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“profit element”

DisallowancesSection 69CSection 69C5,654 judgments

The decision most relied on for profit element is CIT v. President Industries (258 ITR 654), cited in 471 judgments on BharatTax.

Leading authorities on profit element

CIT v. President Industries
258 ITR 654 · 2002 · High Court
471
citing judgments

When books of account are rejected and unaccounted sales or receipts are discovered, the income addition is restricted to the net profit element embedded in these undisclosed transactions, not the entire sale proceeds or receipts, especially if corresponding purchases are not proven to be outside the books.

Sanjay Oilcake Industries v. CIT
316 ITR 274 · 2009 · High Court
460
citing judgments

In cases of alleged bogus or unverifiable purchases, rather than disallowing the entire purchase value, a reasonable profit element or a proportionate percentage of the purchases should be added back to the assessee's income.

CIT v. Siemens Aktiongesellschaft
310 ITR 320 · 2009 · High Court
259
citing judgments

Reimbursements of actual expenses without any profit element are not taxable income. Additionally, mere amendments to the Income-tax Act do not override the provisions of Double Taxation Avoidance Agreements (DTAAs).

CIT v. Vijay M. Mistry Construction Ltd.
355 ITR 498 · 2013 · High Court
252
citing judgments

In cases of alleged bogus or hawala purchases where the existence of transactions is not entirely denied, only the profit element embedded in such purchases, and not the entire purchase price, can be added to the assessee's income. The focus is on determining a reasonable profit percentage for such additions.

CIT v. Balchand Ajit Kumar
263 ITR 610 · 2003 · High Court
212
citing judgments

When making an addition for unaccounted receipts, on-money, or non-genuine purchases/sales, the addition should be restricted to the estimated profit element embedded in such transactions, rather than the entire gross amount, particularly when evidence of corresponding expenditure is incomplete. This estimation often involves applying a net profit rate.

CIT v. Gurubachhan Singh J. Juneja
302 ITR 63 · 2008 · High Court
147
citing judgments

When unaccounted receipts or suppressed sales are detected and books of account are rejected under Section 145(3), additions to income must be restricted to the profit element embedded in such transactions, not the entire transaction value. This profit element is to be estimated by considering the assessee's regular profit ratio as per books of account.

Vijay Trading Co. v. ITO
388 ITR 377 · 2016 · High Court
119
citing judgments

When purchases are found bogus, only the profit element embedded therein, and not the entire purchase value, can be added to the assessee's income.

NK Proteins Ltd. v. DCIT
292 CTR 354 · 2017 · Supreme Court
115
citing judgments

When purchases are unverifiable or alleged to be bogus, only the profit element embedded in such transactions is taxable, not the entire purchase amount; the onus lies on the assessee to prove the genuineness of the transactions.

Judgments citing profit element

Ashok Pandurang Gaikwad, Mumbai vs. ITO WD 2(1), Mumbai

In the result, the appeal u/s 263 stands allowed and appeal bearing no

ITA 22/MUM/2010[2005-06]Status: DisposedITAT Mumbai27 Oct 2016AY 2005-06

Bench: Shri Mahavir Singh, Jm & Shri Rajesh Kumar, Am आयकर अपीऱ सं./I.T.A. No.6191/Mum/2009 (ननधधारण वषा / Assessment Year : 2005-06) Shri Ashok Pandurang Gaikwad, बनधम/ Commissioner Of Income Tax – 10, Rudra Kautir Apartment, Circle-Iii, Vs. Opp Dutta Temple, 3Rd Floor, Quoreshi Mansion, Ambernath -421501 Gokhale Road, Naupada, Thane(W)-400602 आयकर अपीऱ सं./I.T.A. No.22/Mum/2010 (ननधधारण वषा / Assessment Year : 2005-06) बनधम/ Shri Ashok Pandurang Gaikwad, Income Tax Officer-Ward 2(1), 10, Rudra Kautir Apartment, Kalyan. Vs. Opp Dutta Temple, Ambernath -421501 स्थधयी ऱेखध सं./ Pan :Aevpg3266M अपीऱार्थी ओर से / Assessee By Shri Vijay Mehta प्रत्यर्थी की ओर से/Revenue By Shri A.K Srivastava सुनवाई की तारीख / Date Of Hearing : 21.09.2016 घोषणा की तारीख /Date Of Pronouncement : 27.10.2016 आदेश / O R D E R Per Rajesh Kumar, Am These Two Appeals By The Assessee Are Directed Against The Order Dated 31.1.2008 Passed By The Ld.Cit(A)-Iii, Thane Under Section 263 Of The Income

