Fwd: ITAT Orders on Wealth tax covering taxability of land u/s 2(ea) as taxable asset where construction not permitted and where building constructed are not taxable ; valuation for business residential units revaluation to be ignored; On Alleged bogus purchases where supplier held by Sale tax deptt as HAWALA dealer mere suspicion lack of adequate enquiry by Ld AO and closing stock includes purchase; held purchase genuine; gift from relative plain paper declaration sufficient and adequate held; TDS on advance not ipso facto income; section 14A/Rule 8D interest element crucial factors highlighted
Kapil Goel
From: CA.KAPIL GOEL <kapilnkg...@gmail.com>
Date: Sat, Aug 23, 2014 at 1:42 PM
Subject: ITAT Orders on Wealth tax covering taxability of land u/s 2(ea) as taxable asset where construction not permitted and where building constructed are not taxable ; valuation for business residential units revaluation to be ignored; On Alleged bogus purchases where supplier held by Sale tax deptt as HAWALA dealer mere suspicion lack of adequate enquiry by Ld AO and closing stock includes purchase; held purchase genuine; gift from relative plain paper declaration sufficient and adequate held; TDS on advance not ipso facto income; section 14A/Rule 8D interest element crucial factors highlighted
To: Kapil Goel <advocate...@gmail.com>
INCOME TAX APPELLATE TRIBUNALMUMBAI BENCHES “I” MUMBAI
M/s Hindustan Door-Oliver Ltd.
Assessment Year 2004-05 WTA No.18/Mum/2012
Challenging the order dt.19.03.2012 of the CWT(A)-1
7,Mumbai,Assessing Officer (AO) has
raised following grounds of appeal:
1.“On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the A.O, had rightly treated freehold land of Rs, 17,71,01,000/- as an asset liable for wealth tax under section 2(ea)(v)
of the Wealth Tax Act”.
2.“On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the A.O. had rightly taxed book value of Residential flats at Rs. 2,27, 97,000/- as per section 2(ea)(v) of the WT Act as against 17,96,686/- offered by the assessee”.
3.“The assessee prays that the order of the Ld. CIT(A) on the above ground be set aside and that of the AO be restored.”
4.“The assessee prays that the order of the Ld. CIT(A) on the above ground be set aside and that of the AO be restored.”
Before us,the Departmental Representative supported the order of the AO and the Authorised Representative relied upon the order of the FAA. We
have heard the rival submissions and perused the material before us.We find that the building of the assessee was build decades ago and the
building is also being operated as its registered office and is being used for the purpose of the business. As it is in the nature of commercial establishments, the land appurtenant to the building would not fall under the meaning of “urban land”.As per the provisions of the section 2(ea)(i)of
the Act land appurtenant to a building is not to in cluded in the net wealth of an assessee. Respectfully, following the above, we are of the opinion that the land in question cannot be categorised as urban land,as held by the AO. Therefore, confirming the order of the FAA, we decide ground no.1 against the AO.
Refer:
Decisions of the Kerela High Court delivered in the cases of Guidhar Yadalam (163 Taxman 372) and Apollo Tyres Ltd.(189Taxman 225).
Next ground is about value of the Residential flats . The AO found that the assessee had shown residential flats and guest houses aggregating to R
s. 17.96 Lakhs in the return,that as per the balance-sheet the residential flats were shown at the book value of Rs. 2.27 Crores.He held that
the residential flat was an asset within the meaning of section 2(ea)(1) of the Act, hat the exceptions to section 2 were not applicable these a
ssets, that the assessee had not furnished any evidences to shown that same was covered by the exceptions mentioned in the section of the Act.
Finally, he held that the residential flats, at book value of Rs. 2.27 Crores were to be treated as anasset as against Rs. 17.96 Lakhs shown by the assessee in its return of wealth. In the appellate proceedings, before the FAA,it was argued that the assessee has correctly valued the “Residential Flats” based on valuation reports as per provisions of the Act, that the residential flats should be valued as per valuation report. After considering the assessment order and the arguments of the assessee the FAA allowed the appeal filed by it. We find that the assessee has revalued the flats at Rs.2.27 Crores and the AO had adopted the said value while finalising the assessment.At the page no.3 of the paper book the assessee has given details of gross block, depreciation and net block along with the details of original cost, revalued cost and their totals. In our opinion the AO was not justified in adopting the revalued cost. In our opinion the order of the FAA is as per law. So, confirming the same we decide ground no.2 against the AO
INCOME TAX APPELLATE TRIBUNALMUMBAI BENCHES “I” MUMBAI
M/s. S.N.Desai Hospitalities & Developers Pvt. Ltd.
