TaxTMI 
TaxTMI 
2003 (10) TMI 249
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....T(A) has erred in law and on facts in confirming the action of AO in holding that the business of the appellant has not commenced during the year under consideration and further erred in confirming the action of AO in taxing the entire income of the appellant amounting to Rs. 9,56,337 under the head "income from other sources". As a matter of fact the business of the appellant has already commenced during the year under consideration and therefore the entire income of the appellant is required to be assessed under the head 'profits and gains from business or profession'. 3. The learned CIT(A) has erred in law and on facts in not appreciating that the income of Rs. 840 has been added twice. The appellant has returned income of Rs. 840 while its entire income including this Rs. 840 is already added in the total income of Rs. 9,56,337 and to this figure, learned AO has added the figure of returned income of Rs. 840. Thus there is duplication of addition of Rs. 840. 4. The learned CIT(A) has erred in law and on facts in not properly appreciating various authorities cited before him and further erred in law and on facts in applying the ratio of the authorities which are not applic....
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....the appellant amounting to Rs. 5,21,125 under the head "income from other sources". As a matter of fact the business of the appellant has already commenced during the year under consideration and therefore the entire income of the appellant is required to be assessed under the head 'profits and gains from business or profession'. 3. Learned CIT(A) has erred in law and on facts in holding that though the business of the appellant has commenced in as much as the appellant has exported traded goods out of India but business expenses shall not be allowed to be claimed as the main business has not commenced. This artificial distinction of main and other business drawn by the learned CIT(A) is against the scheme of the Act and uncalled for. 4. Learned CIT(A) has erred in law and on facts in not allowing the deduction under s. 80HHC of the Act on the export sales of Rs. 70,43,549. 5. The learned CIT(A) has erred in law and on facts in not properly appreciating various authorities cited before him and further erred in law and on facts in applying the ratios of the authorities which are not applicable to the peculiar facts of the present case and which are distinguishable on facts.....
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....the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 2,29,000 made on account of unexplained share application money." F. The assessee has submitted an application for entertaining additional grounds of appeal for asst. yr. 1995-96, which are reproduced below: "1. Alternatively and without prejudice to any of the contentions raised hereinabove, learned CIT(A) has erred in law and on facts in not appreciating that if the income is required to be assessed under the head 'income from other sources' under s. 56 of the Act, expenditure for earning such income including expenditure for maintenance of corporate status to be allowed as deduction under s. 57(iii) of the act. 2. Alternatively and without prejudice to any of the contentions raised hereinabove, learned CIT(A) has erred in law and on facts in not granting deductions as prescribed under s. 42 of the Act looking to the nature and type of business being carried on by the appellant. 3. Learned CIT(A) as well as learned AO have erred in not considering various facts, submissions, explanations and clarifications as given by the appellant. Both the lower author....
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....e, erred in reaching to an erroneous and incorrect conclusion in law as well as on facts. 5. Alternatively and without prejudice to any of the contentions raised hereinabove, learned CIT(A) has erred in law and on facts in not appreciating that if the income is required to be assessed under the head 'income from other sources' under s. 56 of the Act, expenditure for earning such income including expenditure for maintenance of corporate status has to be allowed as deduction under s. 57(iii) of the Act. 6. Alternatively and without prejudice to any of the contentions raised hereinabove, learned CIT(A) has erred in law and on facts in not granting deductions as prescribed under s. 42 of the Act looking to the nature and type of business being carried on by the appellant. 7. Learned CIT(A) as well as learned AO have erred in not considering various facts, submissions, explanations and clarifications as given by the appellant. Both the lower authorities have further erred in not appreciating the facts and law in their proper perspective. Learned AO seriously erred in law in not observing and acting against the principles of natural justice in as much as time granted to the appe....
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....solving out an extensive scope of problems connected with drilling and testing of the wells and also commissioning, erection of equipments and related activities in the field of extraction of crude oil and other products of the earth. 3.The learned counsel explained that the business activities of the appellant-company can be broadly classified into four different categories: I. Seismic Survey II. Work-Over Operations III. Undertaking Exploitation of Gas Field Exports 3.1 He drew our attention to the prospectus issued by the appellant-company on 31st March, 1994, in which it was, inter alia, stated that the commercial operations of the company commenced from April, 1992. The learned counsel drew our attention to the following contents of the said prospectus: The commercial operations of the company commenced from April, 1992. The nature of these operations being providing technical services and development of gas/oil fields, involves various stages such as: (a) Collection of data (b) Technical analysis of feasibility (c) Commercial viability (d) Preparation of bid documents for submission to ONGC/Govt. of India. The documents for award of a contract....
