TRIBUNAL TAX REPORTS (ITR (TRIB)) Volume 17 : Part 4 (Issue dated : 30-07-2012)

ITR’S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 17 : Part 4 (Issue dated : 30-07-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal --Additional evidence--Commissioner (Appeals) admitting new evidence after considering facts and circumstances of case in entirety and validly--Justified--Income-tax Rules, 1962, r. 46A-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

Business expenditure --Capital or revenue expenditure--Assessee running tutorial institution--Purchase of books for use by students for professional entrance examinations--Is capital expenditure--Depreciation to be allowed at 60 per cent.--Income-tax Act, 1961, ss. 32, 37-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

----Cost of books and awards--Assessee failing to produce vouchers of purchase of books--Expenditure to be disallowed--Assessee to furnish details regarding expenditure on awards--Matter remanded--Income-tax Act, 1961-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

----Demurrage charges paid to railways--Assessee furnishing certificate regarding nature of demurrage--Deduction allowable--Income-tax Act, 1961-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

----Disallowance--Payments in cash exceeding specified limit--Finding that single transactions made to appear as multiple transactions--Payments to be disallowed--Income-tax Act, 1961, s. 40A(3)-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

----Interest on borrowed capital--Interest-free advances--Direction to disallow interest at same rate charged by bank from assessee--Justified--Income-tax Act, 1961-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

Business income --Remission or cessation of trading liability--Addition--Unclaimed liabilities--No record of any remission or cessation of trading liability--Addition to be deleted--Income-tax Act, 1961, s. 41(1)-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

Capital gains --Computation--Sale of land--Valuation by stamp valuation authority applied--Fair market value lower than value adopted by stamp duty authority--Direction to adopt fair market value--Justified--Income-tax Act, 1961, s. 50C-- ITO v. Gita Roy (Kolkata) . . . 431

Cash credits --Assessee producing details and creditor confirming loan granted to assessee--Addition to be deleted--Income-tax Act, 1961, s. 68-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

Company --Dividend--Deemed dividend--Advance to shareholder--Advance to company in which shareholder had substantial interest--Section 2(22)(e) not applicable--Amount not assessable as deemed dividend--Income-tax Act, 1961, s. 2(22)(e)-- Asst. CIT v. Color Crafts P. Ltd. (Chandigarh) . . . 419

Depreciation --Assets given on financial lease--Assessing Officer to determine nature of lease--Different yardstick cannot be adopted for allowing depreciation and taxing lease rent--Matter remanded--Income-tax Act, 1961, s. 32-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

Double taxation avoidance --Non-resident--Permanent establishment--Exact period of continuation of activities in India to be ascertained--Matter remanded--Double Taxation Avoidance Agreement between India and Mauritius, art. 5(1), (2)(i)-- GIL Mauritius Holdings Ltd. v. Assistant Director of Income-tax (International Taxation) (Delhi) . . . 491

Income --Business income--Remission of liability--Bank--Amount transferred from inter-branch transaction blocked accounts to reserves through profit and loss account--Transfer permitted by Reserve Bank of India subject to conditions that claim in respect of entries should be honoured and amount should not be used for declaration of dividends--Amount not of revenue nature to begin with--Amount not assessable under section 41(1)--Income-tax Act, 1961, s. 41(1)-- Punjab National Bank v. Addl. CIT (Delhi) . . . 462

Income from undisclosed sources --Unexplained sales and expenditure--Addition based on statement of director recorded by Central excise authorities--Addition not supported by evidence--Additions not valid--Income-tax Act, 1961-- Asst. CIT v. A. K. Alloys P. Ltd. (Chandigarh) . . . 424

Interpretation of taxing statutes --Interpretation beneficial to assessee--Principle applicable to non-residents-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

Loss --Set off--Loss on share transactions--Actual delivery received by agent of assessee--Loss not speculation loss--Commissioner (Appeals) allowing set off of loss against other heads of income--Justified--Income-tax Act, 1961, s. 43(5)-- Dy. CIT v. Dr. S. Thilagavathy (Chennai) . . . 506

