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Income Tax - Case Laws

Showing 301 to 320 of 515 Records

• 2013 (8) TMI 560
  

  Best judgement assessment - Failure to furnish statement - Applicability of Sub-clause (a) of section 144(1) - Survey under section 133A of the Income Tax Act - Assessee has been avoiding the service of notice & non-cooperating in completing the assessment – Held that:- Assessee had tried to find one excuse or the other for not complying with the notices/show cause notice/explanation sought by the authorities of Income Tax - This is the case of Survey, where the documents found from the possession of the assessee were only identified by putting marks on the said documents and copies of the same were taken by the survey team and original were available with the assessee. Despite show cause notices issued to him, there was no compliance and originals of the said identified documents/books were not produced before the Assessing Officer in the original and set aside proceedings. The plea of the assessee that the alleged documents were never confronted to him and/or photo copies of the same not provided are baseless, as the identified documents and the alleged parallel books of account found during survey were at variance with the books of account, on the basis of which return of income was filed and which were always available with him - This is case of survey and not search and seizure operation where documents and books of account found are impounded. There is no recourse to impounding of documents/books during the survey. Despite the same, the Assessing Officer gave notice to the assessee time and again to collect the photocopies of the said documents, were not complied with by the assessee, though he claims to have received the said notices belatedly. Such defaulters cannot take shelter under the provisions of non-allowance of opportunity or non-confrontation of the alleged documents – Ground was dismissed – Decided against the Assessee.

  Completion of assessment under section 143(3) or section 144 of the Act – Held that:- Provisions of section 144(1)(a) of the Act are not applicable to the instant case - Sub-clause (a) of section 144(1) of the Act which are to be applied where the assessee had failed to furnish any return of income. In the facts of the present case the assessee had furnished return of income on 1.3.1993 declaring loss of Rs.15,700/-, which was processed on 29.2.1993. Thereafter survey under section 133 of the Act was conducted at the business premises of the assessee on 3.2.1992 and four documents marked as B-1 to B-4 were found and identified and the copies of the documents were taken by the survey team - Clauses (b) and (c) of section 144(1) of the Act are applicable where the assessee fails to comply with all the terms of notice issued under sections 142(1), 142(2A) or 143(2) of the Act - in the facts of the present case, first after filing the return of income, survey was conducted at the business premises of the assessee and survey investigation was carried out and comparison was made to the regular books of account maintained by the assessee and thereafter original assessment was made - No merit in the plea of the assessee that the assessment made under section 143(3) of the Act in the present set of facts is invalid – Decided against the Assessee.

  Separate addition for each figure of alleged uchanti loose paper and books – Held that:- Assessee failed to put forward any contention in support of the merits of the case - Addition of Rs.53,32,425/- has been made in the hands of the assessee on account of various entries in the parallel set of accounts and documents marked as D-1 to D-4 found during the course of survey. The assessee has failed to controvert the findings of the Assessing Officer in this regard and has even failed to bring on record any evidence explaining or justifying its stand as to why the said addition should not be made in the hands of the assessee, except the plea of peak investment in support of which no calculation has been filed - The assessee has failed to discharge the onus cast upon him - No merits in the issue raised by the assessee of calculation of peak investment/credit based on the loose papers/books - In the absence of any explanation by the assessee justifying the nature of entries in the said documents found during the course of survey, no merits in the alternate ground of appeal raised by the assessee.

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• 2013 (8) TMI 559
  

  Depreciation u/s 32 - Tribunal deleted disallowance - Held that:- Assessee did not claim depreciation in return filed - Following decision of CIT v. Mysore Cements Ltd. [2010 (3) TMI 984 - KARNATAKA HIGH COURT] - Decided against Revenue.

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• 2013 (8) TMI 558
  

  Expenditure u/s 40(a)(ia) - Tribunal held that the provisions of section 40(a)(ia) applies only to that expenditure which is payable as of 31st March and not to the expenditure which has already been paid during the year itself - decision of the Special Bench in the case of Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) has been carried in appeal before the Andhra Pradesh High Court and the Andhra Pradesh High Court has admitted the Tax Appeal and stayed the decision [2013 (8) TMI 288 - ANDHRA PRADESH HIGH COURT]. - Revenue's appeal admitted.

