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Income Tax - Case Laws

Showing 261 to 280 of 515 Records

• 2013 (8) TMI 664 - ITAT MUMBAI
  

  Revision u/s 263 - Erroneous or prejudicial of revenue - AO allowed the Exemption u/s. 10(34) - Insurance business - Dividend income - whether exemption u/s. 10 can be allowed to an Insurance company when income is computed u/s. 44 of the Act - Held that:- - Issue of deduction u/s. 10 of the Act was considered and allowed following the Hon’ble Bombay High Court Judgment in writ petition No. 2560 of 2011 dt. 01-12-2011 in the case of General Insurance Corporation of India, Mumbai. Versus The Deputy Commissioner of Income Tax, 1(3) Mumbai & Anr. [2011 (12) TMI 70 - BOMBAY HIGH COURT]. Relying upon the judgment in the case of CIT Vs. New India Assurance Co. Ltd [1991 (2) TMI 39 - BOMBAY High Court]; GIC of India vs. CIT(Supreme Court)[2006 (9) TMI 116 - SUPREME Court], it is held that assessee was entitled to exemption u/s. 10 including the dividend income i.e., exemption available u/s. 10(34) of the Act.

  The order passed by the AO allowing exemption u/s. 10(34) of the Act cannot be said to be an order which is erroneous and prejudicial to the interest of the Revenue. - Decided in favor of assessee.

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• 2013 (8) TMI 663 - ITAT HYDERABAD
  

  Deduction u/s 10B - Benefit to 100% EOU - Use of old plant and machinery - conversion of existing unit - Whether the assessee is entitled to claim benefit available to 100% EOU u/s. 10B of the Act read with Circular No. 01/2005 dated 6.1.2005 issued by the CBDT - AO's contention that the old machinery transferred to the new unit exceeded 20% limit - Held that:- Revenue cannot have doubt regarding genuineness of the documents as the documents were issued by Government authorities. It was also made clear before the lower authorities that these are available at the time of survey - The assessee has taken the plant and machinery from M/s. Balaji Agro Oil Industries Pvt. Ltd. which was engaged in the business of castor oil extraction and the present assessee is engaged in chemical business. There is nothing on record to show that the assessee used the machinery used for oil extraction by Balaji Agro Oil Industries Ltd., for the purpose of manufacturing fine chemicals. Further though there was a survey action, the lower authorities not brought on record the bifurcation of the machinery which are already put in to use by Balaji Agro Oil Industries.

  The Assessing Officer not made an allegation that the assessee has not furnished the details of old and new plant and machinery - existing DTA (domestic tariff area) unit can be converted into 100% EOU as per Government of India policy and this is enumerated in Circular No. 1/2005 dated 6.1.2005 issued by the CBDT. Being so, an assessee cannot be denied deduction u/s. 10B of the Act. Further, the assessee in this case applied for approval of Unit-II as 100% EOU to Development Commissioner on 18.12.2002 and the assessee was granted approval as 100% EOU by the Asst. Development Commissioner, Office of Development Commissioner, Visakhapatnam SEZ and issued green card under 100% EOU scheme on 25.4.2003.

  Deduction u/s. 10B has to be allowed to the assessee from the date it got the approval as 100% EOU i.e., 25.4.2003 and the Assessing Officer is directed to allow deduction u/s. 10B from the date of approval as 100% EOU by the competent authority for the unexpired period of 10 consecutive assessment years commencing from the assessment year 2004-05 being regarded as second year of production in first year of commercial production being A.Y. 2003-04. This is so because, even if the new unit was commenced in the FY 2002-03 relevant to A.Y. 2003-04, the claim of deduction u/s. 10B cannot be denied in the FY 2003-04 relevant to A.Y. 2004-05 as this year would be the second year of claim of deduction u/s. 10B of the IT Act - Decided against Revenue.

  Jurisdiction of CIT - CIT set aside claim of 100% depreciation of capital equipment - Held that:- Admittedly, the CIT(A) has no power to remit the issue back to the file of the Assessing Officer with effect from 1.6.2001 as the words "or he may set aside" have been removed from section 251(1)(a) of the Act. Considering this amendment, we are inclined to hold that the CIT(A) should not have sent the issue back to the file of the Assessing Officer and he should have decided the issue by himself. Accordingly, we direct the CIT(A) to decide the issue in accordance with law - Decided in favour of Revenue.

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• 2013 (8) TMI 662 - ITAT DELHI
  

  Undisclosed income u/s 68 - Share application maoney - Onus of proving transaction - Held that:- Assessee's company is not carrying out any business activity. This company has shown investments with others in Schedule-V but details of investment are not available. Therefore, taking into consideration, facts and circumstances and failure of assessee to comply with requirement of Assessing Officer in producing Principal Officers/Directors of share applicant companies, it failed to prove identity as well as genuineness of transaction. They have shown very nominal income. It gives an inference that such returns were filed for creating evidence to be used in future - Following decision of A. Govindarajulu Mudaliar v CIT [1958 (9) TMI 3 - SUPREME Court], CIT vs. N.R. Portfolio (P.) Ltd. [2012 (12) TMI 762 - DELHI HIGH COURT] and CIT vs. M/s. Neelkanth Ispat Udhyog Pvt. Ltd [2012 (8) TMI 198 - DELHI HIGH COURT] - Decided against assessee.

