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Assessee total turnover- 3,60,00,000 nepal export sales- 1,70,00,000 total profit - Rs. 44,00,000 tax paybale - Rs. 11,33,000 total tax deducted by nepal purchaser- Rs. 12,05,000 how much credit is to be allowed ? what is the formula ? which article of DTTA will apply ?

Supreme Court of India in case of 
Totgars' Co-operative Sale Society Ltd v/s ITO , Karnataka , 322 ITR 283
Section 80P, read with section 56, of the Income-tax Act, 1961 - Deductions - Income of co-operative societies - Assessment years 1991-92 to 1999-2000 - Assessee was a co-operative credit society - Its business was to provide credit facilities to its members and to market their agricultural produce - In many cases, assessee retained sale proceeds of members whose produce was marketed by it and since funds created by such retention were not required immediately for business purpose, it invested same in specified securities and earned interest thereon - Whether, on facts, interest earned by assessee would come in category of 'Income from other sources' taxable under section 56 and would not qualify for deduction as business income under section 80P(2)(a)(i) - Held, yes
Words and Phrases : "The whole of the amount of profits and gains of business", as occurring in section 80P(2)(a), of the Income-tax Act, 1961
Mantola Co-Operative Thrift & Credit Society Ltd.v/s Commissioner of Income-tax* [2014] 50 taxmann.com 278 (Delhi High court)
Section 56, read with section 80P, of the Income-tax Act, 1961 - Income from other sources - Chargeable as (Credit society) - Assessment year 2008-09 - Whether where assessee, a co-operative society, engaged in providing credit facilities to its members, deposited surplus funds in fixed deposits and earned interest thereon, said interest would be assessable as 'income from other sources' and, thus, not eligible for deduction under section 80P(2)(a)(i) - Held, yes [In favour of revenue]
Mutholy Service Co-Operative Bank Ltd Vs The Income Tax Officer, ITA No.11/Coch/2014-  (Asst Year 2010-11), Date of pronouncement- 24th, Sept 2014
In the present case, we find that the assessee has earned interest income on fixed deposits made by the assessee with sub-treasury, Meenachili, Kadappattoor and SBI Pala totaling Rs. 20,21,909/- and the interest income earned on the surplus funds of the assessee cannot be considered as business income so as to be entitled for deduction u/s. 80p(2)(a)(i) of the I.T. Act.   Further, we came across the decision of the coordinate Bench of this Tribunal in the case of Aryad Block Small Scale Coir Fibre Mats Manufacturers Co-operative Society Ltd., in I.T.A.  No.787/Coch/2013 vide order dated 14.8.2014 wherein   it has been held that interest income on fixed deposits made by the assessee in a Co-operative Bank and the interest income earned on the surplus funds of the assessee cannot be considered as business income so as to be entitled for deduction u/s. 80P(2)(a)(i) of the I.T. Act.     Accordingly, the  ground  raised by the  assessee is dismissed.
•   Deduction u/s 80P will be allowed only when there is direct or proximate connection with or nexus to the income and the business carried on by the society. Interest income on deposits made with banks is not attributable to income of co-operative society and outside realm of section80P- [Sri Basaveshwara Credit Co-operative Society Ltd. v. CIT [2014] 47 taxmann.com 189 (Bangalore – Trib.)]
•   The Hon'ble Supreme Court of India in the case of Totgars' Co-operative Sale Society Ltd. Vs Income-tax Officer [2010] 188 Taxman 282 (SC), held that fund not required immediately for business of providing credit facilities and interest earned on such fund would come under the category of 'Income from Other Sources' taxable u/s 56 of the Income-tax Act, 1961 and the same would not qualify for deduction as business income u/s 80P(2)(a)(i) of the Income-tax Act, 1961. In view of the decision of the Hon'ble Supreme Court (supra) Interest income on Fixed Deposit- General amounting to Rs.30,00,659/- ; Interest of Rs. 1,48,752/- on M. S.S.S., Interest on Reserve Fund of Rs.1,54,781/-, Interest on Bad Debt Fund of Rs.1,99,593/- and interest on SBF Loan of Rs. 988/- Totalling Rs.35,04,773/- is treated as 'Income from Other Sources' without allowing deduction u/s 80P(2)(a)(i) of the Income-tax Act, 1961. [National coal development corporation staff co-operative credit Soc. Ltd. vs. DCIT –A.Y. 08-09- ITA No.1564/Kol/2011]

IT: No interest is chargeable under sections 234B and 234C for non-payment of minimum alternate tax in advance

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[2014] 49 taxmann.com 391 (Mumbai - Trib.)

IN THE ITAT MUMBAI BENCH 'D'

Rockline Developers (P.) Ltd.

v.

Income-tax Officer*

RAJENDRA, ACCOUNTANT MEMBER
AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER
IT APPEAL NO. 6382 (MUM.) OF 2013
[ASSESSMENT YEAR 2010-11]
FEBRUARY  21, 2014

Section 234B, read with sections 115J and 234C, of the Income-tax Act, 1961 - Interest, chargeable as (MAT Companies) - Assessment year 2010-11 - Whether no interest is chargeable under sections 234B and 234C for non-payment of minimum alternate tax in advance - Held, yes [Para 4][In favour of assessee]

CASE REVIEW

CIT v. Kwality Biscuits Ltd. [2006] 284 ITR 434 (SC) (para 4) followed.

