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Income Tax - Case Laws
Showing 101 to 120 of 182 Records
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2009 (3) TMI 243 - ITAT MADRAS-D
Deduction u/s 10B - Total Turnover - principle of parity between export turnover and total turnover - exclusion expenses incurred in foreign exchange, freight and clearing expenses incurred in foreign exchange in computing deduction -
HELD THAT:- In our understanding the ratio laid down by the Supreme Court in the case of LMW [2007 (4) TMI 202 - SUPREME COURT] is an affirmation of the principle of parity between the export turnover and the total turnover for the purpose of s. 80HHC. It was also the ratio laid down in that case that any receipt which does not have an element of turnover cannot find a place either in the export turnover or in the total turnover. LMW's case was followed by the Supreme Court in CIT vs. Catapharma (India) (P) Ltd.[2007 (7) TMI 203 - SUPREME COURT], where the assessment year involved was 1997-98.
We may refer to some of the orders of the Tribunal on this issue. We have referred to the order of the Bangalore Bench in the case of Tata Elxsi.[2007 (10) TMI 630 - ITAT BANGLORE] held as under:
"10. The term 'total turnover' no doubt is not defined in s. 10A. However, the term 'total turnover' would be an enlargement of the term 'export turnover'. In other words, the sum total export turnover and domestic turnover would constitute 'total turnover'.''
The term 'export turnover' would then be a component or part of the denominator; the other component being the domestic turnover. In other words, to the extent of 'export turnover' there would be a commonality between the numerator and denominator of the formula. In view of the commonality, the understanding should also be the same. In other words, if the 'export turnover' in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the 'total turnover' in the denominator.
Though there is no definition of the term 'total turnover' in s. 10A, there is also nothing in the said section to mandate that what is excluded from the numerator (export turnover) would nevertheless form part of the denominator. One would have to apply consistent standards in understanding and applying a term, particularly when, such term, viz., export turnover has an independent function and at the same time a part of a larger term viz., total turnover. Thus, if some expenses, for any reason are excluded in arriving at the 'export turnover' the same should be reduced from 'total turnover' also.
This order is with reference to s. 10A but again as already noticed the provisions of ss. 10A and 10B are identical on all material aspects. More particularly, both the sections define only the 'export turnover' but not 'total turnover', further sub-s. (4) of both the sections prescribe an identical formula for computing the export profits, in which the export turnover is the numerator and the total turnover is the denominator. We are in respectful agreement with the view expressed by the Bangalore Bench in the above order.
In California Software Co. Ltd. [2008 (8) TMI 430 - ITAT MADRAS-A] held that the objective of the definition of 'export turnover' in s. 10B was to apply the principle of netting by comparing the inflow and outflow of foreign exchange from or into the country. We have already held that this could not have been the objective. The order of the Chennai Bench, to the extent it holds so, with respect, cannot be approved. However, in the same para the Bench has also held that what was never part of the turnover in the first instance cannot be excluded therefrom. We have already held that impliedly at least the Bench seems to have held that the receipts by way of freight, telecom charges or insurance attributable to the delivery of the computer software outside India or expenses incurred in foreign exchange in connection with the provision of the technical services outside India cannot be included in the total turnover.
We have also, inter alia, adopted a similar line of reasoning in the sense that mere reimbursement or recovery of such expenses can in no sense be considered to have an element of turnover. To the extent our view accords with the view taken by the Chennai Bench in para 23 of its order, the same is approved.
In the case of Dy. CIT vs. S.R.A. Systems Ltd.[2007 (6) TMI 256 - ITAT MADRAS], Tribunal was dealing with s. 10A. A perusal of the order shows that the Bench applied the basis of s. 80HHE, which also gave incentives for exports and which contained a definition of both 'export turnover' and "total turnover'. The Bench observed that what was excluded from the export turnover was also excluded from the total turnover and since "s. 10A was akin to s. 80HHE, hence the deduction can be properly computed only by deducting expenditure incurred in foreign exchange both from the total turnover and also from the export turnover". We have also adopted inter alia, a similar line of reasoning and have taken sustenance for our view from the definition of 'total turnover' in s. 80HHE. We may add that we have also referred to s. 80HHF which contains a similar definition of 'total turnover'.
Therefore, we hold that for the purpose of applying the formula under sub-s. (4) of s. 10B, the freight, telecom charges or insurance attributable to the delivery of articles or things or computer software outside India or the expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula. The appeals filed by the Department are thus dismissed. We make it clear that we have not decided the cases of the interveners and they will be decided by the respective Benches in conformity with our decision.