  Disallowance u/s 37 - Expenditure on employee's education (son of Directors) - Held that:- there is no policy formulated by assessee company vide which it had invited applications from all employees for sponsoring their higher education - Had Employee was not son of Directors, his education expenses would have not been met by company. assessee claimed that higher education of Employee would give benefit of more than R.50,000/- per month to assessee company but who has checked credentials of Employee and what salary he would claim in open market. Without there being any material on record, how assessee can say that decision to sponsor education of Employee was not influenced by parental love and affection of Directors - Following decision of CIT vs. R.K.K.R. Steels Pvt. Ltd. [2001 (11) TMI 20 - MADRAS High Court], M. Subramanium Brothers vs. CIT [2000 (12) TMI 67 - MADRAS High Court] and CIT vs. Hindustan Hosiery Ind. [1993 (9) TMI 42 - BOMBAY High Court] - Decided against assessee.

  Disallowance u/s 14- Computation of disallowance on basis of Rule 8D - Held that:- It is only if Assessing Officer is not satisfied with correctness of claim of assessee, in both cases, that Assessing Officer gets jurisdiction to determine amount of expenditure incurred in relation to such income which does not form part of total income under said Act in accordance with prescribed method. prescribed method being method stipulated in Rule 8D of said Rules. While rejecting claim of assessee with regard to expenditure or no expenditure, as case may be, in relation to exempt income, Assessing Officer would have to indicate cogent reasons for same - Matter remitted back - Following decision of Maxopp Investment Ltd. vs. CIT [2011 (11) TMI 267 - Delhi High Court] - Decided in favour of assessee.

  Speculative transaction - Purchase and sales of shares - Section 73 - Held that:- The Explanation exclude certain companies whose gross total income consist mainly of income which is chargeable under heads ‘Interests on securities’, ‘Income from house property’, ‘Capital gains’ and ‘Income from other sources’ or whose principal business is of banking or granting of loans. activities of assessee do not fall in ambit of nature of business provided in Explanation. main business of assessee includes sales of shares. It has shown losses on such activities. Thus, primfacie, Explanation appended to section 73 is clearly applicable on facts of assessee’s case. Under Act, every year is an independent year. If assessee has shown losses in share trading activities and its case falls within mischief of deeming fiction provided in section 73, then, on basis of principle of consistency, assessee cannot plead that requirement of law should not be followed.

  Income from other sources u/s 56 - Cash credit u/s 68 - Held that:- unexplained cash credits have to be brought to tax under section 68 and not under section 56. Both aforesaid sections operate in fields reserved for them. It cannot therefore be said that what is assessable as income u/s 68 must be assessed as income from other sources u/s 56.

  Set off of business loss from income u/s 68 - Held that:- Section 71 permits set off of loss from one head against income from another head of income as enumerated in section 14 - income assessable u/s 68 cannot be assessed under any particular head of income including income from other sources u/s 56 - Therefore, this addition cannot be set off against business losses computed in earlier years. However, as far as expenses disallowed on account of education expenses and on account of establishment expenses are concerned, they are to be set off.

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• 2013 (8) TMI 661 - ITAT DELHI
  

  Disallowance of warranty provision - Contingent nature of warranty provision - Held that:- authorities below are expected to follow the principle of consistency in the light of orders passed by ITAT and first appellate authority in assessee’s own case in earlier assessment years - there was a calculation mistake at the end of Assessing Officer which was later corrected by the Commissioner of Income Tax(A), therefore, it is appropriate to restore this issue to the file of Assessing Officer with a direction that he will decide the issue of assessee’s claim pertaining to provision of warranty in the light of earlier orders of the Tribunal and first appellate authority for the earlier assessment years in assessee’s case - Decided in favour of assessee.

  Rejection of books of accounts - Rejection of application u/s 46A - Held that:- Assessee company filed only journal of April, July, October, 2006 and March 2007 before the Assessing Officer and Assessing Officer rejected the books of accounts u/s 145(3) of the Act with an observation that the books of accounts are not properly maintained and in absence of complete ledger, cash book and vouchers, it is not possible to verify trading results or expenses claimed by the assessee - the books of accounts are necessary evidence for the assessment proceedings and the assessee is bound to cooperate with the Assessing Officer by submitting relevant evidence as per requirements of the Assessing Officer. In the present case, the Assessing Officer has specifically mentioned in the remand report that despite several opportunities to the assessee, the complete books of accounts, bills and vouchers related to the claim of expenses were not submitted by the assessee. The Assessing Officer made a disallowance of 20% of expenses on estimated basis on account of non-production of books of accounts, bills and vouchers despite affording adequate opportunity to the assessee for submission of the same. The Assessing Officer also made a contention in the remand report that the Assessing Officer has never refused to admit any evidence nor there was a position that the assessee is prevented by any sufficient cause for producing the evidence in spite of the fact that sufficient opportunities were granted to the assessee for submitting the evidence in question i.e. production of books of accounts, bills/vouchers - Assessing Officer rejected the books of accounts by holding that the assessee’s accounts were incomplete and incorrect without substantiating anything to prove that its accounts were incomplete and incorrect.

