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Income Tax - Case Laws
Showing 181 to 200 of 515 Records
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2013 (8) TMI 834
Applicability of Section 50C - Transfer of capital assets - A.O. computed capital gain u/s 50C - CIT confirmed computation by A.O. - Held that:- If the AO was to invoke the provisions of Sec. 50C, then A.O. should have first referred the matter to the Valuation Officer - CIT(A) has erred in not asking the AO to refer the matter for valuation - Decided in favour of assessee.
Set off of brought forward unabsorbed depreciation - Held that:- current year's depreciation is to be allowed as set off from the Long term capital gains and brought forward depreciation is to be treated as current year's depreciation as per the legal fiction of Sec. 32(2) of the Act, the same is also be allowed to be set off from the long-term capital gains - Following decision of Suresh Industries (P) Ltd. Vs ACIT [2012 (11) TMI 674 - ITAT MUMBAI] - Decided in favour of assessee.
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2013 (8) TMI 833
Adventure in the nature of trade - Treating income arising out of the sale of agricultural land as business income Sale of agricultural land, a long term capital gain, exempted under Income Tax Act - Assessee owns the agricultural lands situated at Mankal village in Maheswaram Mandal of R.R. Dist - During the year, i.e., 2007-08, the assessee has sold the entire land on 1.12.2006 to M/s. Prajay Holding Pvt. Ltd. for a total consideration of ₹ 24,81,60,000 - Held that:- Agricultural land of the assessee is outside the Municipal Limits of Hyderabad Municipality and that also 8 km away from the outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee Reliance is placed upon the cases s.a. DCIT vs. Arijit Mitra[2011 (8) TMI 556 - ITAT, KOLKATA]; M.S. Srinivas Naicker vs. ITO [2007 (1) TMI 149 - MADRAS High Court ] etc.
It is important to note that what was the intention of the assessees at the time of acquiring the land or interval action by the assessee between the period from purchase and sale of the land and the relevant improvement/development taken place during this time is relevant for deciding the issue whether transaction was in the nature of trade. Though intention subsequently formed may be taken into account, it is the intention at the inception is crucial. One of the essential elements in an adventure of the trade is the intention to trade; that intention must be present at the time of purchase. The mere circumstances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. In a case where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise as strong presumption that the transaction is an adventure in the nature of trade.
In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations and with this intention assessee entered into lease agreement and even there was no intention to sell the land in future at that point of time. It was due to certain compelling circumstances came into picture at a later stages, the assessees were forced to sell the land. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade Appeal allowed - Decided in favor of Assessee.
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2013 (8) TMI 832
Contrary decision passed by A.O. against remand back order of Tribunal - Deduction u/s 80IA - Power of Tribunal to review its own decision - Held that:- Once the Tribunal has set aside the orders impugned in the appeals before it on the issue and restored the matter to the file of the Assessing Officer with the above findings, the duty of Assessing Officer is to pass orders giving effect to the order of the Tribunal - Tribunal has not rejected the claim of the assessee under S.80IA and on the other hand, it was held that the assessee is entitled for deduction under S.80IA - assessee has carried on infrastructure projects, and it is for the purpose of considering other projects, if any, and to quantify the deduction, the issue was remitted back to the file of the Assessing Officer. If the Assessing Officer fails to properly understand or appreciate the directions of the Tribunal, all that can be done at this stage is to mention that the assessee has liberty to explore and pursue the remedies available under law, as the Assessing Officer is duty bound to pass the consequential orders in conformity with the order of the Tribunal cited and he has no discretion or choice to overlook the order of the Tribunal - Having decided the appeals of the assessee, before it, with its common order the Tribunal is ceased of its jurisdiction over those appeals, except to the limited extent of rectifying any mistake therein in terms of provisions of S.254(2) of the Act - Assessee has not mentioned any mistake in Tribunal's order which warrants rectification - Therefore, decided against assessee.
Doctrine of Precedent - Whose decision is binding on whom - Held that:- It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision, just like in the case of Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunal subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working; otherwise there would be confusion in the administration of law and respect for law would irretrievably suffer - It is elementary that what is binding on the court in a subsequent case is not the conclusion arrived at in a previous decision, but the ratio of that decision, for it is the ratio which binds as a precedent and not the conclusion Following decision of Baradakanta Mishra v. Bhimsen Dixit [1972 (9) TMI 142 - SUPREME COURT].