Section 143(3)Section 144Section 194CSection 263Section 40Section 40a

clear that once net profit rate is applied, the expenses or other disallowances, since relating to business, cannot be made separately because the profit element of expenses or disallowances have already been considered while applying profit rate. Accordingly, we confirm the order of CIT(A). Appeal of revenue is dismissed

Ashok Pandurang Gaikwad, Ambernath vs. CIT -III, Thane

In the result, the appeal u/s 263 stands allowed and appeal bearing no

ITA 6191/MUM/2009[2005-06]Status: DisposedITAT Mumbai27 Oct 2016AY 2005-06

Bench: Shri Mahavir Singh, Jm & Shri Rajesh Kumar, Am आयकर अपीऱ सं./I.T.A. No.6191/Mum/2009 (ननधधारण वषा / Assessment Year : 2005-06) Shri Ashok Pandurang Gaikwad, बनधम/ Commissioner Of Income Tax – 10, Rudra Kautir Apartment, Circle-Iii, Vs. Opp Dutta Temple, 3Rd Floor, Quoreshi Mansion, Ambernath -421501 Gokhale Road, Naupada, Thane(W)-400602 आयकर अपीऱ सं./I.T.A. No.22/Mum/2010 (ननधधारण वषा / Assessment Year : 2005-06) बनधम/ Shri Ashok Pandurang Gaikwad, Income Tax Officer-Ward 2(1), 10, Rudra Kautir Apartment, Kalyan. Vs. Opp Dutta Temple, Ambernath -421501 स्थधयी ऱेखध सं./ Pan :Aevpg3266M अपीऱार्थी ओर से / Assessee By Shri Vijay Mehta प्रत्यर्थी की ओर से/Revenue By Shri A.K Srivastava सुनवाई की तारीख / Date Of Hearing : 21.09.2016 घोषणा की तारीख /Date Of Pronouncement : 27.10.2016 आदेश / O R D E R Per Rajesh Kumar, Am These Two Appeals By The Assessee Are Directed Against The Order Dated 31.1.2008 Passed By The Ld.Cit(A)-Iii, Thane Under Section 263 Of The Income

Section 143(3)Section 144Section 194CSection 263Section 40Section 40a

clear that once net profit rate is applied, the expenses or other disallowances, since relating to business, cannot be made separately because the profit element of expenses or disallowances have already been considered while applying profit rate. Accordingly, we confirm the order of CIT(A). Appeal of revenue is dismissed

ACIT 32(1), Mumbai vs. Dalichand G Shah, Mumbai

In the result, the appeal of the Revenue as well as the cross objection of the assessee, both are dismissed

ITA 1451/MUM/2015[2010-11]Status: DisposedITAT Mumbai26 Oct 2016AY 2010-11

Bench: Sri Mahavir Singh, Jm & Sri Rajesh Kumar, Am The Asst. Commissioner Of Income Vs. Shri Dalichand G Shah B-106, Tax, Circle- 32(1), Pratyakshkar Sanjay Apartments S V P Road, Bhavan, R.No.202, 2Nd Floor, Bkc Borivali West Mumbai-400092 Bandra (E) Mumbai-400051 Pan : Aapps1055E Appellant .. Respondent C.O. No.173/Mum/2016 (In Ita No.1451/Mum/2015 - A.Y:2010-11) Shri Dalichand G Shah B-106, Vs. The Asst. Commissioner Of Income Sanjay Apartments S V P Road, Tax, Circle- 32(1), Pratyakshkar Bhavan, R.No.202, 2Nd Floor, Bkc Borivali West Mumbai-400092 Pan : Aapps1055E Bandra (E) Mumbai-400051 .. Cross Objector Respondent