  Books of accounts of the assessee were rejected by the Assessing Officer on baseless reasons which prevented the assessee to produce relevant evidence in support of his claim - Commissioner of Income Tax(A) also rejected the application of the assessee u/s 46A of the Rules without going to the root of the cause which prevented the assessee to produce relevant evidence before the Assessing Officer - claim of the assessee pertaining to total expenses claimed in the Profit & loss account have not been duly verified, evaluated and adjudicated by the authorities below - Decided in favour of assessee.

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• 2013 (8) TMI 660 - ITAT HYDERABAD
  

  Computation of book profit - MAT u/s 115JA - Treatment of interest income for the purpose of section 80IA and thereafter book adjustment u/s 115JA - Deletion of business income - Held that:- The Assessing Officer, while working out the deemed income under S.115JA treated an amount of Rs.3,52,98,854 shown as other income as not earned from business of power generation. It is the contention of the assessee that this income is part of the business of the assessee eligible for deduction under S.80IA, so that the same can be excluded from the provisions of S.115JA as well. The Assessing Officer did not agree and before the CIT(A), the same contentions were reiterated. However, it was also submitted that an amount of Rs.17,75,951 was earned on deposits made for procuring spares which has a direct nexus with the amount borrowed - It is already on record that the amount of Rs.17,75,951 was earned from the deposits made from the borrowals on which interest was also paid. Therefore, there was a nexus with the interest paid to the interest earned - Following decision of Lalsons Enterprises V/s. DCIT [2004 (2) TMI 294 - ITAT DELHI-E] - Decided against Revenue.

  Deletion of addition made by A.O. - Foreign exchange fluctuations - Held that:- The assessee has furnished the return admitting loss at Rs.9,91,61,190 in the re-assessment proceedings. It is also noticed that the assessment was reopened under S.148 issuing notice on 29.01.2003 for the purpose of bringing to tax the income under the MAT provisions of S.115JA. Since this issue of deduction of foreign exchange claim was also crystalised in the original assessment, and since it was not an issue for reopening the assessment, we are of the opinion that the order of the CIT(A) is justified. Further, the assessee has already offered the same amount as income in assessment year 2002-03 - Decided against Revenue.

  Deduction u/s. 115JA(2)(iv) - Deduction u/s 80IA - Income from business of power - Held that:- It is the assessee’s income which has various components for working out the purchase price of energy from the assessee by the AP Transco and one of the components was capital cost of the power project. Since the amount accounted for as income was component of the enhanced capital cost which is directly related to sale of energy, we do not see any reason to treat it as ‘other income’. The Assessing Officer’s objection that it has not been taken to Profit & Loss Account is not correct, as the assessee has adjusted under the head ‘prior period adjustments’ and has offered as income during the year. This was also accepted in the regular computation of income - Decided against Revenue.

  Reopening of assessment - Held that:- reopening of the assessment after four years from the end of the assessment year is bad in law - no new information has been brought on record and the entire information having been placed on record before the Assessing Officer in the course of original assessment, the opinion of the Assessing Officer now can only be considered as change of opinion based on the order for assessment year 2003-04. Since there is no failure on the part of the Assessing Officer in disclosing the material facts at the time of completion of assessment, the reopening after four years from the end of the assessment year, is certainly not as per the provisions of S.147, which empowers the Assessing Officer to reopen only if the conditions are satisfied. Since the proviso to S.147 is clearly applicable - Decided against Revenue.

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• 2013 (8) TMI 659 - ITAT HYDERABAD
  

  Deemed sale - Addition of income from dispatches to sub-contractors - percentage completion method - Difference between the concluded sales and estimated sales - Held that:- There seems to be a prima facie mistake committed by the Assessing Officer in treating the difference between the concluded sales and estimated sales on despatches made to sub-contractors as not accounted, whereas both the streams of income were already taken to the Profit & Loss Account. If this aspect is found to be correct, there is no need to make any addition, as the assessee has offered both the streams of income in the respective Profit & Loss Accounts. Since there seems to be a mistake committed in the course of assessment proceedings and also first appellate proceedings, in the interests of justice, we set aside the issue to the file of the Assessing Officer to examine the contentions of the assessee and in case it is found that the assessee has already accounted for the income as stated above, the question of making any further addition does not arise at all. With these directions, we restore the respective additions in the three years to the file of the Assessing Officer for examination of facts and to decide accordingly. Assessee should be given due opportunity for explaining the above contentions - Decided in favour of assessee.

  Addition towards incorrect accounting of stock - Held that:- The MOU between the assessee and the VSSC, a Government organization, was examined and there is no dispute with reference to the fact that assessee is maintaining a metal bank for procuring strategic raw-material and using them as and when there was order from VSSC for its supply. It is also on record that the VSSC is providing funds and assessee only procures them on behalf of the VSSC and keeps sufficient stock in its godown. Just because the stock was procured by the assessee, it does not mean that it has ownership on the stock, which pertained to VSSC - While accepting that the assessee is maintaining the stock of material on behalf of others and only charging fixed amount for this service, and as such, apparently, there is no need to admit the same in their books as stock in trade, he confirmed the same holding that the assessee did not specify how the balance figures are shown in the books of VSSC and what is the effect of this confirmation. This reasoning given by the CIT(A) cannot be accepted because VSSC has certified the stock under consideration belongs to it and in no way the ownership of the stock pertains to the assessee. Just because the stock is kept with the assessee the same cannot be treated as the stock of the assessee, as it belongs to a third party, viz. VSSC in this case - Decided in favour of assessee.