Decision of the tribunal is binding on the Assessing Officer and he cannot pick up a word or sentence from the order of the Tribunal de hors the context of the question under consideration and construe it to be complete law declared by the Tribunal. A judgment must be read as a whole. Being so, the Assessing Officer cannot sit in judgment over the order of the Tribunal, and he is required to give just effect to the order of the Tribunal. If he has any grievance, he is at liberty to appeal against that order of the Tribunal before higher forum
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2013 (8) TMI 831
Eligibility for deduction under section 80IA of the Income Tax Act Held that:- Assessee should not be denied deduction under S.80IA of the Act as the contracts involves, development, operating, maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract - Contracts which contain the above features to be segregated and on this deduction u/s. 80IA has to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitled for deduction u/s. 80IA of the Act Decided in favor of Assessee.
Rectification of mistake in the order by Honble Tribunal u/s 254(2) of the Income Tax Act - Assessee speaks of is about the grievance that it has suffered on account of the consequential orders passed by the Assessing Officer for the years under consideration, while giving effect to the order of this Tribunal dated 16.3.2012 Held that:- In Miscellaneous Applications or the Written Submissions furnished before Honble Tribunal in support of their claim, the assessee did not pointed out any mistake in the order dated 16.03.2012 of Tribunal, which warrants rectification in terms S.254(2) of the Act - Consequential orders passed by the Assessing Officer constitute independent proceedings, and not part of the proceedings which led to the passing of the order of the Tribunal dated 16.3.2012 - Grievance of the assessee on account of alleged mistakes in such consequential orders, either on account of interpretational differences or even on account of disrespect/disregard to the directions of the Tribunal, shall not vest any power or jurisdiction back with the Tribunal, to oversee the correctness of the correctness of the consequential orders passed, much less, to give directions to revise or rectify the same, even if there is any mistake in the same - Remedy for the assessee lies elsewhere, viz. in the fresh proceedings commencing with such consequential orders and not in the proceedings that culminated with the order of this Tribunal dated 16.3.20120 - In the absence of any specific mistake which warrants any rectification within the scope of the provisions of S.254(2) of the Act, in the order of the Tribunal dated 16.3.2012, no rectification in the order required Decided against the Assessee.
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2013 (8) TMI 830
Writing off of stock - CIT deleted addition - Held that:- provision for slow moving/obsolete inventory, which is created each year in the profits & loss account and balance sheet prepared in accordance with the Companies Act, 1956, has been specifically added back while computing taxable income under the IT Act, while filing the return of income of the respective year i.e. the assessee has not claimed deduction on the 'Provision' created in its accounts, in its income tax computation in the earlier years - assessee had sold the slow moving stock and disclosed the sale proceeds, in its sales account. The provision was written back as no longer required in the accounts and as the provision was not claimed as an expense in its income tax computation in the year in which it was created, the same need not be added back once again. The action of the AO is a double addition. A figure which was never claimed or allowed as a deduction in the earlier year was added back - CIT DR has mistook the write back of provision of inventory, as sale proceeds of slow moving/obsolete inventory of raw materials and thus the confusion. The write back of provision is not sale proceeds of slow moving/obsolete inventory. The sale proceeds have been accounted for as income under the head turnover "Gross turnover" in the profits & loss account. It is not a case where sale proceeds of these obsolete stocks are not accounted for at all - no infirmity in the order of the first appellate authority - Decided against Revenue.
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2013 (8) TMI 829
Disallowance of interest on securities - CIT deleted disallowance made by A.O. - Whether in the case of Government securities, interest accrues on day to day basis or only on the coupon dates - Held that:- assessee cannot prepare the computation of its income for income tax purposes in a manner different from the method under which it keeps accounts - Assessee cannot be prevented from urging in the return that the interest on govt. securities accrued only on the specified coupon dates notwithstanding that credit has been taken in the profit & loss account for the interest on day to day basis - interest accrues only on the specified coupon dates and not on day to day basis - Following decision of Indusind Bank Limited Versus The Addl. CIT, Range 2(3), Mumbai. [2011 (1) TMI 1244 - ITAT MUMBAI] - Decided in favour of assessee.