CASES REFERRED TO

Jt. CIT v. Rolta India Ltd. [2011] 330 ITR 470/196 Taxman 594/9 taxmann.com 36 (SC) (para 3) andCIT v. Kwality Biscuits Ltd. [2006] 284 ITR 434 (SC) (para 4).

S.K. Tyagi, Vimal Punmiya and Himanshu Gandhi for the Appellant. A.C. Tejpal for the Respondent.

ORDER

Dr. S.T.M. Pavalan, Judicial Member - This appeal filed by the assessee is directed against the order of the learned Commissioner of Income-tax (Appeals)-20, Mumbai, dated September 16, 2013 for the assessment year 2010-11.

2. In this appeal, the main ground "B" raised by the assessee relates to the decision of the learned Commissioner of Income-tax (Appeals) in confirming the order of the Assessing Officer levying interest under sections 234B and 234C of the Act to the extent of Rs. 2,90,22,007 and Rs. 45,12,423 (sic) respectively.

3. The relevant facts are that after ascertaining the book profit under section 115JB, the Assessing Officer had disallowed the claim of deduction under section 80-IB(10) as such the book profit was not to be reduced by claim of deduction and thus computed taxable income and tax thereon which was inclusive of interest under section 234B of Rs. 2,90,22,007 and interest under section 234C of Rs. 45,12,432. On appeal, the learned Commissioner of Income-tax (Appeals) confirmed the action of the Assessing Officer relying on the decision of the hon'ble apex court in the case of Jt. CIT v.Rolta India Ltd. [2011] 330 ITR 470/196 Taxman 594/9 taxmann.com 36.

4. Having heard both sides and perused the material on record, it is pertinent to mention that the decision of the hon'ble apex court in the case of Rolta India Ltd. (supra) has been passed on January 7, 2011. However, during the relevant assessment year under consideration, the law on this point has been governed by the decision of the hon'ble apex court in the case of CIT v. Kwality Biscuits Ltd.[2006] 284 ITR 434 (SC) according to which no interest has chargeable under sections 234B and 234C for non-payment of minimum alternate tax in advance. Since this difference in the legal position as applicable to the case of the assessee has not been appreciated by the authorities below, we are of the considered view that the authorities below are not justified in confirming/ levying the interest under sections 234B and 234C of the Act and hence the same are deleted.

5. Since the other issues raised in ground No. "A" becomes merely academic in view of the aforementioned adjudication on the main issue the same is dismissed as requires no adjudication.

6. In the result, the appeal filed by the assessee is allowed.

Whether deduction u/s 54F can be claimed by assessee by selling two house and purchasing one house?

The trust has been registered u/s 12A and also under 80G since long. 8OG registration is being renwed as per rule. But trusts is not able to trace 12A certificate. AO insists on 12A certificate. disallows exemption.
kindly guide.
It is settled law that 80G cannot be given without 12A. But he is asking for copy of registration which we are not able to provided.

.Our client a company has paid Royalty to a company in singapore.Singapore company does not have pan no in india.

2.Our client had deducted tax at 10% as per DTAA agreement.

3.Ao TDS circle has issued notice that TDS should be 20%.

4.Kindly advice.

A company sstarted the process of IPO and incurred some expenditure. However, due to some reasons ,project got aborted. the expenses incurred are being claimed by assessee as revenue expenditure.
Kindly provide your legal opinion.

judgement of Gujarat High court on allowing deduction u/s 80P to credit socities

 "X"tribunal functioning under territorial jurisdiction of "Y" high decided a appeal in favor of the assessee. Department files appeal to "X" high court.However appeal was to be filed to "Z" high court as per jurisdiction of assesse as specified in the income Tax Act. Assessee did not raise object due to ignorance. Appeal was decided against the assessee . SLP filed was also dismissed.Subsequently assessee came to know that the appeal from tribunal should have been filed to "Y" high court. He filed civil application for recall of order of "Y" high court. It was rejected. In second year , department filed appeal to "Z" high court against order of "X" Tribunal."Z" High court dismissed the appeal stating no question of law arises. Now , for third year , appeal is before tribunla "X". Whether "x" tribunal is bound by the judgement of jurisdictional high court i.e 'Y"(territorial jurisdiction) or he has to follow judgement of "Z" high court as per jurisdiction of assessee ?