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• 2013 (8) TMI 658 - ITAT KOLKATA
  

  Business income or capital gain - Income from purchase and sale of shares - Held that:- a perusal of the facts of the present case clearly shows that no borrowed funds had been used by the assessee for the purchase and sale of shares. Further, a perusal of the list of shares as also the details of the short -term capital gains clearly shows that the assessee is not regularly purchasing and selling shares in a systematic manner to be termed as ‘business’. Substantial portion of the gains as disclosed by the assessee is admittedly from the sale of shares, which have been purchased from IPOs and public offers. It cannot be said that the assessee is regularly and systematically doing any business of purchase and sale of shares. Further, the fact that for the earlier and subsequent years, the Revenue has accepted the similar transact ions in the hands of the assessee being taxed as short -term capital gains also goes in favour of the assessee - Following decision of Radhasoami Satsang Versus Commissioner of Income-Tax [1991 (11) TMI 2 - SUPREME Court] - Decided in favour of assessee.

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• 2013 (8) TMI 637 - ALLAHABAD HIGH COURT
  

  Period of Limitation in passing the assessment order - Petitioner has prayed for setting aside the assessment order dated 31.12.2004 for the assessment years 1998-99 to 2002-03 - Contention of the petitioner before the High Court that the original accounts books were seized by the office of the Assessing Officer under Section 131 (3) – Held that:- The contention of the Petitioner that original books of accounts is with Assessing officer is not factually correct - Petitioner was fully aware that the limitation for assessment was going to expire on 8.12.2004. Taking advantage of the letter of the Assessing Officer dated 24.12.2003, which was more than a year old and did not give any details of the books of accounts, which were seized from the previous director of the company, filed the earlier writ petition and obtained an order without disclosing the contents and nature of the documents, which were retained by the department and whether they were relevant for assessment.

  The petitioners were aware of the date fixed by the Assessing Officer in his last notice dated 17.12.2004, which was served on the petitioner on 20.12.2004. Inspite of appearing before the Assessing Officer and participating in the assessment proceedings the petitioner left a letter on the dak counter of the department on 29.12.2004, requesting to provide them documents. The petitioner-company refused to cooperate with the Assessing Officer in the assessment proceedings. They deliberately absented from the proceedings as they could not have faced the Assessing Officer, who was aware of the facts and from whom they had taken time to produce the books of accounts – No merit found in the writ petitions – Writ Petitions dismissed – Decided against the Assessee.

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• 2013 (8) TMI 636 - ALLAHABAD HIGH COURT
  

  Exemption of the amount received as royalty/consultancy charges under Section 80HH and Section 80-I of the Act - Assessee company is engaged in the manufacturing of wide range of products like industrial perfumes, chewing tobacco, synthetic essential oil etc. The assessee has entered into an agreement with Hindustan Lever Ltd. (for short, 'HLL') whereby assessee as the licensor had licensed the formula developed through its research and gave exclusive right to HLL to use the said formula in their products specially in liril soap - It is the claim of the assessee that along with its manufacturing activity, the assessee carried out the research and development activity side by side making use of the entire paraphernalia of the industrial undertaking – Held that:- In the instant case, the consultancy has no nexus with the objects as mentioned in Section 80HH & 80-I of the Act. The case laws relied by the assessee are in the context of old Section of 80E/80I, in which the words were "profit attributable to" as distinct from the word "profit derived from" in the present Section of 80HH and 80-I of the Act.

  Reliance is placed upon the judgment in the case of Honda SIEL Power Products Ltd. vs. Commissioner of Income-tax [2007 (10) TMI 298 - DELHI HIGH COURT], wherein observation made is "Both sections 80HH and 80-I of the Income-tax Act, 1961, use the expression "profit and gains derived from an industrial undertaking". The Supreme Court has drawn a distinction between the expression "derived from" and "attributable to" in Combay Electric Supply Industrial Co. Ltd., vs. CIT, [1978] 113 ITR 84. Only such business profits that have a direct nexus to the essential business activity of the assessee can qualify for deduction under Section 80HH of the Act. Inasmuch as both Sections 80HH and 80-I use the expression "profits and gains derived from an industrial undertaking", the burden is on the assessee to show that the income earned from an activity, the profits from which are claimed to qualify for deduction, has an immediate and direct nexus to the essential activity of the industrial undertaking."

  In the instant case, the consultancy charges received from the HLL is a receipt. So, it is subject to tax and cannot be allowed for deduction under Section 80HH & 80-I of the Act. For the purpose of this section, the profit and gains of the new undertaking is not commercial profit but only such profit as are computed in the manner land down under the Act in pursuance of Section 80AB, as if each undertaking was a separate assessee - By considering the totality of the facts and circumstances of the case, the consultancy charges are not exempted under Section 80HH & 80-I of the Act – Decided in favor of Revenue.