Reduction of claim of bad debt under section 36(1)(vii) - Held that:- In the first place, the ad hoc deduction under s. 36(1)(viia) (b) being the last item on the computation of taxable business profits, it cannot be taken into account at the time of allowing deduction under s 36(1)(vii), and, to that extent, the actual deduction attributable to bad debts [i.e. 36(1)(vii) plus 36)(1)(vii)(b)] will indeed be more than the actual bad debts in that year However, since the provision so allowed under s 36(1)(viia)(b) is be taken into account while allowing deduction for actual bad debts in the subsequent year, the effect of excess deduction, if any, will be squared up in that subsequent year. Secondly, a view seems perfectly acceptable that the provision for bad debts allowable under s. 36(1)(viia)(b) being inherently attributable to the debts outstanding at the end of the year, provision allowable as such is against future bad debts out of debts outstanding at the year end, and, therefore, It need not he mixed up with actual bad debts incurred during the year. - AO to compute deduction allowable on account of bad debt in line with the decision of the Tribunal in case of Oman International Bank, SAOG vs. DCIT [2003 (11) TMI 286 - ITAT BOMBAY-H] and M/s INDUSIND BANK LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(3), MUMBAI [2011 (1) TMI 1244 - ITAT MUMBAI] - Decided in favour of assessee.
Disallowance of loss on unmatured foreign exchange contracts - One of the due dates fell after the end of the previous year i.e. after 31st March - Held that:- where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period i.e. before the date of maturity of the forward contract - Following decision of DCIT vs. Bank of Bahrain and Kuwait (2010 (8) TMI 578 - ITAT, MUMBAI) and M/s INDUSIND BANK LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(3), MUMBAI [2011 (1) TMI 1244] - Decided in favour of assessee.
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2013 (8) TMI 828
Disallowance u/s 14A - Expenditure towards the earning of dividend income - CIT confirmed addition - Held that:- some expenditure out of the administrative expenses is always incurred and, therefore, it is a matter of method of quantifying such attributable expenditure to the exempt income. It is a judicially finalized position in law that the provisions of Rule-8D read with section 14A cannot be invoked for the assessment years prior to AY 2008-2009 - Decided in favour of assessee.
Quantification of such expenditure - Held that:- restricting the disallowance to 2% of the dividend income for this also must bring the peace between the parties for this AY 2005-2006 - Assessee is 100% Export Oriented Unit, invoking the provisions of section 14A of the Act has no tax implication. If any expenditure is disallowed under the said provisions, equalant amount needs to be reduced from the expenditure claimed in the P & L Account - Decided partly in favour of assessee.
Deduction u/s 10A - Reduction of insurance and communication expenses from Export Turnover - Held that:- export turnover means consideration in respect of the export received by the assessee in convertible foreign exchange. But it does not include freight telecommunication charges or insurance attributable to the delivery of the stocks outside India or expenses incurred in foreign exchange in providing technical services outside India. Thus, the expenses incurred in local currency in India on account of telecommunications and insurance are outside the scope of the above said definition given in clause-(iv). It is not the case of the assessee that such expenses on account of telecommunication insurance are incurred outside India. In fact, it is an admitted position that the said expenditure was incurred in local currency in connection with different location within India - Decided in favour of assessee.
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2013 (8) TMI 827
Disallowance of expenditure on amount written off - Losses belong to JV / AOP or assessee - Held that:- The expenses, which stand now written off, i.e., on the JV or the project owner being no longer interested in executing the projects/s, was, firstly, only and on behalf of the JV or the AOP aforesaid. The assessee was merely financing the expenditure for the time being as a promoter of a member of the said AOP. The amount represented only a claim receivable; that received from JPPL being the extent to which the project development stood, under the circumstances, financed by it; the position of JPPL being para materia with that of the assessee. The loss under reference is therefore of the AOP, and not the assessee's loss; the balance loss being borne by JPPL, its JV partner or associate. These amounts, were the project/s to be set up, recorded in the books of the JV or the project owner as toward project cost - there is no reference to written off amounts nor any details thereof, either in the assessment order or in the impugned order. Even no submissions in this regard were made before A.O. or by before Tribunal. Under the circumstances, therefore, there is no basis to modify the findings in respect of this amount, which stands added back similarly - Decided against assessee.