Section 143(3)Section 69

There is no discrepancy about stock statement. In such circumstances, we are of the view that the CIT (A) has rightly applied the embedded profit element in the case of the assessee and restricted the disallowances to the extent of that profit i.e. 15 % of the bogus purchase. We find

ACIT 21(1), Mumbai vs. Girish J Gada, Mumbai

In the result, all the appeals filed by the Revenue are dismissed

ITA 913/MUM/2015[2009-10]Status: DisposedITAT Mumbai25 Oct 2016AY 2009-10

Bench: Shri Amit Shukla () & Shri Ashwani Taneja ()

Section 143(3)Section 40A(3)Section 69C

that these purchases are over-invoiced to reduce the profits. Therefore, the correct approach in such transctions would be to tax only the estimated profit element embedded, over and above the net profit already shown, in such alleged bogus purchases which need to be estimated for taxation purposes. The disallowance ... sales. However, vital question while considering the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded ' therein was to ascertain whether the purchases themselves were completely bogus and non-existent or that the purchases were actually made

ACIT 21(1), Mumbai vs. Girish J Gada, Mumbai

In the result, all the appeals filed by the Revenue are dismissed

ITA 912/MUM/2015[2008-09]Status: DisposedITAT Mumbai25 Oct 2016AY 2008-09

Bench: Shri Amit Shukla () & Shri Ashwani Taneja ()

Section 143(3)Section 40A(3)Section 69C

that these purchases are over-invoiced to reduce the profits. Therefore, the correct approach in such transctions would be to tax only the estimated profit element embedded, over and above the net profit already shown, in such alleged bogus purchases which need to be estimated for taxation purposes. The disallowance ... sales. However, vital question while considering the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded ' therein was to ascertain whether the purchases themselves were completely bogus and non-existent or that the purchases were actually made

Hero Motocorp Limited, New Delhi vs. JCIT, New Delhi

In the result appeal of the assessee in ITA No

ITA 1545/DEL/2015[2010-11]Status: DisposedITAT Delhi24 Oct 2016AY 2010-11

Bench: Sh. I. C. Sudhir & Shri Prashant Maharishihero Motocorp Limited, Jcit, 34, Basant Lok, Vasant Range-1, New Delhi Vs. Vihar, New Delhi Pan: Aaach0812J (Appellant) (Respondent) Dcit, M/S. Hero Moto Corp. Circle-11(1), Ltd., 34, Community Vs. New Delhi Centre, Basant Lok, Vasant Vihar, New Delhi-110057 (Appellant) (Respondent) Dcit, M/S. Hero Moto Corp. Circle-11(1), Ltd., 34, Community

For Appellant: Sh. Ajay Vohra, Sr. AdvFor Respondent: Sh. NC Sawain, CIT DR
Section 143Section 143(3)Section 144CSection 92C

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ―I-2‖: NEW DELHI BEFORE SH. I. C. SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT

Iljin Electric Co. Ltd, Mumbai vs. DCIT (It) Cir 2(2)(1), Mumbai

In the result, appeal for A

ITA 1023/MUM/2015[2011-12]Status: DisposedITAT Mumbai14 Oct 2016AY 2011-12

Bench: Shri Jason P. Boaz, Accoutant Member & Shri Saktijit Dey

For Appellant: Shri Madhur AgarwalFor Respondent: Shri Jasbir Chauhan
Section 143(3)Section 144C(13)Section 144C(5)Section 234BSection 234D

finally utilised in India for the purpose of executing the main contract with the employers viz. MRVC and DMRC. He observed, there is a profit element in off–shore supplies and it has a business connection in India as these off–shore supplies were finally utilised in India. He observed ... applying a dissecting approach by bifurcating the composite indivisible and single contract into on–shore and off–shore purpose, but undoubtedly, there is a profit element in off–shore supply and has a business connection in India since all the supplies and services are finally utilised in India. Splitting

Mahavir Construction Co., Mumbai vs. DCIT 24(3), Mumbai

In the result, the appeal of the assessee and the Revenue are partly allowed for statistical purposes