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• 2013 (8) TMI 635 - ALLAHABAD HIGH COURT
  

  Search u/s 132 of the Income Tax Act - Block assessment - Addition on account undisclosed investment based on diary of the assessee - Held that:- The Assessing Officer has made the addition in this case on the basis of the diary as if the assessee has advanced money to the farmers. The money so advanced will tantamount to be the investment made by the assessee which can be added only under section 69 in the year in which the advance has been made if it is undisclosed income of the assessee as defined u/s 158B(b). Therefore, we do not agree with the finding of the CIT(A) that computation of the income of a particular Assessment Year within the block period is not relevant. In our opinion, the income has to be first computed in a particular assessment year. If the income will not fall in a particular Assessment Year, it cannot form part of the undisclosed income.

  Assessee was asked to verify from the DR whether entries in Annexure A-10 were duly recorded in books of account. The D.R. after several sitting with the assessee filed written submissions and reiterated the findings of the Assessing Officer, at the outset, that the assessee has not maintained the regular books of accounts for the assessment year 1998-99, ignoring the fact that the assessment for the assessment year 1998-99 was completed under Section 143 (3). The A.R., however, could not explain the amount of Rs.10,000/-, Rs.15,000/-, Rs.7100/- and Rs.5000/- totalling Rs.1,27,100/-, which was not entered in the regular books of accounts and which was treated as undisclosed income.

  The assessee had maintained account on computers and that notice in Register A-10 sufficiently explained the entries except an amount of Rs.1,27,100/-, which was treated to be undisclosed income found during the course of search – Decided against the Revenue.

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• 2013 (8) TMI 634 - GUJARAT HIGH COURT
  

  Legality of search & seizure operations – Held that:- As per judgment in the case of Ajit Jain v. Union of India [2000 (1) TMI 41 - DELHI High Court], wherein it was held that even assuming that the amount found from the person was not reflected in the books of account of the Company, mere possession of such amount by the petitioner could hardly be said to constitute information which could be treated as sufficient by a reasonable person. Further, in the case of Dr. Mrs. Anita Sahai v. Director of Income Tax, [2004 (2) TMI 55 - ALLAHABAD High Court ], search and seizure operations were quashed observing that search and seizure can not be fishing expedition. Before search is authorized, the Director must on the relevant material have reason to believe that the assessee has not and would not have disclosed his income.

  On the basis of the above decisions, it has been held that mere possession of money, bullion, jewellery or such valuable article or thing per-se would not be sufficient to enable the competent officer to form a belief that the same had not been or would not be disclosed for the purpose of the Act. What is required is some concrete material to enable a reasonable person to form such a belief. It is, of course, true that such belief is a matter of subjective satisfaction of the competent authority. Such subjective satisfaction, however, must be formed on the basis of the material on record and objective assessment of such material and cannot be on the basis of a mere suspicion or apprehension that the income had not been or would not be disclosed for the purpose of the Act - In the result, the petition is allowed. Search and seizure operation is declared illegal and it is hereby quashed. Consequently, seizure of the gold ornaments under panchnama dated 26th July, 2012 is also quashed – Decided in favor of Assessee.

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• 2013 (8) TMI 633 - ITAT MUMBAI
  

  Deduction claim u/s 80IB of the Income Tax Act - Karaikal Unit in respect of which the impugned deduction u/s 80IB of the Act is claimed by the assessee for the year under consideration was set up in the year 1996 by EID Parry (India) Ltd. and the same was taken over by the assessee - No deduction u/s 80IB of the Act was claimed by EID Parry (India) Ltd. in respect of the said unit in the initial years and even by the assessee up to the immediately preceding year - Due to the continuing losses suffered by the said unit in the earlier years, no deduction u/s 80IB of the Act was claimed as stated by the assessee and the year under consideration was the first year where there was an occasion to claim such deduction – Held that:- The issue as to whether the said unit is eligible for deduction u/s 80IB of the Act or not is required to be established with reference to the initial year and the onus on this regard is on the assessee to establish by producing the relevant documentary evidence to establish that the eligibility conditions stipulated for claiming the deduction u/s 80IB of the Act were duly satisfied in the initial year - It is also required for the A.O. to point out to the assessee as to what exactly is the documentary evidence required to establish its case if the documentary evidence produced by the assessee is found to be not satisfactory by him – Matter remitted to the file of the A.O. with a direction to decide the same afresh after giving the assessee proper opportunity of being heard.

  Disallowance made u/s 36(1)(va) on account of deposit of employees contribution to PF/ESTC made beyond the due date – Held that:- Relying upon the decision of Hon'ble Kerala High Court in the case of Commissioner of Income-tax v. South India Corporation Ltd. [1999 (10) TMI 44 - KERALA High Court] and that of Hon'ble Madras High Court in the case of Commissioner of Income-tax v. Shri Ganapathy Mills Company Ltd. [1999 (2) TMI 26 - MADRAS High Court], it was held that due date of payment under the relevant Act is inclusive of the grace period allowed under the said Act – Decided against the Revenue.