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....e balance sheet was Rs. 15,60,299 which included previous years balance of Rs. 5,46,044. The details of income and expenditure shown by the assessee in its P&L a/c for asst. yr. 1993-94 are as under: Particulars Sch. Amount Rs. 31-3-1993 Income Income 10 9,56,337 9,56,337 Expenses Interest and financial charges 11 1,43,035 Administrative and general exp. 12 8,12,465 9,55,500 Profit before taxes 837 Provision for taxes 500 Profit transferred to balance sheet 337 3.5 Further details of income and expenditure pertaining to asst. yr. 1993-94 are as under: Schedule : 10 Income Particulars Amount Rs. 31-3-1993 Interest on fixed deposit with bank 8,24,087 -- Interest on loans 96,250 -- Miscellaneous income 36,000 -- 9,56,337 -- Schedule : 11 Interest and finance charges Interest on overdraft 1,37,516 -- Bank charges 5,519 -- 1,43,035 -- Administrative ....
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.... schedule submitted in the paper book. 3.8 In asst. yr. 1996-97, the assessee has shown income of Rs. 42,41,742 which mainly consists of interest on fixed deposit with bank, dividend from UTI and interest on margin money, etc. The assessee has debited the following amounts in its P&L a/c: Rs. Interest and financial charges 10 7,83,571 Administrative expenses 11 18,34,792 Preliminary expenses written off 8 5,39,966 Depreciation for the year -- 4,18,559 Provision for taxation -- 4,50,000 40,26,883 The details of interest expenses and administrative expenses have been separately given at p. 41 of the paper book. It may be appropriate to give details of income and expenditure pertaining to asst. yrs. 1995-96 and 1996-97 as shown at pp. 40 and 41 of the paper book: Schedule : 9 Income Asst. yr. 1996-97 Asst. yr. 1995-96 Interest on fixed deposit with bank 32,99,310 15,02,663 Interest on advances -- 3,94,520 Dividend from UTI 8,23,661 5,17,232 Interest on Margin Money 1,10,672 90,679 Kasar 3,224 8,002 Interest on Income-tax refund --....
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....perations and also in relation to exploitation of Baola gas field. The AO should have allowed deduction in respect of entire expenses, as the business of the appellant-company had already been set up from asst. yr. 1993-94. The learned counsel drew our attention to the following judgments: (a) Sarabhai Management Corpn. Ltd. vs. CIT (1997) CTR (Guj) 111 : (1976) 102 ITR 25 (Guj) - approved by the Hon'ble Supreme Court in the case of CIT vs. Sarabhai Management Corpn. Ltd. (1992) 102 CTR (SC) 164 : (1991) 192 ITR 151 (SC) (b) Hotel Alankar vs. CIT (1981) 22 CTR (Guj) 252 : (1982) 133 ITR 866 (Guj) (c) Western India Vegetable Products Ltd. vs. CIT (1954) 26 ITR 151 (Bom) (d) CIT vs. Saurashtra Cement & Chemicals Industries Ltd. (1973) 91 ITR 170 (Guj) (e) Prem Conductors (P) Ltd. vs. CIT (1976) CTR (Guj) 324 : (1977) 108 ITR 654 (Guj) (f) CIT vs. Western India Seafood (P) Ltd. (1992) 107 CTR (Guj) 106 : (1993) 199 ITR 777 (Guj) (g) CIT vs. Ralliwolf Ltd. (1979) 8 CTR (Bom) 129 : (1980) 121 ITR 262 (Bom) (h) CIT vs. Kanoria General Dealers (P) Ltd. (1986) 53 CTR (Cal) 165 : (1986) 159 ITR 524 (Cal) (i) Electrolytic Foil Ltd. vs. ITO (1984) 7 ITD 635 (Hyd) ....