The appeals are dismissed with no order as to costs.
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2009 (3) TMI 240 - ITAT MADRAS-C
Business Expenditure ... ... ... ... ..... he requisition compensation cannot be considered as the income of the assessees, therefore, the expenses proportionate to the requisition compensation are not allowable. The AO taxed both the requisition as well as the acquisition compensation under long-term capital gain and allowed the litigation expenses but disallowed the other expenses by way of conveyance, telephone, vehicle and office expenses. Therefore, when the requisition compensation is excluded from the income of the assessees, the proportionate expenses are also to be excluded. Accordingly, we modify the order of the lower authorities on this issue and direct the AO to allow the proportionate expenses in ratio of the income offered by the assessees and amount received for requisition compensation. However, we are maintaining the percentage restricted by the CIT(A) in respect of non-legal expenses but the same shall also be proportionately allowed. 18. In the result, the appeals of the Revenue are partly allowed.
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2009 (3) TMI 239 - ITAT MADRAS-C
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... ... ..... stified. I agree with the view taken by the learned Judicial Member. 8. The matter will now go before the regular Bench for deciding the appeal in accordance with the opinion of the majority. ORDER Per Shamim Yahya, Accountant Member.-As there was- difference of opinion between the Members, following question was referred to the Third Member for opinion - Whether in view of the facts and circumstances, the issue relatable to computation of deduction under section 80-IB, the order of the ld. CIT(A) could be reversed and that of the Assessing Officer could be restored or matter can be set aside and remitted back to the file of the Assessing Officer for reconsideration? 2. The learned Third Member agreed with the view of the ld. Judicial Member that the order of the ld. CIT (Appeals) was to be reversed and that of Assessing Officer was to be restored. 3. Following the majority opinion, this issue is decided against the assessee. 4. In the result, the revenue s appeal is allowed.
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2009 (3) TMI 237 - ITAT MADRAS-A
Profits Of The Business ... ... ... ... ..... . 16. Further, there is nothing on record to suggest that the assessee wanted to have an independent business activity of generation of electrical energy, for having an independent source of income. This not a case where the assessee had installed as many as ten windmills, and had utilized in its factory only 10 per cent of the electrical energy generated by these windmills, and had sold the balance of 90 per cent of the energy to other parties through the TNEB. The assessee, in the present case, installed only one windmill which generated electrical energy for being used in its factory, and it represented less than 10 per cent of the total requirement of energy. 17. Therefore, in view of above discussion, the question formulated in para No. 9 above has to be answered in the negative, and the issue involved in this appeal has to be decided in favour of the assessee and against the Department. We hold accordingly. 18. In the result, the appeal filed by the assessee is allowed.
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2009 (3) TMI 233 - ITAT, DELHI
Benefits of sections 11 and 12 - Free and subsidized treatment only given to the relatives/friends of doctors/employees of the hospital - The solitary grievance of revenue is that ld. CIT(A) has erred in directing AO to allow benefits of sections 11 and 12 - assessee enjoying status of a scientific research center within the meaning of section 35(1)(ii) - In earlier as well as subsequent assessment years benefit of sections 11 and 12 were granted to the assessee - In present year such benefit has been denied to the assessee by AO.
HELD THAT:- We have perused that list available. In this list name of 443 indoor patients are available. The patients have came from far flung areas also from Uttar Pradesh, Punjab, Haryana and Himachal Pradesh. From the list it is not discernible as to how AO has considered them as employees or relatives of employees.
We could understood the stand of AO if he would have make out a case that assessee is applying its income for any other purpose than the charitable purpose. As rightly observed by the ld. CIT(A) that profitability is not the sole criteria to judge the charitable nature of a society. In a charitable activity incident of profit can be there but that would not goad any quasi-judicial authority to say that society ceases to be a charitable society. AO fails to point out any defects in the objects of society or in the means of achieving those objects. His only area of grievance is that income is resulting to the society by carrying out such activity. But again he fails to take into consideration that such income was only applied for the purpose of charity. AO also pointed out that assessee has entered into contracts with the doctors in such a way that the hospital should not suffer any loss.