  Explanation to Section 43(1) of the Income Tax Act - Disallowance on account of interest attributable to the borrowed funds utilized for acquiring the office premises – Assessee made payment of Rs. 13.56 crores for the purchase of office premises. The said amount was paid by the assessee from the loan taken from UTI Bank Ltd – Held that:- The interest paid on the borrowed funds utilized for acquiring such capital asset is allowable as revenue expenditure as per the main provisions contained in section 36(1)(iii) of the Act - Assessee acquired the capital asset of office premises for the purpose of its existing business and not for any extension of its existing business – Decided against the Revenue.

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• 2013 (8) TMI 632 - ITAT MUMBAI
  

  Applicability of provisions of section 50-C of the Act - Date of agreement versus date of excution of agreement (i.e. conveyance deed) – Held that:- Relying upon the decision in the case of M. Siva Parvathi & Ors[2009 (10) TMI 618 - ITAT VISAKHAPATNAM], it is held that section 50-C of the Act cannot be applied to the sale agreements entered into before the introduction of the said provisions i.e before 1-4-2003 especially when delay in execution and registration of conveyance is sufficiently explained and there is no allegation of suppression of actual consideration – Decided in favor of Assessee.

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• 2013 (8) TMI 631 - ITAT MUMBAI
  

  Allowance of depreciation when no business was carried out – There was withdrawal of permission by RBI to carry on the business activity, therefore, the business of the assessee was not at all in existence – the assessee has filed a copy of letter dated 23-02-2006 issued by RBI reviving the permission to carry on the business activity - Assessee has urged that this additional evidence may be admitted as it was written to carry on the business activity as it was again granted by the RBI on 23-2-2006 i.e. in the year under consideration itself -Assessee therefore was entitled to depreciation as the relevant assets were ready to use for its business which was in existence in the year under consideration - Held that:- ld. D.R. has not raised any objection for admission of the said additional evidence - Additional evidence requires verification and the matter may be sent back to the A.O. for such verification - Assessee also has no objection in this regard – Matter restored to the file of the A.O. with a direction to verify the stand of the assessee of having received the required permission from RBI to revive its business activity in the light of additional evidence filed by the assessee and decide the issue relating to the assessee's claim for depreciation in accordance with law.

  Disallowance of Rs. 29,65,122/- on account of prior period expenses - Said expenditure was mainly comprising of Customs and Excise Duty pertaining to the earlier period which was paid during the year under consideration and claimed as deduction on payment basis – Held that:- The assessee has filed a copy of letter filed before the ld. CIT(A) along with the documents annexed thereto - The assessee was registered as 100% export oriented unit under STPI and accordingly it was allowed to import and buy indigenous machinery without payment of customs and excise duty respectively. The assessee was required to be used the said machinery for export turnover only and it had to fulfill certain export obligation. As further submitted in the said letter, the assessee, however, could not fulfill the export obligation and hence intended to de-bond the same for utilization of the same for local turnover purpose. For this purpose, the assessee was required to pay customs and excise duty for the machinery and although the assessee initiated the process of de-bonding in the earlier year, the first demand for custom and excise duty was raised by the excise authorities only on 19-4-2006. As per the said demand, the custom and excise duty aggregating to Rs. 29,65,122/- was paid by the assessee under two challans dtd. 28-4-2006.

  A perusal of the impugned order of the ld. CIT(A), shows that this important submission made by the assessee as well as the relevant documentary evidence produced in support thereof has not been considered by the ld. CIT(A) as there is no discussion specifically on this point of prior period expenditure in his impugned order - Stand taken by the assessee relying on the relevant documentary evidence requires verification – Ordered to restore this issue to the file of the A.O. with a direction to decide the same after verifying the stand of the assessee from the relevant documentary evidence.

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• 2013 (8) TMI 630 - ITAT CHENNAI
  

  Cost of acquisition of land for computation of Capital Gains – Determination of FMV as on 1.4.1981 - CIT (Appeals) directed the Assessing Officer to adopt the value of land at Ambattur Industrial Estate at Rs. 50 per sq.ft. as on 1.4.1981 for the purpose of computing capital gains - Issue in appeal has been decided by the coordinate Bench of this Tribunal in favour of the assessee for the immediately preceding assessment year i.e. 2008-09 in ITA No.803/Mds/2012 dated 9.8.2012 - Assessee had claimed fair market value of the land situated at Ambattur Industrial Estate at Rs.108/- sq.ft. as on 1.4.1981 but the Assessing Officer adopted the value at Rs.5/- per sq.ft. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to adopt the value at Rs. 50/- per sq.ft. and this valuation of Rs. 50/- per sq.ft was held to be reasonable by the co-ordinate Bench of this Tribunal in the assessee’s own case for the earlier assessment year – Held that:- Value adopted by the assessee company is supported by the reports furnished by two independent valuers. Moreover, the value adopted by the Assessing Officer is too low, when compared to the guideline value of the land at Rs. 536/- per sq. ft. as on 1.4.2007. It is after considering all these aspects that the Commissioner of Income-tax(Appeals) has adopted the fair market value at Rs. 50/- per sq. ft - Value adopted by the Commissioner of Income-tax (Appeals) is reasonable.