What is the status in the Apex court .
2006 (4) S.T.R. 183 (Bom.)
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.M. Lodha and J.P. Devadhar, JJ.
C.K.P. MANDAL
Versus
COMMISSIONER OF CENTRAL EXCISE, MUMBAI-IV
Central Excise Appeal No. 76 of 2005, decided on 25-4-2006
Mandap keeper - Taxable service - Mandap keeper, the appellant according monopoly right to caterer for providing catering and decorative services to hirer - Such services provided to hirer by caterer only and not by appellant - Consideration received by appellant from caterer for giving him monopoly rights not the gross amount charged by appellant from hirer and not liable to Service tax - Sections 65(22), (54), (55), (90)(m) of Finance Act, 1994. - The taxable service in relation to the use of mandap (as defined) is the service to the hirer. The charges received from the hirer in relation to the use of mandap including the facilities provided to the hirer in relation to such use is taxable service. If the appellant renders service as a caterer to the hirer, then such service is a taxable service. By entering into the two agreements with Saideep Caterers and giving them the monopoly to provide for catering and decoration to the hirer of the halls, cannot be said to be providing the service by the appellant to the hirer as a caterer. The appellant is not providing any direct or indirect service of any food, edible preparation, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements to the hirer so as to fall within definition of 'caterer' under Section 65(22). It is not the case of the Revenue that for the catering services provided by Saideep Caterers, the charges are received from the hirer by the appellant. The consideration received by the appellant from Saideep Caterers for giving them monopoly rights for rendering the services for catering and decoration to the hirer is not the amount received by the appellant from the client (hirer). The amount so received is from the third party (Saideep Caterers). There is no relationship of 'mandap keeper' and the 'client' between the appellant and Saideep Caterers. Section 67 says that the valuation of taxable service for charging service tax shall be the gross amount charged by such mandap keeper from the client (hirer) for the use of mandap. The consideration received from Saideep Caterers for giving monopoly rights is not the gross amount charged by the appellant from the hirer. [paras 13, 15]
Appeal allowed

Whether there is any judgement in favour of assessee after special bench in Saffire Garments that even if return is not filed as per due date specified in sec, 139(1) , deduction is available if their is reasonable cause for the delay.

I neee a judgement in favour of revenue ,where it has been held that out of accumulated profits, income tax depreciation need not be deducted.there are judgement in favour of assessee where it has been held that income tax depreciation has to be deducted.

IT : Surrendered income during course of survey has to be assessed separately as deemed income without setting off losses under sections 70 and 71
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[2013] 29 taxmann.com 268 (Chandigarh - Trib.)
IN THE ITAT CHANDIGARH BENCH 'A'
Liberty Plywood (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Ambala*
T.R. SOOD, ACCOUNTANT MEMBER
AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER
IT APPEAL NO. 727 (CHD.) OF 2012
[ASSESSMENT YEAR 2005-06]
DECEMBER 17, 2012
Section 70, read with section 71, of the Income-tax Act, 1961 - Losses - Set off of, from one source against income from another sources under same head of income - Assessment year 2005-06 - Whether income surrendered during course of survey has to be assessed separately as deemed income and set-off of losses under sections 70 and 71 is not possible against such income - Held, yes [Paras 11 & 12] [In favour of revenue]
Section 32 of the Income-tax Act, 1961 - Depreciation - Unabsorbed depreciation - Assessment year 2005-06 - Whether in view of amendment brought out in section 32(2) with effect from 1-4-1997 by Finance Act (No.2) of 1996 and again on 1-4-2002 by Finance Act, 2001 unabsorbed depreciation for block of assessment years 1997-98 to 2001-02 which could not have been set off earlier, cannot be allowed to be set off in subsequent assessment year - Held, yes [Para 14] [In favour of assessee]
FACTS



Facts
• During the course of survey assessee surrendered an additional income of Rs.70 lakhs.
• Assessment was completed by Deputy Commissioner.
• Later on assessment records were examined by the Commissioner wherein he found that the assessment order was erroneous and prejudicial to the interest of the revenue. The Commissioner passed an order under section 263 and opined that surrendered income of Rs. 70 lakhs should be treated as deemed income under section 69, 69A, 69B and therefore, same was not eligible to be set off against carry forward business loss or depreciation in view of the decision of the Gujarat High Court in case of Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290/[2002] 120 Taxman 11.
• Though the order under section 263 was challenged before the Tribunal, the Tribunal observed that the assessment order was definitely erroneous and prejudicial to the interest of the revenue, however, the Commissioner himself was not correct in observing that surrendered income should be treated as deemed income under section 69, 69A, 69B. Accordingly, the Tribunal held that such a conclusion can be drawn only after necessary enquiry and accordingly, the matter was sent to the file of the Assessing Officer for conducting enquiries.
• The Assessing Officer held that since income surrendered during survey was not recorded in the books of account therefore, no deduction of set off of loss on depreciation could be allowed. Accordingly, the surrendered income was assessed separately.
• On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer.
Arguments of assessee
• The assessee submitted that the income surrendered during survey could not be assessed as deemed income under sections 69, 69A, 69B and 69C if nature of source could be properly identified.
• The assessee further argued that as per section 32(2) if unabsorbed depreciation could not be set off in a year under consideration then the same would be added to the depreciation allowance of the following previous year which means it would become current depreciation of the next year. Such depreciation could be adjusted or set off against any head of the income.
Argument of revenue
• Revenue however, relied on the decision of Punjab and Haryana High Court in case of Kim Pharma (P.) Ltd. v. CIT [IT Appeal No. 106 of 2011 (O&M)] wherein the Court held that in case of surrendered income brought forward losses cannot be set off under sections 70 and 71 against the surrendered income.
Issue for consideration
• Whether the surrendered income should be treated as business income so as to set off brought forward losses under section 70 as well as the depreciation under section 32(2)?
HELD



