TaxTMI 
TaxTMI 
2020 (6) TMI 318
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.... No.2541/Bang/2019. The grounds raised by the assessee are as under: 1. That the order of the learned Commissioner of Income Tax (Appeals) is prejudicial to the interests of the appellant, is bad and erroneous in law and against the facts and circumstances of the case 2. Grounds regarding Notional lease rent - Rs. 2,36,67,539 2.1. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the addition of lease rent of Rs. 2,36,67,539/- on a notional basis even though the appellant has not received the above amount. 2.2. That the learned Commissioner of Income Tax (Appeals) erred in law and on fact in confirming the addition of notional rent of Rs. 2,36,67,539/- on the plant and machinery leased to sister concerns on the ground that the rent charged by the appellant is not at par with the fair market value even though no material was brought on record to substantiate the FMV arrived by the learned assessing officer. 2.3. Without prejudice to the above grounds, the learned Commissioner of Income Tax (Appeals) ought to have held that the disallowance can be made only to the extent of Rs. 1,40,06,539/- which is the difference between actual expe....
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....d, delete, amend or otherwise modify either all or any of the above grounds either before or at the time of hearing of this appeal. 4. In the course of hearing, it was submitted by learned AR of the assessee that ground No.1 is general. Regarding ground No.2, he submitted that the notional addition made by the AO and confirmed by the learned CIT(A) is not justified. He placed reliance on the judgment of Hon'ble Gauhati High Court rendered in the case of Highway Construction Co. Pvt. Ltd., Vs. CIT 199 ITR 702, copy available on pages 57 - 61 of the assessee's Paper Book. As against this, learned DR of the Revenue filed written submissions regarding ground No.2 in Assessment Year 2015-16. It was the submission of learned DR of the Revenue that additional evidence filed by the assessee should not be admitted and in this regard, she placed reliance on three judicial pronouncements which are noted in the written submissions filed by her. It was her alternative contention that this matter may be remanded to AO for a fresh decision. 5. We have considered the rival submissions. We find that this issue was decided by learned CIT(A) as per paras 4.1 and 4.2 of his order and for ready refer....
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....e, the argument of the appellant that the AO cannot determine the FMV of lease rental is not correct. Further, the appeallant has argued that the AO failed to appreciate that the machinery let out is unique to construction activities and arc not generally available in the market for leasing except to related parties. Even going by such argument of the appellant its unique and rare machine would normally fetch more lease rental for the appellant. It is observed that the AO has discussed the issue logically and has advanced cogent reasons for determining the FMV for lease rental in the case of the appellant. The computation of lease rental at the rate of 8% of the WDV of the assets h) the AO is also considered reasonable." 6. From the above paras reproduced from the order of CIT(A), it comes out that the addition was made by the AO on this basis that fair market value (FMV) of lease rental is 8% of WDV plus interest expense and depreciation as per Income Tax Act. In the light of these facts, we are now examining the applicability of the judgment of Hon'ble Gauhati High Court cited by the learned AR of the assessee rendered in the case of Highway Construction Co. Pvt. Ltd., Vs. CIT ....
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....e interest which was not due or not collected. In this view, we answer question No. (ii) in the negative, that is, in favour of the assessee and against the Revenue." 7. From the above para reproduced form the judgment of Hon'ble Gauhati High Court, it comes out that in a case where the income is not actually received by the assessee and it has not accrued to the assessee, then under no provisions of Income Tax Act, the income tax authorities are authorized to include such income which was neither due nor collected. In the present case also, this is not the case of the AO that higher amount of lease rental was received by the assessee or it has accrued to the assessee and therefore, in our considered opinion, this judgment of Hon'ble Gauhati High Court is squarely applicable in the present case. No contrary decision of Hon'ble Karnataka High Court or of Hon'ble Apex Court has been cited before us by learned DR of the Revenue and learned DR of the Revenue also could not show that in the facts of the present case, this judgment of Hon'ble Gauhati High Court is not applicable. We respectfully follow this judgment of Hon'ble Gauhati High Court and decide this issue in favour of the ....
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....of Hon'ble Kerala High Court, it was submitted that since Hon'ble Bombay High Court judgment is in favour of the assessee at least to the extent of restoring the matter back to the file of AO, the same should be followed in preference to the judgment of Hon'ble Kerala High Court cited by learned DR of the Revenue. 9. We have considered the rival submissions. First of all, we reproduce paras 11 to 14 from the Tribunal order cited by learned AR of the assessee having been rendered in the case of Innoviti Payment Solutions Pvt. Ltd., Vs. ITO (supra). These paras are as follows: "11. As per various tribunal orders cited by the learned AR of the assessee, it was held that as per Rule 11UA (2), the assessee can opt for DCF method and if the assessee has so opted for DCF method, the AO cannot discard the same and adopt other method i.e. NAV method of valuing shares. In the case of M/s. Rameshwaram Strong Glass (P) Ltd. vs. The ITO (Supra), the tribunal has reproduced relevant portion of another tribunal order rendered in the case of ITO vs. M/s Universal Polypack (India) Pvt. Ltd. in ITA No. 609/JP/2017 dated 31.01.2018. In this case, the tribunal held that if the assessee has opted fo....