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.... to determine the reserve of gas or petroleum. In this method also the sound vibrations from the machine is recorded on the on-board computer to analyse the data. Work over-This is a method used to find out the potential of the oil bearing well. This is also used to determine the quantity of oil in a particular well. One of the technologies involved is the method of logging in which a machine is lowered in the well which sends electrical signals which are recorded and analysed to find out the potential of the well. Work over also involves methods of removing wax from a well. 2. From the above it would be clear that the assessee did not have the necessary capacities during the years under appeal both in terms of technology/machinery as well as manpower to undertake such jobs. Therefore the contention of the assessee that it had carried out these activities is not borne out from records. 4.1 Shri Sanjay Prasad, the learned senior Departmental Representative drew our attention to the schedule of fixed assets annexed with the audited statements to support his contention that the appellant did not have the required equipments, plant and machinery to carry out the aforesaid busi....
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....13 of the said audit report in which it was inter alia stated as under: (i) The company is in the business of production of gas/oil at various proposed sites for which substantial expenses are required to be incurred and which are recoverable on successful implementation of such projects and as such have been debited to pre-operative expenses pending allocation over various contracts and shall be written off over a period of expected duration of the contract. (ii) Similarly, the company has also incurred substantial expenditure whose benefits is expected to accrue over a long period classified under deferred revenue expenditure which shall be written off over a period of three years on commencement of production. 4.4 The learned senior Departmental Representative submitted that the award for bio-gas field was given on 5th April, 1995. The agreement for the same was executed on 2nd Aug., 1995. Copy of agreement executed between the assessee and the Government of India on 5th day of April, 1995 has been placed at p. 72 of the paper book. The learned senior Departmental Representative highlighted art. 8 of the said agreement, which inter alia, requires the assessee to obtain ....
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.... mill and it obtained a certificate of commencement of business on 20th April, 1946. The first purchase of raw material was made on 1st Sept., 1946, though the business really commenced only on 1st Nov., 1946, when it purchased the groundnut oil mill, the business should be treated as set up on 1st Sept., 1946. In the present case, the various activities carried out by the assessee were only of a preparatory stage and the company did not commence any of the actual business activities in all these years. 4.6 The learned senior Departmental Representative relied upon the following judgments in the case of CWT vs. Ramaraju Surgical Cotton Mills Ltd. (1967) 63 ITR 478 (SC), Addl. CIT vs. Speciality Paper Ltd. (1982) 133 ITR 879 (Guj), CIT vs. Sarabhai Sons (P) Ltd. (1973) 90 ITR 318 (Guj), CIT vs. Industrial Solvents & Chemicals (P) Ltd. (1979) 119 ITR 608 (Bom), CIT vs. Prem Hotel (P) Ltd. (1994) 116 CTR (Bom) 401 and CIT vs. Coromandal Fertilisers Ltd. (2003) 182 CTR (AP) 264 : (2003) 261 ITR 408 (AP) to support his contention that the business of the assessee had not been set up during the years under consideration. The AO has therefore rightly denied deduction in respect of enti....
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....rat High Court in the case of Addl. CIT vs. Speciality Paper Ltd. The said judgment has been elaborately explained by the Hon'ble Gujarat High Court in a subsequent judgment in the case of Hotel Alankar vs. CIT. The relevant extracts from the said judgment of the Hon'ble Gujarat High Court in the case of Hotel Alankar are reproduced below: From p. 877 of 133 ITR: "The learned counsel for the Revenue urged that in view of the decision of this Court in Addl. CIT vs. Speciality Paper Ltd. (IT Ref. No. 205 of 1974 decided on 19th Oct., 1978, the Tribunal has rightly applied the test which was also recognised and approved by the Supreme Court in Ramaraju Surgical Cotton Mills' case as to whether an assessee has undertaken the business activities to put them in such a shape that he could be said to be ready to go into the business and it is only then that it can be said that the business has been set up. We are afraid that the learned counsel is reading more than what has been suggested in the test by the Supreme Court or by us in that Speciality Paper Ltd.'s case. In the first place, it should be emphasised that whether a business has been set up or not is always a question of fac....
