TaxTMI 
TaxTMI 
TaxTMI 
2018 (3) TMI 1686
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.... Deposits (ICDs) made by the Assessing Officer?" 2. "Whether on the facts and circumstances of the case and in law, the CIT (A)is right in confirming disallowance only to the extent Rs. 17,72,620/- as capital expenditure out of total disallowance of Rs. 62,76,048/- made by the Assessing Officer being legal and professional fees, even though the balance amount related to discontinued business and was therefore not allowable as business expenses?" 3. "Whether on the facts and circumstances of the case and in law, the CIT (A)has erred in treating the profit on sale of shares of Rs. 2,47,49,139/- as Capital gain as against the business income assessed by the Assessing Officer whereas the facts show clear intention of the assessee to earn business profits?" 4. "Whether on the facts and circumstances of the case and in law, the CIT (A)erred in treating the rental income as income from business and profession as against income taxed under the head "income from house property" by the Assessing Officer." The appellant craves leave to add to, amend or withdraw the aforesaid ground of appeal." 4. As per the facts of the present case, the assessee was carrying on the business of gas di....
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.... is reproduced below:- 4.3 I have duly considered the appellant AR's submission and the facts of the case. I find that the assessee has earned dividend income @ 5% on the debentures. However, the assessee has not offered the interest income on the ground that the concern party has requested to waive the interest. In fact, the assessee has not waived interest as there is no such Board's Resolution but the assessee has preferred not to charge interest in the books of accounts which is a separate matter but for the purpose of computation of income under the Income tax Act, income has to be computed in accordance with principle of accounting. In this case, the assessee has earned income on the basis of Mercantile System of Accounting; but the interest income has not been shown as the assessee has not received the interest in last three years. The money lent as debentures has become non performing asset (NPA). Hence, as per AS-9 no interest is to be charged on NPA. Therefore, the AO is not justified in adding the interest income not received by the appellant. Reliance is placed on the decision of Delhi High Court in the case of CIT vs. VasisthChayVyapar (ITA 552 of 2005), wher....
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....ed to discontinued business and was therefore not allowable as business expenses. 9. We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in its detailed order in para no. 5. The operative portion of the order of Ld. CIT(A) is contained in para no. 5.2 of its order and the same is reproduced below:- 5.2 I have duly considered the submission of the appellant's AR and the facts of the case. I find that the assessee has incurred legal and professional charges in connection with the business of the assessee. Had the assessee not contested the legal proceedings with MIs. Mark Mascarenhas, in London, the assessee would have been held liable to pay more damages. Although the arbitration was passed against the appellant at London, the assessee incurred total expenses of Rs. 3 1,75,043/- only as against the total cost of the award of British pound of Rs. 6,25 ,695/-. Hence, the amount of legal expenses amou....
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....nt case, we find that Ld. CIT(A) has dealt with this ground judiciously. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the revenue stands dismissed. Ground No. 3. 10. This ground grounds raised by the revenue relates to challenging the order of Ld. CIT(A) in treating the profit on sale of shares of Rs. 2,47,49,139/- as Capital gain as against the business income assessed by the Assessing Officer whereas the facts show clear intention of the assessee to earn business profits. 11. We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the re....
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.... while reaching to the conclusion had correctly relied upon the judgment in the case of Janak S. Rangwala v. ACIT (11 SOT 627 Mum), wherein the Hon'ble I.T.A.T. Mumbai, has held that the frequency of transaction should not determine the nature of income. Moreover, consistency has to be maintained in Income tax proceedings if in earlier years, the claim of the assessee was accepted as capital gain, the same cannot be changed in this year on the same set of facts and circumstances of the case. Therefore considering the above facts and circumstances, we dismiss this ground raised by the revenue. Ground No. 4 12. This ground grounds raised by the revenue relates to challenging the order of Ld. CIT(A) in treating the rental income as income from business and profession as against income taxed under the head "Income from house property" by the AO. 13. We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue ....
