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II. Direct Taxes Case Laws:
1. The
Principal CIT Vs. B. A. Research India Ltd., Tax Appeal No. 233 &
234 of 2016, Date of Judgment: 16.06.2016, High Court of Gujarat
Issue:
Whether the Revenue can ignore the approval granted by the
prescribed authority under Rule 18D(2) of the Income Tax Rules, 1962
and hold that the prescribed conditions are not fulfilled by the
assessee and therefore, deny deduction u/s 80IB (8A) of the Income Tax
Act, 1961 r.w. Rule 18D & 18DA of the Rules?
Held_No
Brief Facts:
The assessee company is engaged in scientific research activities.
For the AY 2008-09, it has claimed the deduction u/s 80IB (8A) of the
Act. The assessee had an income of Rs. 22.81 lacs as sample storage
income, which was questioned by AO. The assessee in response stated that
such income has arisen on account of charges received from respective
customers for holding and storage of clinical samples under specific
conditions which were collected from volunteers for carrying out
research work and thus this income is derived from the research
activities of the company. Such income was disallowed from the deduction
u/s 80IB (8A) and all other deductions were allowed by the AO. The
order of AO was taken in revision by CIT u/s 263 and it was held that
the assessee was not eligible for claiming any deduction u/s 80IB (8A)
as the prescribed conditions under Rule 18DA are not fulfilled. Further,
the appeal of the assessee was allowed by the Tribunal holding that the
Revenue cannot question the approval granted by the prescribed
authority for establishing eligibility for claiming deduction u/s 80IB
(8A). Aggrieved by which, the revenue appealed before the High Court.
Held:
It was held that once the approval is granted by the prescribed
authority and such approval is valid, it would no longer be open for AO
to verify the satisfaction of the conditions prescribed under Rule 18DA
in order to refuse deduction u/s 80IB (8A) of the Act but that does not
imply that any claim of deduction under the said section would be
granted mechanically without any verification as the other issues
relevant to the claim of deduction would be within the jurisdiction of
the Assessing Officer. The AO can verify the accounts and refuse
deduction which does not form part of section 80IB (8A) and the income
which does not arise out of the eligible business.
The appeal is answered in the favour of the assessee.
(Please click here for judgment)
2. Homecare Retail Marts Pvt. Ltd. Vs. ACIT, I.T.A. No. 6484/Mum/2014, Date of Pronouncement: 22.06.2016, ITAT - Mumbai
Issue:
Whether the amount of security deposit forfeited and adjusted
against outstanding rent and other charges payable by the assessee to
the lessor may be allowed as business expenditure?
Held_Yes
Brief Facts:
The assessee company is engaged in the business of Super Market/
Hyper Market. For the AY 2010-11, it has debited a sum in P&L A/c on
account of ‘sundry balances written off’. This amount pertains to the
security deposit given to the lessor for the building taken on lease by
the assessee for its business which was subsequently forfeited. AO
contended that the said amount was not revenue expenditure and hence not
allowable. Assessee submitted that the deposit was adjusted against the
outstanding rent and other charges and therefore should be allowed.
The
CIT(A) sustained the disallowance holding that it is not allowable u/s
36(1)(vii) as bad debt and further held that since it is not allowable
as bad debt the same is also not allowable expenditure u/s 37(1).
Therefore, the assessee is in appeal before the hon’ble ITAT.
Held:
The revenue contended that to write off a debt in the books of
accounts, the same amount should have been offered as income in the
past. The assessee submitted that the cancellation deed was executed
between the lessor and the assessee to terminate the original deed. As
per the new deed, the amount of security deposit paid by the assessee
would be adjusted against the outstanding rent, outstanding taxes,
charges, electricity bills, telephone bills and other charges relating
to the said property up to 30.06.2009 and there would be no outstanding
amount to be paid or refunded by either party. All the expenses adjusted
against security deposit are revenue expenditure and hence should be
allowed. It was held by the Tribunal that the contention of the
assessee is allowed as the security deposit is adjusted against the
allowable expenses and the disallowance by the AO is deleted.
The appeal of the assessee is allowed.
(Please click here for judgment)
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