Disallowance of interest - CIT confirmed disallowance - Held that:- A bare reference to the balance-sheet, would show that the assessee-company is a profitable company - It is thus not understand as to how it could be said that the amount invested by the assessee in shares and securities, at the year-end, is out of borrowed funds, which, apart from secured loans, which are for fixed assets, are by way of unsecured loans - No case for disallowance, looking at the financials in any manner, is thus made out. The impugned disallowance is accordingly directed for deletion - Decided in favour of assessee.
Disallowance under section 14A - Held that:- Rule 8D, though not mandatory for the current year, yet cannot be said to be unreasonable, so that the same can only be said to be form a reasonable basis for the disallowance u/s. 14A(1). Having said that, how the Revenue could invoke r. 8D(2)(ii), disallowing interest expenditure there-under; having already disallowed the entire interest u/s. 36(1)(iii). In fact, we have found the entire of it as allowable as a business expense u/s. 36(1)(iii), considering the sources and application of funds, so that no disallowance qua interest expenditure u/r. 8D(2(ii) would arise in the facts and circumstances of the case - Decided in favour of assessee.
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2013 (8) TMI 826
Adjustment of arm's length price - CIT revised order of TPO and enhanced assessee's income - Assessee used Cost Plus Method to determine International transaction relating to purchase and Net Margin Method for sale - TPO has applied TNMM as most appropriate method for bench marking - Held that:- The Commissioner of Income Tax(Appeals) has determined the ALP by taking the TNMM as most appropriate method but at the entity level of the assessee. The Commissioner of Income Tax(Appeals) has arrived at the arithmetic mean of the comparables operating profit at 8.33% against the operating profit at the entity level of the assessee at 4.71% - sale price of the assessee is within the tolerance limit of 5% as per the proviso to section 92C(2) of the Income Tax Act, which is clear from the working of the Commissioner of Income Tax(Appeals) - The operating cost of the assessee is within the 5% tolerance range of the ALP determined by the Commissioner of Income Tax(Appeals), therefore, no adjustment is called for on this account. It is pertinent to note that the Commissioner of Income Tax(Appeals) has determined the arm's length by considering the entity level results of the assessee which includes all the international transactions, therefore, when the over all price of the assessee is within the range of 5% of ALP being the arithmetic mean then no adjustment is permitted - Decided in favour of assessee.
Computation of book profit u/s 115JB - The assessee in the return of income has not increased book profit computed u/s 115JB on account of diminution in value of investment debited to the profit and loss account, however, during the assessment proceedings the assessee conceded the adjustment in view of the retrospective amendment in section 115JB with effect from 1.4.2004 by the finance Act 2009 - Assessing Officer has not examined this issue from the angle of the actual written of the amount as the assessee conceded the same - Following decision of CIT Vs Yokogawa India Ltd. [2012 (9) TMI 390 - ITAT BANGALORE] - Matter remitted back for fresh adjudication.
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2013 (8) TMI 825
Disallowance u/s 14A - CIT deleted disallowance - Held that:- assessee made an investment in shares, which yielded dividend income and interest income - It is an admitted fact that assessee offered itself average cost of investment - it is the case where the assessee disallows the cost of investment applying the rate of 0.5% of the average cost of the investment in accordance with the Rule 8D(2)(iii) of the Income tax Rules 1962 but not out of the administrative expenditure as per the provisions of clause (i) and (ii) of the said Rule 8D(2) - where the accounts for exempt and taxable income are maintained commonly, it cannot be denied that some administrative expenditure was definitely attributable towards the earning of the dividend income - Assessee is engaged in the banking activity and it is an admitted fact the current balance is the source of investment in shares and assessee has not demonstrated how the interest bearing funds are lying in the current accounts of the assessee, a banking company. Normally, every amount lying in the current accounts is interest bearing ones, therefore, the provisions of clause-(iii) of Rule-8D(2) is rightly applicable - Once rule become applicable and the same has to be applied fully - Decided in favour of Revenue.