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....er the head 'Profits and gains from business or profession' against the head 'Income from house property'. Ld. AR further submitted that the AO had assessed the amount received as rent and service charges as 'Income from house property', by invoking the provisions of Section 27(iii)(b) r.w.s 269UA(f) of the Act. The Ld. AR submitted that against the aforesaid invoking of provisions of section 27(iii) of the Act, the assessee wants to submit that the lease agreement with LIC is a monthly tenancy right. Since, section 27 of the Act specifically excludes any right by way of any lease from month to month, hence the tenancy in the present case clearly falls within the exclusions as provided in section 27(iii)(b) of the Act. In order to substantiate the above contentions, the assessee want to bring on record the following documents:- 1) Order of the Estate Officer Life Insurance Corporation under the Public premises (Eviction of Unauthorized Occupant) Act, 1971 dated July 0, 2012, 2) Order of the Bombay Civil Court dated October 12, 2012 3) Order of the Hon'ble Bombay High Court dated February 5, 2013. It was also submitted that the above documents could not be submitted before t....
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....ound of appeal in ITA No. 6212/Mum/2011 for the AY 2008-09 on merits. Therefore, following our own decision in ITA No. 6212/M/13, we apply the same findings in the present appeal in order to maintain judicial consistency which is applicable mutatis mutandis in the present case. Resultantly, the appeal filed by the revenue stands dismissed. ITA No. 725/Mum/2013 for AY 2009-10. 18. Now we take up assessee's appeal filed in ITA No. 725/Mum/2013 for AY 2009-10 on the grounds mentioned herein below:- GROUND I: The Learned Commissioner of Income-Tax (Appeals) - I, Mumbai ["the CIT (A)"] erred in upholding the decision of the Deputy Commissioner of Income Tax - 1(1), Mumbai ("the AO") in disallowing a sum of ' 18,30,157/- under section 14A read with rule 8D of the Income Tax Act,1961 ("the Act") on the alleged ground that the expenses were incurred for earning tax-free income. 2. The Appellant therefore prays that the disallowance of 18,30,157/- being alleged expenses attributed to earning tax-free income be deleted. Revised Ground No. II 1 On the facts and circumstances of the case, the Hon'ble Commissioner of Income Tax (Appeals) 'CIT(A)" erred in confirming the action....
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....trary, the said provision cannot be applied mechanically and it has to apply only if the AO is 'not satisfied' with correctness of the claim of the assessee as per the provisions of section 14A(2) of the I.T. Act. Ld. AR further submitted that only those expenses can be attributable u/s 14A of the I.T. Act which are 'incurred in relation to' earning tax free income and hence no disallowance can be notionally made. The term 'in relation to' means that the expenditure must have been actually incurred in earning exempt income. Ld. AR also submitted that as per the decisions of Hon'ble Bombay High Court in the case of CIT vrs. Walfort Share and Stock Brokers Pvt. Ltd (reported in 310 ITR 421) wherein it was held that 'what section 14A contemplates is the expenditure actually incurred for earning tax free income and not assumed expenditure or deemed expenditure'. Apart from above, Ld. AR also submitted that the assessee was having own funds and no borrowed funds were used to earn exempt income and therefore the provision of section 14A(2) r.w.r 8D is no attracted. In this respect, assessee relied upon the judgment in the case of CIT vrs. HDFC Bank Ltd (366 ITR 505) (Bom HC) and HDFC V....
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....give a reasoned finding that he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to income which does not form a part of the total income under this Act and such 'non-satisfaction' must be objective and judicious. Hence, in this way, as per section 14A(2) provides that the satisfaction regarding correctness or otherwise of the claim of the assessee should be viewed based on the 'accounts' of the assessee. Be that as it may, after considering the facts of the present case and orders passed by Ld. CIT(A) on this ground, we find that Ld. CIT(A) has merely relied upon the judgment of Hon'ble Bombay High Court in the case of M/s Godrej & Boyce Mfg. Co. Ltd. and Daga Hospital Mangement Pvt. Ltd (119 TTJ 289) while applying rule 8D of I.T. Act, and Ld. CIT(A) has not considered the arguments put forth before us. Considering the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO for passing afresh order keeping in view the above submissions and judicial precedents raised by the assessee and apply provision of section 14A r.w. rule 8D of I.T. Act only in relation to the income which ....