1. Merely because the assessee had agreed to share the profits with the Gaziabad party, it cannot be said that the amounts advanced during the assessment years 1993-94 and 1994-95 were not for the purposes of business.
CIT vs Khandwani Export Private Limited (HC)
Dated: 8th Sep. 2011
S. 37 - Allowability of trade loss under section 37 - Non recovery of trade advance - Whether the ITAT was justified in holding that the loss of Rs.75,00,000/- written off by the assessee in the assessment year in question was allowable as business loss
The Ld. CIT (Appeals), held that the assessee was carrying on export business, however, since the assessee had entered into a Joint Venture Agreement with the Gaziabad party for sharing the profits the loss incurred could not be allowed as business loss.
On further appeal filed by the assessee, the ITAT allowed the claim of the assessee by holding that the advance was paid by the assessee to procure garments so that the same could be exported. Merely because the assessee had agreed to share the profits with the Gaziabad party, it cannot be said that the amounts advanced during the assessment years 1993-94 and 1994-95 were not for the purposes of business. As the chances of recovering the said amount was bleak, the assessee wrote off the said amount and claimed the same as business loss, which the ITAT held was allowable as business loss in AY 2001-2002. In our opinion, the decision of the ITAT is based on finding of fact. No substantial question of law arises from the order of the ITAT. Hence, the appeal is dismissed with no order as to costs.
2. CIT vs M/s.Morgan Stanley Advantage Services Pvt. Ltd (HC)
Dated: 30th Aug 2011
S. 10A(1),(3) - Whether when assessee fails to bring in exports proceeds for more than six months, the approval granted by RBI under FEMA meets the requirements of Sec 10A(3), and thus, assessee is entitled to Sec 10A(1) benefit ?
In the present case, it is not in dispute that the entire outstanding export proceeds have been realized by the assessee by the first week of December 2004 that is, beyond the period of six months from the end of the relevant assessment year. The question is, in the absence of specific extension granted by the Competent Authority namely the Reserve Bank of India for realization of the export proceeds as contemplated under Section 10A(3) of the Act whether the assessee could be allowed benefit under Section 10A of the Act.
It is not in dispute that the above approval granted by the Reserve Bank of India relates to realization of the export proceeds which are subject matter of the present appeal. However, the said approval is issued in the context of the provisions of FEMA and there is no formal approval granted by the Reserve Bank of India under Section 10A of the Income Tax Act, 1961, even though an application has been made by the assessee in that behalf.
The Income Tax Appellate Tribunal has held that once the assessee has applied for extension and has completed all the formalities and in response the Reserve Bank of India has taken the remittances on record, then, nonissuance of a formal letter of approval by the Reserve Bank of India cannot be held against the assessee for none of its fault. The Income Tax Appellate Tribunal has further held that in the facts of the present case, it must be held that the extension has been granted in substance and, therefore, the benefit of Section 10A has to be allowed to the assessee on the ground that the extension is deemed to have been granted.
In our opinion, no fault can be found with the decision of the Income Tax Appellate Tribunal.
3. CIT vs Shankarrao MohitePatil Sahakari Bank Limited (HC)
Dated: 8th Sep. 2011
S. 80P(2)(d) - The assessee is a cooperative bank, the assessee claimed deduction under Section 80P(2)(d) of the Income Tax Act, 1961 in respect of the interest income earned from other co operative banks and societies. The AO disallowed deduction under Section 80P(2)(d) on part of the interest on the ground that the investments in other cooperative banks were made out of the funds belonging to the customers and, therefore, proportionate interest paid to the customers have to be deducted from the interest received by the assessee from other cooperative banks and societies while computing deduction under Section 80P(2)(d) of the Act. HELD: Plain reading of Section 80P(2)(d) clearly shows that the whole of the interest or dividend income derived by a cooperative society from its investments with other cooperative society is liable to be deducted under Section 80P of the Act. As the language used in Section 80P(2)(d) is clear and unambiguous, the ITAT was justified in holding that there was no scope for disallowing part of the interest / dividend income and that the assessee was entitled to the deduction under Section 80P(2)(d) on the whole of the amount received by the assessee as interest on the investments with other cooperative societies.
4. CIT vs Shri Mukesh Ratilal Marolia (HC)
Dated: 7th Sep. 2011
S. 69 - Sale of Share – Genuine - Whether the ITAT was justified in deleting the amount of Rs.1,41,08,484/- received by the Assessee on sale of the shares as unexplained investment under section 69 of the Income Tax Act, 1961 is the question raised in this Appeal. The AO has held that neither the purchase nor sale of shares were genuine and that the amount of Rs.1,41,08,484/stated to have been received by the Assessee on sale of shares was undisclosed income and accordingly made addition under section 69 of the Income Tax Act, 1961. The Appeal filed by the Assessee was dismissed by CIT (A). Similarly, the sale of the said shares for Rs.1,41,08,484/through Two Brokers namely, M/s Richmond Securities Pvt. Ltd. and M/s. Scorpio Management Consultants Pvt. Ltd. cannot be disputed, because the fact that the Assessee has received the said amount is not in dispute. It is neither the case of the Revenue that the shares in question are still lying with the Assessee nor it is the case of the Revenue that the amounts received by the Assessee on sale of the shares is more than what is declared by the Assessee. Though there is some discrepancy in the statement of the Director of M/s. Richmand Securities Pvt. Ltd. regarding the sale transaction, the Tribunal relying on the statement of the employee of M/s. Richmand Securities Pvt. Ltd. held that the sale transaction was genuine. In these circumstances, the decision of the ITAT in holding that the purchase and sale of shares are genuine and therefore, the Assessing Officer was not justified in holding that the amount of Rs. 1,41,08,484/- represented unexplained investment under Section 69 of the Income Tax Act, 1961 cannot be faulted.
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