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2013 (8) TMI 824
Notice u/s 148 - Validity of reassessment proceeding - Change of opinion - Reopening at the instance of Audit objections - Held that:- Reassessment proceedings were initiated by the AO after objections were received from the internal audit party, the dates of audit objections and the dates of issue of notice u/s. 148 establish the fact that there was nexus between the two - while passing the original assessment order, AO had called for the details about lease equalisation reserve as well as about the writing off of non- performing assets - after considering the submissions of the assessee AO decided that lease equalisation reserve and provision of diminution in investment has to be given particular treatment. As stated earlier one of the items was taxed under normal provisions and not under MAT provisions, whereas the other item was considered for MAT provisions and not for computation under normal provisions of the Act. Thus an informed decision was taken by the AO about both the items. In these circumstances, if AO decided to issue a fresh notice for reopening the completed assessment it has to be treated as change of opinion - order of assessment that was passed by the AO under section 143(3) is not silent in respect of points on the basis of which the assessment was sought to be reopened - reopening was result of change of opinion. Fact that the AO did not record reasons for computing income under normal/MAT provisions, would be of no consequence - Decided in favour of assessee.
Role of the Audit parties to point out of the factual mistakes and not to advise the AO on legal matters. Therefore if an AO, reopens the assessment on the legal advice of the audit party it cannot be held forming of an independent opinion.
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2013 (8) TMI 823
Deduction u/s. 80IB - CIT declined deduction - Held that:- assessee is engaged in the business of development of customized software on job work basis - software produced by the assessee is not a map simpliciter but an interactive digital product which produces lots of reports and relevant information, on the basis of various inputs including maps of the area. The fact that it is produced on a platform not owned by the assessee is irrelevant inasmuch as what is being transferred by the assessee is not the platform but the end product. The mere fact that one of the input is owned by the client itself, does not mean that the property in the product never belonged to the assessee. In any case, all this is really irrelevant inasmuch as there is a specific direction from a coordinate bench to the effect that all that is to be seen is the point of time when property in end product is transferred. It is clear that the product, i.e. software, comes into existence after carrying on several processes, and its only on completion of these processes, the property in the product can be transferred to the customer. The transfer of property is therefore not an ongoing process at the each stage of work as will be the case of a provision for services - Following decision of of CIT vs. Oracle Software India Ltd. [2010 (1) TMI 9 - SUPREME COURT OF INDIA] - Decided in favour of assessee.
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2013 (8) TMI 822
Unexplained investment - Capital investment - CIT deleted addition - Held that:- evidences which were made available and explanations offered with supporting material before the CIT(A) were not produced before the Assessing Officer and the CIT(A) did not give an opportunity for the Assessing Officer to peruse the same before passing his order, which is not in line with the provisions of Rule 46A - Matter remitted back to the file of Assessing Officer - Decided in favour of Revenue.
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2013 (8) TMI 821
Disallowance u/s 14A - Disallowance made as per Rule 8 - Held that:- calculation of disallowance was based on Rule 8D only and the same cannot be sustained in the assessment year 2007-08 - Neither the Assessing Officer nor the learned Commissioner (Appeals) has pointed out any defect in the working of the calculation of disallowance under section 14A furnished by the assessee and has not pointed out any specific expenditure incurred for earning of dividend income - Decided in favour of assessee.
Depreciation - BSE Membership card - intangible asset - section 32(1)(ii) - Held that: - On the analysis of the Rules of BSE, it is clear that the right of membership (including right of nomination) gets vested in the Exchange on the demise/ default committed by the member; that, on such forfeiture and vesting in the Exchange the same gets disposed of by inviting offers and the consideration received thereof is used to liquidate the dues owed by the former/ defaulting member to the Exchange, Clearing House, etc. - the right of membership (including the right of nomination) vests in the Exchange only when a member commits default. Otherwise, he continues to participate in the trading session on the floor of the Exchange; that he continues to deal with other members of the Exchange and even has the right to nominate subject to compliance of the Rules. Moreover, by virtue of Explanation 3 to Section 32(1)(ii) the commercial or business right which is similar to a "licence" or "franchise" is declared to be an intangible asset. - Therefore, the right of membership, which includes right of nomination, is a "licence" or "akin to a licence" which is one of the items which falls in Section 32(1)(ii) of the 1961 Act. The right to participate in the market has an economic and money value. It is an expense incurred by the assessee which satisfies the test of being a "licence" or "any other business or commercial right of similar nature" in terms of Section 32(1)(ii) - Following decision of Techno Shares and Stocks Ltd. v/s CIT [2010 (9) TMI 6 - SUPREME COURT OF INDIA] - Decided against revenue.