Surrendered income during course of survey has to be assessed separately
• The Punjab and Haryana High Court in case of Kim Pharma (P.) Ltd. (supra), clearly held that surrendered income can be taxed as deemed income without setting off of the losses under sections 70 and 71. Following the decision of the Punjab and Haryana High Court it is held that surrendered income has to be assessed separately as deemed income and set off of losses under sections 70 and 71 is not possible against such income. [Paras 11 & 12]
Issue relating to setting off of depreciation under section 32(2)
• The plain reading of section 32(2) clearly shows that if the depreciation cannot be fully adjusted against profits and gains chargeable in the relevant year because of inefficiency of the profits then the same would be added to the depreciation of the following year. This means that unabsorbed depreciation which cannot be set off in a particular year, would become current depreciation in the following year and there is no restriction against such set off. Therefore, unabsorbed depreciation which is carry forward as current depreciation under section 32(2) is clearly available for setting off. [Para 12]
• However, this provision has been amended twice with effect from 1-4-1997 by the Finance Act (No. 2) of 1996 and again on 1-4-2002 by the Finance Act, 2001. [Para 13]
• Keeping in view the said amendment it is held that unabsorbed depreciation for the block of assessment years 1997-98 to 2001-02 which could not have been set off earlier, cannot be allowed to be set off in subsequent assessment year. Therefore, the order of the Commissioner (Appeals) is set aside and the matter is remitted back to the file of the Assessing Officer with a direction to only allow set off of unabsorbed depreciation which is outside the block of assessment years 1997-98 to 2001-02. [Para 14]

[2012] 17 taxmann.com 15 (Karnataka)

HIGH COURT OF KARNATAKA

Commissioner of Income-tax

v.

Yokogawa India Ltd.*

N. KUMAR AND RAVI MALIMATH, JJ.

IT APPEAL NO. 1062 OF 2008

AUGUST 29, 2011

Section 115JB of the Income-tax Act, 1961 - Minimum alternate tax - Assessment year 2004-05 - Whether while computing book profits, provisions made for bad and doubtful debts cannot be added back in accordance with Explanation (c) to section 115JB(1) as same is not an ascertained liability - Held, yes [In favour of assessee]

FACTS

The assessee was engaged in manufacturing, trading and distribution of process control instruments and undertaking related services. In the course of assessment, the Assessing Officer added amount in respect of provision for doubtful debts in computing book profits under section 115JB by treating the same as the provision for meeting liabilities other than ascertained liabilities. On appeal, the Commissioner (Appeals) held that the addition for bad and doubtful debts could not be made to the book profit under item (c) of the Explanation to Section 115JB. The Tribunal agreed with the finding of the Commissioner (Appeals).

On revenue's appeal:

HELD

In the instant case, the debt is an amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore, item (c) of theExplanation is not attracted to the facts of the case. Item (c) in section 115JA and 115JB(1) are identical. In order to attract theExplanation the debt which is doubtful or bad should satisfy the requirement contemplated in item (c) of the Explanation. It is the amount or amounts set aside as provisions made for meeting the liability other than the ascertained liabilities. In the instant case also the bad and doubtful debt for which a provision is made which is in the nature of diminution in the value of any asset would not fall within item (c) of Explanation (1). It is in that context the appellate Commissioner as well as the Tribunal has granted relief to the assessee. Realising the fatality of the said argument, it is contended now that item (i) cannot amount to satisfaction as provision for diminishing in the value of assets is substituted, if case of the assessee falls under item (c). In meeting the aforesaid case, the assessee brought on record the judgment of the Apex Court in the case of Vijaya Bank v. CIT [2010] 323 ITR 166/190 Taxman 257 where the Apex Court had an occasion to consider this Explanation. It accepted the argument on behalf of the revenue to the effect that the Explanation makes it very clear that there is a dichotomy between actual write off on the one hand and provision for bad and doubtful debt on the other. A mere debit to the profit and loss account would constitute a bad and doubtful debt, but it would not constitute actual write off and that was the very reason why the Explanation stood inserted. Prior to the Finance Act, 2001 many assessees used to take the benefit of deduction under section 36(1)(vii) by merely debiting the impugned bad debt to the profit and loss account and, therefore, the Parliament stepped in by way of Explanation to say that a mere reduction of profits by debiting the amount to the profit and loss account per se would not constitute actual write off. The Apex Court accepted the said legal position. However, it was clarified that besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and consequently, at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance sheet was shown as net of the provision for the impugned bad debt. Then the said amount representing bad debt or doubtful debt cannot be added in order to compute book profit. Therefore, after the Explanation the assessee is now required not only to debit the profit and loss account but simultaneously also reduce the loans and advances or the debtors from the assets side of the balance sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is shown as net of the provisions for the impugned bad debt. Therefore, in the first place if the bad debt or doubtful debt is reduced from the loans and advances or the debtors from the assets side of the balance sheet the Explanation to section 115JA or 115JB is not at all attracted. In that context even if amendment which is made retrospective the benefit given by the Tribunal and the appellate Commissioner to the assessee is in no way affected. In that view of the matter, there is not merit in this appeal. [Para 8]

The parties to bear their own costs.

CASES REFERRED TO

Vijaya Bank v. CIT [2010] 323 ITR 166/190 Taxman 257 (SC) (para 7) and CIT v. HCL Comnet Systems & Services Ltd. [2008] 305 ITR 409/174 Taxman 118 (SC) (para 7).

K.V. Aravind and M.V. Seshachala for the Appellant. K.P. Kumar for the Respondent.

