular business dealings with the above two concerns dealing with holiday resorts & tourism industry. Therefore, since the transactions were normal business transactions, they can not be described as loans or advances which form a distinct category of financial transactions. Therefore, provisions of section 2(22)(e) are not at all applicable. High Court held that it is clear, that the assessee was a travel agency & the above two concerns that it had dealings with i.e. M/s Holiday Resort (P) Ltd. & M/s Ambassador Tours (India) (P.) Ltd. were also in tourism business. The assessee was involved in booking of resorts for the customers of these companies & entered into normal business transactions as a part of its day-to-day business activities. The financial transactions can not in any circumstances be tr....
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....epting a deposit or accepting a loan. Therefore, the transactions as are found in the books of accounts of the assessee cannot be termed as deposits or loans as understood in common parlance. It only represents diversion of funds from one concern to another depending upon the exigencies of the business. These findings has been approved by Rajasthan High Court in case of CIT Vs. Maheshwari Nirman Udhoyg 302 ITR 201. DCIT Vs. Lakra Brothers 106 TTJ 250 (Chand.) (Trib.) The important words in section are loan or advance & for the individual benefit of such shareholders. Loan is something different from debt. For a loan there must be a lender, borrower as well as a contract/agreement between the parties for the return of the loan amount. Every sale of goods on credit does not amount to a transaction of loan. In the case of assessee, there was a debit balance on account of the advance paid by AEPL and this was purely advance during the ordinary course of business for business expediencies. It cannot be said that there was intention of the company to give a loan. AO has never doubted the sequence of market service, exhibition at hotel and execution of orders in pursuance of the advan....
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....P. The Assessing Officer held that the amount paid to the assessee-company was a deemed dividend under section 2(22)(e) of the Income-tax Act, 1961. The Tribunal held that it was an advance for a commercial purpose to the assessee-company by its sister concern P and not a deemed dividend under section 2(22)(e) of the Act. On appeal, it was held that the amounts advanced for business transaction between the assessee-company and P did not fall within the definition of deemed dividend under section 2(22)(e). The transaction of cheque received & cheque paid in present case, in the normal course of business are neither transaction of loan nor a transaction of advance. These transactions are not attached with any obligation. In the mutual interest amounts are transferred between the two concerns considering the availability of limit with the particular concern. The transactions are entered in commercial expediency & not with the purpose of making payment by way of loan or advance. The various cases relied by the AO are therefore distinguishable as tabulated on Page 15-17 of the CIT(A) order. Hence, in view of the decisions relied above, section 2(22)(e) is not attracted to such transa....
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....ther account except the account considered by the Assessing Officer. This is single and consolidated account, wherein the trade transaction has been passed through, therefore it is a business and trade account. Now the question arises, whether, the provision section 2(22)(e) of the Income-Tax. Act' 1961 are attracted upon the business of trade transaction. In this regard learned counsel has rightly placed the reliance upon the decision of Hon'ble Delhi High Court in the case of CIT V/s Raj Kumar (2009) TIOL 247 (Del.) "Trade advance which are in the nature of money transacted to give effect to a commercial transactions would not fall within the ambit of the provisions of Section 2(22)(e) of the Act - Revenue's appeal dismissed. While delivering the judgment, Hon'ble Delhi High Court has distinguished the decision of Apex Court in the case of P.Sharda and Tarti Lata Shayam. It has also recently been held by Hon'ble Delhi High Court in case of CIT Vs. Ambassador Travels (P) Limited (2008) 173 Taxman 407 (Del.) that "the assessee was involved in the booking of resorts for the customers of these company and entered into normal business transaction as a part of its day-to day bu....