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• 2013 (8) TMI 557
  

  Application of section 50C and 43CA of the Income Tax Act - stamp duty valuation – Held that:- On a circumspection of sub-section (1) of section 43CA, it becomes manifest that the provisions for substituting stamp value for the actual sale consideration on transfer of the land, building or both, which were earlier restricted to the capital asset' under head "Capital gains" have now been extended to other than a capital assets' under the head "Profits and gains of business or profession" as well. The reference to the words "other than a capital asset" and the placement of section 43CA in Chapter IV-D indicate that the stamp value in respect of building or land or both sold by a person engaged in such business shall be substituted with the actual consideration received as a result of transfer, if the latter is lower than the former. The insertion of this provision by the Finance Act, 2013 with effect from 01.04.2014 makes it abundantly clear that the mandate of section 43CA shall apply only with effect from assessment year 2014-2015 and not before that. As the assessee in the present case is engaged in the business of selling of flats after construction, the income from which is chargeable under the head "Profits and gains of business or profession", the provisions of section 43CA cannot apply to substitute the actual sale consideration with the stamp value in the previous year relevant to assessment year 2009-2010 under consideration - Invoking the provisions of section 50C for sustaining the addition, has no legal legs to stand on – Decided in favor of Assessee.

  Application of section 56(2)(vii)(b)(ii) read with section 50C of the Income Tax Act – Commissioner(Appeals) sustained the addition at ₹ 8,53,79,819 by holding that market value of flats ought to have been considered instead of the actual sale consideration – Held that:- Both the above provisions are inapplicable on the facts and circumstances prevailing in the present appeal –

  Assessing officer did not bring any material on record to show that the assessee in fact received higher price than declared. Under such circumstances, the action of the authorities of the Income Tax in this regard cannot be justified.

  Valuation of Closing stock - Addition of ₹ 13,44,81,944 on account of lower valuation of closing stock - Assessing Officer found total area of unsold flats at 31,414 sq.ft., the value of which was shown in the balance sheet at ₹ 2.03 crore. This gave rate of ₹ 647 per sq.ft. On the perusal of the profit and loss account, the Assessing Officer observed that the cost of construction was at ₹ 4928 per sq.ft. - The assessee was required to handover tenements having area of 225 sq.ft. each aggregating to 1797 sq.mtrs in the project - Vide letter dated 24.12.2012, MHADA directed the assessee to surrender the surplus Built up area admeasuring 1797.25 sq.mtr.' either in same building or in any other building in same ward only - Assessee was under obligation to hand over 1797 sq.mtrs. of built up area to MHADA as can be seen from that letter following interference by the Hon'ble Bombay High Court that both the assessee and MHADA agreed that the assessee would "surrender the surplus built up area admeasuring 1797.25m2" – Held that:- Obligation to handover the built up area admeasuring 1797.25 sq.mtr. was on the assessee from the very beginning. At the end of the year, the built up area to such an extent could not have been considered as the assessee's stock in trade - Cost of 1797 sq. mtrs. be treated as Super built up area' and in that way, the addition deserves to be deleted – Matter restored to the file of A.O. for working out the value of the remaining closing stock – Decided in favor of Assessee.

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• 2013 (8) TMI 556
  

  Addition made on account of bogus purchases to the tune of Rs.17,59,225/- - Assessment order passed under Section 143(3) dated 30th of December, 2008 were that the assessee in individual capacity is a civil contractor. The allegation of the AO was that the assessee had made bogus purchases – Held that:- The commodity supplied were not subject to sales tax, therefore, the CST/ST number were not mentioned on the bills. Further, it has also been noted that in respect of some of the parties, the entire amount could not be paid during the year under consideration, therefore, the part of the amount remained outstanding which was paid in the subsequent year through account payee cheques – Thus, purchases were not bogus – Decided against the Revenue.

  Bad debts written off – Held that:- After considering the totality of the facts and circumstances of the case as also the case law cited of TRF Ltd. Vs. CIT [2010 (2) TMI 211 - SUPREME COURT] we are not inclined to intervene with the factual as well as legal finding of learned CIT(A) on the issue of write off of sundry balance. In the result , no force in this ground of the Revenue. Hence dismiss.

  Disallowance made u/s 40(a)(ia) of the Act amounting to Rs.1,35,98,554/- without considering the fact that the payment of TDS was made into the government in contravention of the provisions of Section 200(1) of the Act, 1961 – Held that:- Relying upon the decision in the case of CIT Vs. Nestle India Ltd. [2005 (2) TMI 41 - DELHI High Court ], wherein it was held that Where assessee had deducted tax at source from royalty payment in the same financial year and deposited the same in the next financial year within limitation prescribed under Chapter XVII-B r.w.s. 200(1), no disallowance of royalty payment could be made by invoking Section 40(a)(i) - As per the amended provisions, if the payments have made before the due date of filing of the return then the same is allowable, ld. CIT(A) has not examined the each and every detail of payment and the corresponding dates of the deposit of T.D.S. - Remanded back to CIT(A) for the limited purpose to examine the dates of the deposits of the T.D.S. and if the same is as per the law as pronounced in the case law cited above then the same should be allowed – Decided against the Revenue.