Non-resident --Income deemed to accrue or arise in India--Double taxation avoidance--Assessee providing various hotel related services to hotels across the world--Assessee having no permanent establishment in India--Payments received not royalty or fees for technical services--Income-tax Act, 1961, s. 9(1)(vii), Explanation 2 --Double Taxation Avoidance Agreement between India and the U. S. A, art. 7-- Deputy Director of Income-tax (International Taxation) v. Sheraton International Inc. (Delhi) . . . 457

----Royalty--Payment from re-sellers on sale of shrink wrap software--Not royalty but business income--Non-resident not having permanent establishment in India--Income not assessable in India--Income-tax Act, 1961, s. 9--Double Taxation Avoidance Agreement between India and the U. S. A., art. 12(3)-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

Revision --Powers of Commissioner--No tax effect--Order cannot be revised--Income-tax Act, 1961, s. 263-- Punjab Wool Syndicate v. ITO (Chandigarh) . . . 439

Unexplained income --Unexplained credit entries in capital account--Assessee furnishing details of remittance--Addition to be deleted--Income-tax Act, 1961-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and Mauritius :

Art. 5(1), (2)(i) --Double taxation avoidance--Non-resident--Permanent establishment--Exact period of continuation of activities in India to be ascertained--Matter remanded-- GIL Mauritius Holdings Ltd. v. Assistant Director of Income-tax (International Taxation) (Delhi) . . . 491

Double Taxation Avoidance Agreement between India and the U. S. A :

Art. 7 --Non-resident--Income deemed to accrue or arise in India--Double taxation avoidance--Assessee providing various hotel related services to hotels across the world--Assessee having no permanent establishment in India--Payments received not royalty or fees for technical services-- Deputy Director of Income-tax (International Taxation) v. Sheraton International Inc. (Delhi) . . . 457

Art. 12(3) --Non-resident--Royalty--Payment from re-sellers on sale of shrink wrap software--Not royalty but business income--Non-resident not having permanent establishment in India--Income not assessable in India-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

Income-tax Act, 1961 :

S. 2(22)(e) --Company--Dividend--Deemed dividend--Advance to shareholder--Advance to company in which shareholder had substantial interest--Section 2(22)(e) not applicable--Amount not assessable as deemed dividend-- Asst. CIT v. Color Crafts P. Ltd. (Chandigarh) . . . 419

S. 9 --Non-resident--Royalty--Payment from re-sellers on sale of shrink wrap software--Not royalty but business income--Non-resident not having permanent establishment in India--Income not assessable in India-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

S. 9(1)(vii), Explanation 2 --Non-resident--Income deemed to accrue or arise in India--Double taxation avoidance--Assessee providing various hotel related services to hotels across the world--Assessee having no permanent establishment in India--Payments received not royalty or fees for technical services-- Deputy Director of Income-tax (International Taxation) v. Sheraton International Inc. (Delhi) . . . 457

S. 32 --Depreciation--Assets given on financial lease--Assessing Officer to determine nature of lease--Different yardstick cannot be adopted for allowing depreciation and taxing lease rent--Matter remanded-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

----Business expenditure--Capital or revenue expenditure--Assessee running tutorial institution--Purchase of books for use by students for professional entrance examinations--Is capital expenditure--Depreciation to be allowed at 60 per cent.-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

S. 37 --Business expenditure--Capital or revenue expenditure--Assessee running tutorial institution--Purchase of books for use by students for professional entrance examinations--Is capital expenditure--Depreciation to be allowed at 60 per cent.-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

S. 40A(3) --Business expenditure--Disallowance--Payments in cash exceeding specified limit--Finding that single transactions made to appear as multiple transactions--Payments to be disallowed-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

S. 41(1) --Business income--Remission or cessation of trading liability--Addition--Unclaimed liabilities--No record of any remission or cessation of trading liability--Addition to be deleted-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

----Income--Business income--Remission of liability--Bank--Amount transferred from inter-branch transaction blocked accounts to reserves through profit and loss account--Transfer permitted by Reserve Bank of India subject to conditions that claim in respect of entries should be honoured and amount should not be used for declaration of dividends--Amount not of revenue nature to begin with--Amount not assessable under section 41(1)-- Punjab National Bank v. Addl. CIT (Delhi) . . . 462

