ITAT DECISIONS

Issue: Deduction u/s80IB in respect of housing
Project
Laukik Developers v. DCIT, circle-3, Thane (W) {105 ITD
657(Mum)}
In this case, assessee developed housing cum
commercial project in the A.Y.2002-2003. The tribunal
noted that local authority approved the project as
housing cum commercial project since it constructed
3,143 S.Ft. for shops in the project. Hence It did not
meet the condition as pure housing project and deduction
u/s80 IB was denied to the assessee. Even Tribunal
refused to allow proportionate deduction relating to the
residential area constructed for the reason that project
needs to be housing project only.
Issue:- Taxability of Goodwill
Alankar Business Corporation Ltd., v. DCIT, Company
Circle I(3)Chennai
{105 ITD 629(Chennai)}
The company entered into agreement to sell goodwill on
28-2-1999 and received the consideration. However it
was shown as advance payment in view of the fact that
other business was sold by agreement dated 27-7-1999
and the same was confirmed by the appropriate
authority later on. Hence “A” offered the capital gain on
sale of goodwill in the A.Y.2002-2003. The Dept did not
accept the contention and taxed it in the year of receipt of
amount. The Tribunal ruled that substance of the
agreement needs to be looked into and not the form of
agreement. The advance receipt of amount was
crystallized once other assets were sold hence assessee
has rightly offered the income in the year in which other
assets were sold.
Issue: Deductibility of expenses u/s14A
ACIT v. Tamil Nadu Silk Producers Federation Ltd.{105
ITD 623(Chennai)}
The Tribunal held that department can not deny
deduction of expenses incurred on income which is
eligible for deduction under chapter VI-A (Section 80A to
80U) in as much as such income goes in to computation of
total income thereafter deduction under chapter VIA is
allowed. Whereas Section 14A speaks about restriction
of expenses incurred in relation to exempt income that
does not go into the computation of total Income.
Issue: Maintainability of order u/s 263
Colorcraft Kashimira Ceramic Compound v.ITO ward-
4(4) Thane{105 ITD 599(Mum)}
In this case , the Tribunal observed that if CIT issued show
cause notice to invoke section 263 for any order being
erroneous and prejudicial to the interest of the revenue,
he ought to have passed order on the points covered in
the show cause notice. If he deviates from the show
cause notice and passes order on different issues, that
order is not sustainable under law.
However Tribunal endorsed the view of dept. that mere
supply of information by assessee would not debar CIT
for not exercising the provision of section 263 of the Act.
If A.O. did not make enquiry on the materials furnished
before him by the assessee in order to assess as to
whether the claim of the assessee is correct or not. The
CIT is empowered to pass order u/s 263 of the Act.
Issue: Rejection of books of Accounts u/s145 of
the Act
ITO, Ward 2(5),Rajkot v. Girish M. Mehta {105 ITD 585
(Rajkot)}
In his case, Tribunal held that before rejecting books of
accounts, depatment has to prove that accounts are
unreliable, incorrect or incomplete. When accounts are
regularly maintained in the ordinary course of business,
duly audited under the provisions of the Act and free from
any qualification from auditors , should be taken as
correct . If depatment needs to enhance the gross profit
margin , first it should need to satisfy the conditions of
section 145 with regard to specific defects in the
accounts . In the absence of any proof of the falsity or
defects in the accounts, department. can not make
addition on account of lower G.P. Margin declared by the
assessee.
Issue: Slump Sale u/s 50B, Disallowance of
Interest u/s14A
Zuari Industirs Ltd., v. ACIT, Circle-2, Margao{105 ITD
569(Mum)}
The Tribunal decided that net worth of undertaking in
case of slump sale can either be positive or nil in case of
liabilities exceeds depreciable values and book value of
other assets. The Members did not accept the contention
of department that negative net worth ought to be added
in the sale consideration in case of slump sale of
undertaking.
As regards disallowance of interest in view of investment
made in shares whose dividend income thereof is tax
free. The Tribunal held that onus is on the department. to
prove that any expenditure was incurred for earning tax
free income. If department can not prove by identifying
the nexus between the borrowed fund and investment
thereof in investment which generates tax free income,
the same can not disallowed u/s14A of the Act.
Issue: Deemed Dividend u/s 2(22)(e) of the Act.
ACIT. Circle I(1), Trichur v. Smt. Lakshmikutty Naryan
{105 ITD 558(Cochin)}
The tribunal observed that if there is an outflow of money
from the company to shares holders who holds more than
10% shares therein, and merely book entry is passed and
debited his accounts. In this event, there is no tax liability
with regard to deemed dividend u/s2 (22)(e) of the Act.
Issue: Speculation loss u/s73
ACIT, circle 4(3) Mumbai v. Sucham Fin.&Investment(I)
Ltd.{105 ITD 353(Mum)}
The “A” was engaged in the only business of purchase and
sale of shares. The” A” disclosed certain loss on trading of
shares where delivery was not taken and certain profit on
trading of shares where delivery was taken. The Tribunal
held that entire business will fall within the ambit of
explanation to section 73 of the Act. Therefore entire
profit and loss will be merged and resultant profit after
set off loss of non delivery based transaction will be liable
for taxation