Date of Pronouncement :19/ 08/2 014
Assessment Year 2004-05 to 2007-08
Before us, Departmental Representative (DR) supported the order of the AO, AR made the same submissions which are made before the FAA and
the AO, he further referred to page no. 7 & 8 of the paper book issued by the municipal corporation of greater Mumbai, he relied upon the order of the Hon'ble jurisdictional High Court delivered in the case of Prabhakar
Kishore Kunde(194 Taxman 306).With reference to ground no.3 about compensation receiv ed by the assessee,he stated that issue was covered
in favour of the assessee by the order of the Hon'ble High Court Punjab & Haryana delivered in the case of Perminder Singh (232 CTR 195).
5.We have heard the rival submissions and perused the material before us. We find that the issue about inclusion of a plot of land has been de
alt by the FAA after considering the relevant provisions of the law.The Act has provided exemption to certain assets to be included for determining payable wealth tax From the above it is clear that if on a plot of land construction of a building is not permissible under any law then the said plot of land could not form part of urban land or the asset to be taxed under the Act.In the case under consideration the certificate issued by the
Municipal Authorities demonstrate that the plot of land was a reserved as recreation ground and on the date of assessment the local authorities
had not granted permission to construct any building on it. Even till the passing the order by the FAA, permission was not granted to
construct building on the plot of land owned by the assessee had. Before us, also no evidence was produced that prove that permission was granted
to the assessee had for construction in the year under consideration. Therefore, considering the factual matrix of the matter and the
bove mentioned two judgments,we are of the opinion that the order of the FAA does not suffer from any legal infirmity. Confirming his orders we decide first two grounds against the AO.
Ground no.3 is decided in favour of the assessee by the decision of the Hon’ble High Court of Punjab and Haryana delivered in the case of Perminder Singh(supra).In our opinion receivable compensation cannot be taken for valuing an asset on a particular date- especially
when it is not certain that the assessee would get compensation or not at the first place. Taxes cannot be levied on hypothetical situations.Respect
fully,following the above referred judgment of the Hon’ble P &H High Court,we decided ground no.3 against the AO
INCOME TAX APPELLATE TRIBUNALMUMBAI BENCH
Mrs. Indrani Mukerjea,
Date of Pronouncement : 21/08/ 2014
Assessment Year 2007-08
.
We have heard the rival submissions and perused the material on record.We find that the AO had made the addition because the assessee had not filed balance-sheet and capital account of her husband and because the gift deed was made on a plain paper.He was also of the opinion that there was no occasion for the husband of the assessee to make gift. In our opinion the stand taken by the AO is neither logical nor legal. Act does not envisage that for making so called high amount
gifts there should be special paper or special performa. What is required by the law is legal confirmation. The AO had not doubted the authenticity of the gift deed or the content of the deed. His objection is the quality of paper. In our opinion, tax liability cannot be fastened to an assessee
because a document is presented by him is on a plain paper. It is the content of the document and the genuineness of the subject matter that decide the issue.AO has not alleged that both these elements were missing. So, in our opinion FAA had rightly rejected the argument of the AO in this regard. We find that the assessee had filed bank account, copy of return filed by her husband showing income of Rs.8.13 Crores.If the AO had any doubt about the capacity of the donor he could have made further inquiries. But, he did not proceed further. Bank account of the donor, his return of income leave no doubt that he had capacity to make gifts. Thus, his creditworthiness is proved beyond doubt. His endorsement of gift prove the genuineness of the transaction. Finally, we fully agree with the decision of the FAA that no occasion is required for the spouses to make gifts. Considering the facts and circumstances of the case we are of the opinion that the order of the FAA does not suffer from any legal infirmity.
INCOME TAX APPELLATE TRIBUNAL,MUMBAI
-
‘D’ BENCH
M/s R.R. Kabel Ltd.
Assessment Year-2009-2010 ITA No.3380/Mum/2013
date of Pronouncement :20- 08 -2014
challenging the order dt.27.02.2013 of the CIT(A)-1
3,Mumbai,Assessing officer(AO)has raised
following Grounds of Appeal:
(i)The Learned CIT(A) has erred on facts and in law in restricting the disallowance of Rs.1,68, 621/-offered by the assessee under section 14A r.w,
Rule 8D(2)(ii) of the Income-tax Act, without properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer.
(ii)The Learned CIT(A) has erred on facts and in law in restricting the disallowance of Rs, 1,68,621/- offered by the assessee under section 14
A r.w. Rule 8D(2)(ii) of the Income-tax Act, ignoring the facts that the Assessing Officer has calculated disallowance under section 14A r.w. Rule 8D of the Act.