S. 43(5) --Loss--Set off--Loss on share transactions--Actual delivery received by agent of assessee--Loss not speculation loss--Commissioner (Appeals) allowing set off of loss against other heads of income--Justified-- Dy. CIT v. Dr. S. Thilagavathy (Chennai) . . . 506

S. 50C --Capital gains--Computation--Sale of land--Valuation by stamp valuation authority applied--Fair market value lower than value adopted by stamp duty authority--Direction to adopt fair market value--Justified-- ITO v. Gita Roy (Kolkata) . . . 431

S. 68 --Cash credits--Assessee producing details and creditor confirming loan granted to assessee--Addition to be deleted-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

S. 263 --Revision--Powers of Commissioner--No tax effect--Order cannot be revised-- Punjab Wool Syndicate v. ITO (Chandigarh) . . . 439

Income-tax Rules, 1962 :

R. 46A --Appeal--Additional evidence--Commissioner (Appeals) admitting new evidence after considering facts and circumstances of case in entirety and validly--Justified-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

In course of block assessment proceedings, additions could not be made in re

 

IT: In course of block assessment proceedings, additions could not be made in respect of amount received by assessee in respect of which tax had been deducted at source

[2012] 20 taxmann.com 184 (Karnataka)
HIGH COURT OF KARNATAKA

Commissioner of Income-tax

v.

R. Sridhar

TRIBUNAL TAX REPORTS (ITR (TRIB)) Volume 17 : Part 4 (Issue dated : 30-07-2012)

ITR’S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 17 : Part 4 (Issue dated : 30-07-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal --Additional evidence--Commissioner (Appeals) admitting new evidence after considering facts and circumstances of case in entirety and validly--Justified--Income-tax Rules, 1962, r. 46A-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

Business expenditure --Capital or revenue expenditure--Assessee running tutorial institution--Purchase of books for use by students for professional entrance examinations--Is capital expenditure--Depreciation to be allowed at 60 per cent.--Income-tax Act, 1961, ss. 32, 37-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

----Cost of books and awards--Assessee failing to produce vouchers of purchase of books--Expenditure to be disallowed--Assessee to furnish details regarding expenditure on awards--Matter remanded--Income-tax Act, 1961-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

----Demurrage charges paid to railways--Assessee furnishing certificate regarding nature of demurrage--Deduction allowable--Income-tax Act, 1961-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

----Disallowance--Payments in cash exceeding specified limit--Finding that single transactions made to appear as multiple transactions--Payments to be disallowed--Income-tax Act, 1961, s. 40A(3)-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

----Interest on borrowed capital--Interest-free advances--Direction to disallow interest at same rate charged by bank from assessee--Justified--Income-tax Act, 1961-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

Business income --Remission or cessation of trading liability--Addition--Unclaimed liabilities--No record of any remission or cessation of trading liability--Addition to be deleted--Income-tax Act, 1961, s. 41(1)-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

Capital gains --Computation--Sale of land--Valuation by stamp valuation authority applied--Fair market value lower than value adopted by stamp duty authority--Direction to adopt fair market value--Justified--Income-tax Act, 1961, s. 50C-- ITO v. Gita Roy (Kolkata) . . . 431

Cash credits --Assessee producing details and creditor confirming loan granted to assessee--Addition to be deleted--Income-tax Act, 1961, s. 68-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

Company --Dividend--Deemed dividend--Advance to shareholder--Advance to company in which shareholder had substantial interest--Section 2(22)(e) not applicable--Amount not assessable as deemed dividend--Income-tax Act, 1961, s. 2(22)(e)-- Asst. CIT v. Color Crafts P. Ltd. (Chandigarh) . . . 419

Depreciation --Assets given on financial lease--Assessing Officer to determine nature of lease--Different yardstick cannot be adopted for allowing depreciation and taxing lease rent--Matter remanded--Income-tax Act, 1961, s. 32-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

