TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 995
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Bench, Ranchi Assessment Year: 2013-14 Appeal against the order passed u/s 250 by the C.I.T. (Appeals), Ranchi Grounds of Appeal: 1. For that Ld. C.I.T.(A) was not justified to confirming the addition of interest amount of Rs. 20,73,527/- u/s 56 under the head "Building Construction Fund" on the ground that this interest income was not credited in Profit and Loss account. The Ld. C.I.T.(A) totally overlooked the fact that same amount was debited in Short term Deposit account and also credited directly in to "Building Construction fund", which net impact will be zero. As this income was generated for earmarked fund as such the addition has ne legs to stand and fit to be deleted. 2. For that Ld. C.I.T. (A) was not justified for confirming the addition of Rs. 1,61,16,136/- under the head "Change in the method of accounting employed vis-à-vis the method employed in the immediate preceding year". The addition cannot be made merely on the basis of comment written by Ld. Auditor. The Ld. A.O. also could not establish on which section the addition was made. As such order passed by Ld. C.I.T. (A) is illegal and bed in the eye of law. 3. For....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hould not be considered as income of the corporation as the organisation does not have any legal right over the fund invested. The forest department is entitled to the interest accrued. The corporation is liable to return the unused fund along with the interest, hence, interest will be taxable in the hands of the corporation only if, the Forest department waive its legal right over the fund and interest. Diversion of Income is the process of diverting income before it is earned by the assessee. Such amount shall be excluded from the Total Income of the assessee as the income is diverted to someone else before being earned by the assessee. In case of diversion of Income there is an over-riding title of any other person on such income. So, the income before being earned by the assessee reaches such person and hence not chargeable to tax in hands of the assessee. The amount of Rs. 2 crores was sanctioned from Department of Forest; Govt. of Jharkhand vide letter no. 4 budget-13/2010 dated 31.03.2011 in the FY 2010-2011. The interest earned on investments, made out of building fund, should not be considered as income of the organization as it is diver....
X X X X Extracts X X X X
X X X X Extracts X X X X
....total of all the 5 points mentioned as understatement of profit in Annexure A of Auditor's Report. It is not the amount of the loss of stock. This loss was a business loss as it occurred while carrying regular business activities and should be allowed. Hence, the Ground of Appeal was allowed. Ground of Appeal Ld. DCIT in its questionnaire raised the issue of Addition of Rs. 7,30,89,663 on account of loss of old stock of 2649.445 Bags of Kendu Leaves. We have submitted detailed calculation of quantifiable loss on account of 2649.445 i.e., 16,21,327.86. With reference to Notice No: ITBA/APL/S/APL_1/2017-18/1004870702(1), CIT has stated in the closure that the remark of the Auditor has to be taken in context. Vide Audit Comments in the Audit Report as Annexure -1 to the Audit Report 'Understatement of Income'. The auditor made 5 comments, in each comment he had stated the amount of "Understatement of Income". The total of all the comments taken together was, as per the Auditor, understatement of income. It was held that the amount of the loss on account of theft of 2649.445 Bags was not Rs. 7.30.89.663. It was Rs. 17,69....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also claimed by the assessee as part of the said fund provided by forest department. It was the submission that during the assessment year 2017-2018 the assessee has also repaid the said Rs. 2 crores to the forest department and the interest portion of Rs. 20,73,527/- has not yet been paid to the forest department though the forest department is claiming for the same. It was the submission that the assessee treated the same as a current liability in his balance sheet. It was the submission that the Ao treated the same as income of the assessee. It was the submission hat the fund have not been provided by the forest department, the interest was also liable to be proved as part of the fund provided by the forest department. It was the submission that the AO treated the same as income of the assessee and ld. CIT(A) has upheld the action of the AO. 5. In reply, ld. CIT-DR submitted that he had no objection if such amount treated as income of the assessee was allowed as expenditure when the same is returned to the forest department. 6. We have considered the rival submissions. We find merit in the arguments of the ld. CIT-DR that applying the principle of real income the amount be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....been paid to the Raiyats. With this direction, this issue is treated as partly allowed. 10. The third issue is with regard to the disallowance of the Royalty. It was the submission of the ld.AR that during the impugned assessment year the assessee had shown an amount of Rs. 13.35.52.240/- as royalty payable to the Government of Jharkhand. The AO had disallowed the same. The ld. CIT(A) had allowed the assessee's claim to an extent of Rs. 9 lakhs. The balance of Rs. 4,35,52,240/- was disallowed on the ground that proofs have not been produced. It was the submission that even today the amount has not been paid to the Government and the same remained as a contingent liability in the account of the assessee. It was the submission that the same may be permitted to be claimed as an expenditure when the amount is paid. It was the submission that there is a fear that as the said royalty is no more allowable expenditure from the assessment year 20147-2015, the AO might not allow the same as the same expenditure relates to the assessment year 2009-2010 but has not been paid till date. 11. In reply, ld.CIT-DR submitted that if the assessee is able to clearly show that the said amount per....