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2013 (8) TMI 820
Disallowance of interest paid on unsecured loans to the persons specified under section 13(3)/40A(2)(b) of the Income-tax Act, 1961 - Substantial loan was borrowed by the assessee from the parties specified under section 40A(2)(b) of the Act besides other creditors. But interest was paid at the same rate i.e. @ 18% per annum to both the types of creditors - Nothing is placed on record to establish that the assessee has paid lesser rate of interest to the financial institutions. Moreover, no loan was borrowed from the financial institutions in the impugned assessment year - Since the assessee has paid interest @ 18% per annum to all types of its creditors, disallowance of excess payment of interest on the ground that higher rate of interest was paid to the persons specified under section 40A(2)(b) of the Act cannot be sustained Decided against the Revenue.
Rate of depreciation of books purchased for college library - Assessee claimed depreciation @ 60% on book purchased for college library, but the Assessing Officer allowed depreciation only @ 15% by holding that the books are plant and machinery and the assessee is running an educational institution and is not engaged in the business of lending library Held that:- There is force in the contentions of the assessee that due to fast changing technology around the globe, the reference books also become obsolete in a short span - Books were given to the students for which library charges were collected by the assessee-society. Therefore, as per para 9(ii) of the Schedule of Depreciation of the Income-tax Rules depreciation is to be allowed @ 100% - Decided against the Revenue.
Reference under section 142A of the Act was made to the DVO for estimating the value of college building of the assessee-society without rejecting the books of account Held that:- Reliance is placed upon the Apex court judgment in the case of Sargam Cinema vs. CIT [2009 (10) TMI 569 - Supreme Court of India ], wherein it was held that without rejecting the books of account, reference to the DVO cannot be made In the present case, assessing Officer has not rejected the books of account of the assessee. The assessee's books of account are properly audited and no defect has been pointed out therein. There is no specific finding of the Assessing Officer for rejection of the books of account. Therefore, reference to the DVO was made without rejecting the books of account. Thus, the reference to the DVO was not sustainable in the eyes of law as per the aforesaid judgment of the Hon'ble Apex Court and estimation made on the basis of the DVO's report deserves to be deleted Decided against the Revenue.
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2013 (8) TMI 819
Deduction u/s 57(iii) or section 36(1)(iii) of the Income Tax Act Colourable transaction for tax avoidance - Assessee is a partner of M/s. Sahara India (Firm); and Director in various companies of M/s. Sahara Group. For the assessment year 1997-98, the assessee has filed loss return for ₹ 36,48,09,550/-. While completing regular assessment, the Assessing Officer disallowed the interest of ₹ 36,57,27,195/- claimed by the assessee as interest paid on loan for purchase of shares under the head "income from other sources" Held that:- Assessee is a partner in the firm, known as M/s. Sahara India (Firm), where he is holding 62% shares and remaining shares are lying with other partners including Smt. Swapna Roy, the wife of the assessee. Thus, for all the purposes, the firm has become propriety concerned. This firm has collected the money from the public, on behalf of various companies of Sahara Groups - Firm has retained the money for a longer period without transmitted to the concerned companies. The firm has also borrowed the funds on interest from SIMBCL; a company of the group. The assessee has invested this amount in a few companies of Sahara Groups, which were suffering heavy losses - Loans were taken by the assessee on interest and invested in other loss making companies of the same Group.
In the instant case, the assessee has invested the amount in the companies, which were already suffering heavy losses. So, there was no chance to receive any pecuniary benefits. Perhaps in the past also, the assessee might have invested some amounts without any financial benefit. In these circumstances, fresh investment made by the assessee cannot be considered for business purposes specially when the assessee is running a financial entity. The assessee is Managing Director in M/s. Sahara India Financial Corporation Ltd. (SIFCOL) and was aware about the financial health of all the companies of the group - Firm M/s. Sahara India had received money in the form of loan/advance from public and SIMBCL; SIFCOL; and Sahara India Housing Corporation Ltd. (SIHCL) and had retained it for a considerable period, before investing in loss making companies of the group - It appears that the interest paid on borrowed funds was not for exclusively and wholly for the purposes of business. No prudent businessman would like to make an investment in loss suffering companies when the firm itself has borrowed the funds on interest Reliance has been placed upon the case of McDowell & Co. Ltd. vs. C.T.O.,[1985 (4) TMI 64 - SUPREME Court ], wherein the Hon'ble Apex Court observed that it is the duty of the Court to expose of colourable device by uplifting the corporate veil Decided in favor of Revenue.