In our opinion from those contracts nothing adverse can be drawn against the assessee because in order to provide best facilities assessee is supposed to keep best doctors on its panels. Similarly it has to see that hospital should able to run its activity. If it starts loosing the resources then its existence would be in dark. Therefore, taking into consideration all the material on record and the findings recorded by the CIT(A) we do not find any error in the order of ld. First Appellate Authority.
In the result, the appeal of the revenue is dismissed.
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2009 (3) TMI 230 - ITAT DELHI-I
Agreement For Transfer ... ... ... ... ..... t the assessee received only service charges and it had no proprietary rights in goods etc. purchased by it. Therefore, these relevant documents go against the case of the assessee. 8.6 In a nutshell, it is held that the instance case is one of rendering multi-farious services for production of films by foreign companies in India and handing over the negatives to them in India. This does not involve export or transfer outside India by any means of any film software by the assessee. That is why the learned CIT(A) had to read words in the section which are not there, and had to resort to purposive interpretation of the provision. However, since the basic conditions of this section are not satisfied, there is no question of applying purposive rule of construction to read something, which is not there in the section. Therefore, we are of the view that the learned CIT(A) erred in granting the deduction to the assessee. 9. In the result, both the appeals of the Revenue are allowed.
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2009 (3) TMI 229 - ITAT DELHI-I
Genuineness Of Gift ... ... ... ... ..... position of penalty was not justified. In the present case also, the Department has not made any other efforts to come to the conclusion that the gifts in question could in no circumstances have been amounts received as gift from Shri Sanjay Mohan Agarwal. These assessees have surrendered these gifts as income under a situation, where they could not produce Shri Sanjay Mohan Agarwal because of his death before the starting of reopening proceedings. In he present cases also, the facts and circumstances arc equally consistent with the hypothesis that they could have taken gifts from Shri Sanjay Mohan Agarwal and therefore, in the present cases, the concealment itself is not established beyond doubt and therefore, the penalty imposed in the present cases is not justified. We, therefore, delete the same in all these eases by respectfully following this judgment of Hon'ble Gujarat iHigh Court. o p /o p 9. In the result, all these appeals of the assessees arc allowed. o p /o p
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2009 (3) TMI 228 - ITAT DELHI-H
Concealment ... ... ... ... ..... cording to the assessee, it has not actually transferred the goodwill. It has only admitted Shri S.K. Aggarwal, a new partner. It is running the petrol pump under the dealership of Bharat Petroleum. The only change is in the constitution of the firm otherwise the firm is continuing with its business. All these facts were before the AO. On due consideration of all these facts in the light of Board s circular, we are of the opinion that there is no mala fide intention on the part of the assessee to furnish inaccurate particulars. It has disclosed the complete facts before the AO. It has adopted a particular computation for the capital gain which did not meet the approval of the AO but that does not mean that assessee has furnished inaccurate particulars. It is only a difference of opinion between the assessee and the AO. In our opinion, assessee did not deserve to be visited with penalty in the above circumstances. 10. In the result, the appeal filed by the assessee is allowed.
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2009 (3) TMI 227 - ITAT DELHI-G
Claim for loss suffered on loan advance - business loss u/s. 28 r/w s. 37 or capital loss u/s. 45 - business of manufacturing and real estate - loan given to subsidiary company to acquire shareholding - loan not connected with the business of the assessee company - AO rejected the claim - In earlier years interest in respect of loans had been disallowed on the ground that the loans were not given in business interest - alternative claim of the assessee was also rejected on the ground that loan could not be said to be capital asset and therefore, loss suffered on settlement of loan could not be said to be capital loss u/s. 45 - CIT(A) upheld the order passed by AO.
HELD THAT:- The loan given to DCM International Ltd. was not connected with the business of the assessee company. Thus the amount of loan initially given was not in line with the business activities of the assessee. When the amount advanced is not in line with the business, the same cannot be treated as has been advanced during the course of normal business activities of the assessee. Moreover a single transaction of loan cannot be termed as business activity and that too after lapse of several years when loss of capital has occurred.
It is a settled law as held by Hon'ble Supreme Court in the case of CIT vs. Nainital Bank Ltd.[1964 (9) TMI 11 - SUPREME COURT] that every loss is not so deductible unless it is incurred in carrying out the operation of the business and is incidental to the operation. Therefore, we find that the assessee had advanced loan for acquisition of shares in joint venture company DCM Toyota Ltd., which was renamed as DCM Daewoo Motors Ltd. Thus the amount advanced was in respect of fixed capital. Therefore, the assessee's claim cannot be allowed as a business loss u/s. 28 r/w s. 37.