ITA 4254/MUM/2015[2008-09]Status: DisposedITAT Mumbai07 Oct 2016AY 2008-09

Bench: Shri D. Karunakara Rao & Shri Amarjit Singh

For Appellant: Shri Hitesh ShahFor Respondent: Shri Naveen Gupta, DR
Section 133ASection 143(3)Section 147Section 69C

Simit P Sheth in ITA No.553 of 2012, dated 16.1.2013 (356 ITR 451), which is relevant for the proposition that the only profit element embedded in such purchases can be added to the income of the assessee when the assessee purchased goods in grey market without bills and made ... However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non existent or that the purchases were actually made

ITO 16(3)(1), Mumbai vs. Ghaverchand B Jain, Mumbai

Accordingly Ground No.1&2 are partly allowed

ITA 4567/MUM/2014[2010-11]Status: DisposedITAT Mumbai07 Oct 2016AY 2010-11

Bench: Shri R.C.Sharma & Shri Pawan Singhito, Central Circle- 16(3)(1), Sh. Ghaverchand B Jain 1St Floor, Matrumandir Road, (Prop M/S Champak Steel House) 59/14, Nanubhai Desai Road, Tardeo, Mumbai-400020. Vs. Opp. Islampura Street, Mumbai-400004 Pan: Aabpj5830C (Appellant) (Respondent) Sh. Ghaverchand B Jain Income Tax Officer, Central (Prop M/S Champak Steel House) Circle- 16(3)(1), Ist Floor, Mulji Thackersey Building, Matrumandir Road, Vs. 52/52A, Nanubhai Desai Road, Tardeo,Mumbai-400020. Opp. Islampura Street, Mumbai-400004 Pan: Aabpj5830C (Appellant) (Respondent)

For Appellant: Sh. Sanjeev M. Shah (AR)For Respondent: Sh. S.K. Bepari (DR)
Section 253Section 69C

Commissioner of Income Tax (Appeals), in appeal the addition was sustained to the extent of 12.5% of the impugned purchases on the basis of profit element embedded in the said purchases. Thus, being aggrieved by the Revenue as well as the Assessee both have assailed the order of Commissioner ... case of CIT Versus Smith P Sheth (supra). I sustained an addition to the extent of 12.5% of the purchases made as the profit element embedded in such purchases. Accordingly Ground No.1&2 are partly allowed.” During the course of hearing neither the ld DR for the Revenue

ITO, Ward - 1(3), Kolkata vs. M/S. Atn International Limited, Kolkata

In the result, the appeal of the revenue in ITA No

ITA 1531/KOL/2011[2004-05]Status: DisposedITAT Kolkata05 Oct 2016AY 2004-05

Bench: Shri M. Balaganesh, Am & Shri S.S.Viswanethra Ravi, Jm]

For Appellant: Shri Rajat Kr. Kureel, JCIT, Sr. DRFor Respondent: Shri Miraj D. Shah, AR
Section 143(3)Section 147Section 73

preoperative and preliminary expense relating to the channel and transferred the same at book values / cost to its subsidiary company. There is no profit element derived from it. Hence we hold that there is no case for making any addition towards excess depreciation or profit derived from excess of assets

Magoxy Infrastructure P. Ltd, Mumbai vs. DCIT 10(3), Mumbai

In the result, appeal of the assessee is partly allowed

ITA 2172/MUM/2014[2010-11]Status: DisposedITAT Mumbai05 Oct 2016AY 2010-11

Bench: Shri Joginger Singh & Shri D. Karunakara Rao

For Appellant: Shri Rishabh ShahFor Respondent: Shri Aarsi Prasad, DR

Gujarat High Court in the case of Simit P Sheth (supra) and find the same is relevant for the proposition that the only profit element embedded in such purchases can be added to the income of the assessee when the assessee purchased goods in grey market without bills and made ... However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non existent or that the purchases were actually made

M/S Credai Bengal, Kolkata vs. CIT, (Exemptions), Kolkata

In the result, assessee’s appeal allowed

ITA 381/KOL/2016[2011-2012]Status: DisposedITAT Kolkata30 Sept 2016AY 2011-2012

Bench: Shri Waseem Ahmed & Shri K.Narasimha Charyassessment Years:2011-12

Section 11Section 11(1)(a)Section 143(3)Section 2(15)Section 25Section 263

public. Its sole motto is to provide assistance and support services to entrepreneurs and investors in real estate industry. Therefore, admittedly, there is no profit element in such activities which are rendered to a section of the people, who are entrepreneurs in housing industry. The assessee is not providing assistance