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• 2013 (8) TMI 555
  

  Taxable event - Completion of contract - profit on sale of the flats - Year of completion of the residential complex built by a developer - CIT(Appeals) has given a categoric finding that the project was completed in the Financial Year relevant to the AY. 1999-2000 - Chartered Accountant of the assessee vide letter dated 14-12-2004 has mentioned in his letter that the housing project was completed in the Financial Year 1998-99 - Assessee had applied for issuance of Completion Certificate in the month of August 1999 and the Completion Certificate was issued to the assessee by CMDA on 29-12-1999 – Held that:- Project is completed when it becomes habitable and all activities relating to the construction of the project are completed. It is the choice of the developer when to apply to the concerned, authority for the issuance of completion certificate - Year of completion of project as 1998-99.

  Amount received by the assessee from underwriter is the purchase cost of the flats or advance against the sale of underwritten flats - Held that:- The term 'underwrite' means to assume financial responsibility to guarantee the purchase of a full issue of stocks or bonds - Perusal of the underwriting agreement makes it clear that VGP (underwriter) has to pay the agreed amount in a phased manner to the assessee by January 1998. In lieu of the consideration received, the assessee has to complete the apartments and hand over the possession to the prospective buyers brought in by VGP. In the book of accounts, the assessee has shown the amount received from VGP in lieu of underwritten apartments as advance. The assessee is appropriating the amount shown as advance to sale in the year of execution of sale deed. The assessee has received the amount much prior to the date of execution of sale deed and delivery of possession of property - The risk, responsibility and liability to sell the flats underwritten is on the underwriter.

  If VGP brings any buyer of the flat and requests assessee to execute sale deed in his favour, the assessee is duty bound to get sale deed executed in favour of the prospective buyer and handover possession of the flat. In case the assessee refuses to do so, it shall be breach of contract between the assessee and underwriter - From the documents on record and the facts of the case, it is evident that the amount received by assessee from underwriter is the sale price of the flats.

  Taxable event – AY in which the income of the assessee is liable to be taxed – Held that:- The assessee is following project completion method. Therefore, the assessee is liable to be taxed in the year of completion of the project - Project of the assessee was completed in the year 1998-99 relevant to the AY. 1999-2000, the income from sale of flats is liable to be taxed in AY. 1999-2000 – Advance received from VGP which in fact is the sale proceeds of the flats, on completion of the project has to be treated as sale consideration. The consideration can only be treated as advance till the time the project is in progress. The day the project is completed, the advance has to be treated as sale consideration – Decided in favor of Revenue.

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• 2013 (8) TMI 554
  

  Proceedings u/s 147 - Assessee claimed deduction u/s 80IB - A.O. disallowed deduction and started proceeding u/s 147 - CIT annulled reassessment - Held that:- reopening of assessment has been done in this case on the basis of retrospective amendment to Section 80IB(10) of the Act. In the reasons recorded for re-opening of the assessment, there was no mention that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment at the time of original assessment. There is also no dispute about the fact that re-opening has been done after four years from the end of the relevant assessment year. As per first proviso to section 147 for the purpose of initiating proceedings u/s 147 after the expiry of four years from the end of relevant assessment year, the income chargeable to tax should have escaped assessment by reason of failure on the part of the assessee either (i) to make a return u/s 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or (ii) to disclose fully and truly all material facts necessary for his assessment - Following decision of Sadbhav Engineering Ltd. Versus Deputy Commissioner of Income-tax [2010 (7) TMI 521 - Gujarat High Court] and Aayojan Developers Versus Income-tax Officer [2011 (2) TMI 738 - Gujarat High Court] - Decided against Revenue.

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• 2013 (8) TMI 553
  

  Exemption u/s 10(23C)(iiiad) - substantial govt aid - computation of turnover of Rs.1 crore - three educational institution - Held that:- Assessing Officer has considered the total receipts of three educational institution being run by the assessee society whereas the claim of the assessee is that the same should be considered separately and if it is done then, the income of these institutions is fully exempt U/S 10(23C)(iiiad) - the annual gross receipts of three educational institution being run separately by the assessee society cannot be clubbed together for examining the fulfillment of the conditions of receipt being less then the prescribed limit of annual gross receipts. - Following decision of Jat Education Society Versus Dy. CIT [2011 (3) TMI 569 - ITAT DELHI] - Decided in favour of assessee.