JUDGMENT

N. Kumar, J. - The revenue has preferred this appeal challenging the order passed by the Tribunal which upheld the view of the Appellate Commissioner that the addition made by the Assessing Authority on account of provision of doubtful debts claimed by the assessee is not proper.

2. This appeal pertains to the assessment year 2004-05. The assessee is engaged in manufacturing, trading and distribution of process control instruments and undertaking related services and had furnished its return of income for the assessment year 2004-05 on 01.11.2004 declaring a total loss of Rs. 1,07,23,313/-. The return was processed under Section 143(1) of the Act and was subjected to scrutiny. During the scrutiny, the claim of deduction under Section 10A was computed to nil besides effecting certain additions and the order came to be passed on 26.12.2006. Aggrieved by the said order passed by the Assessing Authority, the assessee preferred an appeal raising nine grounds. One such ground raised was the amount added in respect of provision for doubtful debts of Rs. 10,84,33,130/- in computing book profits under Section 115JB of the Act (book profits) by treating the same as the provision for meeting liabilities other than ascertained liabilities. The assessee contended that the debts due to the assessee were provided as doubtful debts and the adjustment; provided under Section 115JB is only in respect of provisions made towards unascertained liabilities. Therefore the Assessing Authority was not justified in facts in adding back the provisions.

3. After considering the several judgments relied on, the Appellate Authority held that the addition for bad and doubtful debts cannot be made to the book profit under item (c) of the Explanation to Section 115JB and therefore, directed the Assessing Authority not to increase the provision for doubtful debts of Rs. 10,84,33,130,/-, made in the assessee's books for the relevant assessment year under appeal in computing the book profits under Section 115JB of the Act. Aggrieved by the same, the revenue preferred an appeal to the Tribunal. The Tribunal agreed with the finding of the Appellate Commissioner dismissed the appeal Aggrieved by the same, the revenue is in appeal.

4. The appeal was admitted to consider the following substantial question of law:

"Whether the Appellate Authorities were correct in holding that the provisions made for bad and doubtful debts cannot be added back in accordance with the Explanation (c) to Section 115JB(1) of the Act as the same is not an ascertained liability when computing the book profits under Section 115JB of the Act?

5. The assessee in the balance sheet as at 31st March 2004 showed a sum of Rs. 7,131.51 lakhs as amount from the debtors. For the relevant assessment year a sum of Rs. 296.30 lakhs was shown as doubtful debt. Infact a sum of Rs. 1,212.26 lakhs is the accumulated doubtful debt and it is shown as opening balance. However, under debtors, (unsecured) a total amount of Rs. 8640.07 is the amount shown as debt due to the Company. Out of the said amount a sum of Rs. 1,508.56 lakhs which represents the doubtful debts was given deduction to in the balance sheet and the total debts due is shown as Rs. 7,131.51 lakhs. In other words, provision for doubtful debts is deducted from the total assets of the Company and therefore they had claimed the aforesaid deductions. In addition, to that, in the expenses column in the balance sheet a sum of Rs. 801.77 lakhs has been written off as bad debts. Therefore now a sum of Rs. 10,84,33,130/- was claimed as bad debts thus written off. The assessing authority in the assessment order passed by him under Section 143(3) of the Act added the provision for doubtful debts, book profit, for the purpose of computation of income under Section 115J of the Act. In the entire order there is no whisper about the reason for adding back the said amount. Aggrieved by the same, when the assessee preferred an appeal, the appellate Commissioner held that the addition for doubtful debts cannot be made to the book profit under Item (c) of Explanation to Section 115JB as the same is not contemplated in Explanation (1) to the said provision. The order has been affirmed by the Tribunal.

6. Section 115JB is a special provision for payment of tax of certain Companies. If the income-tax payable by a Company on the total income is less than 18% of book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of 18%. Explanation added to the said provision makes it clear that for the purpose of this Section book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-Section (2) is increased by the amounts mentioned therein at Clauses (a) to (h) as doubtful debts. The doubtful debts written off are not mentioned in the said Explanation as what is added is only to arrive at the book profit. Under those circumstances the appellate Commissioner as well as the Tribunal were justified in setting aside the addition made by the assessing officer.

7. The learned counsel for the Revenue submitted that Clause (i) stands added to the said Explanation which has come into effect from 1-4-2001 and therefore as the said amounts are set aside as provision for diminishing in the value of assets by virtue of retrospective operation, the said amounts have to be added only to arrive at the book profit and therefore the order passed by the Tribunal is illegal and requires to be set aside. In that context, he also relied on the Judgment of the Apex Court in the case of Vijaya Bank v. CIT [2010] 323 ITR 166/190 Taxman 257 and CIT v. HCL Comnet Systems & Services Ltd. [2008] 305 ITR 409/174 Taxman 118. After referring to items (a) to (f) as provided in the Explanation it was held that even doubtful debts can be added back to the net profit if Item (c) stands attracted. Item(c) deals with amounts set aside as provisions made for meeting the liabilities, other than ascertained liabilities, The assessee's case, would, therefore, fall within the ambit of Item (c) only if the amount is set aside as provision, the provision is made for meeting a liability and the provision should be for other than ascertained liability, that is, it should be for unascertained liability. In other words, all the ingredients should be satisfied to attract Item (c) of Explanation to Section 115JA. It was further held that there are two types of debt. A debt payable by the assessee is different from a debt receivable by the assessee. A debt is payable by the assessee where the assessee has to pay the amount to others whereas the debt receivable by the assessee is an amount which the assessee has to receive from others. In the present case the debt under consideration is debt receivable by the assessee. The provision for bad and doubtful debt, therefore, is made to cover up probably the diminution in the value of assets that is debt which is an amount receivable by the assessee. Therefore, such a provision cannot be said to be a provision for liability, because even if a debt is not recoverable no liability could be fastened upon the assessee.