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....cal Industries Ltd. in these terms: "That decision raised the question as to when a certain business carried on by the assessee could be said to have been set up; whether it was set up prior to 31st March, 1966, or subsequent to that date." and the Division Bench proceeded to observe: "We fail to see how a decision given on one set of facts can bind us to reach a similar decision on a totally different set of facts. There is nothing in this decision which would deflect us from the view which we are otherwise inclined to take." In CIT vs. Saurashtra Cement & Chemical Industries Ltd., at p. 175 of the report, it is observed: "It is necessary in order to determine this question to consider what constituted the business of the assessee. Loosely, it may be said that the business of the assessee was manufacture and sale of cement. But in determining questions arising under fiscal legislation, loose use of expression often tends to confound the real issue. To determine what was the business of the assessee, we must consider what are the activities which constituted such business without being misguided by loose expressions of vague and indefinite import. The activities whic....
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....other activities is started. Take, for example, a case where an assessee engages in the business of a trader which consists of purchasing and selling goods. The assessee must necessarily purchase goods in order to be able to sell them and purchase of goods must, therefore, necessarily precede their sale. Can it be said in such a case that when the assessee purchases goods for the purpose of sale, he does not commence his business? Is it necessary that he must start the activity of selling goods before be can be said to have commenced his business? We have to consider the question as to when an assessee can be said to have commenced business from a common sense point of view. We have to ask ourselves the question as to when a businessman would regard a business as being commenced? Would he not consider a business as having commenced when an essential activity of that business is started? The argument of the Revenue seeks to confound the commencement of a business with the establishment of the business as a whole and carrying on of all the activities of the business. This confusion is the result of a loose description of the business of the assessee as a business of manufacture and s....
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....ow briefly examine the principles of law laid down by the Hon'ble Gujarat High Court and the Hon'ble apex Court in various judgments cited by the learned counsel for the assessee. Western India Vegetable Products Ltd. vs. CIT: In this case, the company was registered on 29th Dec., 1945. The certificate of commencement of business was issued by the registrar of joint stock companies on 20th April, 1946. The company purchased a groundnut oil mill on 1st Nov., 1946. The assessee made first purchase of groundnut in September, 1946. The Tribunal on these facts held that the business cannot be said to have been commenced merely on the ground that the certificate of commencement of business has been obtained by the company. Business can be said to have been commenced when some activity in relation to carrying on the business is done. It may be the purchase of raw material, placing an order for the raw material, sales and so on. Nor can the date of commencement of the business be correlated to the date of the purchase of the mill. The Tribunal on the facts of this case held that they will fix the 1st of September, 1946, as the date when the company started the business activity in re....
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....arily precede all other activities is started. A company was formed in 1956 for the manufacture and sale of cement. As part of its business the assessee obtained a mining lease for quarrying limestone and started the mining operations in 1958. It claimed the expenditure incurred for the purpose of extracting limestone as also depreciation and development rebate for the machinery installed for that purpose for the asst. yrs. 1960-61 and 1961-62: Held, that the activities which constituted the business of the assessee were divisible into three categories, the first category consisted of the activity of extraction of limestone by quarrying the leased area of land. This activity was necessary for the purpose of acquiring the raw material to be utilised in the manufacture of cement. The second activity comprised the activity of manufacture of cement by user of the plant and machinery set up for that purpose; and the third category consisted of selling manufactured cement. These three activities combined together constituted the business of the assessee. The activity of quarrying the leased area of land and extracting limestone from it was as much an activity in the course of carry....
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....ell them. In the instant case, the company has started securing orders well in advance of the date on which it actually started production of aluminium conductors. The selling of aluminium conductors manufactured by it is as much a part of the business activity of the assessee-company as the manufacture of the aluminium conductors. The orders acquired by the assessee-company from the different electricity boards ensured ready market for the company when the company actually went into production and it purchased raw materials and stock in advance so that it could go into production on an appropriate scale and supply the goods against the orders which it had already received. As has been pointed out by Bhagwati C.J. in Saurashtra Cement & Chemical Industries' case, even the activity of acquiring raw materials can be part of the business activity of a manufacturing unit because, unless the raw materials are ready, the production cannot start and unless the production has started, the goods cannot be actually sold. All the time we have to bear in mind that the test is of common-sense and what in the eye of a businessman can be said to be the commencement of the business. Since selling ....
