TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 96
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....one Shri Ravindersingh Mital for purchase of land. 4. Facts in brief, as emerging out from the relevant orders of the Revenue authorities, the assessee company is engaged in manufacturing of fabrics, cotton yarn and power generation (wind mill & power plant). The assessee has filed return of income on 28.9.2012 declaring total income of Rs. 13,35,69,580/-. The return was processed under section 143(1), and thereafter the case of the assessee was selected for scrutiny assessment by issuance of notice under section 143(2), which was served upon the assessee. During the assessment proceedings, from the details submitted by the assessee, the ld.AO noticed that the assessee had given Rs. 3,61,50,000/- as advance to one Shri Ravindrasingh Mittal for a land deal. AO further noticed that as per the record no interest has been charged on such advances, nor land deal has been materialized. On a show cause notice, it was explained by the assessee that the assessee has entered into a sale agreement dated 20.10.2007 with Shri Ravindrasingh Mittal and made on advance of Rs. 13,14,50,000/-for purchase of land at Mouje Sahawadi, Tal. City, Dist. Ahmedabad admeasuring 64977 sq.yards at the rate of....
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....nth of April, 2012 in terms of mutual agreement between the parties for cancellation of agreement of sale. Therefore, the decision of the ld.AO in making addition on account of interest expenditure was not based on the facts and figure on record, rather on some extraneous consideration, which has no reason or justification. However, the assessee made an alternative claim that even notional interest charged by the AO at 15% was very much on higher side, as the AO has charged on the basis of legal notice dated 4.3.2010 issued by the assessee to the seller. At the most it should be 9.75% p.a. because this rate was charged by the AO while disallowing interest in respect of capital work-in-progress. Applying the same principle, the ld.AO should have calculated the interest at the rate of 9.75%p.a. on the outstanding advance as on 1.4.2011 till the receipt only. In this way, the assessee submitted that the amount of interest would be Rs. 58,38,468/- as against Rs. 1,93,17,500/-. 5 On the other hand, the ld.DR supported the orders of the Revenue authorities and pleaded to sustain the addition. 6. We have considered rival submissions; perused the material available on record, and also or....
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....ed interest out of such payment and advances were made out of interest bearing fund. But where is the proof to make such an assumption ? We are unable to accept this view of the department in the absence of any piece of evidence. The assessee all through contended that the advances were made out of interest free funds, and because of substantial delay in execution and likely non-performance of the deal, the assessee has to forgo the interest, and accept return of money advanced. It is trite law that AO cannot question the reasonableness by putting himself in the arm-chair of the businessman and assume status or character of the assessee. It is for the assessee to decide, whether the expenses should be incurred in the course of his business. Therefore, the action of both the authorities has no legal justification. In view of the above, and after considering the facts in entirety, we do not find any merit in the action of the Revenue authorities in making addition of interest charge on the impugned advances made to the seller. Accordingly, we delete the impugned addition, and allow this ground of appeal. 7. Now we take ground no.2. This ground reads as under: "Quantum of Interest:....
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....he notional brought forward loss, even though they have been set off against earlier years' income. Accordingly, the ld.AO worked out amount available for deduction under section 80IA at NIL. Aggrieved by the action of the AO, the assessee preferred appeal before the ld.CIT(A), who after considering the claim of the assessee, and relying upon various case laws, allowed the claim of the assessee. Not satisfied with the order of the ld.CIT(A) is Revenue is now before the Tribunal. 14. Both the parties relied upon respective orders of the Revenue authorities and prayed for allowing their respective claims. Further, the ld.counsel for the assessee to support its claim also relied upon the judgment of Hon'ble Madras High Court in the case of Valaudhswamu Spg. Mills, 340 ITR 477, decision of ITAT in the case of Sadbhav Engg. Ltd., 153 ITD 2334 which followed Hon'ble Madras High Court decision, and CBDT Circular No.1/2016 dated 15.2.2016. 15. We have considered rival submissions and gone through the orders of the Revenue authorities, and also certain case laws cited by the parties. The issue before us is, whether the profit earned by the assessee during the assessment year 2012-13 would....
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....briefly stating, the assessee-company has made a payment of Rs. 15,22,527/- to one Naroda Enviro Projects Ltd. towards land fill charges of solid waste. The ld.AO sought for furnishing of TDS details. From the details, the ld.AO noticed that the assessee has not deducted TDS while making payment to the said concern. Assessee submitted that the said concern is a non-profit making concern and registered under section 12AA of the Act, and the service provided by them was not in the nature of contract. The said concern has filed return of income, and the assessee has furnished copy of invoice issued by the concern. The ld.AO did not accept the explanation of the assessee. He accordingly invoked provisions of section 40(a)(ia) of the Act. However, in appeal, the ld.CIT(A) after relying on various judgment including the judgment of Hon'ble Delhi High Court in the case of CIT Vs. Ansal Landmark Township P.Ltd,377 ITR 635directed the ld.AO to verify Form NO.26A and delete the impugned addition. Aggrieved by this direction, the Revenue is in appeal before the Tribunal. 19. Heard both the parties; perused respective orders and also judgments cited. We find that the issue in question stands ....