8. In the present case, the debt is an amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore it was held that Item (c) of theExplanation is not attracted to the facts of the case. Item (c) in Section 115JA and 115-JB(1) are identical. In order to attract theExplanation the debt which is doubtful or bad should satisfy the requirement contemplated in Item (c) of the Explanation. It is the amount or amounts set aside as provisions made for meeting the liability other than the ascertained liabilities. In the instant case also the bad and doubtful debt for which a provision Is made which is in the nature of diminution in the value of any asset would not fall within item (c) ofExplanation (i). It is in that context the appellate Commissioner as well as the Tribunal has granted relief to the assessee. Realising the fatality of the said argument, it is contended now that item (i) cannot amount to satisfaction as provision for diminishing in the value of assets is substituted, in case of the assessee falls under Item (c). In meeting the aforesaid case, the learned counsel for the assessee brought to our notice the judgment of the Apex Court in the case of Vijaya Bank (supra) where the Apex Court had an occasion to consider his explanation. It accepted the argument on behalf of the Revenue to the effect that the explanation makes it very clear that there is a dichotomy between actual write off on the one hand and provision for bad and doubtful debt on the other. A mere debit to the profit and loss account would constitute a bad and doubtful debt, but it would not constitute actual write off and that was the very reason why the explanation stood inserted. Prior to the Finance Act, 2001 many assessees used to take the benefit of deduction under Section 36(1)(vii) of the 1961 Act by merely debiting the impugned bad debt to the profit and loss account and, therefore, the Parliament stepped in by way of Explanation to say that a mere reduction of profits by debiting the amount to the profit and loss account per se would not constitute actual write off. The Apex Court accepted the said legal position. However it was clarified that besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and, consequentially, at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance sheet was shown as net of the provision for the impugned bad debt. Then the said amount representing bad debt or doubtful debt cannot be added in order to compute book profit. Therefore, after theExplanation the assessee is now required not only to debit the profit and loss account but simultaneously also reduce the loans and advances or the debtors from the assets side of the balance sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is shown as net of the provisions for the Impugned bad debt. Therefore, in the first place if the bad debt or doubtful debt is reduced from the loans and advances or the debtors from the assets side of the balance sheet the Explanation to Section 115JA or JB is not at all attracted. In that context even if amendment which is made retrospective the benefit given by the Tribunal and the appellate Commissioner to the assessee is in no way affected. In that view of the matter, we do not see any merit in this appeal.

9. The substantial question of law is answered in favour of the assessee and against the Revenue, Accordingly, this appeal is dismissed.

The parties to bear their own costs.

Whether deduction under 35D is available to cateres/hotel industry/transporters befre amendment of section 35D from A.Y. 2009-10. As industrial undertaking is not defined in section 35D , whether defintion which has been propounded by Courts for other sectionc can be used. The latest judgement is of Ansals. Kindly give your opinino.

Whether interest on late payment of TDS is allowable expenditure u/s 37.Kindly reply with any case law if there is on the issue.

COMMISSIONER OF INCOME TAX vs. CHENNAI PROPERTIES & INVESTMENT LTD.
HIGH COURT OF MADRAS
R. Jayasimha Babu & N.V. Balasubramanian, JJ.
Tax Case No. 468 of 1986
20th April, 1998
(1999) 239 ITR 435 (MAD) : (1999) 105 TAXMAN 346 (MAD)
Legislation referred to
Sections 201(1A), 37,
Case pertains to
Asst. Year 1981-82
Decision in favour of
Revenue

Business expenditure—Interest paid on agricultural loans—Interest under s. 201(1A)— Interest paid for period of delay takes colour from the nature of principal amount required to be paid but not paid within time—Principal amount here would be income-tax and interest is payable for failure to pay the tax deducted at source—The fact that income-tax required to be remitted was not income-tax payable by assessee but on behalf of another does not in any manner after the character of payment—Income-tax is not allowable as business expenditure—Amount not deducted and remitted has the character of tax—Therefore, interest paid under s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction.

Conclusion
Interest paid under s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction as the liability to pay interest is directly related to the failure to deduct or remit the tax deducted at source

I was able to find this judgement which is against the assesse.

IT : Prior to amendment of section 80-IB with effect from 1-4-2010,
adjacent residential units sold to family members could not be
considered as one unit having area exceeding specified limit so as to
deny deduction to assessee

nnn

[2011] 12 taxmann.com 468 (Mum. - ITAT)

IN THE ITAT MUMBAI BENCH 'J'

Emgeen Holdings (P.) Ltd.

v.