As contended that the Tribunal has allowed the claim of the assessee in AY 2000-01 by dismissing the Revenue's appeal that interest paid on borrowed funds diverted to sister concerns as a measure of commercial expediency could not be disallowed in view of decision of Hon'ble Supreme Court in the case of S.A. Builders Ltd. vs. CIT(A) & Anr.[2006 (12) TMI 82 - SUPREME COURT]. Hence, the Tribunal has accepted the contention of the assessee in principle that the said loan was given for the purposes of business and, therefore, the loss incurred is allowable as deduction u/s. 28/37 as the same was incurred during carrying on of the business of the assessee. We are unable to accept this proposition.
It is a settled law as held by Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works (P) Ltd.[1992 (9) TMI 1 - SUPREME COURT] that it is neither desirable nor permissible to pick out a 'Word or a sentence from the judgement of the Supreme Court divorced from the context of the question under consideration and treated to be the complete law declared by the Court. The judgement must be read as a whole and the observations from the judgement have to be considered in the light of questions which were before the Court.
Therefore, in view of decision of Hon'ble Supreme Court in the case of Sun Engineering Works (P) Ltd. the assessee cannot be treated to be engaged in the business of money-lending and the loss of capital will be allowable as business loss. Therefore, the claim of the assessee does not survive.
The term 'capital asset' has been defined u/s. 2(14), which means property of any kind connected with his business or profession, but does not include (i) any stock-in-trade, consumable stores or raw materials held for the purpose of the business; (ii) personal effects; (iii) agricultural lands.
The definition of "transfer" in cl. (47) of s. 2 includes extinguishment but that extinguishment refers not to the extinguishment of the asset itself but to the extinguishment of the holder's right to the assets. This position of law has been finally settled by the Supreme Court in its decision in Vania Silk Mills (P) Ltd. vs. CIT[1991 (8) TMI 2 - SUPREME COURT]. In the view of the Supreme Court, where the assets are destroyed, there is no question of their transfer to others, there is a capital loss but it is not on account of any transfer, but it is on account of disappearance of the asset itself. The said principle applies in case before us. When an assessee finds his valuable assets like loan valueless merely for the inability of the debtor company to pay a part of such loan, the assessee's asset in the form of loan disappears.
This is a position which the assessee admits not only by declaration but also by conduct. The assessee has written off the loan as loss to it for good. That being the case, here also we cannot say that there is any transfer involved. It is purely a case of disappearance of the loan itself. It is not that the assessee has transferred its right to the assets in favour of a third party whereby the right has extinguished. The asset itself is extinguished. Thus in our considered opinion the loss suffered by the assessee cannot be treated as capital loss u/s. 45.
Thus, claim of the assessee is not allowable either as business loss u/s. 28 r/w provisions of s. 37 nor as capital loss u/s. 45. Therefore, we do not find any infirmity in the order of CIT(A) confirming the stand of the AO on both the counts.
The appeal filed by the assessee is dismissed in terms of above discussions.
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2009 (3) TMI 226 - ITAT DELHI-F
Allowability ... ... ... ... ..... on of assignment and consequential treatment of taxability in the hands of assessee, and to decide the issue afresh as per the terms and conditions applicable to keyman insurance policy on assignment to the keyman. After getting the clear position if the AO found that as per certification issued by LIC, the keyman policy is converted into ordinary policy, then to follow the observation of Co-ordinate Bench as discussed hereinabove. Before parting with the matter, we may clarify that amount of loans and interest thereon as availed by the assessee on these policies will not effect the maturity value of the policy, which is liable to be considered along with amount of bonus thereon, which the assessee is entitled to get. Accordingly action of the assessee in offering the net amount received from LIC after deduction of loan and interest thereon as availed by the assessee on these policies is not correct. 9. In the result, the appeal is treated as allowed for statistical purposes.
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2009 (3) TMI 225 - ITAT DELHI-E
Disallowance on Payment of grants and royalty - Whether such grants constituted an "expenditure" as envisaged in s. 37(1) or could be allowed u/s. 36(1)(xii) - Grants given by the assessee to various entities and royalty to State Government - HELD THAT:- It can be seen that s. 37 deals with expenditure in general referred to here, for brevity, as business expenditure. It lays down that any expenditure not being expenditure of the nature described in s. 30 to s. 36 and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".