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....or use of software, and therefore assessee was not entitled for depreciation at the rate of 60%. He accordingly applied depreciation at 25%. However, the ld.CIT(A) allowed the claim of depreciation by holding that the software purchased by the assessee is tangible assets, and therefore, as per Appendix-1 to Rule 5 of the IT Rules, assessee is entitled for depreciation at the rate of 60%. While holding so, he also observed that similar claim was allowed by the AO since beginning in the past, and therefore, there was no justification to restrict depreciation at 25%. Though the nature of acquisition, whether computer software was purchased outright or a license for use of any computer software was not clear, but the fact as recorded by the ld.CIT(A) that similar claim from beginning in the past was allowed by the department, and there was no addition during the year, cannot be said unjustifiable. Thus, we are not inclined to reverse the order of the ld.CIT(A) on this issue. This ground of appeal is also dismissed. 23. Ground No.4: The ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 41,21,439/- made on account of disallowance of interest on Foreign Currency Convert....
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....liability on the assessee-company and the company was bound to discharge the liability on due date, if the bond holders do not exercise their option to convert into equity. The claim for deduction of financial charges was towards loan liability which was repaid with interest, and now exist no liability. Therefore, interest on liability was revenue in nature, and was fully allowable. Assessee further pointed out that the assessee was claiming liability pertained to the concerned year when the same arose each year and by reversal of entry, the resultant income was also offered and taxed by the Department, therefore, the claim of the assessee was perfectly justified and allowable. The ld.CIT(A) after having found the explanation and submissions of the assessee justifiable, allowed the claim of the assessee with the following finding: "7.3. / have carefully considered the facts and the observations of the A.O. and the submissions of the appellant. I find that the appellant had issued FCCB bonds which are used for the purposes of its business. Premium on Bonds and debentures is held to be revenue expenditure. The accounting treatment given by the appellant is explained as narrated by ....
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.... business. These bonds were liable to be redeemed at the end of certain period alongwith specified rate of interest, if the bond holder does not exercise the option of converting the same into equity. The company was also having option to buy back the bonds at the prevailing market-rate and as a result the company may decide accordingly considering commercial expediency, if it was profitable and advisable to extinguish the liability. In that event, the assessee company can have either profit or loss in the books due to buy-back or in other words by extinguishment of the debt liability. It is further pleaded that the assessee-company had issued FCCB to the tune of USD 2,00,00,000/- on 11.4.2007, and out of this, USD 1,00,00,000 was bought back in the F.Y.2009-10 wherein the company has declared income of Rs. 7,72,95,808/- in the computation of income. Similarly, during F.Y.2010-11 the company bought back USD 25,00,0000 and declared income of Rs. 75,80,574/- in the computation of income. Now during the assessment year 2012-13 the company again bought back USD35,00,000 and incurred loss of Rs. 41,21,439/- and claimed the same as deduction from computation of income. All these facts kn....
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....nst the action of the ld.CIT(A) in deleting addition of Rs. 1,12,263/- made by the AO under section 41(1) of the Act in respect of cessation of liabilities. 29. With the help of ld.representatives, we have gone through the orders of the Revenue and also perused material available on record. We find that in the balance sheet of the assessee for the last three years, the assessee shown outstanding sundry creditors to the extent of Rs. 1,12,263/-. The ld.AO presumed that since the liability was not paid off even after three years, the same was ceased to exist, and in view of provision of section 41(1) of the Act any amount benefit which was obtained by a person with respect to any loss, expenditure or trading liability incurred in any earlier Assessment Years will have to be written back to the profit and loss account of the assessee and taxed accordingly. In the absence of satisfactory reply, the ld.AO treated outstanding liability of Rs. 1,12,263/- as deemed income of the assessee in terms of the above provisions, and added the same to the total income of the assessee. However, the ld.CIT(A) did not concur with the finding of the ld.AO. He observed that since the assessee has not w....
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....before the ld.CIT(A), who after going through the submissions of the assessee and examining availability of interest free funds with the assessee, allowed claim and deleted the disallowance of interest. Aggrieved, Revenue is now before the Tribunal. 32. The ld.DR supported the order of the AO. On the other hand, the ld.counsel for the assessee while reiterating submissions made before the lower authorities, also contended that provisions of section 36(1)(iii) for disallowance of interest is applicable only in respect of capital borrowed for acquisition of an asset, when there is no borrowing for acquisition of any of these assets the question of any disallowance of interest does not arise. The assessee company has acquired the assets of Rs. 7,94,44,853/- out of cash profit generated during the year amounting to Rs. 47,88,11,656/-, the details of which has already submitted during the assessment proceedings. In view of huge cash surplus, it was not correct to say that any interest bearing funds have been utilized for the purpose or out of the basket of interest bearing funds, for acquisition or utilization in respect of capital work-in-process. The action of the AO, therefore, was ....