(iii)The Learned CIT (A) has erred on facts and in law in not appreciating the fact that the Hon’ble Bombay High in the case of Godrej & Boyce M
fg.Co. Ltd. vs DCIT reported in (2010) 328 ITR 81 (Born) has held that the rule 8D is applicable from A.Y. 2008-09 onwards and therefore the disallowance made by the Assessing Officer is justified.
(iv)The Ld.CIT (A) order is contrary in law and on facts and deserves to be set aside.
(v)The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the AO restored. The appellant craves leave to amend or
alter any ground or add a new ground that may be necessary.
2.3.
We have heard the rival submissions and perused the material before us. We find that while making the disallowance u/s.14A r.w.r.8D of the Rules, the AO has applied the rule in a mechanical manner, whereas the FAA has considered the issue from all angles. He had taken in to consideration the factors like interest paid for business acitivities, opening and closing balances of investments, decrease in investment made by the assessee during the year under consideration, investment made by the assessee in group concerns, facts of the matter of subsequent assessment year. In our opinion,the order of the FAA is based on sound reasoning and does not require any interference, as it does not suffer from any legal or factual infirmity.Therefore, confirming his order,we decide the effective ground of appeal against the AO.
INCOME TAX APPELLATE TRIBUNAL,MUMBAI
-
‘D’ BENCH.
Shri Rajeev G. Kalathil, Date of Pronouncement :20-08-2 014
Assessment Year-2009-10 TA No.6727/Mum/2012
[1]
2.3. Before us,Departmental Representative argued that both the suppliers were not produced before the AO by the assessee,that one of them was
declared hawala dealer by VAT department, that because of cheque payment made to the supplier transaction cannot be taken as genuine. He
relied upon the order of the G Bench of Mumbai Tribunal delivered in the case of Western Extrusion Industries.(ITA/6579/Mum/2010-dated 13.11
.2013).Authrorised representative (AR) contended that payments made by the assessee were supported by the banker’s statement, that goods received by the assessee from the supplier was part of closing stock,that the transporter had admitted the transportation of goods to the site. He
relied upon the case of Babula Borana (282 ITR251),Nikunj Eximp Enterprises (P) Ltd. (216Taxman171)delivered by the Hon’ble Bombay
High Court.
2.4.We have heard the rival submissions and perused the material before us.We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical
end. But,he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such
exercise was done.Transportation of good to the site is one of the deciding factor to be considered for resolving the issue.The FAA has given a finding
of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion Industries
(supra)is concerned,we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But,in the case before us,there is nothing, in the order of the AO,about the cash trail. Secondly,proof of movement of goods is not in doubt. Thererfore, considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse the view taken by the AO.So, confirming the order of the FAA,we decide ground no.1 against the AO.
.3.We have heard the rival submissions and perused the material before us. Undisputed fact of the case are that the assessee had received work or
der in December 2008 for refloating, repair and installation of sea water intake and outfall pipeline for Chennai Desalination Limited at Ennore
Port, Chennai,that he had raised bills of Rs.. 88.3Lakhs for the period ending on 31.03.2009, that 20% of the billed amount i.e. Rs. 17.66 Lakhs was adjusted out of the total advance received by him, that balance advance of Rs. 1.41 Crores (1.59 Crores – 17.66 Lakhs) was shown as liability in the balance sheet for the year under appeal, that in the reconciliation of billing and advance statement, the assessee had offered advance of Rs..1.41 Crores as a part of sale for the AY-2010-11,that the contract was completed in the succeeding year.
Accounting Standard-9 (AS-9) envisages that the revenue from sale/service should be recognized as to the performance set out in paragraph no. 11 or 12 are satisfied.In our opinion, the advance
received by the assessee during the year cannot be treated income and hence he had correctly shown the balance amount of Rs. 1.14 Crores for the AY-2010-11. It is a fact that deduction of tax for the payment is one of the deciding facts for recognize the revenue of a particular year. But
TDS in itself does not mean that the whole amount mentioned in it should be taxed in a particular year deduction of tax and completion of assessment are two different things while finalizing the tax liability of the assessee and AO is required to take all the facts and circumstances of the case not only the TDS certificate.
Considering the peculiar facts and circumstances, we are of the opinion that order of the FAA with regard to the TDS does not suffer from legal infirmity. We find that in Hansh Road Carriers.Pvt. Ltd. (Supra) similar view has been taken, we also find that the FAA had directed the AO to include Rs. 3.21 Lakhs, being TDS on the advance of Rs. 1.41 Crores, to be included as a part of the turnover in terms of section 198. Considering the above facts,the order of the FAA is upheld. Ground no.2 is deciding against the AO.