  Deduction u/s 10(23C)(iiiab) - requirement of approval of CCIT - Held that:- As per the provisions of this sub-clause (iiiad) of clause (23C) of section 10 that the term "aggregate annual receipts" of each educational institution is relevant and if any assessee is having more than one educational institution then the aggregate annual receipt of each of such educational institution has to be considered separately - the income of these three institutions are also exempt u/s sub-clause(iiiad) of clause (23C) of section 10 because aggregate income of each of these institutions in each of these two years is below Rs. 1 crore. The requirement of approval of CCIT under sub-clause (vi) of clause (23C) of section 10 is for those who are not covered by sub-clauses (iiiab) or (iiiad) of clause (23C) of section 10. Since, these three institutions are covered by clause (iiiad), clause (vi) is not applicable - Decided in favour of assessee.

  Substantial Government Aid - Held that:- the percentage of grants in aid with respect to total receipts are more than 34.33% considered by the Hon'ble Karnataka High Court to be substantial [2011 (2) TMI 1235 - Karnataka High Court]. - the assessee/institutions were substantially financed/aided by the Govt. and hence are eligible for exemption u/s 10(23C)(iiiab). - Decided in favor of assessee.

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• 2013 (8) TMI 552
  

  Set off of business losses - setoff of business losses with speculation gains - Held that:- The restriction set out in section 73 relates only to losses of speculation business being set off against profits of non speculation business, but not vice-versa. Therefore, in the absence of specific restriction on set off of normal business losses against profits of speculation business, the same cannot be inferred or assumed. Similar is the position with regard to set off of speculation losses against non speculation profits.

  Section 72(1) provides that non speculation business loss can be set off against "profits and gains, if any, of any (emphasis supplied by us) business or profession" carried on by assessee and assessable in that assessment year, and when it cannot be so set off, it shall be carried forward to the following assessment year. The expression "any" business clearly includes all businesses, without making any distinction between speculation and non-speculation business, and, therefore, going by the plain language of the statutory provision losses in a business, other than in speculation business, can be set off against profits of speculation business as also non speculation business - Decided in favour of assessee.

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• 2013 (8) TMI 551
  

  Penalty u/s. 271(1)(c) - Onus on assessee to furnish a reasonable explanation - CIT upheld penalty - Held that:- assessee did not revise the statement of brought forward (or carry forward) loss/es even after the receipt of the appellate order for A.Y. 1995-96 on 25.01.2002, accepting its claim for the set-off of loss to this extent. The same led to a corresponding difference in the brought forward loss for A.Y. 1996-97. To this extent the assessee has clearly preferred a double claim, i.e., firstly against the income for AY 1995-96 and then again for the current year. Its argument of the A.O. having disallowed the claim subject to verification is to no effect inasmuch as the difference in loss, as claimed and allowed, is finally only for this difference, i.e., which stands wrongly claimed. If the assessee considered that its claim for set off of business loss against LTCG, made for AY 1995-96, may be disallowed in appeal, so that he chose to keep alive its claim for set off of the said loss against income for the current year, the only manner he could do so was by way of a note in the return o income for the current year, and not by actually claiming a set off. The same makes his stand, rather than clarificatory, contradictory, inasmuch as the assessee did not withdraw its claim for the preceding year.

  In fact, the return for the current year stands filed on 22/4/2004, i.e., after having received the order allowing its claim for set off of business loss against income (LTCG) for AY 1995-96, so that these considerations are only hypothetical and of no relevance. This is as the loss no longer survived for set off, having been already adjusted, rendering the claim for its adjustment (of business loss) to that extent (for this year) as without basis. The assessee thus has no explanation, much less a valid one, for the excess of Rs. 27.01 lakhs, except want of due diligence.

  In fact, the audit report contains a specific column for furnishing information on brought forward claims for losses and unabsorbed depreciation, and which should have also infused a sense of responsibility in preparing and filing the return, while it is apparent that the figure of loss(es) has been mechanically adopted. Rather, as apparent, the record was not updated for three consecutive years, i.e., A.Y. 2002-03 to 2004-05, and despite the same having a tax impact for the current year. The assessee’s case is sans any explanation, and levy of penalty on this sum stands rightly confirmed by the ld. CIT(A) - Decided partly in favour of assessee.

