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× Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India

These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.

03-01-2019, Srinivasa Hair Industries, Section 41(1), Tribunal Visakhapatnam

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5 months 1 week ago #8283 by amit
Section - 41(1), 36(1)(iii), 263
Order Date - 03-01-2019
Favouring - Assessee
Court - Tribunal Visakhapatnam
Appellant - Srinivasa Hair Industries
Respondent - ACIT
Justice - V. DURGA RAO JM & D.S. SUNDER SINGH AM
Citation - 119Taxpundit80
Appeal No. - I.T.A.No.194/Viz/2018
Asstt. Year - 2013-2014

Order

PER : D.S. SUNDER SINGH

This appeal is filed by the assessee against the order of the Principal Commissioner of Income Tax (Pr.CIT), Rajahmundry videF.No.9/263/Pr.CIT/RJY/2017-18 dated 28.03.2018 for the Assessment Year (A.Y.)2013-14.

2. In this case, the assessee filed the return of income declaring total income of Rs.3,54,65,050/- on 26.09.2013 and the assessment was completed u/s 143(3) by an order dated 21.04.2015 ( wrongly typed as 21.04.2014) on total income of Rs.3,61,81,321/-. Subsequently, the Pr.CIT, Rajahmundry has taken up the case for revision u/s 263 and noticed that

(i) The assessee has transferred an amount of Rs.6,52,39,273/- from the trade creditors to the capital accounts of the partners of the firm which was explained before the AO vide letter dated 16.04.2015 that the amounts were transferred for the purpose of bank loans and no cessation of liability. The Pr.CIT was of the view that the contention of the assessee was not substantiated with proper evidence, hence, the Ld.Pr.CIT viewed that the creditors were transferred to the capital accounts of the partners and the liability of Firm to the extent ceased to exist and the provisions of section 41(1) are applicable. The AO did not verify the application of 41(1), hence observed that the assessment order passed by the AO u/s 143(3) r.w.s. 147 is erroneous and prejudicial to the interest of the revenue.

(ii) From the confirmation letters obtained from the common creditors for the current year and the subsequent assessment years, the Ld.Pr.CIT noticed that all of them are from Kolkata and there was mismatch of signatures of the same persons and the genuineness of the creditors was not investigated by the AO.

(iii) The Pr.CIT further observed that the assessee had incurred interest expenditure of Rs.10.58 crores on borrowed capital and as per the balance sheet, except sundry creditors, reserves and surpluses other funds are interest bearing funds. During the year, the building at Vijayarai Village was stated to have been completed at total cost of Rs.3.36 crores on which depreciation was also claimed. The Pr.CIT observed that the assessee claimed the interest during the construction period of the building for which it is not eligible for deduction as per the provisions of section 36(1)(iii) and the said interest needs to be disallowed.

Similarly, under the head sundry debtors the assessee had shown an amount of Rs.3.23 crores towards joint construction account of partners at Koppal, Karnataka on which depreciation was not claimed, which indicates that the asset has not been put to use, hence, viewed that interest pertaining to the funds borrowed and invested during the pre-construction period needs to be disallowed as per the provisions of section 36(1)(iii) of the Act.

(iv) Ld.Pr. CIT also found that the assessee has shown M/s Madhulatha Entertainment as debtor for an amount of Rs.2.68 crores and

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