TaxTMI 
TaxTMI 
2017 (3) TMI 1053
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....CIT(A) erred in confirming addition of interest income of Rs. 4,07,30,483/- on the capital contribution made in partnership firm as the same is not crystallized. 2. On the facts and circumstances of case and law, the Ld. CIT(A) erred in confirming addition of Rs. 9,79,200/- claimed as the Sundry debtor write off during the relevant year. 3. On the facts and circumstances of case and law, the Ld. CIT(A) erred in confirming addition of Rs. 1,99,905/-as TDS written off during the relevant year. 4. On the facts and circumstances of case and law, the Ld. CIT(A) erred in confirming addition of Rs. 9,24,000/- paid as Rent in view of Section 40A(2)(b) of the I.T. Act, 1961 and added the same to the total income of the assessec. 5. On the facts and circumstances of case and law, the Ld. CIT(A) erred in confirming addition of Rs. 87,50,000/- claimed as Investment in Joint Venture written off during the relevant year. 6. On the facts and circumstances of case and law, the Ld. CIT(A) erred in confirming disallowance of Long term Capital loss amount Rs. 24,01,139/- arising from the sale of shares. 7. The Ld. CIT(A) erred in confirming the charging interest u/s 234B and 234C of....
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.... the assessee that the amount of interest did not accrue. Therefore he upheld the action of the AO. However, he did not adjudicate the alternative submissions of the assessee wherein it was submitted by the assessee that the impugned addition made by the AO has led to double addition of the same income in two different years. 5.3. Being, aggrieved, the assessee filed an appeal before the Tribunal. 5.4. During the course of hearing, detailed arguments were made to contest the action of the lower authorities in holding that interest income had accrued during the year under consideration. It was alternatively submitted that the assessee would be satisfied if its alternative prayer is accepted and double addition is removed. 5.5. Per contra, Ld. DR submitted that the facts of the case clearly indicate that the interest income had accrued during the year before us, and therefore assessee should have offered the same in its return for the impugned year. However, Ld. DR fairly agreed that double addition of same income should be removed. 5.6. We have carefully gone through entire facts and circumstances of the case. The impugned interest income has been added by the AO in the ....
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....on lease rent basis. The said party has now advised us that the Gas Cylinders delivered to them were defective and they cannot accept the Cylinders. Therefore no Rent is due to us. However, for recovering the said amount from them we should have taken up the matter legally against the party. But we decided not to take legal action against them for recovering the Rent due as it would cost us about Rs. 3.00 to Rs. 5.00 Lacs. So, we decided to write off the said amount. " 6.2. But, AO was not satisfied with the claim on the ground that as per law, unless and until it was established by the assessee that the impugned 'write-off' represented its revenue receipt and the same was offered to tax in earlier years, it cannot be allowed as Bad Debt in its hands, and since the assessee was not able to place on record requisite evidences to substantiate the nature of impugned transactions or eligibility of the said claim, it was held as not allowable. 6.3. During the course of hearing before the Ld. CIT(A), detailed arguments were made. But Ld. CIT(A) confirmed the action of AO by observing as under: "Ground of Appeal No 2 relates to the disal lowance of Rs. 9,79,200/- claimed as write....
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.... but the payment in full was inadvertently made to these parties. However extra amounts paid could not be recovered from the said parties. Under these circumstances, these unrecovered amounts are of nature of loss incurred during the normal course of business. Complete details were shown to us by Ld. Counsel in this regard. Nothing wrong has been pointed out by the Ld. DR in this regard. Under these circumstances, we find that disallowance made by the AO was not justified under the law. Therefore, impugned disallowance is directed to be deleted. Thus, Ground no.3 is allowed. 8. Ground No.4: This ground deals with the action of lower authorities in making disallowance on account of rent paid u/s 40(A)(2)(b) amounting to Rs. 9,24,000/-. 8.1. The brief background is that it was noted by the AO that assessee had paid rent to Mrs. Shobha Jain (non executive director of the company) and Smt. Sudha Gupta (wife of the M.L. Gupta, Director of the company) for taking 50% share of the flat for using the same for the purpose of business of the assessee company. Detailed replies were filed by the assessee before the AO. But, AO was of the opinion that these transactions are camouflage and....
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....yes closed just because the rent expenses was allowed in earlier years and so she has to statutory allow it also for this year. I do not find any merit in the argument of the appellant, as the appellant has not brought any records to substantiate that the premises taken on rent was actually utilised for the purpose of business. The general principle underlying section 37(1) is that an expenditure which is found to have been wholly and exclusively made or laid out by a businessman for purposes of his business is to be allowed. There can hardly be any dispute on the proposition that the businessman is the best Judge to determine the business expediency and, therefore, when he claims to have incurred certain expenditure for business expediency, his version should ordinarily be accepted. This principle, however, does not debar the assessing authorities to enquire and investigate as to whether such expenditure was actually incurred by the businessman and if incurred whether the same was incurred wholly and exclusively for business consideration. The doctrine that the businessman is the best Judge of business expenditure does not affect the right, nay, duty of the assessing authorities t....
