ITAT Bangalore Judgments — March 2015

The Tribunal found that the CIT(Appeals)'s order lacked clarity on how the assessee accounted for overdue interest. It noted that while Section 43D allows certain entities to defer tax on sticky loan interest, other assessees can still claim it if they demonstrate the loans are doubtful. The matter was remanded for fresh consideration by the AO.

The Tribunal held that certain comparable companies with high turnover and significant related party transactions should be excluded. It also directed that reimbursement of expenses, if purely out-of-pocket, should not be included in operating cost for markup calculation.

The Tribunal held that a temporary lull in business does not warrant disallowing genuine business expenditure. Since the assessee demonstrated no intention to close down its business and the genuineness of the expenditure was not doubted, the CIT(A) was justified in allowing the claim.

The Tribunal held that the assessee was not given a proper opportunity to cross-examine Shri S.K. Srinivasa, and reliance on his statement without cross-examination is unsustainable. The CIT(A) also failed to consider the assessee's contentions regarding the non-appearance of the witness.

The Tribunal held that the actual provision made in the books for bad and doubtful debts alone should be reckoned for considering the threshold limits under Section 36(1)(viia), and it was not necessary to consider the breakup of rural vs. urban debts.

The Tribunal held that the CIT(A) erred in rectifying the order under Section 154 as the issue was debatable. It also ruled that disallowance under Section 14A should be deleted when interest-free funds exceed investments. The issue of disallowance under Rule 8D(2)(iii) was restored to the AO for fresh consideration.

The Tribunal held that the CIT was justified in exercising jurisdiction under Section 263 as the AO had accepted the assessee's explanation without adequate investigation. However, the Tribunal found that the CIT erred in directing the addition of Rs.36.55 lakhs without further inquiry. The Tribunal noted that an affidavit from Mr. Krishnamurthy supported the assessee's claim, and guideline valuations were also provided. The Tribunal reasoned that before concluding unexplained investment, the CIT should have examined Mr. Krishnamurthy, investigated the property valuation, and ascertained the reasons for the title defect in the first sale and the subsequent compromise. Since these inquiries were not made, the addition was not sustainable. Therefore, the Tribunal modified the CIT's order, directing that the addition of Rs.36.55 lakhs be deleted. The assessment order on this issue was set aside and remanded to the AO for fresh consideration after affording the assessee an opportunity of being heard.

The Tribunal held that interest on non-performing assets should not be recognized as income on an accrual basis, following the decision of the jurisdictional High Court. The Tribunal found no reason to interfere with the CIT(A)'s order.

The Tribunal held that the CIT(A) erred in rectifying the order under Section 154 as the issue of gross vs. net expenditure for R&D deduction was debatable. The Tribunal also restored the issue of disallowance under Rule 8D(2)(iii) to the AO for fresh consideration and remanded the issue of wealth tax liability for book profit calculation.

The Tribunal held that the CIT(A) erred in rectifying the order under Section 154 as the issue of gross vs. net expenditure was debatable. The Tribunal also addressed disallowance under Section 14A and the treatment of wealth tax provision for book profit calculation.

The Tribunal held that the jurisdictional High Court's decision is binding. Therefore, whatever is excluded from export turnover must also be excluded from total turnover for the purpose of Section 10B deduction.

The Tribunal held that the CIT's order under Section 263 was not sustainable. Following a coordinate bench's decision, the Tribunal ruled that the assessee was entitled to a deduction of Rs. 1 crore by investing Rs. 50 lakhs in each of two financial years, provided the investments were made within six months of the transfer.

The Tribunal held that the assessee failed to establish the creditworthiness and capacity of the donors/creditors to provide the gifts/loans. The explanation regarding the source of funds for these transactions was found to be unsatisfactory.

The Tribunal held that Section 80P(4) applies only to 'co-operative banks' as defined in the Banking Regulation Act, 1949, and not to 'co-operative societies' carrying on credit facilities for their members. Therefore, the assessee society is eligible for the deduction.

The Tribunal upheld the CIT(A)'s order, finding that the assessee's father had sufficient agricultural income and cash balance to make the gift. Revenue failed to controvert the factual findings with cogent evidence.

The Tribunal found that the assessee did not provide sufficient details to substantiate the use of a scientific method for the warranty provision. The CIT(A)'s observation that the provision was fully utilized was also found to be incorrect based on the data.

The Tribunal held that expenses incurred in foreign exchange for travelling and salary of employees deployed abroad for software development, testing, installation, and monitoring are integral to export turnover and should not be excluded for Section 10A deduction.

The Tribunal held that Section 14A disallowance is not warranted when the assessee has not claimed any income as exempt and such income does not form part of the total income. Therefore, the order of the CIT(A) was upheld.

The Tribunal held that if the sale consideration/capital gains are utilized for purchase or construction of a new asset before the due date for filing the return under Section 139(4), the assessee is entitled to exemption under Section 54F. The assessee had invested the entire sale consideration by 31.3.2010.

The Tribunal observed that the assessee was not interested in pursuing the appeal due to non-attendance. Following the principle of vigilance and Rule 19(2) of the ITAT Rules, the appeal was dismissed.

The Tribunal presumed that the assessee was not interested in pursuing the appeal. Following a precedent, the appeal was dismissed for non-prosecution.