Unless there is a finding that assessee’s investment is not business activity and the funds are not utilized for the purpose of business, disallowance under section 36(1)(iii) does not arise. There is no disallowance under section 14A in this year as the dividend income was taxable. Therefore, the interest disallowance has to be considered under section 36(1)(iii). If there is income or loss under the head capital gains, the interest disallowance under section 36(1)(iii) pertaining to the investment activity is also to be considered as deduction, while working out the capital gain.
The facts in the case before Hon’ble High Court (supra) are identical to the facts in hand because the assessment order was passed by the AO as per the discussion with CIT and as per the office note dt. 28/12/2006 then the subsequent CIT cannot revise the assessment order. In view of the above discussion, we hold that when the AO has conducted an enquiry and taken a possible view then while exercising the jurisdiction u/s 263, the CIT cannot take a different view.
The assessee has shown long term capital gains and short term capital gains on buying and selling of shares and mutual funds, but, the revenue treated the same as business income based on the claim of the assessee in AY 2004-05 as trading activity of the said transactions. The only dispute between the assessee and revenue is that whether the assessee’s claim of treating the income arising out of selling and buying of shares out of the capital gains is correct or treating the said income is a trading activity as held by the revenue based on the decision in AY 2004-05 is correct.
It has been observed by the AO that waiver of ‘term loan’ is not trading liability, expenditure or loss as envisaged under section 41(1) of the Act. In other words, he has not invoked the provision of section 41(1) of the Act but treated the waiver of principle of amount of ‘term loan’ chargeable to tax under the head ‘income from other sources’
Revenue contending that sale took place on 24.02.05 and thereby the investment made u/s. 54EC on 30.08.2005 is beyond the prescribed period of six month. Once the board of directors approve the transfer, then only the process of transfer of shares can be said to be completed in case of a private limited company. The Annual Return filed before the ROC disclosed that the date of registration of transfer was 28th February 2005, confirmed by purchaser. Board resolution approving transfer of shares was passed on 25th February 2005.
Explanation below section 9(2), as relied on by the ld DR, requiring inclusion of income in the total income of the non-resident whether or not the non-resident has a residence or place of business or business-connection in India or the non-resident has rendered services in India, is applicable only in respect of clauses (v) to (vii). Clause (i) of section 9 has not been included by the legislature within the ambit of this Explanation. It shows that unless a non-resident earns income from business operations carried out in India, such income cannot be deemed as accruing or arising in India. Reverting to the facts of the instant case, it is crystal clear that the assessee rendered “International services” outside India which required the payment in question. If this is the position, which has not even been disputed by the learned Departmental Representative, then there can be no question of roping such income within the ken of section 9(1)(i).
Issue involved in the present case is no more res integra and is covered by the decision of the Hon’ble Apex Court in the case of Topman Exports V/s CIT (supra) wherein it has been held that not the entire amount received by the assessee on sale of DEPB, but the sale value less the face value of the DEPB will represent profit on transfer of DEPB by the assessee. Respectfully following the above authoritative pronouncement of the Hon’ble Supreme Court, we direct the AO to recompute the deduction u/s 80HHC in accordance with the aforesaid judgment of the Hon’ble Apex Court and accordingly the orders passed by the ld.CIT(A) for the above assessment years do not call for any interference.
The contention that the provisions of section 56(1)(v) regarding the amount received from the relative was not there before Revenue authorities. Moreover it is to be established that the person who gifted money is assessee’s sister as claimed. It was also to be established that the said sister is working as Dentist in U.K. The audit certificate placed before the CIT (A) with reference to the creditworthiness should have been admitted and examined by the CIT (A) which was not done.
The contention of the learned Sr.AR to the effect that the Revenue moved rectification application in the year 2011 i.e. after around 3 years from the date of passing of the Tribunal order u/s 254(1), belies the Revenue’s stand of such ground having been in fact taken, is without any force. When section 254(2) provides a period of limitation of four years from the date of passing of the order, it implies that any rectification application moved within this statutory period of four years requires consideration. As the instant application u/s.254(2) is well within the stipulated period, in our considered opinion, there is no justification in not accepting it.
Undisputed facts are that the assessee is a plot society and not a flat society. Thus, notification dated 9th August 2001, issued by Govt. of Maharashtra, does not apply to the facts of the case. The first appellate authority had followed the judgment of Hon’ble Jurisdictional High Court in Sind Co. Operative Housing Society, [2009] 26 DTR 149 (Bom.), and granted relief to the assessee. As all the receipts are admittedly from the members, we have to necessarily uphold the order of the first appellate authority and dismiss the appeal of the Revenue.