Kinjal Construction Co. & Chirag Construction Co. (Jv), Mumbai vs. ITO 18(2)(4), Mumbai

In the result, appeal of the assessee is dismissed

ITA 4384/MUM/2015[2010-11]Status: DisposedITAT Mumbai30 Sept 2016AY 2010-11

Bench: Shri D. Karunakara Rao & Shri Amarjit Singh

For Appellant: Shri Dilip SanghaviFor Respondent: Shri Prakash Pathade, DR
Section 133(6)Section 133ASection 143(3)Section 147

dated 16.1.2013 (356 ITR 451), Ld Counsel for the assessee submitted the said judgment is relevant for the proposition that the only profit element embedded in such purchases can be added to the income of the assessee when the assessee purchased goods in grey market without bills and made ... However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non existent or that the purchases were actually made

Asst CIT 25(2), Mumbai vs. Vijay M Vaghani, Mumbai

In the result, the Revenue’s appeal is dismissed and assessee’s C

ITA 3434/MUM/2014[2010-11]Status: DisposedITAT Mumbai30 Sept 2016AY 2010-11

Bench: Shri Jason P. Boaz, Am & Shri Sandeep Gosain, Jm आयकर अपील सं./ I.T.A. No. 3434/Mum/2014 ("नधा"रण वष" / Assessment Year: 2010-11)

For Appellant: Shri Vipul Joshi
Section 133(6)Section 40Section 69CSection 69c

Nikunj Eximp Enterprises cited supra and also the decision in the case of CIT vs. Leaders Valves (P) Ltd (also referred supra), the profit element on the total component in dispute is what needs to be added to the income of the appellant. The total amount which is being treated

Intel Corporation, Bangalore vs. Dy. Dir I.T., Bangalore

In the result, the appeal of the assessee is partly allowed

ITA 1486/BANG/2013[2008-09]Status: DisposedITAT Bangalore30 Sept 2016AY 2008-09

Bench: Shri Vijay Pal Rao & Shri Inturi Rama Rao

For Appellant: Shri Koushik Muharjee, C.AFor Respondent: Smt. Swapna Das, JCIT (D.R)
Section 9(1)(vii)

salaries paid abroad to the technical personnel, and that the reimbursement was on a ‘cost-to-cost’ basis, without any profit element, the provisions of section 195 of the Act cannot be, once again, applied to reimbursement of salaries made to the foreign company. Accordingly, no tax was required ... convenience Intel Corp has disbursed the salary to the employees of ITIPL and has claimed reimbursement of the same from ITIPL. There is no profit element involved in the reimbursement. Therefore, reimbursement of such salary is not subject to tax in the hands of the Appellant. The ratio of decision

Jai Hind Paper Mart, Mumbai vs. ITO 14(2)(3), Mumbai

In the result, both the appeals of assessee and revenue are dismissed

ITA 6134/MUM/2014[2009-10]Status: DisposedITAT Mumbai28 Sept 2016AY 2009-10

Bench: Shri R.C. Sharma, Am & Shri Sandeep Gosain, Jm आमकय अऩीर सं./I.T.A. No.6134 /Mum/2014 (निर्धारण वषा / Assessment Year: 2009-10) M/S. Jai Hind Paper Mart Income Tax Officer 14(2)(3), 3Rd Floor, Earnest House 186, Hiramanek Bldg, बिधम/ Dadiseth Agiary Lane, Nariman Point, Vs. Chira Bazar, Mumbai-400 021. Mumbai-400 002. स्थामी रेखा सं./जीआइआय सं ./Pan/Gir No. Aaafj3532E (अऩीराथी /Appellant) (प्रत्मथी / Respondent) : आमकय अऩीर सं./I.T.A. No.6144 /Mum/2014 (निर्धारण वषा / Assessment Year: 2009-10) Income Tax Officer 14(2)(3), M/S. Jai Hind Paper Mart 3Rd Floor, Earnest House 186, Hiramanek Bldg, बिधम/ Nariman Point, Dadiseth Agiary Lane, Vs. Mumbai-400 021. Chira Bazar, Mumbai-400 002. स्थामी रेखा सं./जीआइआय सं ./Pan/Gir No. Aaafj3532E (अऩीराथी /Appellant) (प्रत्मथी / Respondent) : अऩीराथी की ओय से / Appellant By : Shri Ratan Samul प्रत्मथी की ओय से/Respondent By : Shri K. Ravi Kiran

