TaxTMI 
TaxTMI 
2017 (6) TMI 591
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....ithout taking into considering the provisions of section 94(8) of the Income Tax applicable from A.Y. 2005-06." 3. Facts of the case, in brief, are that the assessee had made an investment of Rs. 4 crores in TATA Guilt Securities Fund for which it was allotted 18.08 lakh units of the Fund. The Fund declared bonus at the ratio of 1:1. As a result, the assessee was in possession of 37.96 lakh units of the Fund at the original cost of Rs. 4 crore only. During the impugned assessment year, the assessee sold 18.98 lakh units for a consideration of Rs. 2,03,61,324/-. Against the distributed cost of Rs. 2 crore, the assessee accounted for a profit Rs. 3,61.324/- in its books. However, for tax purposes, the cost of the units sold was taken at original cost of Rs. 4 crore, thus resulting in loss of Rs. 1,96,38,676/-. Adjusting the said capital loss of Rs. 1.96,38.676/- in sale of Tata Guilt Securiteis Fund with the capital gain of Rs. 1,76,12,162/- in sale of other mutual funds / units / securities, the net capital loss declared by the assessee in the tax return was Rs. 20,26,514/-. 4. The assessee had disclosed a sum of Rs. 44,34,823/- as net profit on sale of investment which was di....
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....th the return but has not included the same in the revised working submitted, therefore, the Assessing Officer also added the same amount to the income of the assessee under the head of short term capital gain. 7. In appeal, the ld. CIT(A) deleted this sum by observing as under: "The appellant had, in computing the cost of TATA Guilt Securities Fund sold, applied the FIFO (First in First out) principle. The only point for verification, therefore, was whether the appellant had taken the cost of the balance 18.98 lakh units received as bonus as Nil when these units were sold. The appellant was asked to clarify this position vide letter dated 08.01.2013. The appellant replied vide letter dated 15.01.2013 that the bonus shares were sold during FY 2006-07 relevant to AY 2007-08 wherein the cos had been taken at Nil. The FIFO method is an accepted way of computing capital gain. The cost of the bonus shares has been taken at Nil value in AY 2007-08 by the appellant. The AO is direted to verify this claim of the appellant for AY 2007-08 to ensure that the correct capital gain has been offered to tax. Needless to say that remedial action shall be taken if the appellant is found ....
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.... the Act, that loss, if any, would stand disallowed to extent of dividend or income received or receivable on such securities or units in computing assessee's income chargeable to tax. 12. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Alka Bhosle 325 ITR 550 [Bom] he submitted that the Hon'ble High Court in the said decision has held that all the three conditions that are spelt out in clauses (a), (b) and (c) of section 94(7) of the Act must be fulfilled before consequence that is envisaged in section, comes into force. He, accordingly, submitted that the provisions of section 94(8) are not applicable to the present case. 13. So far as the argument of the ld. DR that FIFO is not an acceptable method is concerned the ld. AR filed a copy of Circular issued by CBDT bearing No. 768 dated 24.06.1998 and submitted that FIFO is not an accepted method. Therefore, the ld. DR is not justified in stating that FIFO method is an acceptable method. 14. We have considered the rival arguments made by both the sides, perused orders of the A.O and the ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the variou....
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....ar securities are bought or acquired, the owner shall be under no greater liability to incometax than he would have been under if the original securities had been bought back or reacquired." 17. We find the Hon'ble Delhi High Court in the case of Shambhu Mercantile Ltd [supra] has held that the conditions prescribed in clauses (a) to (c) of sub-section (7) of section 94 are cumulative in nature. Accordingly, it has been held that it is only when the transaction of purchase and sale is in relation to a security or a unit in respect of which dividend or income received is exempt and it is within stipulated period of three months as prescribed in clauses (a) and (b) of section 94(7) of the Act, the loss, if any, would stand disallowed to the extent of dividend or income received or receivable on such securities or units in computing assessee's income chargeable to tax. Similar view has been taken by the Hon'ble Bombay High Court in the case of Smt. Alka Bhonsle [supra]. 18. So far as the argument of the ld. DR that FIFO is not an acceptable principle is concerned, we find the CBDT itself vide Circular No. 768 dated 24.06.1998 has held that FIFO is an accepted method. Und....