Double taxation avoidance --Non-resident--Permanent establishment--Exact period of continuation of activities in India to be ascertained--Matter remanded--Double Taxation Avoidance Agreement between India and Mauritius, art. 5(1), (2)(i)-- GIL Mauritius Holdings Ltd. v. Assistant Director of Income-tax (International Taxation) (Delhi) . . . 491

Income --Business income--Remission of liability--Bank--Amount transferred from inter-branch transaction blocked accounts to reserves through profit and loss account--Transfer permitted by Reserve Bank of India subject to conditions that claim in respect of entries should be honoured and amount should not be used for declaration of dividends--Amount not of revenue nature to begin with--Amount not assessable under section 41(1)--Income-tax Act, 1961, s. 41(1)-- Punjab National Bank v. Addl. CIT (Delhi) . . . 462

Income from undisclosed sources --Unexplained sales and expenditure--Addition based on statement of director recorded by Central excise authorities--Addition not supported by evidence--Additions not valid--Income-tax Act, 1961-- Asst. CIT v. A. K. Alloys P. Ltd. (Chandigarh) . . . 424

Interpretation of taxing statutes --Interpretation beneficial to assessee--Principle applicable to non-residents-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

Loss --Set off--Loss on share transactions--Actual delivery received by agent of assessee--Loss not speculation loss--Commissioner (Appeals) allowing set off of loss against other heads of income--Justified--Income-tax Act, 1961, s. 43(5)-- Dy. CIT v. Dr. S. Thilagavathy (Chennai) . . . 506

Non-resident --Income deemed to accrue or arise in India--Double taxation avoidance--Assessee providing various hotel related services to hotels across the world--Assessee having no permanent establishment in India--Payments received not royalty or fees for technical services--Income-tax Act, 1961, s. 9(1)(vii), Explanation 2 --Double Taxation Avoidance Agreement between India and the U. S. A, art. 7-- Deputy Director of Income-tax (International Taxation) v. Sheraton International Inc. (Delhi) . . . 457

----Royalty--Payment from re-sellers on sale of shrink wrap software--Not royalty but business income--Non-resident not having permanent establishment in India--Income not assessable in India--Income-tax Act, 1961, s. 9--Double Taxation Avoidance Agreement between India and the U. S. A., art. 12(3)-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

Revision --Powers of Commissioner--No tax effect--Order cannot be revised--Income-tax Act, 1961, s. 263-- Punjab Wool Syndicate v. ITO (Chandigarh) . . . 439

Unexplained income --Unexplained credit entries in capital account--Assessee furnishing details of remittance--Addition to be deleted--Income-tax Act, 1961-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and Mauritius :

Art. 5(1), (2)(i) --Double taxation avoidance--Non-resident--Permanent establishment--Exact period of continuation of activities in India to be ascertained--Matter remanded-- GIL Mauritius Holdings Ltd. v. Assistant Director of Income-tax (International Taxation) (Delhi) . . . 491

Double Taxation Avoidance Agreement between India and the U. S. A :

Art. 7 --Non-resident--Income deemed to accrue or arise in India--Double taxation avoidance--Assessee providing various hotel related services to hotels across the world--Assessee having no permanent establishment in India--Payments received not royalty or fees for technical services-- Deputy Director of Income-tax (International Taxation) v. Sheraton International Inc. (Delhi) . . . 457

Art. 12(3) --Non-resident--Royalty--Payment from re-sellers on sale of shrink wrap software--Not royalty but business income--Non-resident not having permanent establishment in India--Income not assessable in India-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

Income-tax Act, 1961 :

S. 2(22)(e) --Company--Dividend--Deemed dividend--Advance to shareholder--Advance to company in which shareholder had substantial interest--Section 2(22)(e) not applicable--Amount not assessable as deemed dividend-- Asst. CIT v. Color Crafts P. Ltd. (Chandigarh) . . . 419

S. 9 --Non-resident--Royalty--Payment from re-sellers on sale of shrink wrap software--Not royalty but business income--Non-resident not having permanent establishment in India--Income not assessable in India-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