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• 2013 (8) TMI 549
  

  Cancellation of registration granted to a Charitable Trust under section 12A of the IT Act – Held that:- Section 12AA(3) of the Act empowers the CIT to cancel such registration if he satisfy that activities of the trust or institutions are not genuine or are not being carried out in accordance with objects of the trust or institution as the case may be - The power of cancellation of registration under section 12A of the Act came to be incorporated by way of amendment introduced by Finance Act 2010 w.e.f. 01.06.2010 - The C.B.D.T. Circular No.1/2011 dated 06.04.2011 explains that this amendment will apply for A.Y. 2011-12 and subsequent years. Whereas, in the case under consideration, the CIT cancelled registration under section 12A of the Act for A.Y. 2009-10 which is not in accordance with the law - This view is fortified by the judgment of Hon'ble Delhi High Court in the case of DIT(E) v. Mool Chand Khairati Ram Trust [2011 (4) TMI 563 - DELHI HIGH COURT]

  Even otherwise also, as we notice that registration under section 12A/12AA can be cancelled in the circumstances provided in section 12AA(3) of the Act of which detail has been discussed above in Para no 19 of this order. If we apply the said condition stipulated in section 12AA(3), we find that there is no finding of the CIT that activities of the assessee, Agra Development Authority are non-genuine or not being carried out in accordance with the object of the assessee, Agra Development Authority - In the case under consideration, the condition stipulated in section 12AA(3), that activities of the assessee, Agra Development Authority are non-genuine or not being carried out in accordance with the object of the assessee, Agra Development Author is not satisfied - The CIT by his own motion added one more condition in section 12AA (3) that the object of the assessee, Agra Development Authority is not charitable as per amended provisions of section 2(15) of the Act for which the CIT is not empowered to add such own condition in the statute. - Appeal allowed – Decided in favor of Assessee.

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• 2013 (8) TMI 548
  

  Capital receipt or Revenue receipt - Entertainment tax subsidy - CIT held it as capital receipt - Held that:- Ld. CIT (A) in the year before us, has deleted the disallowance by observing that similar additions for Assessment Year 2006-07 and 2007-08 were deleted by the CIT (A) by referring to, inter alia, 'Ponni Sugar' (2008 (9) TMI 14 - SUPREME COURT) and that the facts and circumstances in the years under consideration were similar to those in the earlier years. This has not been disputed - Decided against Revenue.

  Applicability of Explanation 10 to sec. 43(1) - Held that:- Central Government granted subsidy to assessee as incentive for setting up industry in backward areas - subsidies granted to industries on a percentage of the capital cost are not deductible from the "actual cost" under section 43(1) of the Act for the purpose of calculation of depreciation, etc. - there was no obligation on assessee to utilize it for any specific purpose will not be hit by Explanation 10 to Sec. 43(1) - entertainment subsidy being for the promotion of cinema/ multiplex industry; only because the methodology adopted is to cap it to capital cost of assets will not mean to reduce the cost of asset directly or indirectly in terms of Explanation 10 to Sec. 43(1) - Decided in favour of assessee.

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• 2013 (8) TMI 533
  

  Business income or Capital gains - Gain on realization of Shares and mutual funds - Held that:- assessee has maintained two separate accounts and has classified his acquisition of share investments under two heads. It is very pertinent to note that in the case of the assessee, sale of shares under the head 'investment' has always been considered as capital gain in the earlier years, which is evident from the fact that the same has been accepted by the Assessing Officer in scrutiny proceedings right from assessment year 2002-2003 to 2005-2006. Not only the assessee has followed this consistent approach with regard to the treatment of shares one as investments and other as stock in trade separately, but the same has also been consistently allowed by the Department - there is no bar for an assessee to maintain two separate portfolios i.e. one in relation to investment in shares and other relating to business activities involved in dealing of shares - It is also noticed that, in the case of assessee, under the head 'short term capital gains' most of the shares have been held for a period of more than three months and six months and there are no intra-day transactions of shares under this head - on the shares held as investment by the assessee, the income arising on sale of such shares is assessable under the head 'long term capital gain' and 'short term capital gain' and not 'business income' as held by AO and CIT(A) - Following decision of The Commissioner of Income Tax Versus Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] - Decided in favour of assessee.

