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It is not in dispute that under the Companies Act, 1956, both straight line method and written down value method are recognised. Therefore, once the amount of depreciation actually debited to the profit and loss account is certified by the auditors, then, as per the decision of the apex court in the case of Apollo Tyres Ltd. The Assessing Officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115-J.
Unless the Assessing Officer assesses the income with reference to which he had formed a reason to believe within the meaning of Section 147 of the Act, it would not be open to him reassess or assess any other income chargeable to tax which has escaped assessment and comes to his notice in reassessment proceedings. In this case, admittedly the ground on which reassessment notice under Section 148 of the Act was issued was dropped while passing the reassessment order dated 27.03.2006 under Section 143(3) read with Section 147 of the Act. Thus, in view of the decision of this court in the matter of Jet Airways (I.) Ltd. (supra), no occasion to entertain the proposed question of law arises.
The other objection taken by the TPO for rejecting CUP method was that there was difference in the dates of comparable transactions. The ld. DR brought to our notice the transactions entered into by the assessee with its AE on 27.11.2004 which was compared by the assessee with transactions entered with Non-AEs on 10.5.2004 & 12.3.2005. It can be observed that the comparison is made by the assessee with the transactions entered into in the same year with Non-AEs.
At the time of registration proceedings u/s 12A r.w. section 12AA of the Act, the CIT is statutorily required to examine and satisfy himself as to the genuineness of the activities of the Trust or institution, carried on, in consonance with its objects. The objects of the trust or institution must conform to the definition of ‘Charitable purpose’ as defined u/s 2(15) of the Act.
Karnataka High Court in CIT v. Ranka & Ranka [2012] 206 Taxman 322 wherein the Division Bench has considered Instruction No.3 and the National Litigation, Policy, had held as under: (i) Instruction No.3/11 is also applicable to the pending appeals. (ii) As the tax effect in the instant case is less than Rs.10 lakhs, the appeal stands dismissed on the ground of monetary limit, without expressing any opinion on the merits of the claim, making it clear that the Department is at liberty to proceed against the assessee in future, if there any amount due from the assessee, on similar issue and if it is above the monetary limit prescribed.
In our considered view, in the light of the relationship between the assessee and her father-in-law, the Tribunal has rightly held that the genuineness of the transaction is not disputed, in which, the amount has been paid by the father-in-law for purchase of property and the source had also been disclosed during the assessment proceedings. If there was a genuine and bonafide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty.
The original assessment was made on 30-11-2006 under section 143(3). The Finance Act, 2008 inserted clause (h) of Explanation 1 to section 115JB retrospectively from 1-4-2001. The effect of this clause was to increase the book profit by the amount of deferred tax and the provision therefor. It is not in dispute that one of the reasons to believe as recorded by the respondent is that in view of the retrospective amendment, the deferred tax liability, for which a provision had been made in the accounts, was to be added back to the book profit.
In the present case, it was repeatedly emphasized that the assessee’s dividend income was confined to what it received from investment made in a sister concern, and that only one dividend warrant was received. These facts, in the opinion of this court, were material, and had been given weightage by the Tribunal in its impugned order. There is no dispute that the investment to the sister concern, was not questioned; even the Commissioner has not sought to undermine this aspect.
As regards the year of allowability, the claim has to be allowed on the basis of restatement of the liability on the balance-sheet date as held by the hon’ble Supreme Court in the case of Woodward Governor India (P.) Ltd. (supra). Thus the claim of the assessee is allowable. In case there is gain in a year and the assessee has not offered it to tax, the Revenue is free to take action under law. In these years, admittedly there is loss which is allowable as deduction.
The machinery which was purchased by the assessee in the course of expansion of new Project was installed in the year 1996-97 relevant to the Asst. Year 1997-98. There is nothing on record to suggest that the assessee had put the machinery to use during the Asst. Year 1998-99. It appears that the assessee had claimed 100% depreciation as the project was completely abandoned later in the year 1999. Since the machinery was never put to use by the assessee no depreciation is allowable for the Asst. Year 1998-99.
