AI Drafter 
TaxTMI 
TaxTMI 
2016 (6) TMI 54
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....AO for the earlier years followng the directins of ITAT allowed the deduction of bad debts in respect of running chits and therefore erred in giving the directions once again to compute the irrecoverable amounts in respect of running chits, instead of directing its deduction absolutely. 4. The learned CIT (A)-3 Hyderabad erred in upholding the taxability of foreman dividend at Rs. 15,67,25,358/-. 5. The learned CIT (A)-3 ought to have clearly held that the foreman dividend was not taxable on the principles of mutuality. 6. Any other ground(s) that may be urged at the time of hearing. 2. Ground Nos. 1 & 6 are general in nature and hence need no adjudication. Ground Nos 2 & 3 are against the directions of the CIT (A) to the AO to compute the irrecoverable amounts in respect of running and terminated chits, instead of directing its deduction absolutely by following the decision of ITAT in the earlier years. 3. Brief facts of the case are that the assessee company, engaged in the chit fund business, filed its return of income for the relevant A.Y on 23.09.2012 declaring a total income of Rs. 51,95,51,430. During the assessment proceedings u/s 143(3) of ....
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....seeking the allowability of the same as business income u/s 28 of the Act in Ground Nos. 2 & 3. 4. Having regard to the rival contentions and the material on record, we find that this issue had arisen in the earlier AYs as well before this Tribunal and vide orders dated 11.03.2011 in ITA No.490/Hyd/2010 for the A.Y 2007-08, this Tribunal has held as under: "4. On appeal the CIT(A) held that the bad debts relatable to terminated chits are to be allowed in view of the order of this Tribunal dated 26.7.2004 in ITA Nos. 500, 506/H/2009, ITA No.294, 327/H/2001, ITA No.471 & 1049/H/2004. However, in the case of running chits, he has set aside the matter to the file of Assessing Officer with a direction to compute the bad debts relatable to running chits as per the directions contained in the order of this Tribunal dated 26.7.2004 in ITA Nos.500, 506/H/2009, ITA No.294, 327/H/2001, ITA No.471 & 1049/H/2004 for the assessment years 1995-96, 1997-98 and 1999-2000 wherein the Tribunal has given its findings in Para No. 6.6(xx) and 6.6 (xxi): 6.6 (xx). On these facts a claim of loss without corresponding inflow of funds from the foreman which is a definite possibility in ....
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....has considered this issue vide its order dated 26.7.2004 in ITA Nos.500, 506/H/1999, ITA Nos.294, 327/H/2001 and ITA Nos.471 & 1049/H/2002 for the assessment years 1995-96, 1997-98, 1998-99 and 1999-2000 wherein the Tribunal held in Para 4 as follows: 4. Coming to the grounds in the Revenue appeals, these issues are squarely covered by the order of this Tribunal 'B' Bench dated 26.7.2004 in ITA Nos.500, 506/Hyd/1999, ITA Nos.294, 327/Hyd/2001 and ITA Nos.471/Hyd/2002 & 1049/Hyd/2002 for the assessment years 1995-96, 1997-98 and 1999-2000 and wherein it was held at page No.51 of the order as follows: 6.6.(xxi). We have to mention that this issue has not come up during the course of arguments of the case. If the assessee has made the claim as indicated, no prejudice would be caused to him by setting aside the matter. Similarly no prejudice would be caused to revenue on this count as it can examine the claim afresh. To allow the claim to the extent indicated above fresh collection of facts and figures are required and thus we set aside the issue to the file of the Assessing Officer for considering the claim afresh in the light of this order. Thus the appeal of the as....
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.... Rs. 52,54,100 made on account of commission on cancelled chits, not considering the fact that the assessee is following mercantile system of accounting and all the incomes and expenditures are to be accounted for on 'accrual basis'. 3. The learned CIT (A) erred in deleting the disallowance of Royalty payment of Rs. 3,76,81,919 to M/s Shriram Ownership Trust, not considering the observations of the AO that the said expenditure is not incurred wholly and exclusively for the purpose of business as per the provisions of section 37(1) of the Act. 4. Any other ground(s) that may be urged at the time of hearing". 10. Having regard to the rival contentions and the material on record, we find that the order of the CIT (A) is in consonance with the directions of ITAT in the assessee's own case for the earlier A.Ys. The relevant paras are reproduced hereunder for ready reference: "14. The ground No.2 in Revenue appeal in ITA No.120/H/2010 is as follows: The CIT(A) ought to have appreciated the action of the Assessing Officer in making addition towards commission on removed chits which is contravention and not properly dealt by the assessee company as per the ....
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....f appeal of the assessee is allowed. 16. In view of the above order of this Tribunal, we dismiss this ground taken by the Revenue on the same lines. 19. The Ground No.4 in Revenue appeal in ITA No.120/H/2010 is as follows: The CIT(A) ought to have appreciated the action of the Assessing Officer in adding Royalty payments made by the assessee company which are in contravention under the copy Act and as per section 37 of the IT Act, 1961. 20. Similar issue came up for consideration before this Tribunal for the assessment years 2004-05, 2005-06 and 2006-07. The Tribunal vide its order dated 26.7.2004 in Para 20 held as follows: Page 136, 137, 138 of PB. 6.7 (iv): We are convinced with the arguments of the learned counsel for the assessee. The Bangalore Bench of the Tribunal in ITA No.751, 750, 749 & 748/(Bang.)/1998 in the case of M/s Sriram Chits (Bangalore) Ltd. Vs. DCIT (assistant) Special Range, Bangalore held as follows: "29. We have carefully gone through the records and consideration the rival contentions. M/s Sriram Chits & Investment (P) Ltd. having registered office at Madras was the absolute owner of the copy right relat....
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....(P) Ltd. the subsidiary company in the year 1994 vide an agreement entered into, which provided for the payment of certain % of the Auction turnover as royalty to Sriram Chits and Investments (P) Ltd. 7. By the agreement, Sriram Chits and Investments (P) Ltd., has formally committed itself to the growth and development of Sriram Chits (Bangalore) (P) Ltd. for a further period of 7 years. 8. The duty of Sriram Chiuts and Investments (P) Ltd. does not end with merely transferring the right to sue its logo to its subsidiary company. It also assumes the responsibility to ensure that the name which it has built up over the years is maintained by Sriram Chits (Bangalore) (P) Ltd. Towards thi, Sriram Chits and Investments (P) Ltd. has provided financial assistance time and again to Sriram Chits (Bangalore) (P) Ltd. to help its working capital requirements. 9. When Sriram Chits (Bangalore) (P) Ltd. commenced operations, all its employees were from Sriram Chits & Investments (P) Ltd. who had prior experience in this line. Even now, Sriram Chits (Bangalore) (P) Ltd. looks for managerial support from Sriram Chits and Investments (P) Ltd. which is being provided. In ....