Deputy Commissioner of Income-tax, Range 9(1)

PRAMOD KUMAR, ACCOUNTANT MEMBER
AND VIJAY PAL RAO, JUDICIAL MEMBER
IT APPEAL NOS. 3594, 3595, 3647 AND 3648 (MUM.) OF 2009
[ASSESSMENT YEARS 2003-04 AND 2004-05]
JULY 29, 2011

Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and
gains from industrial undertakings other than infrastructure
development undertakings - Assessment years 2003-04 to 2004-05 -
Whether amendment made to section 80-IB with effect from 1-4-2010, is
prospective in nature - Held, yes - Whether under pre-amended section
as long a residential unit has less than specified area, is as per
duly approved plans and is capable of being used for residential
purposes on stand alone basis, deduction under section 80-IB(10)
cannot be declined in respect of same merely because end user, by
buying more than one such unit in name of family members, has merged
those residential units into a larger residential unit of a size which
is in excess of specified size - Held, yes [In favour of assessee]

[2011] 12 taxmann.com 37 (Ahd.)

IN THE ITAT AHMEDABAD BENCH 'A'

Income-tax Officer, Ward-2(2), Ahmedabad

v.

Parag Mahasukhlal Shah*

MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND A.K. GARODIA, ACCOUNTANT MEMBER
IT APPEAL NO. 2075 (AHD.) OF 2008
CO NO. 120/AHD./2008
[ASSESSMENT YEAR 2005-06]
JUNE 30, 2011

Section 194A of the Income-tax Act, 1961 - Deduction of tax at source - Interest other than interest on securities - Assessment year 2005-06 - Whether when a payment is compensatory in nature and not related to any deposit/debt/loan, then such a payment is out of ambits of provisions of section 194A - Held, yes - Assessee was proprietor of a concern engaged in trading of ball bearing - It was having dealership of FAG - As per terms of agreement, assessee was allowed interest free credit period for 60 days - In case of overdue payment cost of purchase was paddled with a liability to pay a compensatory sum which was termed as interest - As per assessee since it was not in nature of interest in strict terms, there was no liability to deduct tax at source - Assessing Officer took a view that as per section 2(28A) interest means, interest payable in any manner in respect of any money borrowed or debited - He thus opined that for payment in question provisions of section 194A were applicable - Since assessee failed to deduct tax under section 194A in respect of interest payments, Assessing Officer disallowed those payments by invoking provisions of section 40(a)(ia) - Whether in view of fact that impugned payment had a direct link and immediate nexus with trade liability being connected with delayed purchase payment, it did not fall within category of 'Interest' as defined in section 2(28A) for purpose of deduction of tax at source as prescribed under section 194A - Held, yes - Whether, therefore, Commissioner (Appeals) was justified in holding that assessee was not a defaulter of non-deduction of tax at source under section 194A - Held, yes

Section 2(28A) of the Income-tax Act, 1961 - Interest - Assessment year 2005-06 - Whether a payment having no nexus with a deposit, loan or borrowings is out of ambit of definition of interest as per section 2(28A) - Held, yes

FACTS

The assessee was a proprietor of a concern engaged in trading of ball bearings. He claimed certain interest expenses in the profit and loss account. The Assessing Officer noticed that a part of interest expenses was towards FAG. The assessee's explanation was that he was having dealership of FAG. As per terms of agreement, the assessee was allowed interest-free credit period for 60 days. It was further informed that in case of overdue payment the cost of purchase was paddled with a liability to pay a compensatory sum which was termed as interest. Whenever there was default in making payment beyond the normal credit period, then the same was agreed to be compensated accordingly. It was, therefore, explained that the said amount was nothing but in the nature of additional sale price paid. As per the assessee since it was not in the nature of interest in strict terms, hence there was no liability to deduct the tax at source. However, the Assessing Officer was not convinced and according to him as per section 2(28A) interest means, interest payable in any manner in respect of any money borrowed or debited. In his opinion, for such payment the provisions of section 194A were applicable. Finally, it was concluded that in terms of the provisions of section 40( a )( ia ), the expenditure of the said interest payment was to be disallowed. On appeal, the Commissioner (Appeals) having accepted the assessee's explanation, directed the Assessing Officer to delete the addition.

On revenue's appeal :

HELD

The definition of interest under section 2(28A) appears to be wide, inter alia, covers interest payable in any manner in respect of loans, debts, deposits, claims and other similar rights or obligation. This definition further includes service charges but those charges should be in respect of the money borrowed. By this definition, therefore, it is evident that if the charges are in respect of a debt or in respect of any credit facility then such charges are inclusive in the definition of 'interest'. Therefore, the interest is a payment of money in lieu of use of borrowings. It is payable by a debtor to the creditor. But it is also worth to note that the said definition is not wide enough to include other payments. There ought to be distinction between the payments not connected with any debt, with a payment having connection with the borrowings. A payment having no nexus with a deposit, loan or borrowings is out of the ambit of the definition of interest as per section 2(28A). [Para 7.2]

The decision in the case of Ghaziabad Development Authority v. Dr. N.K. Gupta [2002] 258 ITR 337 (NCDRC) is very helpful to decide instant appeal because it was held in that case that if the nature of payment is to compensate an allottee, then the provisions of section 194A not to be applied as far as the question of deduction of TDS on interest is concerned. Though the said compensation was mentioned as 'interest' but the Members held that the word used 'interest' did not fall within the definition as defined under section 2(28A). [Para 7.3]