S. 9(1)(vii), Explanation 2 --Non-resident--Income deemed to accrue or arise in India--Double taxation avoidance--Assessee providing various hotel related services to hotels across the world--Assessee having no permanent establishment in India--Payments received not royalty or fees for technical services-- Deputy Director of Income-tax (International Taxation) v. Sheraton International Inc. (Delhi) . . . 457

S. 32 --Depreciation--Assets given on financial lease--Assessing Officer to determine nature of lease--Different yardstick cannot be adopted for allowing depreciation and taxing lease rent--Matter remanded-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

----Business expenditure--Capital or revenue expenditure--Assessee running tutorial institution--Purchase of books for use by students for professional entrance examinations--Is capital expenditure--Depreciation to be allowed at 60 per cent.-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

S. 37 --Business expenditure--Capital or revenue expenditure--Assessee running tutorial institution--Purchase of books for use by students for professional entrance examinations--Is capital expenditure--Depreciation to be allowed at 60 per cent.-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

S. 40A(3) --Business expenditure--Disallowance--Payments in cash exceeding specified limit--Finding that single transactions made to appear as multiple transactions--Payments to be disallowed-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

S. 41(1) --Business income--Remission or cessation of trading liability--Addition--Unclaimed liabilities--No record of any remission or cessation of trading liability--Addition to be deleted-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

----Income--Business income--Remission of liability--Bank--Amount transferred from inter-branch transaction blocked accounts to reserves through profit and loss account--Transfer permitted by Reserve Bank of India subject to conditions that claim in respect of entries should be honoured and amount should not be used for declaration of dividends--Amount not of revenue nature to begin with--Amount not assessable under section 41(1)-- Punjab National Bank v. Addl. CIT (Delhi) . . . 462

S. 43(5) --Loss--Set off--Loss on share transactions--Actual delivery received by agent of assessee--Loss not speculation loss--Commissioner (Appeals) allowing set off of loss against other heads of income--Justified-- Dy. CIT v. Dr. S. Thilagavathy (Chennai) . . . 506

S. 50C --Capital gains--Computation--Sale of land--Valuation by stamp valuation authority applied--Fair market value lower than value adopted by stamp duty authority--Direction to adopt fair market value--Justified-- ITO v. Gita Roy (Kolkata) . . . 431

S. 68 --Cash credits--Assessee producing details and creditor confirming loan granted to assessee--Addition to be deleted-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

S. 263 --Revision--Powers of Commissioner--No tax effect--Order cannot be revised-- Punjab Wool Syndicate v. ITO (Chandigarh) . . . 439

Income-tax Rules, 1962 :

R. 46A --Appeal--Additional evidence--Commissioner (Appeals) admitting new evidence after considering facts and circumstances of case in entirety and validly--Justified-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

S. 54EC limit of Rs. 50L does not apply to the transaction but financial year.

 

Aspi Ginwala vs. ACIT (ITAT Ahmedabad)

S. 54EC limit of Rs. 50L does not apply to the transaction but financial year. Delay in investing within 6 M owing to non-availability of bonds to be excused

The assessee sold property on 22.10.2007 and computed long-term capital gains. The s. 54EC investment was required to be made within 6 months i.e. on or before 21.04.2008. The assessee invested Rs. 50 lakhs in REC bonds on 31.12.2007 (FY 2007-08, within the 6 M time limit) and Rs. 50 lakhs in NHAI bonds on 26.5.2008 (FY 2008-08, beyond the 6 M time limit) and claimed a deduction of Rs. 1 crore. The assessee claimed that no eligible scheme was available for subscription from 1.4.2008 to 28.5.2008 and that he applied in the NHAI bonds as soon as it opened and that he was prevented by sufficient cause from investing within the time period of 6 months. The AO & CIT (A) rejected the claim for exemption of Rs. 50 lakhs in respect of the NHAI bonds on the ground that (i) it exceeded the monetary limit of Rs. 50 lakhs prescribed in s. 54EC and (ii) it was made beyond the time limit of 6 months. On appeal to the Tribunal, HELD allowing the appeal:

