In this case penalty proceedings have been initiated by ld. CIT(A) pursuant to enhancement of income made by him vide his order dated 17.07.2012. The appeal against this order has been filed before the Tribunal on 4th October, 2012 which is in fact the first appeal of the assessee against the enhancement of income by ld. CIT(A). As the appellate proceedings are already on, we are not going into the merits of the case.
It is settled principle that the deeming fiction created under any provisions of the Act cannot be imported into a beneficial provisions of the Act. In this case, the addition made on account of disallowance of expenditure is due to the deeming fiction created by the penal section 40(a)(ia) of the Act. Thus, the effect of the same cannot be imported into a beneficial provision vis-a-vis section 80-IB(10) of the Act.
It is not pointed out as to how the expenses incurred are excessive or unreasonable therefore, such expenditure can be disallowed by invoking the provisions of Section 40(A)(2) of the Act. In view of this matter, we do not find any infirmity into the order passed by Ld. CIT(A). Therefore the appeal filed by the Revenue is dismissed.
As per Explanation 7; no penalty is leviable if the assessee proves that the price charged or paid in such transaction was computed in accordance with the provisions contained in Sec. 92C and in the manner prescribed under section in good faith and with due diligence.
Per Bench – Out of this bunch of ten appeals, there are various appeals of the assessee and the revenue for different assessment years against separate orders of Ld. CIT(A) VIII, Ahmedabad. All these appeals were heard together and are being disposed off by way of this common order for the sake of convenience.
In the case of ITO v. Harley Street Pharmaceuticals Ltd. [2010] 38 SOT 486 (Ahd) it has been held that provisions of Sec.50C are applicable only for computation of capital gains in real estate transaction in respect of seller only and not for the purchaser.
As per the mandate of section 92(1), income from International transaction between AEs has to be computed having regard to ALP. Thus, there is nothing in the statutory language to suggest that the AO must demonstrate the avoidance of tax before invoking these provisions.
The issue before us is whether the interest paid on sales tax under the amnesty scheme is an allowable deduction as business expenditure. The law is well settled that the interest paid on sales tax is not of penal in nature and is therefore allowable as business expenditure. Therefore, in our opinion the interest on sales tax is an allowable business expenditure.
In the case of Harley Street Pharmaceuticals Ltd. (supra) it has been held that provisions of Sec.50C are applicable only for computation of capital gains in real estate transaction in respect of seller only and not for the purchaser. Legal fiction cannot be extended any further and has to be limited to the area for which it is created.
The question as to whether the amount constituted the corpus fund of the assessee-trust, in view of the fact that the Commissioner (Appeals) after considering declaration from all the 60 donors of the corpus fund certifying that they have donated towards corpus fund of the assessee-society and the revenue has not raised any ground of appeal against the admission of these declarations produced by the assessee before the Commissioner (Appeals), the amount in question has to be held as constituting ‘Corpus Fund’ of the assessee-society and accordingly, the order of the Judicial Member on the issue is to be confirmed.