Essential and positive condition of allowance is that the expenditure should have been laid out or expended wholly and exclusively for the purpose of such business. Therefore, the expenses which are permitted as deduction are such as are made for the purpose of carrying on the business i.e., to enable a person to carry on and earn profit in that business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profit of the business, but that must also be for the purpose of earning profits of the business and reference can be made to the decision of Hon'ble Supreme Court in the case of Haji Aziz & Abdul Shakoor Brothers vs. CIT[1960 (11) TMI 15 - SUPREME COURT].
The grants given by the assessee even though they are in accordance with the objects stated in the Act and even if they are made or disbursed as per directions of Central Government and in the public interest, but the same does not fulfill the criteria as laid down in the s. 37 to come within the purview of allowability as the same cannot be said to be an expenditure incurred wholly and exclusively for the purpose of business. Therefore. the claim of the assessee that these grants should be allowed u/s. 37(1) cannot be accepted and is liable to be rejected. Accordingly rejected.
Whether such grants can be called to be "capital expenditure" so as to exclude these expenditures from the ambit of s. 36(1)(xii) - According to well-established law, capital expenditure is an expenditure which is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the assessee. Thus, the primary condition to bring such "grants" to be termed as "capital expenditure" is that it should be made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business of the assessee and reference in this regard can be made to the decision of Full Bench in the case of Praga Tools Ltd. vs. CIT [1979 (11) TMI 80 - ANDHRA PRADESH HIGH COURT].
In the present case the grants and royalty paid to State Government and claimed under the head 'Expenses on direct operations/grants' cannot be said to be for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business of the assessee as by making such grants assessee has not acquired any asset and such grants have not brought any advantage of enduring benefit to the assessee. Therefore, these grants and payment of royalty cannot be called to be "capital expenditure" incurred by the assessee.
Therefore, it has to be held that these grants and payment of royalty are allowable u/s. 36(1)(xii) as assessee has fulfilled all the conditions specified in that section. To conclude, it is held that these grants and payment of royalty claimed under the head "Expenses on direct operations/grants" are not allowable u/s. 37(1), but they are allowable u/s. 36(1)(xii).
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2009 (3) TMI 224 - ITAT DELHI-C
Business Expenditure ... ... ... ... ..... n in s. 40(b). To the similar effect is the decision of Hon ble Karnataka High Court in the case of N.M. Anniah and Co. vs. CIT 1975 CTR (Kar) 78 (1975) 101 ITR 348 (Kar) cited by the learned counsel for the assessee wherein it was held that s. 40A has no application to the matters contained in s. 40(b) and the overriding effect given to s. 40A is only in respect of matters not covered by s. 40(b). In our opinion, the ratio of these two judicial pronouncements cited by the learned counsel for the assessee is directly applicable to the issue involved in the present case and respectfully following the same, we hold that the disallowance made by the AO on account of partners remuneration covered under s. 40(b) by invoking the provisions of s. 40A(2) was not sustainable. In that view of the matter, we uphold the impugned order of the learned CIT(A) deleting the said disallowance and dismiss this appeal filed by the Revenue. 5. In me result, the appeal of the Revenue is dismissed.
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2009 (3) TMI 223 - ITAT DELHI
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... ... ..... T) 113 (Delhi) 2008 111 ITD 287 (Delhi) are distinguishable on the facts and are of no help to the assessee. In these cases the assessee was paid non-compete fee whereas in the case before us the payment has been made for termination of services. Therefore, the decisions relied upon by the assessee are not applicable. In view of the above, we are of the considered view that the learned Commissioner of Income-tax (Appeals) was not justified in treating the part of the payment towards restrictive covenants. We, therefore, set aside the order passed by the learned Commissioner of Income-tax (Appeals) and restore the order of the Assessing Officer. As regards the assessee s appeal, as held above, the entire amount of USD 10,00,000 is assessable as profits in lieu of salary. Accordingly, the appeal filed by the assessee is dismissed. In the result, the appeal filed by the assessee is dismissed and by the Revenue is allowed. The order pronounced in the open court on March 31, 2009.
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2009 (3) TMI 222 - ITAT DELHI
Appellate Tribunal ... ... ... ... ..... t dated 1-11-2006, the revenue sought that following question be referred to the Special Bench Whether on the facts and circumstances of the above-mentioned cases, the income from Bandwidth/transmission charges for up-linking/down-linking signals/data transmission through the use of transponders in the satellite is taxable in the hands of above-mentioned foreign companies in accordance with provisions of the Income-tax Act read with relevant provisions of Tax treaties with respective countries? 7. It is evident from above that it was revenue s stand that there is conflict between the two decisions of the Tribunal and that matter has to be examined with reference to provisions of the statute as well as the provisions of the DTAA. Instead of one, the reference Bench framed three questions to cover comprehensively the issue involved in the present group of appeals. 8. In the light of above discussion, the objection of the revenue is rejected, and Intervener is permitted to join.