  Exclusion of interest on bank loan and term loans for the purpose of determining disallowance under Rule 8D(2)(ii) read with section 14A of the Act – Held that:- Commissioner of Income Tax (Appeals) excluded the interest on bank loan and term loans from the calculation of disallowance under Rule 8D(2)(ii) as the assessee has utilized the bank loan and term loan for the purpose of purchase of machineries and for expansion of projects and these loans were specifically sanctioned for specific project and such loans were also used for the purpose for which they were sanctioned. In the circumstances, Commissioner of Income Tax (Appeals) has rightly excluded such interest from the purview of computation of disallowance under Rule 8D(2)(ii) – Decided against the Revenue.

  Writing off of advances to its subsidiary companies on the ground that the assessee failed to substantiate that the advances have been made in the course of normal business – Held that:- The facts and circumstances of the case show that the assessee has extended loans and advances to its subsidiaries to support the business and on account of commercial expediency. The subsidiaries could not repay the loans or advances for the reason that they have incurred huge financial losses and have gone sick. The Assessing Officer has not disputed the fact that subsidiary companies are under liquidation proceedings and therefore loans are not recoverable. It is understandable that assessee was constrained to write off the advances as the same were not recoverable on account of losses suffered by the subsidiaries and in some of the cases on account of liquidation proceedings – Also, in the instant case, it is an admitted fact that the loans advanced to the subsidiary companies were utilized by them for their business requirements and have not been utilized for the personal benefits of the individuals/directors – Decided against the Revenue.

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• 2013 (8) TMI 629 - ITAT BANGALORE
  

  Whether discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head profits and gains of business? - Vesting period and quantum of entitlement of shares – Held that:- The period from grant of option to the vesting of option is the `vesting period' - It is during such period that an employee is supposed to render service to the company so as to earn an entitlement to the shares at a discounted premium. The vesting period may vary from a case to case. If the vesting period is, say, four years with equal vesting at the end of each year, then it is at the end of the vesting period or during the exercise period, which in turn immediately succeeds the vesting period, that the employee becomes entitled to exercise 100 options or qualify for receipt of 100 shares at discount - Though the shares are allotted at the end of the vesting period, but it is during such vesting period that the entitlement is earned. It means that 25 options vest with the employee at the end of each year on his rendering service for the respective year. If during the interregnum, he leaves the service, say after one year, he will still remain entitled to exercise option for 25 shares at the discounted premium at the time of exercise of option. In that case, the benefit which would have accrued to him at the end of the second, third and fourth years would stand forfeited. Thus it becomes abundantly clear that an employee becomes entitled to the shares at a discounted premium over the vesting period depending upon the length of service provided by him to the company. In all such schemes, it is at the end of the vesting period that option is exercisable albeit the proportionate right to option is acquired by rendering service at the end of each year.

  Quantification of ESOP discount – Subsequent adjustment at the time of exercise of options – Held that:- Company incurs a definite liability during the vesting period, but its proper quantification is not possible at that stage as the actual amount of employees cost to the company, can be finally determined at the time of the exercise of option or when the options remain unvested or lapse at the end of the exercise period. It is at this later stage that the provisional amount of discount on ESOP, initially quantified on the basis of market price at the time of grant of options, needs to be suitably adjusted with the actual amount of discount.

  ESOP discount – Held that:- Discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t. the market price of shares at the time of grant of options to the employees - The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time. However, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option. No accounting principle can be determinative in the matter of computation of total income under the Act. The question before the special bench is thus answered in affirmative by holding that discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head `Profits and gains of business or profession'.

  Deduction for discount – Discount amounting to ₹ 3.38 crore for the A.Y. 2003-04 - On being called upon to furnish bifurcation of such claim, the assessee filed a chart showing its detail comprising of four amounts. First amount of ₹ 1.62 crore has been shown as the first tranche of 25% option. Second amount of ₹ 81.25 lakh as the second tranche of 25% option; third amount of ₹ 54.16 lakh as the third tranche of 25% option and the last amount of ₹ 40.62 lakh as the fourth tranche of 25% option – Held that:- Last three amounts can’t qualify for deduction at the end of the first year itself - Assessee claimed deduction for the proportionate part of discount for the second, third and fourth year at the end of the first year itself because 25% of options vested in the employees at the end of the first to fourth year each. This defies all logics and rationalities - When the options vest equally over a period of four years, it is but natural that the company would incur equal liability for the discounted premium @ 25% of total discount on receipt of services of the employees at the end of each year. The way in which the assessee has claimed deduction runs contrary even to the SEBI Guidelines, which also provide for deduction on straight line basis. The manner of the assessee's claiming deduction has resulted in needlessly increasing the amount of deduction for the first year at the cost of deduction for the subsequent three years. It needs to be set right by apportioning the total amount of the discounted premium evenly over the vesting period of four years.