Taxability of perquisites Section 17(2) read with section 295(2)(c) of the Act - Assessee is a partner in M/s. Sahara India (Firm) and a Director in various group companies. The assessee was also receiving the salary income from M/s. Sahara India Financial Corporation Ltd. The assessee was enjoying the facilities of the free accommodation, furniture and fixtures, facility of servants, chauffeur driven car, telephone facility, facility of free water, electricity and foreign travel etc Held that:- Perquisite denotes to a benefit amounts or advantage mostly in kind and enjoyed by the employee at the cost of employer, generally in addition to the salary or wages to which he is entitled - Perquisite is a part of salary and taxable. So, the perquisite will have to come under the clutches of the Income-tax. Being the salaried person, the assessee is entitled for the standard deduction on the salary. The remaining perquisite is taxable - Valuation of the perquisite, Section 295(2)(c) of the Act provides that CBDT may make rules for the determination of the value of any perquisite chargeable to tax under this Act in such manner and on such basis as appears to the Board to be proper and reasonable.
Deemed dividend u/s 2(22)(e) of the Income Tax Act - Assessee was the Managing Director of M/s. Sahara India Financial Corporation Ltd., which is a Residuary Non-Banking Company collecting deposits from the public. The assessee was also a partner in M/s. Sahara India (Firm) which was acting as an agent of the said company for mobilizing the deposits. The assessee was the beneficial owner of the shares of M/s. Sahara India Financial Corporation Ltd. (SIFCOL); M/s. Sahara India Airlines Ltd.; M/s. Sahara India International Corporation Ltd.; as also a partner holding substantial interest in M/s. Sahara India (Firm). The assessee was having 62% share as partner in M/s. Sahara India (Firm) and remaining major share was holding by other partners including his wife Held that:- The amount collected by the firm belongs to the company concerned. This amount is to be sent by the firm to the company promptly along with statement of account but the same was not done properly - Assessee deliberately retained or allowed to be retained the funds in the firm - The firm was supposed to send the money to the company promptly. Moreover, the Firm has shown the loan/advances from the company on its liability side in the balance-sheet, therefore, it is a loan for the firm.
In the instant case, no circumstances were explained by the assessee for what reason the heavy deposits made by the investors were retained by the assessee in the Firm for a longer period. For this reason alone, it is a case of deemed income as the assessee is a shareholder in all the companies Decided in favor of Revenue.
Section 64(1)(ii) of the Income Tax Act - Spouse of individual is in receipt by way of salary, commission, fees or any other form of remuneration whether in cash or in kind from a concern in which such individual has a substantial interest - Smt. Swapna Roy, the spouse of the assessee, was drawing a net income of ₹ 6,22,230/-. The AO has clubbed the income of Smt. Swapna Roy, the wife of the assessee, with the income of the assessee Held that:- Smt. Swapna Roy is a post-graduate and is also a Director in many companies. She has expertise in business matter also. She is a separate assessee since long, so, her income cannot be clubbed Decided against the Revenue.
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2013 (8) TMI 818
Limitation u/s 149 of the Income tax act for issue of notice u/s section 148 Date of issue of the notice is relevant Held that:- Relying upon the judgment in the case of Kanubhai M.Patel (HUF) Vs. Hiren Bhatt Or His Successors To Office and Others [2010 (7) TMI 704 - Gujarat High Court], it is held that date of issue would be the date on which the same were handed over for service to the proper officer which, in the facts of the present case, were postal authorities In the instant case, the notice was handed over to the postal authorities on 1st April, 2008 which was beyond the period of limitation of six years provided in Section 149 Barred by limitation.
Incorrect mention of address in the Notice u/s 148 of the Income Tax Act Held that:- The notice has to be sent at the address of the assessee given in its record with the Income-tax Department and not with some other address which might have been given by the Investigation Wing. The notice was issued in March, 2008 and the assessment was completed in December, 2008 and, in the assessment order, the Assessing Officer himself has given a different address than what was given in the notice under Section 148 - Notice was issued at the incorrect address and the same cannot be said to be valid issue of notice if the same is wrongly addressed Decided against the Revenue.
