|
II. Direct Taxes Case Laws:
1. DCIT Vs. HMS Real Estate Pvt. Ltd., I.T.A. No. 3289/Del/2018, Date of Pronouncement: 27.12.2018. ITAT - Delhi
Issue:
Whether
expenses u/s 37(1) of the Act be disallowed on the ground that no
revenue has been earned from business in the instant year.
Held: No
Brief facts:
The
brief facts of the case are that the assessee was incorporated as a
wholly owned subsidiary of HBT Real Estate Holdings Ltd, Mauritius for
the purpose of development & construction of real estate projects in
India. During AY 2012-13, assessee has earned interest of
Rs.31,10,952/-.In the return of income, the assessee claimed revenue
expense of Rs.1,00,17,751/- resulting into loss of Rs.69,06,799/-.The
Ld.AO disallowed the expenses incurred on the plea that no revenue has
been earned from business during the instant year. Further, the business
of assessee is building of a park and therefore, all expenses whether,
direct or indirect should be accounted as Capital WIP. On appeal, the
Ld.CIT(A) deleted the disallowance.
Being aggrieved, the revenue has filed an appeal before the Hon’ble ITAT.
Held
The Hon’ble ITAT while relying on decision of Hon'ble Delhi HC in the
case of Dhoomketu Builders and Development Pvt. Ltd. 216Taxmann 76 held
that when an assessee whose business is to develop real estates, is in
a position to perform certain acts towards the acquisition of land,
that would clearly show that it is ready to commence business and, as a
corollary, that it has already been set up. It is well settled
principle that all the expenses incurred after the business had been set
up are allowable as business deduction under section 37 of the Act.
Further, it is not necessary that any income has to be earned to claim
deduction of expense u/s 37.
Therefore, the appeal was held in favour of assessee and against the revenue.
Cases cited
1. CIT vs. Dhoomketu Builders & Development Pvt. Ltd. 216Taxmann 76.(Delhi HC)
2. CIT(A) vs. Rajendra Prasad Mody115 ITR 519 (SC).
(Please click here for judgment)
2. ACIT Vs. Karam Chand Rubber Industries (P) Ltd., I.T.A. No. 6599/Del/2014, Date of Pronouncement: 12.12.2018, ITAT - Delhi
Issue:
Whether the fact that vendors are not available at the given address is
sufficient to treat the purchases as bogus if the assessee has
discharged primary onus and substantiated the purchases through
documentary evidence and payment is made through banking channel?
Answer: NO
Brief Facts:
The
assessee is a company engaged in thebusiness of manufacturing of
cycle/rickshaw rims.A search u/s 132 of the IT Act wascarried out at M/s
Dhirani group of cases during which the businesspremises of the
assessee was also covered.In response to notice u/s 153A of the IT Act,
the assessee filed its return of income declaring total income of
Rs.46,05,820/-. In response to notice u/s 142(1)/143(2), theassessee
filed the requisite details as called for by the AO from time totime.In
the course of post search enquiry, summons u/s 131 of the IT Act
wereissued to the four parties from whom the assessee has made the
purchases.However, the summons was returned unserved by the Postal
Authorities. The AO conducted the enquirythrough the Inspectorwho
reported that such concerns/firms could not belocated.The AO asked the
assessee to prove theidentity and credit worthiness of the parties and
the genuineness of the transactions.The assessee furnished the details
like copy of Form No.Cand copy of VAT returnfiled by the assessee
company to prove the purchases, etc.Relying on the report given by
theInvestigation Wing as well as the report of Inspector, the AO
heldthat the assessee failed to prove the identity and genuineness of
the parties from whompurchases amounting to Rs.2,79,80,857/- has been
made. He, therefore, treated thesame as unexplained and made the
addition.
Being
aggrieved, assessee filed an appeal before CIT(A), submitted that all
the four dealers are duly registeredwith the Department of Trade and
Taxes. Copies of the data available at the website ofthe department was
submitted. Copies of the ledger account of theparties were filed and it
wasargued that all the payments have been made by account payee
cheque/bank draft.Based on the arguments advanced by the assessee, the
ld.CIT(A) deleted theaddition and held that AO has not referred to any
seized documents on the basis of which anyadverse conclusion could have
been arrived at in respect of the said suppliers.The AO has disallowed
the purchases merely on the ground thatthe suppliers were not traceable
at the given addresses. Such an action of the AOcannot be sustained.
Non-availability of the suppliers at the given addressescould be for
several reasons including shifting of their premises or closing downof
the business. As such, there is no requirement under the law that the
buyer ofgoods should continue to keep track of the seller’s
whereabouts.The judicial opinion is uniformly in favour of the appellant
as regardsthe onus cast upon the assessee in respect of purchases. The
assessee cannot beasked to produce the supplier of goods.The
non-availability of a party at the given addresses could be one of
thegrounds for initiation of investigation. The transaction could be
finally held asbogus only after material facts disproving the contents
of the documents etc. areestablished.Hence the disallowance of purchases
is hereby deleted. Aggrieved with such order of the CIT(A), the Revenue
is in appeal before theTribunal.
Held,
that nothing adverse was found from thepremises of the assessee
regarding the purchases made from the four partiesconcerned. It was just
that those four parties arenot available at the given address. However,
it is a fact that the payments have beenmade through banking channel
and the assessee had substantiated the purchases byproviding
documents.Therefore, it cannot be said that these purchases were bogus
when the assessee substantiated all the necessary documentswhich is
required to be kept. Thus, the order ofthe CIT(A) is upheld and
theappealof the Revenue is dismissed.
The appeal is in favour of the assessee and against the revenue.
(Please click here for judgment)
|
New User? 
Subscribe Now