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2009 (3) TMI 221 - ITAT COCHIN
Estimation Of Income ... ... ... ... ..... The Commissioner of Income-tax (Appeals) has made observation that the Assessing Officer should have considered the quality of the input while determining the quantum of output. But the fact to be seen is that the assessee has not made any such attempt to show the different qualities of the various lots of purchase if any, by comparing the purchase particulars. It is possible that the wheat purchased by the assessee would be of different quality. But that does not defeat the reasons explained by the Assessing Officer. In the facts and circumstances of the case, we find that the assessing authority is justified in interfering with the ratio of wastage returned by the assessee. Accordingly, we set aside the orders of the Commissioner of Income-tax (Appeals) on this point and restore the orders of the Assessing Officer. In result, the appeals filed by the assessee are dismissed and the appeals filed by the Revenue are allowed. The order pronounced on the 13th day of March, 2009.
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2009 (3) TMI 220 - ITAT COCHIN
Appeal To Commissioner (Appeals) ... ... ... ... ..... e assessee-company. Therefore, that condition is also satisfied. It is already settled and recognized that feature film production and exhibition is an industry. Reference may be made to the decision of the Bombay High Court in the case of Abdulgafar A. Nadiadwala v. Asst. CIT 2004 267 ITR 488. As film exhibition is characterized as an industry, the assessee is also satisfies the conditions of an industrial company. In these circumstances, the finding of the Commissioner of Income-tax (Appeals) on merits of the contention of the assessee is justified that the assessee is a sick industrial company entitled to exemption from the restrictive rule of eight year period. In the facts and circumstances of the case, we find that the order of the Commissioner of Income-tax (Appeals) is just and proper both in law as well as in facts. Therefore, the Revenue fails in its appeal. In result, this appeal filed by the Revenue is dismissed. The order pronounced on the 2nd day of March, 2009.
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2009 (3) TMI 219 - ITAT COCHIN
Disallowance of staff salary and allied expenses pertaining to sister concern - AO held that the payments made by the assessee-company to M/s M. Bhaskar Kini & Co. (P) Ltd. was excessive in terms of laws stated in s. 40A(2)(a) - disallowed the sum out of the total claim - CIT(A) deleted the disallowance made AO.
HELD THAT:- AO has no case that no such payments were made by the assessee-company to M/s M. Bhaskar Kini & Co. (P) Ltd. There is also no case that the services of the employees of M/s M. Bhaskar Kini & Co. (P) Ltd. were not utilized by the assessee-company. The legal requirements of claiming the expenditure have been established by the assessee-company. AO has not brought anything on record to show that the payments made by the assessee-company to M/s M. Bhaskar Kini & Co. (P) Ltd. were excessive when compared to the remuneration attributable to the services rendered by the employees. AO also has no case that the extent of services utilized by the assessee-company from the employees of M/s M. Bhaskar Kini & Co. (P) Ltd. was not necessary to carry on the business of the assessee.
Therefore, we find that the disallowance was not justified and CIT(A) has rightly deleted the same. This issue is decided against the Revenue.
Non-deduction of tax for payment of ship charter hire charges - Royalty u/s 9(1)(vi) - Whether the payment made by the assessee is a royalty and whether it is taxable in India - AO has erred in invoking s. 40(a)(i) to disallow the expenses - - Ejusdem generis - CIT(A) has erred in not confirming the disallowance made by the AO - HELD THAT:- The assessing authority has treated. the payments made by the assessee-company under the category of royalty. The expression 'royalty' further means the use of any patent, invention, model, design, secret formula or process or trade mark or similar property. The meaning of the word "property" should be read in the company of the words like patent, invention, model, etc. The principle of interpretation of ejusdem generis applies here. The assessee has not made the payments for the purpose of any such property.
Therefore, it is very clear that the payments made by the assessee-company were in the nature of simple payments for chartering ships on hire for doing the business outside India. Therefore, the payments do not satisfy the test laid down in s. 9. When s. 9 is not satisfied, there cannot be a case that income is deemed to accrue or arise in India as a result of hire payments made by the assessee-company to foreign ships.
