In the present case, the AO has also made addition of Rs. 19,58,253/- on account of alleged expenditure incurred to earn exempt income while computing book profit u/s 115JB of the Act. The AO’s action has been confirmed by the CIT(A). Both the authorities have applied Rule 8D of the Income-tax Rules while computing the amount of expenditure disallowable u/s 14A of the Act. As already held above, the provisions of Rule 8D are not applicable to the present assessment year under consideration. Therefore, disallowance of expenditure by applying Rule 8D is not justified.
The Tribunal found that in view of Instructions issued by the CBDT where the tax effect is less than Re. 1 lakh. The Department should not file an appeal before the Tribunal. In the present case the tax effect is less than Re. 1 lakh. Under the circumstances, the Tribunal did not entertain the appeal.
The revenue is in appeal before us against the order of Learned CIT(Appeals) dated 11.10.2010 passed for assessment year 2002-03. The solitary grievance of the revenue is that Learned CIT(Appeals) has erred in deleting the addition of Rs.50,07,000 which was added by the Assessing Officer with the aid of section 68 of the Income-tax Act, 1961.
This is undisputed fact that the interest has been paid by the assessee, as is evident from perusal of the profit and loss account, as mentioned by the AO. It is also undisputed fact that the assessee had purchase assets. Therefore, the provisions of section 36(1)(iii) and proviso thereunder, which is inserted w.e.f. 1.4.2004 vide Finance Act, 2003 are applicable. It is evident that the interest on borrowed capital cannot be allowed unless such asset was first put to use.
This appeal by the assessee is directed against the order dated 3.2.2011 of CIT(A) for the assessment year 2005-06. The only dispute raised is regarding annual value of second house property which was self occupied by the assessee.
The Ld. Counsel relied on the order of Co-ordinate Bench in the case of Nivi Trading Ltd. Vs DCIT in ITA No. 5455/M/2010 dt. 12.10.2011 to submit that assessee does not have any other expenditure except to maintain day today activity and the expenditure has no nexus with the earning of tax free income, therefore, disallowance u/s. 14A is not warranted.
It is not in dispute by either of the parties that the provisions of section 41(1) are not applicable. The issue here now remains as to whether advances received towards booking by the various persons in the earlier years and as reflected in the balance sheet are genuine or not. From a perusal of the balance sheet for the earlier years which have been placed in the paper book and as pointed out by the learned Counsel, it goes to show that these liabilities are towards advance booking at the time when appellant tried to carry out the housing project.
In the case of Commissioner of Income-tax vs. Multiplan India (P) Ltd.; 38 ITD 320 (Del), the appeal filed by the revenue before the Tribunal, which was fixed for hearing. But on the date of hearing nobody represented the revenue/appellant nor any communication for adjournment was received. There was no communication or information as to why the revenue chose to remain absent on that date.
Assessing Officer has observed that according to AIR Information, assessee has received a sum of Rs.41,73,321 on account of interest other than securities from Swedish Match Singapore Pte Limited. He issued a show-cause notice to the assessee inviting his explanation as to why the alleged interest income be not assessed as income of the assessee.
It is undisputed fact that the appellant is an undertaking and is engaged in the manufacturing of article specified in Fourteenth schedule and in a specified category of states for which it is eligible for deduction u/s.80IC. Such an exemption has been allowed in the earlier years by the Assessing 0fficer himself i.e. for the Assessment Year 2005-06 and 2006-07. Sub-section 3 of section 80IC categorically provides that the deduction would be available for 100% of such profits and gains for 10 assessment years if the profits and gains have been derived from such business activities.