Sufficiency of reasons to be recorded for issuance of Notice u/s 148 Held that:- Relying upon the judgment in the case of Sarthak Securities Co. P. Ltd [2010 (10) TMI 92 - DELHI HIGH COURT], it was held that only information received by the Assessing Officer was that M/s Aayushi Stock Brokers (P) Limited is found to be providing accommodation entries in the form of bogus share transactions, bogus share capital etc - Detail given is only with regard to name of the bank, ledger account number and amount. Even the nature of transactions is not given, much less to establish that the above transactions are in the nature of accommodation entries - Assessee has only sold the shares through M/s Aayushi Stock Brokers (P) Limited and the sale proceed has duly been considered while computing the income of the assessee for the assessment year under consideration - Reasons did not satisfy the requirement of Section 147 Decided against the Revenue.
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2013 (8) TMI 817
Power of CIT to invoke section 263 for revision of assessment Held that:- Whether under the facts and circumstances of the case, the assessee was eligible for deduction under Section 80IA or not is a controversial issue and on the issue there are two opinions and if the A.O. has taken one then the order of the A.O. cannot be cited to be erroneous order - When the A.O. is satisfied then it is not necessary to discuss such matter in the order. The assessee has established that the assessee has furnished relevant documents in reply to the queries raised by the assessee. The view taken by the A.O. is after considering the material and submission of the assessee. The order of the A.O. cannot be said to be erroneous. CIT merely want further verification or according to him adequate verification. Such verification does not cover to exercise the power under Section 263 of the Act - Order of A.O. is not erroneous and this basic condition for invoking section 263 of the Act has not been satisfied Decided in favor of Assessee.
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2013 (8) TMI 816
Accrual of interest - Mercantile system of accounting - Accounting Standard notified u/s145A. - CIT held that since the appellant has been following mercantile system of account the accrued interest has to be included in the total income - Held that:- No pleading made on behalf of the assessee specifically averring that the reliance placed by the lower authorities on the order of the CIT(A) - Decided against the assesse.
Disallowance of software expense - Held that:- in the preceding assessment year the very disallowance had been made treating software expenses as 'capital' in nature - no reason to interfere in the findings of the CIT(A) - Decided against the assesse.
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2013 (8) TMI 815
Search and seizure - Shortage of stock found during search and seizure - CIT deleted addition made by A.O. - Whether order made by CIT is without any basis - Held that:- CIT is giving the basis of his decision that the shortage of finished goods occurred only on account of non inclusion of unfinished jumbo reel/parent reel lying on the floor which was subsequently cut into small reels and entered into RG-1 register against production on 14.07.2009 and 15.07.2009. This basis given by CIT(A) in support of his decision is totally contrary to the facts. If some jumbo reels and parent reels lying on the floor on the date of search i.e. on 16.07.2009 were not included in the inventory of finished goods then how such non inclusion in the inventory of finished goods on the date of search can explain the finished goods as per RG-1 register on 16.07.2009.
The basis of Ld. CIT(A) is this that from the inventory of goods, it is clear that inventory of unfinished reels on the floor was not taken in stock as on 16.07.2009. Even if it is correct, it is not relevant for the purpose of explaining the shortage in the stock of finished goods on the date of search because it is admitted position of fact that in the RG-1 register, only finished goods is entered as production and therefore, the search team was required to take stock of only finished goods for the purpose of comparing the available stock of finished goods as compared to book stock of finished goods.
There is no basis of exclusion form opening stock of finished goods as on 16.07.2009 because the production on 14.07.2009 and 15.07.2009 is included in the RG-1 register and the same must be available with the assessee on the date of search i.e. 16.07.2009 in the form of finished goods and the same cannot be explained by availability of unfinished goods on the date of search.
The exclusion on account of dispatch on 16.07.209 is also without any basis in the facts of the present case when there is no finding given by CIT(A) that such dispatch on 16.07.2009 is before the inventory taken by the search party. Generally, the search is carried in the morning hours and hence, any dispatch on the date of search cannot be before taking the inventory by the search party and in some cases, there can be such dispatch but then this has to be brought to the notice of the search party and evidence may be brought on record about the time of dispatch and the time of taking inventory by the search party and in the absence of any such evidence produced by the assessee, the reconciliation statement is not acceptable - There order of CIT is without any basis and reversed - Decided in favour of revenue.
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