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....ethod of accounting consistently being followed by the appellant. This was also not challenged by revenue earlier. In fact, if the method adopted by AO is followed, it will result in reduction of income in the subsequent FY by an equivalent amount. Rule of consistency requires that a state of affairs not be disturbed unless new facts or circumstances necessitate a different view. There are no new facts in the case. Hon'ble Supreme Court in Radhasoami Satsang v. CIT [(1992) 193 ITR 321 (SC)] has observed as under:- "We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.'' 4.4 In view of the above facto-legal position, the ground of appeal succeeds. The addition of Rs. 19,51,00,000/- is deleted. The appellant ....
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....rcumstances and in view of the detailed reasoning given by the ld. CIT(A), we do not find any infirmity in his order deleting the addition by following the rule of consistency. The ground raised by the Revenue is accordingly dismissed. 26. Ground No. 3 of the appeal of the Revenue reads as under: "On the facts and in the circumstances of the case the Ld. CIT(A) has erred in fully allowing the claim of deduction u/s 80IA in respect of captive power plant of the assessee, without deciding the specific findings of the A.O that profit of the unit was inflated because of non accounting of interest on borrowed fund, low administrative expenses etc." 27. Facts of the case pertaining to this ground, in brief, are that the Assessing Officer, during the course of assessment proceedings, observed that the assessee has claimed deduction u/s 80IA of the Act in respect of profit for power units of Rs. 26,07,21244/- as 100% of the profit derived by the said units. From the return filed by the assessee, the Assessing Officer observed that assessee has claimed such deduction in respect of power plant No. III to VIII for which, separate report in Form No 10CCB have been filed. The Ass....
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....the Act of Rs. 26,07,21,244/- was duly supported by the auditor's certificate in Form No. 10CCB in respect of Power Plant No. III to VIII. The assessee has also enclosed separate unit wise balance sheet, profit and loss account duly audited by the Chartered Accountant. The assessee has also enclosed the claim of deduction u/s 80IA of the Act for the assessment year 2000-01 in respect of DG set No. 1 and 2, assessment year 2001-02 in respect of DG set No. 1,2,3,4,5,6 and Vizag division. It was argued that in all the earlier years, the claim of the assessee in respect of power generated by the respective power generating units duly supported by audited accounts and certificates of auditors has been accepted and allowed by the Assessing Officer in the assessment proceedings. Therefore, following the rule of consistency, the Assessing Officer on the same set of facts should have accepted for the year under consideration. Various decisions were also brought to the notice of the ld. CIT(A). It was further argued that the Assessing Officer in the order has failed to establish on what ground he is not accepting the unit wise audited account except for casting allegations that the assessee ....
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....osing copies of various communications received from the Government of Haryana and Haryana State Electricity Board (HSEI3) indicating that one of the conditions for sanction of captive power plants to the appellant was agreement by the appellant to synchronize with and supply surplus power to the state grid. This being the case, and the settled law that captive use will not disentitle eligibility to deduction u/s 801 / 80IA / 80IB. the disallowance cannot be sustained. Accordingly, this ground of appeal is allowed and the appellant gets relief of Rs. 26,07,21,224/-." 31. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before us. 32. The ld. DR heavily relied on the order of the Assessing Officer. 33. The ld. counsel for the assessee, on the other hand, while supporting the order of the ld. CIT(A) submitted that the assessee has maintained separate books of account. The expenditure incurred in respect of each unit are separately identifiable. The administrative expenses have been allocated on the basis of turnover. Therefore, there is no question of any notionality. Further, in the preceding years the claim has been allowed. Therefore, the ld CIT(A) wa....
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....icer, on the basis of audited report, treated an amount of Rs. 5329/- as income u/s 2(24)(x) r.w.s 36(i)(va) of the Act on account of delayed deposit of ESI. In appeal, the ld. CIT(A) allowed the deduction on the ground that such deposits have been made within the due date of filing of the Income tax return. We do not find any infirmity in the order of the ld. CIT(A). Various benches of the Tribunal are consistently taking the view that if the employee's contribution towards PF and ESI etc are deposited with the concerned authorities before the due date of filing return, then there cannot be any disallowance u/s 43B of the Act. Since the assessee in the instant case has made such deposit before the due date of filing of the return, therefore, the ld. CIT(A) was fully justified in deleting the disallowance made by the Assessing Officer. Ground raised by the Revenue is accordingly dismissed. ITA No. 2518/DEL/2013 [By the Assessee] 37. Grounds of the appeal by the Assessee read as under 1. That the Commissioner of Income Tax (Appeals) erred on facts and in law in direct nexus with earning of exempt income could only be disallowed under section 14A of the Act. 1....