The liability u/s. 195 is cast on the assessee only when the payment is made to a non-resident, which is chargeable under the provisions of the IT Act. Here, the payments made by the assessee do not fall under s. 9 and the payments do not take the character of any sum chargeable to tax under this Act. Therefore, s. 195 docs not come into operation.
When s. 195 does not apply to the present case, there is no violation of that section and consequently invoking of s. 40 (a)(i) does not arise. Therefore, we find that CIT(A) is justified in deleting the disallowance made by the AO. This issue is decided against the Revenue.
Claim of expenses made by the assessee for want of proper evidence - AO disallowed u/s. 37- payments made in cash for engaging of labour - AO was of the opinion that the assessee on his own has prepared the vouchers and hence the payments should be disallowed - CIT(A) deleted the same.
HELD THAT:- The claim of expenses cannot be disallowed only on the ground that the mode of evidence produced by the assessee is not sufficient. The deductibility of the expenditure has to be examined in the light of the facts and circumstances of the case. The AO has made comparison of the expenditure for earlier assessment years. But it is to be seen that in all the cases considered for the earlier assessment years, only those payments which were in excess were taken note of. AO has to compare the entire cash payments of those assessment years. The comparison made by the AO is not on a level ground.
As a matter of consistency, we find that the assessee has claimed similar expenses in the past assessments as well and the AO has allowed such expenses. The quantum of expenditure claimed by the assessee for the impugned assessment year is comparable to the total turnover and income returned by the assessee. Therefore, in the facts and circumstances of the case, we find that the disallowance is not called for and the CIT(A) has rightly deleted the same.
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2009 (3) TMI 218 - ITAT COCHIN
Appeal (Tribunal) ... ... ... ... ..... hat when the proceedings pending before the IT authorities got transferred to the Settlement Commission and once the proceedings before the Settlement Commission got abated, the proceedings would revive only before those IT authorities. Tribunal is not an IT authority for the purpose of the IT Act, 1961. Therefore, the Tribunal has no reason to come into the picture at all. 12. In the present case. it is for the CIT(A) to suo motu revive the appeals and decide the same in accordance with law or for the assessee to move a petition before the CIT(A) to revive or restore the appeals and thereafter to proceed in accordance with law. It is only after the CIT(A) passing orders in the appeals after restoration or revival, the Tribunal gets jurisdiction, if circumstances so arise. 13. Therefore, in the facts and circumstances of the case, we reject the appeals filed by the assessee as not maintainable before the Tribunal. The condonation petition filed before the Tribunal is non est.
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2009 (3) TMI 217 - ITAT COCHIN
Business Expenditure ... ... ... ... ..... ers thus not in the role of a farmer but in the role of a businessman. In the present case, the assessee a businessman has assumed the role of a farmer and that role of the farmer cannot be over looked for the reason that the said role was assumed as part of the business expediency of the assessee company. 16. In the case of Sassoon J. David and Co. (P) Ltd. vs. CIT, the Hon ble apex Court held that the law directs attention to the purpose for which, and not to the motive with which the expenditure is incurred, because purpose is different from the ultimate motive. This decision also would apply only if the subject-matter is coming within the statutory competence of the IT Act. 17. As already made clear, agricultural income and agricultural expenses are outside the purview of the IT Act, 1961. In such facts and circumstances of the case, we hold that the lower authorities have rightly made the disallowance. 18. In result, these two appeals filed by the assessee are dismissed.
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2009 (3) TMI 216 - ITAT COCHIN
Educational Institution ... ... ... ... ..... d for claiming exemption under s. 10(23C)(iiid). If the activities carried on by the assessee are only educational activities, the assessee is covered by s. 10(23C)(iiid). The specific function carried on by the assessee is covered by equally specific provision of law and in such circumstances, the assessee is not supposed to take shelter under s. 11. 12. Therefore, we find that the assessments in these two cases have to be completed afresh by applying the provisions of law contained in s. 10(23C)(iiid). The fact that the assessee has claimed exemption under s. 11 should not fetter the applying of the correct provision of law and also rendering of substantive justice. 13. The AO may call for further details from the assessee. if necessary so as to process the cases under s. 10(23C)(iiid). He is further directed to give an opportunity to the assessee to present its case. 14. In the result, these two appeals filed by the assessee are treated as allowed for statistical purposes.
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