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....es. The assessee placed before the lower authorities, details and evidences in the form of confirmation, agreements, copies of income tax returns of these payees and other details to show business user of these premises as well as confirmation of transaction and genuineness of payments. Thereafter nothing was brought on record by the AO to negate these facts and details/evidences. 8.7. Further, this fact cannot be ignored that the payments made to these persons have always been allowed in past by the AO. The rental income has been assessed by the income tax department in the hands of these payees. Under these circumstances, the AO was expected to maintain consistency in his approach and should not have disallowed the claim merely on the basis of his doubts. 8.8. Further, the AO invoked provisions of section 40A(2)(b), which do not permit full disallowance of expenditure. Only that part of expenditure can be disallowed which is in excess of market rates. Before making any such disallowance, the onus is upon the AO under the law to show that amount paid to a related party is more than market rates. No such exercise has been done by the AO in the case before us. 8.9. Thus, ta....
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....NI TUBES LIMITED ALONG WITH BIFR ORDERS LIST OF DOCUMENTS: SR.NO. PARTICULARS OF DOCUMENTS 1. Agreement for Development of the Leasehold Property between Kamani Tubes Limited And Kamanwala Housing Construction Limited dated 22.04.1995 for developing, repairing, renovation, re-constructing and/or improving of the leasehold property / building viz. Kamani Chambers (old and new) 2. Order dated 13.11 1997 by Sole Arbitrator Mr. Dakshesh B. Dhruv 3. Minutes dated 02.05.2000 by Sole Arbitrator Mr. Dakshesh B. Dhruv 4 Order of BIER Meeting dated 21.03.2006 5 Letter dated 30.04.2007 to M/s Kamani Tubes Limited 6 Reply dated 06.06.2007 from Little & Co., Advocates & Solicitors 7 Rejoinder Letter dated 11. 07.2007 8 Public Notice dated 09.05.2007 9 Order of BIFR Meeting dated 19.01.2011 10 Copy of Arbitration Petition dated 28.03.2011 in the High Court of Judicature at Mumbai 11 Order dated 29.07.2011 of Arbitration Petition rejected 12. Minute of BIFR Meeting dated 21.04.2011 13. Minutes of BIFR Meeting dated 02.06.2011 consisting that the M/s Kamani Tubes Ltd binding to pay the dues i.e 10% of outstanding principal amount as per the sanctioned sche....
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....e said claim, the assessee submitted as under: "We had made an investment of Rs. 4.5 lakh in F. Y.2010- 11 by purchasing 4500 shares of Rs. 100 each of M/s. Shakun Gases P Ltd which was having gas filling plant at Bhavnagar. But the said company was closed down long back as they could not survive anymore and because of that we did not get Out money back. Further, there were enquiries from our Auditors in regard to the said investment. So, at last, these shares were given to the Promoters at the price of Rs..1 per share, thus we recovered Rs. 4,500/- and we have written off the balance amount of Rs. 4,45,500/-" 10.2. But, the AO was not satisfied with the justification and therefore, he disallowed the claim. 10.3. During the course of appeal before the Ld. CIT(A), detailed submissions were made but the claim made by the assessee was disallowed by the Ld. CIT(A) with following observations: The appellant claims that it has incurred loss on sale of Shares of Shakun Gases P Ltd. It is seen that the loss incurred is on sale of unquoted share i.e. M/S Shakun Gases Pvt Ltd. The status of company at present is active. Mostly the share of unquoted shares are acquired of closely ....
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.... the basis of mere surmises and conjecturers. It appears that in this case also both the parties lacked in their duties in terms of discharging respective onus lied upon them under the law. Therefore, we find it appropriate to send this issue back to the file of the AO. The assessee shall bring on record all the primary evidences to justify and substantiate the said claim. The AO shall be at his liberty to verify the claim directly with the concerned parties, as may be considered appropriate by him. But, in any case, he is not allowed to make the disallowance merely for the reason of his suspicion and guess work. Further, it is clarified once again that provisions of section 40A(2)(b) are clearly not applicable upon the said transaction in the facts of this case, since neither the assessee has claimed any expenditure for computing the income under the head business nor the parties fall within the definition of relative as envisaged under the law. No such finding has been given by the AO as to how the said party is related party as has been envisaged under the law. Therefore, the AO shall examine this issue in the light of the facts of the case and the law as is applicable. This iss....
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....are far more than investment made in partnership firm. Thus, no disallowance on account of interest could have been made. Further, since no exempt income has been earned during the year under consideration, no disallowance could be made u/s 14A. It was also submitted that investment was made in the partnership firm for strategic reasons. Therefore, this investment should be excluded for the purpose of making any disallowance. In responses to this argument that no disallowance could be made in absence of any exempt income following judgment were relied: 1. Cheminvest Limited v. CIT ITA No. 749/2014 order dated 02.09.2015 2. CIT v. Delite Enterprises judgment dated 26.02.2009 of Bombay High Court. 3. CIT v. Corrtech Energy (P.) Ltd. 45 taxmann.com 116 (Gujarat) 4. CIT v. Shivam Motors- Judgment dated 5.5.2014 of All High Court 5. CIT v. Lakhani Marketing Incl. Judgment dated 02.04.2014 (P & H) 6. CIT v. Winsome Textile Industries Ltd. 319 ITR 203(P & H) 7. M/s. Daga Global Chemicals Pvt. Ltd. v. ACIT ITA No.5592/Mum/2012 8. ITO v. Pioneer Radio Training Services Pvt. Ltd. ITA No.4448/Del/2013 11.3. Per contra Ld. DR relied upon the order of the AO. 11.4.....