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• 2013 (8) TMI 628 - ITAT AHMEDABAD
  

  Disallowance of depreciation - Assets leased to Western Railways - CIT allowed depreciation - Held that:- it is not a case, as is appearing from different clauses of the lease deed that the equipments leased will be returned back to the lessor after the expiry of the lease. Nothing has been brought to disapprove the said clauses of the lease deed by any of the authorities below - It is not proved that assessee is only a financer and is not interested in the assets and therefore, it cannot be said as full payout lease - such claim did not arise for consideration for the first time, but, is spread over to the entire period between A.Y. 1996-97 to 1999-2000. Such claim was made by the Assessee and duly granted by the Assessing Officer - Following decision of DEPUTY COMMISSIONER OF INCOME TAX BHARUCH CIRCLE. VERSUS GUJARAT NARMADA VALLEY FERTILIZERS CO LTD [2013 (8) TMI 300 - GUJARAT HIGH COURT] - Decided in favour of assessee.

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• 2013 (8) TMI 627 - ITAT MUMBAI
  

  Deduction of consultancy fees - contract work for film production - A.O. made disallowance - CIT deleted disallowance - Held that:- although the assessee was engaged in the business of trading in investment and securities and the contracts for film production were executed by it for the first time during the year under consideration, there was complete unity of control and management - if there is common management and common control of the business, the new line of business constitutes expansion of the existing business - business relating to film production was set up in the year under consideration and the expenditure in question on payment of consultancy fees having incurred by the assessee in connection with the said business, the same was allowable as deduction even though the execution of the contract work for film production was not commenced during the year under consideration - Following decision of B.R. Ltd. vs. CIT [1978 (5) TMI 3 - SUPREME Court] - Decided against Revenue.

  Applicability of Rule 9-A - Expenditure on production of feature films - Whether the assessee is in the business of production of feature films as contemplated in Rule 9A - Held that:- It is manifest from the relevant portion of the agreement between the assessee company and M/s Sahara India TV Network that the role of the assessee company as "production house" was limited to produce the films at the instance of the producer Sahara India TV Network strictly in accordance with the concept, theme, script, production value and production schedule etc. approved by the producer. Even any alteration in the approved details was to be done with the prior written consent of the producer - The activity of production of film was to be monitored and supervised by M/s Sahara India TV Network as producer and the instructions and advice given by M/s Sahara India TV Network to the assessee, be it commercial and otherwise, was binding on the assessee as the production house. M/s Sahara India TV Network as the producer was entitled to use , exhibit, market, sell, distribute, re-produce, assign and exploit etc. the films and parts thereof as may be decided by it being perpetual and global territory holders of the films and the assessee production house was not entitled to any rights, interests and claims whatsoever except the gross consideration expressly provided in the agreement - all these terms and conditions of the agreement are sufficient to show that M/s Sahara India TV Network was the producer of the film as envisaged in Rule 9A and not the assessee and the said Rule therefore was not applicable in computing the business income of the assessee - Decided against Revenue.

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• 2013 (8) TMI 626 - ITAT HYDERABAD
  

  Penalty u/s 271(1)(c) - CIT estimated profit rate @ 5% - Held that:- Tribunal in a large number of cases of assesses, carrying liquor trade has directed estimation of profit at the rate of 5% on the sales turnover of the assessee - Following decisions of Badri Prasad Bhagavandas & Co. Vs. CIT [1994 (10) TMI 268 - MADRAS HIGH COURT] - Decided against Revenue.

  Penalty u/s 271(1)(c) - Rejection of books of accounts - CIT deleted penalty - Held that:- Merely because the profit has been estimated and certain additions are made in the assessment would not automatically lead to imposition of penalty u/s 271(1)(c) of the Act. The additions made in assessment proceedings ipso facto does not lead to a conclusion that the assessee has concealed particulars of income or furnished inaccurate particulars of income. There must be material brought on record on the basis of which a conclusion can be formed that there is a conscious attempt on the part of the assessee to conceal its income or furnish inaccurate particulars of its income. It is not disputed that the major addition in case of the assessee is on account of estimation of profit - It is well settled principles of law that when profit is estimated there cannot be any inference that the assessee has concealed the income or furnished inaccurate particulars of income so as to attract the provisions of section 271(1)(c) of the Act - Following decisions of CIT vs. Iqbal Singh & Co. [2009 (3) TMI 568 - HIGH COURT OF PUNJAB AND HARYANA] and Eagle Synthetics (P) Ltd. Vs. Income-tax Officer [2010 (2) TMI 719 - ITAT, Ahmedabad] - Decided against Revenue.

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• 2013 (8) TMI 625 - ITAT MUMBAI
  

  Valuation u/s 50C - A.O. rejected valuation done by Govt. valuer - Held that:- valuation is done by the government approved valuer - valuation done by the government approved valuer cannot be brushed aside, as it has been done by a qualified person - Following decisions of ITO vs United Marine Academy [2011 (4) TMI 15 - ITAT MUMBAI], Mrs. Sosamma Paulose vs JCIT [2003 (2) TMI 161 - ITAT COCHIN] and CIT vs Raman Kumar Suri [2012 (12) TMI 421 - BOMBAY HIGH COURT] - Decided in favour of assessee.

  Disallowance u/s 14A - Expenditure to earn the exempt incomes - Held that:- assessee was holding on to old investment in shares in which hardly one dividend is received in a year on which no expenditure was incurred - It is quite incomprehensible income claimed to be exempt is huge amount in dividends, and receiving the same in one dividend warrant is improbable - Assessee's grievance not clear - Decided against assessee.

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