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....hat the assessee had not commenced its business prior to 26th June, 1965." CIT vs. Western India Seafood (P) Ltd: The Hon'ble Gujarat High Court after referring to all the above referred judgments, has held as under: "In the light of the aforesaid settled legal position, therefore, it is easy to visualise that for the setting up of the business of processing marine products, the assessee, during the assessment year in question, had to make all preparations and had also to provide on the spot the necessary infrastructure. Even conceding that entering into advance contracts with fishermen for collection of fish during the monsoon season may not be taken as a first step towards setting up of business, at least from 15th Aug., 1970, when the assessee acquired a godown where the processing or marine products could start when fish became available after the monsoon, it can be said that was the starting point of the setting up of the business of processing marine products. Actual arrival of fish later on would not postpone the setting up of such business. The Tribunal was, therefore, right in concurring with the view of the AAC that the expenditure incurred by the assessee after ....
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....or running an oil mill purchased groundnut oil mill in a working condition on 1st Nov., 1946. But the assessee made purchase of raw material in September, 1946. It also started placing orders for raw materials and sales and so on prior to transaction of purchase of raw materials in September, 1946. The Hon'ble High Court held that the purchase of raw material and other activities prior to the commencement of the business were essential activities for commencing the said business and therefore it was held that the business of the company could be said to have been set up from 1st Sept., 1946. The expenses incurred during the intervening period from 1st Sept., 1946 to 1st Nov., 1946 were held to be allowable as deduction. 9.2 In the case of CIT vs. Saurashtra Cement & Chemicals Industries Ltd., the company was incorporated for manufacture and sale of cement. The company was formed in 1956. It started mining operations for excavation of limestone in the year 1956. The company started manufacture of cement in October, 1960. The Hon'ble Gujarat High Court held that the activity which was necessary for the purpose of acquiring raw material to be utilised in the manufacture of cement s....
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....d, on the basis of which one can arrive at a proper decision as to when the business can be said to have been set up on the given facts and circumstances. 10. Let us now examine the facts of the present case on the basis of principles of law emerging from the above referred decisions by applying the tests laid down by the Hon'ble Courts in the above referred judgments. 11. The appellant-company was incorporated on 29th Aug., 1991. The main object of the company is to render technical oil field services viz., seismic survey and work-over operations besides undertaking exploitation of gas fields. In asst. yr. 1993-94, the learned counsel pointed out that the prospectus issued by the company on 31st March, 1994 inter alia shows that the commercial operations of the company commenced from April, 1992. He also brought to our notice that the appellant-company had given a tender for participation of seismic processing to ONGC on 31st April, 1992. The second tender to ONGC for seismic processing was also given on 12th March, 1993 which falls in asst. yr. 1993-94. He also pointed out that the company was promoted by Indian promoters as well as representatives of foreign collaboration ....
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.... on ONGC on 12th Nov., 1993 and bank guarantee for Rs. 5,85,300 was given on 19th Nov., 1993. Subsequently, the extended bank guarantee for Rs. 5,85,300 was furnished on 30th March, 1995. The original bid was returned back by ONGC for cancellation on 25th Sept., 1995. The offer was renewed by ONGC on 4th Jan., 1996 and thereafter the subsequent developments took place in January, 1996. These facts stated on behalf of the assessee also clearly show that the first effective activity in the field of work-over operations viz. submission of tenders for hiring of equipments which was essential for carrying out the work-over operations was given on 12th Nov., 1993, which also falls in asst. yr. 1994-95 and not in asst. yr. 1993-94. 14. The activity in the field of oil gas fields also did not commence in asst. yr. 1993-94. At p. 66 of the paper book the assessee has given details of participation for Baola gas field. The date of bid given in the year 1992 has not been mentioned. The copy of bid submitted has also not been produced before the Departmental authorities nor before us. The said bid was approved by the Govt. on 27th Dec., 1993. This also falls in asst. yr. 1994-95. The assess....