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....o be DCF method and he cannot change the method of valuation which has been opted by the assessee. Hence, in our considered opinion, in the present case, when the guidance of Hon'ble Bombay high Court is available, we should follow this judgment of Hon'ble Bombay High Court in preference to various tribunal orders cited by both sides and therefore, we are not required to examine and consider these tribunal orders. Respectfully following this judgment of Hon'ble Bombay High Court, we set aside the order of CIT (A) and restore the matter to AO for a fresh decision in the light of this judgment of Hon'ble Bombay High Court. The AO should scrutinize the valuation report and he should determine a fresh valuation either by himself or by calling a final determination from an independent valuer and confront the same to the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. In our considered opinion and as per report of research committee of (ICAI) as reproduced above, most critical input of DCF model is the Cash Flow Projections. Hence, the assessee should be asked to establish that such projection....
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....td., Vs. Pr. CIT (supra). The Tribunal has noted that as per the judgment of Hon'ble Bombay High Court, it was held that AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. The Tribunal has followed the judgment of Hon'ble Bombay High Court and disregarded various other Tribunal orders against the assessee which were available at that point of time. In the present case also, we prefer to follow the judgment of Hon'ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT (supra) in preference to the judgment of the Hon'ble Kerala High Court cited by DR of the Revenue rendered in the case of Sunrise Academy of Medical Specialities (India) (P.) Ltd. Vs. ITO (supra) because this is settled position of law by now that if two views are possible then the view favourable to the assessee should be adopted and with regard to various Tribunal orders cited by learned DR of the Revenue which are against the assessee we hold that bec....
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....f income because in the present year also, assessee has shown an income of Rs. 58,88,121/- as profit on sale of investments (Net). The Bench wanted to see as to whether this income is claimed as exempt or declared as taxable. In reply, it was submitted by learned AR of the assessee that he will file the computation of income after the hearing is over. Learned DR supported the orders of authorities below. 13. We have considered the rival submissions and we find that this is the claim of the learned AR of the assessee that there is no exempt income earned by the assessee in the present year but he has not filed the computation of income to establish that and we find that the assessee has earned in the present year Rs. 58,88,121/- as profit on sale of investments (Net) and in the absence of computation, we do not know whether it is claimed as exempt or is declared as taxable. Moreover, in ground No.4.4, the assessee has stated that disallowance under section 14A should be restricted to Rs. 25,68,400/- being exempt income. In course of arguments, it was submitted by the learned AR of the assessee that it is a mistake. But in view of this that the Computation of Income is not filed bef....
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.... Act. 3.2. Without prejudice to the above ground, that the learned Commissioner of Income-Tax (Appeals) ought to have allowed the sum of Rs. 1,25,09,633/- as deduction u/s. 37(1) of the Act. Addition u/s. 56(2) (viib) - Rs. 23,92,68,988/- 4.1. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the addition of Rs. 23,92,68,988/- u/s. 56(2) (viib) of the Act on the ground that the value of the shares issued exceeds the fair market value per share. 4.2. That the learned Commissioner of Income Tax (Appeals) ought to have held that the assessing officer has no jurisdiction to go beyond the valuation report issued by chartered accountant. 4.3. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in upholding the action of the assessing officer in rejecting the DCF method of valuation adopted in the valuation report and adopting Net Asset Value Method. 4.4. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the valuation report cannot be relied upon because the Chartered Accountant did not authenticate the projections. 4.5. That the learned Commissioner of Incom....
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.... the fulfilment of this precondition. The assessee issued fresh equity capital and for issue of such fresh capital, the assessee incurred an aggregate expenditure of Rs. 9,32,946/-. Such expenditure was disallowed by the AO but the same was allowed by Hon'ble Bombay High Court by holding as under: "It is clear that we must find the aim and objects, from a businessman's point of view, in incurring the said expenditure. It is established, upon the Tribunal's finding, that the assessee had no need for funds. It is established that it had need only of the technical collaboration arrangement to run profitably. What, therefore, motivated the businessman in the assessee was the expediency of ensuring the continuance of the technical collaboration arrangement. The object and purpose of the said expenditure, therefore, seen from the businessman's point of view, must be held to be to obtain the approval of the Government to the continuance of the technical collaboration arrangement. This being the object and purpose, the said expenditure must be held to be revenue expenditure and an allowable deduction. That an advantage of an enduring character, namely, the increase in the s....