(i) The Proviso to s. 54EC provides that the investment made in a long term specified asset by an assessee "during any financial year" should not exceed Rs. 50 lakhs. It is clear that if the assessee transfers his capital asset after 30th September of the financial year he gets an opportunity to make an investment of Rs.50 lakhs each in two different financial years and is able to claim exemption upto Rs.1 crore u/s 54EC. The language of the proviso is clear and unambiguous and so the assessee is entitled to get exemption upto Rs.1 crore in this case;

(ii) Though the time limit of 6 months for making the investment u/s 54EC expired on 21.4.2008, no bonds were available for subscription between 1.4.2008 to 28.5.2008. The investment was made as soon as the subscription opened on 26.5.2008. The assessee was accordingly prevented by sufficient cause which was beyond his control in making investment in these Bonds within the time prescribed. Exemption should be granted in cases where there is a delay in making investment due to non-availability of the bonds (Ram Agarwal 81 ITD 163 (Mum) followed)

See the contra view in ACIT vs. Raj Kumar Jain & Sons (HUF) (ITAT Jaipur)

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Ahmedabad Urban Development Authority vs. ACIT (ITAT Ahmedabad) S. 194C defines "work" to include "carriage of goods and passengers by any mode of transport other than railways" while s. 194-I defines "rent" to mean payment for use of "plant" (which is defined in s. 43 to include vehicles). As the cars were owned and maintained by the…
Kumarpal Amrutlal Doshi vs. DCIT (ITAT Mumbai) When a payment is made by cheque, then the `date of payment' is the `date of the cheque' even though the cheque may be encashed subsequently. As the cheque was issued within 6 months of the transfer, s. 54EC relief was available even though the cheque was encashed, and

Whether expenses incurred on corporate film-making is revenue in nature?

 

Income tax - Whether expenses incurred on corporate film-making is revenue in nature - YES, rules ITAT

MUMBAI, NOV 24, 2011: THE issues before the Bench are - Whether corporate film making charges are akin to sales promotion and hence the same are allowable as revenue expenses - Whether, for claiming an amount as bad debt, it is necessary to establish that such an amount is of revenue character. And the verdict partly goes in favour of the assessee.

Facts of the case

Assessee is a company engaged in the business of manufacturing and repairs of specialized motors. It claimed the deduction of corporate film making expenses and claimed write-off of certain bad debts. During the course of assessment proceedings the AO observed that the expenses of corporate film-making provided enduring benefits to the assessee and hence the same were capital in nature. The AO also denied the claim of right of bad debts on the ground that the advances made by the assessee were capital in nature and hence the write-off of the same was not permissible. CIT (A) allowed the appeal of the assessee. Before the ITAT, the DR pointed out that the advances made by the assessee company were inter-corporate deposits and hence the same activity cannot be regarded as regular activity of business.

After hearing the parties ITAT held that,

++ we find that the categorical finding of the CIT(A) is that "it has been held in various decisions that the expenditure incurred in making of advertisement film is an expenditure of revenue in nature." Therefore, we find no infirmity in the order of CIT(A) deleting the disallowance of Rs. 1,25,000/- made by the AO on account of corporate film making charges treating the same as revenue expenditure. Accordingly, this ground of appeal of the revenue is dismissed;

++ the AO has observed in the assessment order that interest accrued on inter-corporate deposits in the past also not shown as business income. Whereas the learned CIT(A) has observed that income on inter-corporate deposits was duly offered for taxation by the assessee in the preceding years. He gave a finding that the placement of inter-corporate deposits was in the normal course of business. In view of the above contradictory findings given by the authorities below, we set aside the order of the CIT(A) and remit the matter back to the file of the AO to examine the issue whether interest received on inter-corporate deposits offered for taxation as business income or not, whether placement of inter-corporate deposits was the normal course of business or not and decide, the entire issue pertaining to addition of Rs. 58,03,193/- consisting of advance made to suppliers at Rs 70,367/- and inter corporate deposit placed with Alpic Finance Ltd. Rs. 48,00,000/-, amount not recovered from debtors Rs. 72,552/- and accrued interest on inter-corporate deposits Rs. 8,60,274/-, de-novo after providing reasonable opportunity of being heard to the assessee in the matter.