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....ions against such finding given by CIT(A) before the Tribunal. The finding so given by CIT(A) in asst. yr. 1994-95 have thus achieved finality. No sales were made by the assessee in asst. yr. 1993-94. No income from business has been derived by the assessee in any of the years under consideration except the profit on two transactions of export of medicines made in the month of February, 1994. 18. It may now be necessary to make a reference to the technical collaboration agreement executed by the assessee with ZNGF on 25th Oct., 1993. The appellant-company in their prospectus issued on 31st March, 1994 has stated the following facts: D. Technical collaboration Zepadneftegeofizika (ZNGF) has its registered office at 8, Artillery Street, Gomel 246 022, Belorussia. ZNGF is one of the foremost companies specialising ingeophysical studies in the erstwhile USSR. It was established in 1968 under the Ministry of Oil and Gas Industry of USSR and is presently Belorussian owned association. ZNGF is associated with the discovery of large oil fields in Belorussia. ZNGF also operated in various oil regions of Belorussia, Ukraine, Armenia, Korea, Iraq, Cuba, Algeirs, Vietnam etc. ZNGF is ....
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....pp. 25-26 of the paper book inter alia show that the company has paid directors remuneration of Rs. 60,000 in asst. yr. 1994-95 as against nil remuneration to directors in asst. yr. 1993-94. The said details also indicate that the company has incurred various other expenses of revenue nature which were necessary for corporate existence, necessary for carrying out various activities for setting up of the assessee's business, expenses necessary for earning income from interest, dividend etc. A mere look at the details of various administrative and general expenses and the interest expenditure incurred by the assessee shows that all such expenditure debited in the P&L a/c are expenditure of revenue nature. It will be imperative to repeat that all direct revenue expenditure incurred for commissioning of specific projects have been shown under the head "pre-operative expenditure" and have been capitalised by the assessee and shown under the head "misc. expenditure" on the asset side of the balance sheet. The assessee has not claimed any deduction in respect of such pre-operative expenditure capitalised by them and shown in the balance sheet. They have claimed deduction only in relation ....
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....95 and onwards. The loss arising due to such permissible deduction of revenue expenditure should be treated as a business loss and the same should be set off against current year's income from other sources assessed by the AO as per s. 71 of the Act and the unabsorbed amount should be carried forward as business loss in subsequent years as per relevant provisions of the Act. 24. We will now give our findings in relation to each of the grounds raised in all these appeals keeping in view the findings given in relation to the aforesaid main point. 25. ITA No. 3678/Ahd/2002 for asst. yr. 1993-94: 25.1 The first ground relating to alleged invalidity of proceedings initiated under s. 147 was not pressed by the learned counsel for the assessee at the time of hearing. Hence, ground No. 1 is rejected, as not pressed. Ground No. 2: 25.2.1 As regards ground No. 2, the view taken by the AO that the income of Rs. 9,56,337 is assessable under the head "income from other sources" is upheld, as such income represents interest on fixed deposit, interest on loan and misc. income as per details already reproduced in earlier part of this order. Such income derived by the assessee cannot....
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....ature. We have already given finding that the business cannot be treated to have been set up in asst. yr. 1993-94. We have also given our finding with regard to assessability of interest income etc. under the head "income from other sources" and deduction of 10 per cent of the total expenditure out of such income. Hence, ground No. 4 and 5 do not require any separate finding. Our findings given in relation to the main issue and in relation to ground No. 2 will cover these grounds also. 25.5 Ground No. 6 relating to deduction under s. 42 was not pressed by the learned counsel for the assessee at the time of hearing. Hence, the same is rejected, as not pressed. 25.6 Ground No. 7 is also general in nature. All the submissions made by the learned counsel in relation to the main point have been elaborately considered hereinbefore. Ground No. 7 is therefore devoid of any merit and is accordingly rejected. 25.7 No arguments were addressed in respect of ground No. 8 relating to levy of interest under s. 234A/B/C. The AO is however directed to grant consequential relief. 25.8 As regards ground No. 9, no appeal is maintainable against initiation of penalty proceedings under s. 27....
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....s. It would be worthwhile to state that the Revenue has not preferred any appeal against the order of the CIT(A) for asst. yr. 1994-95. Therefore the finding given by the CIT(A) that the net income from export sales has to be brought to tax as income from business, has achieved finality and the same cannot be disturbed in the absence of cross-appeal or cross-objection by the Revenue in relation to this point. 26.2.2 We also agree with the finding of the learned CIT(A) that the income by way of interest and dividend shown in the P&L a/c has to be taxed under the head "income from other sources". The AO should however grant deduction at the rate of 10 per cent of total expenses after excluding the expenses incurred for purchase of goods and expenses incurred for exports, as has been held in asst. yr. 1993-94 under s. 57(iii) of the Act. 26.2.3 However, we do not agree with the finding of the learned CIT(A) that the other expenses not related to export sales will not be allowed as deduction as the main business of the appellant has not commenced. We have already given a finding after consideration of the entire relevant facts and material that the business of the assessee sho....