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• 2013 (8) TMI 525
  

  Depreciation u/s 32 of the Income Tax Act – Plant ready for used but not used in actual due to unavailability of raw-material – Held that:- Relying upon the judgment in the case of Whittle Anderson Ltd Vs. Commissioner of Income Tax, Bombay City I [1968 (12) TMI 27 - BOMBAY High Court]; CIT Vs. Vayithiri Plantations Ltd [1980 (1) TMI 27 - MADRAS High Court], it was held that deprecialtion u/s 32(1) of the Income Tax Act will be allowed – Reliance is also placed upon the decision in the case of Liquidators of Pursa Ltd Vs CIT [1954 (2) TMI 1 - SUPREME Court], wherein it was held that so long as the business was going and the machinery got ready for use but due to certain extraneous circumstances, the machinery could not be put to use, the said fact could not stand in the way of granting relief under Section 32 of the Act – Decided against the Revenue.

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• 2013 (8) TMI 524
  

  Special audit u/s 142(2A) of the Income Tax Act – On the ground of complexity of accounts - The assessee has submitted copy of ledger account in 5 volumes but supporting vouchers of receipts and payment has not been submitted on the ground that there are voluminous records - In view of the petitioner's audit report that the accounts of the petitioner is not complex or the special audit report has been called for either just for extension of time to complete the assessment or otherwise – Held that:- In absence of vouchers, the correctness of state of affairs could not be verified and looking to the complexities and enormity and assessee's inability to substantiate its income and expenditure by producing supporting vouchers, it is in the interest of revenue, justice and fair play to make a reference u/s 142 (2A) of the Act to get the accounts of the assessee audited – Decided against the Assessee.

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• 2013 (8) TMI 523
  

  Re-opening of assessment - Challenge to the notice u/s 148 - SAP Implementation charges claimed as Revenue expenditure in P&L A/c – Held that:- SAP Implementation charges in question was never treated as revenue expenditure, clubbing with Administrative expenses - Return and other accompanying documents were brought on record during the assessment proceedings - One such document happens to be the schedule of administrative expenses at Annexure-II, which includes the said sum of Rs.86.17 lac as a part of 'Capital Work in Progress' – In face of such documents on record, the first ground is held to be factually incorrect - When the expenditure itself was never claimed by way of revenue expenditure, the question of disallowing such an expenditure on such basis requiring of reopening of assessment would not arise – Decided in favor of Assessee.

  Disallowance u/s 14A of the Income Tax Act of proportionate expenditure for earning the tax free income - Petitioner who had earned tax free dividend income should have been subjected to disallowance of proportionate expenditure for earning such income on the basis of the formula provided in Rule 8D of the Income-tax Rules, 1962 - This claim for disallowance u/s 14 A was examined at length and in the assessment order through a speaking order, part disallowance was made – Held that:- Question of disallowance of expenditure or part thereof under Section 14A of the Act for earning exempt income was very much alive before the Assessing Officer during the original assessment proceedings - Entire issue was scrutinised by the Assessing Officer during the original assessment proceedings. It is only upon consideration of the said aspect, assessing officer has made disallowance to the limited extent of Rs.2,11,316/-.

  Even within a period of four years such assessment cannot be reopened. Any permission to the Assessing Officer to do so would amount to permitting change of opinion - To correct the assessment order passed after a detailed examination by the Assessing Officer, the succeeding Assessing Officer cannot resort to the proceedings of reopening – Notice quashed. - Decided in favor of Assessee.

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• 2013 (8) TMI 522
  

  Expenses not allowed for non-deduction of TDS u/s 40(a)(ia) - Assessee is a partnership firm and is an agent of M/s Maruti Udyog Ltd. and its business is sales, servicing and managing a workshop for maintenance of vehicle - Assessee had incurred an expenditure of Rs.29,70,172/- and Rs.11,31.388/- under the heads denting and painting expenses and free service charges - No TDS was deducted against denting and painting expenses and free service charges payments – Held that:- Relying upon the judgment in the case of Hero MotoCorp. Ltd. Vs. Addl. CIT in ITA No. 1980/D/2012, it is held that dealer has not rendered technical services as contemplated u/s 194J to the assessee for which the assessee paid a particular amount to the dealer and non-deduction of tax at sources on such payments does not attracts disallowance u/s 40(a) (ia) – Provisions of 194J are not applicable.

  Regarding applicability to section 194C – Held that:- Individual payments were not exceeding Rs.50,000/- and, therefore, provisions of section 194C are also not applicable – Decided against the Revenue.