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....td, is the business and trade transaction entered into the normal course of business and the provision of section 2(22)(e) are not applicable thereupon and the addition of Rs. 1,84,15,499/- u/s 2(22)(e) of the Income-Tax Act' 1961 is deleted. Since I have deleted the addition of Rs. 1,84,15,499/-, therefore my finding upon the issue of deduction of tax liability, the depreciation as per the income tax and possess accumulated profit have remained merely of academic interest therefore, no finding thereupon have been given." 35. After considering the above findings of ld. CIT (A) and the written submissions of the assessee which are also reproduced somewhere above in this order, we find that ld. CIT (A) has examined the issue extensively and then found that the transaction does not relate to either loan or advances. Therefore, provisions of section 2(22)(e) are not attracted. While holding so, the ld. CIT (A) has taken into consideration various case laws relied upon before him which are also relied on here before the Tribunal and then only concluded that the addition made by AO was not justified. The ld. CIT D/R except placing reliance on the order of AO and placing reliance on....
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....2(22)(e) of the Act. We have also gone through the various case laws, some of them have already been considered by ld. CIT (A) and found that they are in support of the case of the assessee. 35.2. The decisions relied upon by ld. CIT D/R are not applicable on the facts of the present case as these transactions of the assessee are of business in nature and, therefore, they do not fall within the ambit of section 2(22)(e). In view of these facts and circumstances and in view of the detailed reasoning given by ld. CIT (A) which is reproduced somewhere above in this order, we hold that ld. CIT (A) was justified in deleting this addition. Accordingly we confirm the order of ld. CIT (A) in this respect." After going through the order of the Tribunal and submissions of both the parties, we find that facts and circumstances of the transactions are identical to the case of M/s. Deepak Vegpro Pvt. Ltd. (supra). In case of M/s. Deepak Vegpro Pvt. Ltd. also the addition was made for assessment year 2006-07. In case of M/s. Deepak Vegpro Pvt. Ltd., we have already held that the transactions are business in nature. Therefore, a finding has already been given for the year under consideration as....
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....the case are that Assessee company claimed telephone expense of Rs. 23,39,150/-. AO disallowed 20% out of the same i.e. Rs. 4,67,830/- by holding that the use of telephone & internet lines for non business purposes can not be ruled out. CIT (A) deleted the disallowance. 29. After considering the orders of the AO and ld. CIT (A), we again find no infirmity in the finding of ld. CIT (A). We noted that expenditure incurred under this head is exclusively for the purpose of business. The AO has not pointed out any particular expenses which are not for purposes of business. Looking to the turnover of the assessee and other details kept by assessee, we hold that ld. CIT (A) was justified in deleting the addition. Accordingly we confirm his order on this issue also. 30. Ground No. 5 is against deleting addition of Rs. 20,000/- made on account of withdrawal of depreciation on Wind Mill. 31. Brief facts of the case are that during the year under consideration, assessee company claimed depreciation @80% on windmill i.e. Rs. 2,40,000/-. However, AO on the basis of depreciation rates worked out by it in the preceding A.Y.'s i.e. 10% on foundation & rooms, made disallowance of Rs. 20,000/-. T....
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.... Therefore, similar direction may be given in this case also. 37. After considering the orders of the AO and ld. CIT (A) and order of the Tribunal in case of M/s. Deepak Vegpro Pvt. Ltd. (supra), we find that similar addition was made in case of M/s. Deepak Vegpro Pvt. Ltd. also and after considering the arguments and the orders of the authorities below, the Tribunal has given following finding:- "13. After considering the submissions and perusing the material on record, we find that rule 8D is not applicable for the year under consideration as Rule 8D has been held applicable prospectively i.e. from assessment year 2008-09 in the case of Godrej & Boyce Mfg. Co. Ltd., 328 ITR 81 (Bombay). 13.1. First submission of the assessee is that ld. CIT (A) was not justified in setting aside the issue to the file of the AO as power of setting aside from the Cit (A) has been taken away by Finance Act, 2001 with effect from 1.6.2001. However, since rule 8D is not applicable and disallowance has to be considered afresh in view of the nexus of exempted income and investment made by assessee for earning exempted income. 13.2. The Hon'ble Supreme Court in case of CIT vs. Walfort Share & ....
