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Income Tax - Case Laws
Showing 281 to 300 of 585 Records
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2013 (9) TMI 640
Cash credit u/s 68 - determination of new credit - Difference in opening and closing balance - Held that:- In the original assessment order made under section 144, the Assessing Officer noted that unsecured loans had increased by ₹ 23,64,272 being difference of closing balance and opening balance of loans shown in the balance sheet. Since the assessee had not filed any confirmations, the Assessing Officer added the said sum under section 68 of the Act. The intention of the Assessing Officer was obviously to add the new credits during the year on account of loans but since it was an ex parte assessment and the assessee had not given details, the new credits were computed as the difference between the closing and opening balance - it is not a case that the Assessing Officer had not added a particular cash credit in the original assessment but the same was added in the fresh assessment. The Assessing Officer in this case in the original assessment had added new cash credits in the ex parte assessment which on verification in the fresh assessment was found to be more and, therefore, it cannot be said that any new addition has been made by the Assessing Officer - Following decision in case of Mcorp Global P. Ltd. [2009 (2) TMI 5 - SUPREME COURT] - Decided against assessee.
Unexplained cash credit - Held that:- the claim of the assessee cannot be accepted or cash credit cannot be taken as explained satisfactorily only on the ground that loan had been received through banking channel. In case the assessee is not assessed to tax, the burden is on the assessee to show the source from which the loan had been received. But in this case no material has been produced to show creditworthiness of the creditor. The assessee must prove the identity and creditworthiness of the creditor and bank transactions are not sacrosanct - matter remanded back for verification and re-adjudication.
Disallowance of loss - The dispute is regarding allowability of loss claimed by the assessee in the business on account of sale of shares. - Held that:- Normally the assessee is required to give distinctive numbers of shares sold for the purpose of verification but in this case since shares sold were purchased earlier and shown in the balance-sheet, in case, the assessee files reconciliation of shares sold with respect to the shares declared earlier in the years, the claim of loss in our view should be considered. However, we also make it clear that in the balance-sheet, the assessee had shown shares as investment and, therefore income/loss arising from sale of shares has to be con sidered as capital loss and not business loss. Further, since shares are shown as investment and loss has to be considered as capital loss, provisions of the Explanation to section 73 is not applicable in such cases. In our view matter requires fresh consideration at the level of the Assessing Officer - Decided partly in favour of assessee.
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2013 (9) TMI 639
Capital Gains - Transfer u/s 2(47) - whether receipt of advance against agreement of sale (duty registered) would constitute transfer or relinquishment of the asset and extinguishment of any right - Held that:- Smt. Raj Rani Devi Ramna v. CIT [1992 (5) TMI 11 - PATNA High Court] - sale deed, though registered, stipulating a condition precedent that the property shall pass only on receipt of sale consideration, transaction did not take place on the date of registration of sale deed - the assessee having executed the agreement, which only contemplated the sale property to the purchaser on a future date on certain terms without transferring any right of ownership, and no possession of property is given or right to use the property or right to receive income arising in the property was also not given to the purchaser - in such circumstances, it was not a transfer in terms of section 2(47) of the Income-tax Act
Following CIT v. Rasiklal Maneklal (HUF) [1989 (3) TMI 3 - SUPREME Court] - there was neither an "exchange" nor a "relinquishment" and no capital gains arose from the transaction - An "exchange" involves the transfer of property by one person to another and reciprocally the transfer of property by that other to the first person -There must be a mutual transfer of ownership of one thing for the ownership of another - A "relinquishment" takes place when the owner withdraws himself from the property and abandons his rights thereto - It presumes that the property continues to exist after the relinquishment - Where, upon amalgamation, the company in which the assessee holds shares stands dissolved, there was non "relinquishment" by the assessee - In view of the above discussion, there was no relinquishment of right over the property. decided against Revenue.
Confirmation of Addition Towards Payment Made - addition was sustained in the hands of the assessee on the reason that it was deleted in the hands of the recipients - Held that:- The deletion of the addition by the Commissioner of Income-tax (Appeals) in the hands of recipients may be on various reasons, but that itself cannot be a reason to sustain the same in the hands of the assessee who has incurred this expenditure wholly and exclusively for the purpose of business. Considering the facts and circumstances of the case, we are inclined to delete the addition - When the payment of this amount arose out of the same transaction, in our opinion, this payment alone cannot be disallowed - More so, all these persons had claimed the right over the property which the assessee dealt with by selling the same to DLF group of companies - At that time, they initiated civil litigation and this expenditure, in our opinion, it was incurred by the assessee on account of business and commercial exigencies for the purpose of business.
