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10.01.2019 - Voice of CA presents - Latest Updates
Thursday, January 10, 2019

  I. Headlines Today:   

  1. CBDT has specified the New/ Revised Procedure, Format and Standards for the Purpose of Electronic Filing of Form No.13  (Click for detail)
  2. CBIC notifies certain new services under Reverse Charge Mechanism w.e.f. January 1, 2019  (Click for detail)
  3. In drive against shell companies, KYC to be made mandatory for firms  (Click for detail)
  4. Tax benefits for salaried, middle classes, hike in savings limit in interim budget  (Click for detail)
  5. Make GST input tax credit claims online: Suresh Prabhu to FinMin  (Click for detail)
  6. GST Council meet: Small businesses likely to get tax relief  (Click for detail)
  7. Confederation of Indian Industry seeks corporate tax cut, higher I-T slab  (Click for detail)
  8. Evasion of Rs. 48,555cr GST, Excise, Service Tax in Apr-Dec  (Click for detail)
  9. Payment Firms Look to Cash in on RBI’s Tokenisation Note  (Click for detail)

  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


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.

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


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)


Golden Rules:

  "Success is a tasty dish.
Patience, intelligence, knowledge & experience are its Ingredients.
But Hard Work is that little Salt that makes it Delicious" 


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