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....round No. 9 the addition sustained by ld. CIT (A). 41. The brief facts of the case are that Assessee company claimed vehicle running & maintenance expense of Rs. 17,27,911/-. Division wise bifurcation of the same is as under:- Division Amount Oil Division 12,71,864/- Jaipur Glass & Potteries 4,39,844/- Goenka Products 16,203/- Total 17,27,911/- AO disallowed 20% out of the same i.e. Rs. 3,45,582/- by holding that the expenditure is not fully vouched & is claimed on self made vouchers. Therefore, in the absence of proper bills & vouchers these expenses are not subject to verification. CIT(A) restricted the disallowance to 10% i.e. Rs. 1,72,791/- in order to plug the possible leakage of revenue & to meet the ends of justice. 42. After considering the orders of the AO and ld. CIT (A), we noted that for assessment year 2004-05 similar additions were made. However, Tribunal while deciding the appeal in ITA No. 599/JP/2010 vide order dated 25.02.2011 in para 3.6 has deleted the disallowance in its entirety. Following the order of the Tribunal, we delete the entire addition sustained by ld. CIT (A). In this way ground of the assessee is allowed and ground of the department fails. ....
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....ails. 53. Ground No. 11 in the appeal of the department is against restricting the disallowance at Rs. 50,000/- out of Rs. 5,00,000/- made by the AO on account of legal and professional expenses. 54. The assessee has challenged the sustenance of addition by ground no. 8. 55. AO made an addition of Rs. 5,00,000/- against claim of assessee at Rs. 12,04,143/- by holding that assessee has no base for claiming the expenditure/no third party verification of substantial amount is possible. The ld. CIT (A) restricted this disallowance to Rs. 50,000/- just to plug the possible leakage of revenue. 56. After considering the submissions, we find that assessee deserves to succeed in this ground. On perusal of ledger account of legal and professional expenses, it is noticed that the expenditure is incurred on payment of monthly retainership charges to various consultants/professional charges paid for obtaining consultancy/court charges for appearing and arguing the matters at various levels. All the confirmations have been filed. There is no dispute about rendering of services. Therefore, we hold that there is no question of disallowing of Rs. 50,000/- on adhoc basis. Accordingly, we delete ....
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....coming from earlier years and therefore addition can't be made during the year under consideration. It is to be noted that in subsequent years, the liability in respect of following creditors has been paid. The details of the same is as under:- S.No. Name of the Party Opening Balance Date of Payment 1. Shivam Securities- Cr. For exp (PB 212) 19,489/- 19.03.2009 2. Manohar Lal Kejriwal- Broker (PB 213) 2,094/- Running account 3. Jiwa Ram -Broker (PB 214) 1,803/- Running account 4. Elkay Company- Broker (PB 215) 4,745/- Running account TOTAL 28,131/- In respect of remaining creditors, the amount is payable. There is no material with the lower authorities to presume that liability has ceased to exist. Hence, addition made u/s 41(1) is uncalled for. Reliance is placed on the following cases:- CIT Vs. Sadul Textiles Ltd 167 ITR 634 (Raj) It was held that amounts representing unclaimed bonus and unclaimed wages though timebarred had not resulted in remission or cessation of trading liability and hence could not be taxed under section 41(1) of the Income-tax Act, 1961. Goodricke Group Ltd. Vs. CIT 338 ITR 116 (Cal.) (HC) The words "obtained, whether in cash or in any other ma....
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....amilnadu Warehousing Corporation 292 ITR 310 (Madras) It was held that the assessee had continued to show the admitted amount of Rs. 8,22,925 as liability in the balance-sheet. The undisputed fact was that it was a liability reflected in the balance-sheet. Once it was shown as liability by the assessee, the Commissioner was wrong in holding that it was assessable under section 41(1) of the Act. Unless and until there is a cessation of liability, section 41(1) is not applicable. Uttam Air Products (P) Ltd Vs DCIT 99 TTJ 718 (Del) It was held that, the balance of the creditor was outstanding in the books of the assessee for a considerable period of time. The essential dispute is as to whether in the absence of any written off by the assessee and also in the absence of any tangible proof of the supplier having given up its claim, the revenue is not justified in ignoring the liability and making out a case for cessation of liability, when it is undisputed that the same has been shown in the balance sheet as creditor, indicating thereby that the amount stood payable. ITO Vs R B Sethi Moolchand Nemichand (P) Ltd 14 ITD 473 (JP)(TM) It was held that admittedly the amount had not ....