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....ng the order under s. 143(3) r/w s. 147. Since this is a mistake apparent from records, the same is rectified under s. 154 of the Act. 8. Subject to above, the total income of the assessee is revised as under: Rs Rs. Export Sales 70,43,549 Less: Purchase for resale and clearing and forwarding charges 65,03,188 5,40,361 Balance c/f 5,40,361 Add: Income from other sources: (i) Interest on FD with bank 1,19,761 (ii) Interest on loans 41,184 (iii) Dividend 3,60,180 5,21,125 Revised total income 10,61,486 i.e. 10,61,490 26.3.1 Since the assessee did not make any claim for deduction under s. 80HHC in the original return nor at the time of re-assessment proceedings, such a claim cannot be allowed at the stage of appeal before the Tribunal against reassessment order. The learned counsel has not pointed out as to whether the assessee has complied with the various conditions prescribed in s. 80HHC. The assessee's claim for grant of deduction under s. 80HHC is therefore devoid of any merit and is accordingly rejected. ....
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....entitled to grant of depreciation on depreciable assets in accordance with the provisions of law. 28. Additional Grounds for asst. yr. 1995-96: 28.1 The assessee has raised various additional grounds for asst. yr. 1995-96 which have been mentioned in para 6 of this order. The additional ground relating to deduction under s. 42 of the Act was not pressed by the learned counsel for the assessee at the time of hearing. The other additional grounds raised by the assessee for asst. yr. 1995-96 have already been discussed and decided hereinbefore, which mainly relate to deductibility of various expenditure either as business expenditure or as deduction allowable under s. 57(iii) of the Act. The allowability of all such expenditure will depend on the main finding as to when the business can be said to have been set up. The findings in relation to the aforesaid main ground and allowability of expenditure have already been given. The finding given in para 26.7 and 26.8 will similarly apply in relation to additional grounds No. 4 and 5 relating to interest under s. 234A/B/C and initiation of penalty under s. 271(1)(c). The additional grounds so raised by the assessee thus already stand....
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....entity of the shareholders could be established. Until such enquiry was made, it could not be said that the income-tax authority had acted upon the materials so disclosed. 29.3 The principles of law laid down by the Full Bench of Hon'ble Delhi High Court in the case of CIT vs. Sophia Finance Ltd. have been followed by the Ahmedabad Bench of Tribunal in the case of Cas Card Finance Ltd.. Similar principles have been laid down by the Hon'ble Calcutta High Court in the case of Hindustan Tea Trading Co. Ltd.. The principles of law so well settled by the above referred decisions are binding on the IT authorities and the Tribunals. We will therefore have to examine the facts of the present case in the light of the principles laid down by the Hon'ble Delhi High Court and the Hon'ble Calcutta High Court cited supra. The learned CIT(A) in paras 9 and 10 of his order has observed that the assessee furnished full details such as folio numbers, name and address of the shareholders, number of shares subscribed by them, copy of share application form, cheque numbers and date and the name of the brokers. It has also been mentioned in para-10 of the appellate order that most of the share applic....
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.... dividend from UTI, interest on margin money and other interest/kasar income has rightly been assessed by the AO as income from other sources in view of the judgment of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilisers Ltd. vs. CIT and the judgment of the Hon'ble Gujarat High Court in the case of Sarabhai Sons (P) Ltd. vs. CIT. 30.3 We have however directed the AO to allow deduction of 10 per cent of total expenditure of revenue nature debited in the P&L a/c under s. 57(iii) out of such income from other sources. We have also held that the business of the assessee should be treated as having been set up from asst. yr. 1994-95. Therefore, the remaining 90 per cent of the expenditure of revenue nature debited in the P7L a/c should be allowed as deduction as business expenditure. The AO should also consider the question relating admissibility of depreciation and amortisation of preliminary expenses written off in P&L a/c in accordance with the relevant provisions of the IT Act, 1961. The business loss arising due to such permissible deduction of business expenditure etc. should be set off against income from other heads in accordance with s. 71 of th....