As per section 194A, if a person is responsible for paying any income by way of interest, he shall at the time of credit or at the time of payment is required to deduct income-tax. Vide an Explanation annexed to section 194A, it is clarified that where any income by way of interest is credited either under the 'suspense account' or 'interest payable account' or 'by any other name', then also such person is liable to deduct tax. On plain reading of this section, it is apparent that the term 'interest' used in this section relates to and in connection of a debt or a loan or a deposit. The circumstances under which the assessee is required to deduct the tax have also been narrated. Therefore, a conclusion can be drawn that if a payment is compensatory in nature and not related to any deposit/debt/loan, then such a payment is out of the ambits of the provisions of section 194A. [Para 8.1]

If the immediate source of receipt of payment is a loan, deposit, etc., then the payment is in the nature of 'interest' but if the immediate source of receipt of payment is trade activity, then the nature of receipt is not 'interest payment' but in the nature of payment of compensation. [Para 8.2]

An another interesting feature involved to resolve the controversy was that the revenue otherwise could not allow the claim of payment under section 36(1)( iii ) because as per this section, the deduction is provided in respect of the amount of interest paid on capital borrowed for the purpose of business. The only provision under the Act is section 37 under which the payment/expenditure was allowable being laid out wholly and exclusively for the purpose of the business. The nature of payment was such that it could not be considered either under section 56, i.e. 'Income from other sources' or under section 57 prescribing deductions only in respect of 'income from other sources'. Inter alia, the conclusion was that since the nature of payment did not fall within the category of 'income from other sources' as also could not be allowed as payment of interest under section 36(1)( iii ), therefore, it's true nature was nothing but added value of cost of purchase, hence no TDS was required to be deducted. [Para 11]

In the light of aforesaid, it was opined that the impugned payment had a direct link and immediate nexus with the trade liability being connected with the delayed purchase payment, hence, it did not fall within the category of 'interest' as defined in section 2(28A) for the purpose of deduction of tax at source as prescribed under section 194A. Resultantly, the assessee could not be held a defaulter of non-deduction of tax at source under section 194A. The Commissioner (Appeals) had rightly reversed the findings of the Assessing Officer. [Para 12]

In the result, the revenue's appeal was to be dismissed.

CASES REFERRED TO

Nirma Industries Ltd. v. Dy. CIT [2006] 283 ITR 402 / 155 Taxman 330 (Guj.) (para 3), CIT v. Nirma Industries Ltd. [2008] 166 Taxman 9 5 (SLP No. 28) (para 5), CIT v. Indo Matsushita Carbon Co. Ltd. [2006] 286 ITR 201/ 122 Taxman 516 (Mad.) (para 5), British Bank Middle East v. CIT [1998] 233 ITR 251 (Bom.) (para 5), CIT v. Jackson Engineers Ltd. [2010] 231 CTR 348 (Delhi) (para 5), CIT v. Advance Detergents Ltd. [2010] 228 CTR 356 (Delhi) (para 5), Phatela Cotgin Industries (P.) Ltd. v. CIT [2008] 303 ITR 411/ 166 Taxman 9 (Punj. & Har.) (para 5), Tata Sponge Iron Ltd. v. CIT [2007] 292 ITR 175/ 165 Taxman 191 (Ori.) (para 5), Ghaziabad Development Authority v. Dr. N.K. Gupta [2002] 258 ITR 337 (NCDRC) (para 7.2), CIT v. Madras Motors Ltd. [2002] 257 ITR 60 / 122 Taxman 516 (Mad.) (para 9), CIT v. Paras Oil Extraction Ltd. [1998] 230 ITR 266/96 Taxman 234 (MP) (para 10) and Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 / 129 Taxman 539 (SC) (para 10).

The assessee is a builder. He sold all the flats at Rs. 25 lakhs each. On each flat sold, he took on-money of Rs.10 lakhs. He honestly entered on-money taken, in the account books and increased his profit accordingly. He is claiming 100% deduction u/s 80IB(10) on such on-money. Whether such deduction is allowable?

CASELAWS - Kerala State Electricity Board Vs. Deputy Commissioner of Income-tax TAX REPORTS
TAXMAN - VOLUME 196 [2011] 196 TAXMAN . . . (. . . )
[2011] 196 TAXMAN 1 (Ker .)
HIGH COURT OF KERALA

Kerala State Electricity Board *

v.

Deputy Commissioner of Income-tax

J. CHELAMESWAR, CJ. AND P.R. RAMACHANDRA MENON, J.
IT APPEAL NOS. 1703, 1710 AND 1716 OF 2009 AND 127 OF 2010
NOVEMBER 12, 2010


Section 115JB of the Income-tax Act, 1961 - Minimum alternate tax - Assessment years 2002-03 to 2005-06 - Whether section 115JB would be applicable to assessee, a statutory corporation constituted by notification of State of Kerala, pursuant to powers vested in it by virtue of section 5 of Electricity Supply Act, 1948 - Held, no

This judgement should be brought to the notice of all the power sector companies. According to me , the resoning taken by Hon,ble High court seems to be convincing and there is less scope of its reversal by the Apex ccourt.Till , then time electricity company may enjoy their exemption period from taxation because as per normal provisions , most of the power companies are having huge losses.
Comments from the learned members are highly appreciated.