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• 2013 (8) TMI 521
  

  Unexplained investment under section 69 of the Income Tax Act – Claimed by assessee that cash balance of Rs.9,49,500 was available as on 31-03-2003; therefore, sufficient cash balance is available with the assessee for making a deposit of Rs.99,052 in the personal account of the assessee maintained with SBT - Assessing officer has not examined the availability of the cash balance as on 31-03-2003 – Held that:- Since the assessee has filed details of transactions and claims that sufficient funds are available, this Tribunal is of the considered opinion that the details filed by the assessee needs to be examined by the assessing officer – Matter remanded back to the Assessing officer.

  Addition as income from other sources - Selling of trees which were grown spontaneously for which there is no cost of acquisition - Sale consideration received on sale of the trees which were grown spontaneously without any human aid – Held that:- Trees were grown spontaneously in the property purchased in the year 2001 - As per judgment in the case of Suman Tea & Plywood Industries (P) Ltd [1997 (3) TMI 81 - CALCUTTA High Court], wherein it has been held that sale of trees grown spontaneously as not taxable - Receipt on sale of trees grown spontaneously has to be treated as capital in nature and since there is no cost of acquisition, it cannot be assessed as taxable income - Calcutta High Court judgment in the case of Suman Tea & Plywood Industries (P) Ltd (supra) may be squarely applicable to the facts of the case – Therefore, sale of trees grown spontaneously has to be treated as capital in nature and since there is no cost of acquisition, it is not liable for taxation.

  Estimation of agricultural income - The copies of the data said to be collected from the Agricultural Officer is not available on record. Details regarding varieties of banana cultivated are also not on record – Held that:- In the absence of the details of varieties of banana cultivation on the land, it is not known how the Agricultural Officer was able to provide the data. The price of each variety of banana would depend upon the prevailing market rate during the relevant assessment year. Moreover, when the assessee claims that he is maintaining the books of account for cultivation, without finding fault with the books of account maintained for cultivation, estimation of agricultural income may not be justified. Therefore, if at all there was any defect in the books of account, it is for the assessing officer to reject the same after examination and thereafter resort to estimation, if required. But without examining the books of account, solely on the basis of the data collected from the Agricultural Officer, the profit cannot be estimated. Accordingly, the matter needs to be re- considered. Hence, the issue is remitted back to the file of the assessing officer.

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• 2013 (8) TMI 520
  

  Deferred Payment Guarantee Commission chargeable to tax - Assessee is a banking company - The assessee is following the mercantile system of accounting and there from, income is eligible to tax upon accrual - The assessee receives the commission for the entire period of the debt repayment that it guarantees at the time when the guarantee agreement is entered into – Held that:- The right to receive commission for the un-expired period of the guarantee became perfected and crystallized only with the expiry of the unexpired period - Accordingly, the right to receive commission for the unexpired period of the guarantee became perfected and crystallized only with the expiry of the unexpired period and income from deferred guarantee commission did not accrue or arose in the relevant Assessment year, relying upon the decision of the Hon’ble Supreme Court in the case of Madras Industrial Corpn. [1997 (4) TMI 5 - SUPREME Court], which decides the case in favor of Assessee.

  Disallowance of Staff welfare expenses – Held that:- Tribunal in the earlier A.Y. rejected the claim of the assessee for want of details whereas in the present case the assessee has submitted these details, hence, the decision of the Tribunal in that year is not applicable - Both the Revenue Authorities have treated this expenditure as opposed to the public policy, however, in our view the same cannot be a valid reason for disallowing the expenditure because this aspect does not come within the provisions of I.T. Act, 1961 - It is a matter of corporate policy where policies of this type are framed after due consultation with employees/officers association, hence, it cannot be treated as arbitrary. Further, the officers of the bank do not get any bonus whereas the employees get bonus which can also be treated as arbitrary in the similar manner, if the contentions of the Revenue are accepted - Expenditure incurred by the assessee is allowable as revenue expenditure.

  Double disallowance of profit tax of Frankfurt office – Held that:- Proper verification is required regarding fact pointed out by the assessee that the provision for profit tax at Frankfurt branch was also part of the provision for foreign tax for all foreign branches of ₹ 32,38,34,950/- and thus there is double disallowance of ₹ 1,40,78,488/- being the profit tax paid by the assessee in respect of Frankfurt Branch. According the AO is directed to verify the point whether there is a double disallowance in this regard and decide the same as per law.