For Appellant: Shri Ratan SamulFor Respondent: Shri K. Ravi Kiran
Section 143(1)Section 148

case of CIT Vs Smith P Seth (356 ITR 451) (Guj) the Court held that not the entire purchase price but only the profit element embedded in such purchases should be added to the income of the assessee. The estimation of rate of profit may vary no uniform yardstick could

D.C.I.T CC - Xiii, Kolkata. vs. M/S Tantia Constraction Ltd., Kolkata

In the result, both the appeals of the assessee as well as the revenue are dismissed

ITA 69/KOL/2013[2006-07]Status: DisposedITAT Kolkata23 Sept 2016AY 2006-07

Bench: Shri M. Balaganesh, Am & Shri S. S. Viswanethra Ravi, Jm]

For Appellant: Shri Manish Tiwari, ARFor Respondent: Shri G. Mallikarjuna, CIT, DR
Section 115JSection 132Section 139(1)Section 153A

such cases, the developer receives the money from the person with whom agreement for development of facility is made. Such payment also include profit element of the enterprise eligible for deduction u/s 80IA subject to fulfillment of other conditions. If, an enterprise which only develops the infrastructure facility, would

D.C.I.T., Circle-5, Kolkata vs. M/S East India Holdings Pvt. Ltd., Kolkata

In the result, appeal of Revenue stands dismissed and that of assessee is allowed

ITA 2585/KOL/2013[2010-2011]Status: DisposedITAT Kolkata23 Sept 2016AY 2010-2011

Bench: Shri Waseem Ahmed & Shri K.Narsimha Chary

Section 143(3)

back the entire goods removed from the factory without the invoice cover. Even if the assessee has not substantiated the transaction then also only profit element should have been added to the income and not the entire sale proceeds. The assessee also submitted that the details of the job work ... accepted the plea of the assessee with regard to the quantum of addition. The addition made by the AO consists of two parts one profit element and second unaccounted investment in unaccounted purchases. Ld. CIT(A) observed that the job charges claimed by the assessee shows a higher gross profit

M/S East India Holdings Pvt. Ltd., Kolkata vs. D.C.I.T Cir - 5, Kolkata

In the result, appeal of Revenue stands dismissed and that of assessee is allowed

ITA 2432/KOL/2013[2010-11]Status: DisposedITAT Kolkata23 Sept 2016AY 2010-11

Bench: Shri Waseem Ahmed & Shri K.Narsimha Chary

Section 143(3)

back the entire goods removed from the factory without the invoice cover. Even if the assessee has not substantiated the transaction then also only profit element should have been added to the income and not the entire sale proceeds. The assessee also submitted that the details of the job work ... accepted the plea of the assessee with regard to the quantum of addition. The addition made by the AO consists of two parts one profit element and second unaccounted investment in unaccounted purchases. Ld. CIT(A) observed that the job charges claimed by the assessee shows a higher gross profit

M/S. Jivesh Developers & Properties Pvt. Ltd, Mumbai vs. The Dy CIT Cen Cir 24 & 26, Mumbai

In the result, appeal of the assessee is allowed

ITA 575/MUM/2008[2004-2005]Status: DisposedITAT Mumbai23 Sept 2016AY 2004-2005

Bench: Shri Mahavir Singh & Shri D. Karunakara Rao

For Appellant: Shri J.D. Mistry; Mr. Yogesh TharFor Respondent: Shri Sujit Bangar, Sr. AR
Section 80ISection 80Q

erred in confirming the action of the AO in denying deduction of Rs. 25,45,576/- under section 80IB (10) of the Act being profit element contained in license fees in respect of flats given on leave and license basis allegedly on the ground that the profits derived by giving