TaxTMI 
TaxTMI 
2024 (4) TMI 257
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....come on 29.09.2013 declaring total loss of Rs. 2,64,74,150/- and book loss of Rs. (-)3,50,86,844/-. Assessee's Return was selected for scrutiny and assessment order was passed u/s. 143(3) of the Act on 31.12.2015 by making the following additions and disallowances: (i) Disallowance u/s. 43B of the Act 19,40,232/- (ii) Prior Period Expenses 91,956/- (iii) Prior Period Income 91,956/- (iv) Non Deduction of TDS on International Transaction 54,000/- (v) Disallowance u/s. 50C of the Act 6,71,29,538/- (vi) Disallowance on account of Excess Depreciation Claimed on Software Licenses 4,58,137/- (vii) Capitalization of Interest on Capital Work in Progress 47,37,168/- (viii) Disallowance u/s. 40A(3) of the Act 60,517/-. 2.1. Thus, the Assessing Officer determined the total income of the assessee as Rs. 7,45,63,504/- as against the returned loss and demanded tax thereon. 3. Aggrieved against the assessment order, the assessee filed an appeal before Ld. CIT(A), who partly allowed the assessee's appeal and partly confirmed the additions. Aggrieved against the appellate order, both the Assessee and Revenue are in appeal(s) before us. 4. The Grounds of Appeal raised by th....
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.... Thus the above Grounds No. 2 to 4 and Ground No. 6 are hereby dismissed. 7. Ground No.5: The Ld.CIT(A) has erred in sustaining disallowance of interest amounting to Rs.47,37,168 as capital expenditure by the Assessing Officer. During the course of the assessment proceedings, the Assessing Officer capitalised the interest at the rate of 12% on closing balance of CWIP in the absence of exact computation provided by the assessee and this disallowance is confirmed by the Ld. CIT(A). 7.1. Before us, the Ld.Counsel for the assessee Mr. M.K. Patel explained that the assessee has sufficient interest-free funds in the form of share capital, reserves and surplus. He also placed on record the relevant pages of audited financial statements reflecting shareholder's funds. He also relied on the Co-ordinate Bench decision in the case of DCIT Vs. IRM Offshore and Marine Engineers P Ltd. reported in (2023) 157 Taxmann 171, which is to the effect that once substantial interest-free funds are available with the assessee, no disallowance is called for under section 36(1)(iii) of the Act. 7.2. Per contra, Ld. Sr. DR Shri Ashok Kumar Suthar appearing for the Revenue supported the order passed by the....
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....for industrial purpose. Due to various financial, administrative and infrastructural problems, the assessee were not able to start their proposed "Industrial Project" on the above plots. Therefore, after obtaining necessary approvals from Competent Authority, the above plots were gifted to M/s.Ratnakar Estate Developers Pvt. Ltd. "free from all encumbrances and without any consideration, either in cash on hand" by executing Gift Deed dated 29.10.2012. 11.1. The Assessing Officer issued a show cause notice to the assessee to explain as to how the gift by one company to other company can be genuine, considering the fact that the company is an Artificial Judicial Person and the element of "natural love and affection" cannot be exist and why not to invoke the provisions of section 50C of the Act for the above Gift transaction. 11.2. In response, the assessee referred section 122 of the Transfer of Property Act and claimed that there is no restriction that the gift can be made only between natural person out of 'love and affection'. Further, clause (iii) of section 47 of the Act, specifically excludes any transfer of a capital asset under a Gift from the ambit of Transfer. Therefore n....
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....ned for the purposes of stamp duty valuation as consideration for transfer of land and made addition as per the provisions of sec. 50C of the Act. 7.3.1. During the course of the appellate proceedings, the appellant has again reiterated the facts as mentioned before the AO. The appellant has also submitted that as per Clause 53 of objects incidental or ancillary to the main objects of the Memorandum of Association, the appellant is competent to alienate, transfer, gift, donate, settle any property of the company with or without consideration to any person. The appellant has also relied upon the decisions in the case of Redington (India) Ltd (supra) and KDA Enterprises Pvt. Ltd. (Supra) besides the decision relied upon by it before the AO. A perusal of the judicial pronouncement relied upon by the appellant shows that the High Courts as well as Benches of ITAT have held that a company is capable of making a gift if it is authorized to do so by its Memorandum of Association. Thus, the AO's claim that the appellant was an artificial juridical person and hence, cannot make a gift is not correct in view of these judicial pronouncements. Once the appellant company is held to be cap....
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.... certain existing movable or immovable property made voluntarily and without consideration by one person, called the donor, to another, called the donee and accepted by or on behalf of the donee. When the provisions of law contained in sections 5 & 122 of the TP Act read together, it emerges that a company being a living person can transfer property by way of gift. (Para 72) As per section 122 of the TP Act, 1882 the following are the ingredients of a gift valid in law: Transfer of existing movable or immovable property, Transfer made voluntarily, without consideration, by donor to the done, accepted by the donee. (Para 73) The essential ingredients of a valid gift are the existence of the property, voluntary nature of the transfer and absence of consideration. As a pre-condition for making a valid gift, the law does not prescribe any attributes like "love and affection". (Para 74) Transfer of property as the general law contemplates is the transfer of both existing property and future property. But in a gift, the transfer must be of an existing property. The meaning given to the expression "gift" in the erstwhile Gift Tax Act, 1958 is the same. A gift is defined in the said ....
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....rresponding change was made under the Income tax Act and, therefore, taxability of gift remained outside the tax net for a long time until section 56(2) was amended for bringing tax on gifts received by individuals and HUFs with certain conditions with effect from 01.04.2005. Therefore, legislature again indicated its intention that certain gifts received by individuals and HUFs only will be taxed under the Income-tax, in the hands of the recipient, but gifts received by companies or any other person other than individuals and HUFs were not brought under the tax net. With the passage of time, it was realized that certain kind of transactions of transfer of certain kind of shares by certain category of companies only further need to be taxed and accordingly the legislature brought provisions of section 56(2)(viia) and 56(2)(vilb) of Income-tax Act in the statute with effect from 01/06/2010 and 01.04.2013 respectively, but any other gift by companies or any other person other than individual and HUF still left outside the tax net. Therefore, the amount received by the assessee is not taxable as gift u/s. 56 of Income Tax Act or any other provisions of the Income Tax Act." 14.1. Thus....
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.... dismissed. 16. Ground No.2 relates to disallowance of depreciation of Rs. 4,58,137/- on Computer software. The AO disallowed the claim stating that the assessee has only purchased license to use the software and therefore not entitled to claim depreciation at 60%. 16.1 Ld. Counsel submitted that after 1st April, 2003, "computer software" is entitled to depreciation at 60% as per amended provisions of Appendix I of IT Rules, 1962. The rate of 60% applicable in respect of 'computers including computer software' introduced for and from asst. year: 2003-04. It has been classified as a tangible asset w.e.f. 1st April, 2003, under the heading "Plant" in Appendix I to the IT Rules and entitled to depreciation at 60%. Further the expression "computer" has not been defined in the Act. However, it has been defined by under section 2(1)(i) of the Information Technology Act, 2000. As per the said Act, "computer" means any electronics, magnet, optical or other high speed data processing device or system which performs logical, arithmetic and memory functions by manipulation of electronics or magnetic or optical impulses and includes all "input-output processing", "storage", "computer....