  Depreciation on lease assets given to Konkan Railway Corporation Ltd - sale and lease back - Finance lease or operating lease - As per the lease agreement the assessee has entered into an operating lease of the asset in question - Asset in question is the railway track which is already owned by the lessee Konkan Railway Corporation Ltd. (KRCL) but because of the requirement of funds the KRCL decided to raise the funds by making the arrangement of sale and lease back of the asset – Held that:- Real object as far as KRCL is concerned for entering into the transaction of sale and lease back is to raise/arrange the funds. The two transaction of sale of the asset in question to the assessee bank and lease back cannot be separated as there was no choice with either of the party to restrict the transaction of sale alone independently because it was neither possible nor permissible to sell out the asset in question by the Konkan Railway Corporation being the integral part of their railway system which is the very basis of the existence of the KRCL - Sale transaction in question is merely on paper and to facilitate the financial arrangement by the assessee to the KRCL without involving any real intention of transfer of the asset in question.

  In the case in hand the lease is for fix period of 84 months during which the assessee would recover the full value of lease asset with finance cost being interest as agreed between the parties - The risk and reward of ownership of the asset vested with the lessee and therefore for all practical purposes the ownership of the asset was vested with the lessee and not with the assessee - Assessee would recover the investment (cost of asset) with interest and not the asset in question - As per the lease agreement is only for securing the financial interest of the assessee and not intended to really take the asset in its possession on the expiry of lease term or on the termination of the lease agreement - Therefore all the features and attributes of finance lease as discussed by the Special Bench in case of IndusInd Bank [2012 (3) TMI 212 - ITAT MUMBAI] do exist in the case of the assessee – Also, as per RBI Circular No. FSCBC 18/24- 01-001/93-94 dated 14.02.1994 which inter alia deals with equipment leasing do not find any scope for argument that the instant lease agreement be treated as that of operating lease – the transaction in question is finance lease and not operating lease. - Therefore, no depreciation on asset will be allowed – Rental income from the lease will not be considered as income of the assessee for the income tax purpose and only the finance interest portion will be considered as income of the Assessee.

  Depreciation on matured securities – Held that:- Diminution in the value of securities which had matured and become due for redemption during the year but were not redeemed - There may be some delay on the part of the companies or the State Governments in paying the redemption amount. But, whenever the payment would be made it cannot be expected to be less than the face value - Any liability de futuro is not an ascertained liability in praesenti and cannot be allowed as deduction under the Income-tax Act as held in the case of Indian Molasses Co. Pvt. Ltd. vs. CIT [1959 (5) TMI 5 - SUPREME Court] and Standard Mills Co. Ltd. Vs.CIT [1997 (3) TMI 64 - BOMBAY High Court]. Hence, no such ad hoc deduction could be allowed against the amount receivable on redemption of securities which had matured and become due for payment before the close of the accounting year – Decided against the Assessee.

  Taxability of recovery of interest credited to Interest Suspense Account - Held that:- the amount recovered during the year out of the interests credited to the suspense account in the earlier year would be taxable. - Decided against the assessee.

  Loss of revaluation of permanent category investment – Held that:- As per Hon’ble Kerala High Court in the case of Malabar Co-operative Central Bank Ltd. [1973 (10) TMI 23 - KERALA High Court], the banking institution as a part of business activity will have to have ready resources to meet its liability the extent of which could never be foreseen - Security capital employed is a part of normal course of business of a bank and the money which was not lend to the borrower but was invested in the form of deposits in another bank cannot be said to have become ceased to be part of stock in trade of bank - Investment in question very much represented stock in trade of the baking business of the assessee and the loss on the revaluation thereof is allowable as deduction – Decided in favor of Assessee.

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• 2013 (8) TMI 519
  

  PF and ESIC contribution - Addition made on account of delayed payment - CIT deleted addition - Held that:- if the amount is paid before filing the return under Section 139(1) then no disallowance can be made - If the amount is paid within the grace period then the amount needs to be treated paid in time - Following decision of CIT Vs. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] - Decided against Revenue.

  Reopening of assessment - Addition on account of depreciation - Held that:- reasons have been recorded on the basis of contents of balance sheet filed along with return of income. The assessment in this case was completed under Section 143(3) on 28-1- 2006 and the return was filed on 25-11-2003 originally. The case of the assessee does not fall under the exception clause provided under section 147(a), where the assessment can be reopened after four years, if the AO found that the assessee has not disclosed all the particulars of income completely and truly - This is not a case of the AO that the assessee has not disclosed fully and truly all materials facts in respect of income earned during the year - While computing the assessment, the block of assessment cannot be segregated - Following decision of Hindustan Lever Limited Vs. ACIT [2004 (2) TMI 41 - BOMBAY High Court] - Decided against Revenue.

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