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....the assessee has shown a sum of Rs. 3,60,000/- as dividend from magnum global fund investment of Rs. 15,00,000/-. He, therefore, asked the assessee to explain as to why disallowance u/s 14A should not be made. The assessee explained that there is no co-relation of the expenditure with the dividend income. However, the Assessing Officer held the above submission of the assessee to be vague and general in nature. According to him, the expenses for earning of any income cannot be ruled out. The assessee has not proved any nexus whether investment has been made out of surplus fund or borrowed capital though amount of investment and dividend income both having in nominal value looking to the size of company. The Assessing Officer accordingly made disallowance of Rs. 50,000/- u/s 14A and added the same to the total income of the assessee. 41. Before the CIT(A), the assessee challenged the above addition made by the Assessing Officer. It was argued that the Assessing Officer without any evidence or pinpointing any expenditure has made the ad-hoc disallowance which is not correct. Relying on various decisions, it was argued that the buden s on the Assessing Officer to prove on the basis....
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.... has been proved by the Assessing Officer. No material has been placed on record to show that the assessee has incurred some expenditure for earning tax-free income. In our opinion, although, there is no disallowance of interest expenditure for earning tax-free dividend income, however, it cannot be said that no administrative expenditure has been incurred for earning the tax-free income of Rs. 3,60,000/- on the investment of Rs. 15,00,000/-. Since the dividend income is on account of investment in Magnum Global Fund of Rs. 15,00,000/-, therefore, considering the totality of the facts of the case, disallowance of Rs. 50,000/- on ad-hoc basis under the facts and circumstances of the case appears to be on higher side. Although, the ld. counsel for the assessee submitted that no disallowance has been made in the past, however, it was not brought to our notice as to whether the disallowance was not made in scrutiny assessment or summary assessment. Considering the totality of the facts of the case, disallowance of Rs. 25,000/- under the facts and circumstances of the case, in our opinion, will meet the ends of justice. We hold and direct accordingly. The ground nos.1.1 to 1.2 by the as....
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....ecision of the Hon'ble Supreme Court in the case of CIT vs. Karnal Cooperative Sugar Mills Ltd. reported in 243 ITR 2 and in the case of CIT vs. Bokaro Steels Ltd. reported in 236 ITR 315 and the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sriram Honda Power Equipment reported in 289 ITR 475 were relied upon. 50. However, the CIT(A) was not satisfied with the explanation given by the assessee. Relying on various decisions including the decisions of Hon'ble Supreme Court in the case of Tuticorn Alkali Chemicals and Fertilizers Limited and CIT Vs. Bokaro Steels Limited he upheld the addition made by the Assessing Officer. While doing so, he observed that in the instant case the assessee has raised funds for expansion of the Orissa Project and out of the same has made temporary investment to earn interest income and capital gains. Therefore, such income has to be brought to tax a income from other sources. He accordingly upheld the addition of interest income of Rs. 6,11,95,775/-. He further held that the income of Rs. 1,32,88,663/- on sale of investment transferred to Orissa Plant account to reduce the project cost shall be charged to tax as short term capital ....
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....ed the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only issue to be decided in the impugned grounds is regarding the treatment of Rs. 6,11,95,775/- being interest earned on temporary funds and the income of Rs. 1,32,88,663/- on sale of investment transferred to Orissa Plant. According to the Assessing Officer, such interest income has to be brought to tax as income from other sources which has been upheld by the CIT(A) by relying on the decision of the Hon'ble Supreme Court in the case of Tuticorn Alkali Chemicals and Fertilizers Limited (supra) and various other decisions. It is the submission of the ld. counsel for the assessee that such interest income should be reduced from the capital work in progress. It is his alternate contention that if the interest income is taxed as "income from other sources" then deduction should be allowed on the interest expenditure for earning such interest income as per the provisions of section 57(iii). We find merit in the alternate contention of the ld. Counsel for the assessee.....