Disallowance of Site-Levelling Expenditure Held that:- As the situation warrants the assessee must have incurred the expenditure - The reason for disallowance was that incurring of the expenditure was not stipulated in the memorandum of understanding - The Department not doubted incurring of the expenditure - When the assessee had incurred the expenditure wholly and exclusively for the purpose of business it cannot be disallowed on the reason that it was not stipulated in the memorandum of understanding - Relying upon CIT v. Malayalam Plantations Ltd. [1964 (4) TMI 9 - SUPREME Court ] - The Assessing Officer also stated that the valuation report does not mention incurring of the expenditure - If the assessee incurred the expenditure in the year under consideration before executing the sale deed in the month of August 2007 the same had to be allowed.
Disallowance of Payment to Sub-Agents Held that:- The Department had not got anything on record to show that the payment was excessive or it was made to relatives of director of the assessee-company - the claim of the assessee had to be allowed - relying upon Commissioner Of Income-Tax, Kerala Versus Malayalam Plantations Limited[ 1964 (4) TMI 9 - SUPREME Court]
During the course of search action, the Department found material in the form of receipts for payments made through account payee cheques to sub-agents to the tune of ₹ 1.70 crores and the same was seized - This payment was subjected to TDS - The subagents have filed their returns of income after payment of advance tax as applicable - Even during the course of investigation, the assessee placed necessary evidence before the investigating authority explaining the payment - Thereafter the assessee also filed acknowledgement for receipt of commission.
Disallowance of Architect Fee - Held that:- The expenditure had to be allowed as business expenditure and the same was allowed - the assessee filed all the requisite details in the form of bill and receipt from the architect - Payment was made by cheque and also subjected to TDS - The expenditure was incurred towards consulting services provided by the architect with regard to site plan, SEZ specific building plan - More so, the Department had not brought anything to show that the assessee had not incurred this expenditure for the purpose of the business and it was presumed that it was incurred for the purpose of business and the same had to be allowed.
Disallowance of Technical Expenditure Held that:- The assessee claimed the above expenditure but had not filed explanation regarding this expenditure and had also not filed proof for having spent this expenditure - This expenditure was relating to the earlier year and the same was disallowed - Before us also no evidence was produced by the assessee as a proof for incurring this expenditure wholly and exclusively for the purpose of business - Being so this ground is dismissed.
Disallowance of Expenditure Towards Video Surveillance Charges - Held that:- if the expenditure has been incurred for the purpose of business in the assessment year under consideration it had to be allowed as business expenditure while determining the income from the business - Accordingly, if this expenditure by the assessee was for the purpose of the business it had to be allowed though the entire property was not sold by the assessee in the year under consideration - Only incurring expenditure wholly and exclusively for the purpose of the business was important - Relying upon Commissioner Of Income-Tax, Kerala Versus Malayalam Plantations Limited [1964 (4) TMI 9 - SUPREME Court] - we allow the claim of the assessee as incurring of expenditure by the assessee was for the purpose of business was not doubted.
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2013 (9) TMI 638
Jurisdiction u/s 263 Jurisdiction of CIT - Doctrine of merger - Deduction u/s 80IB - Held that:- Deduction claimed by the assessee had been restricted by the Assessing Officer to the extent that deduction in respect of a part of profits relating to the income from sale of undivided interest of land - On appeal, this issue had been decided by the Commissioner of Income-tax (Appeals) - Inasmuch as the issue relating to deduction under section 80-IB of the Act the same had been seized by the Commissioner of Income-tax (Appeals) and after deliberation, he decided the issue in favour of the assessee - Thus, there was merger of the order of the Assessing Officer with that of the Commissioner of Income-tax (Appeals) - As rightly contended by the learned authorised representative for the assessee, there was no jurisdiction under section 263 of the Act available to the Commissioner of Income-tax.
The Assessing Officer had considered the provisions of section 80-IB(10) in its totality and on the basis of which the Commissioner of Income-tax (Appeals) analysed the issue in depth and negated the stand of the Assessing Officer for the reasons recorded in his order - Thus, we are unable to agree with the Commissioner of Income-tax's perception that the Commissioner of Income-tax can revise u/s 263 on the question of eligibility of deduction under section 80-IB(10) since those were two different views by relying on the Delhi Tribunal's finding in the case of Modi Xerox Ltd. v. Deputy CIT [1998 (4) TMI 162 - ITAT DELHI-C ].
Following Commissioner of Income-Tax Versus Shri Arbuda Mills Ltd. [1996 (1) TMI 11 - SUPREME Court] - once the order of the Assessing Officer got merged with the appellate order of the Commissioner of Income-tax (Appeals) on a particular issue, the Commissioner of Income-tax cannot invoke the provisions of section 263 of the Act on the premise to verify the eligibility of deduction under section 80-IB since those were two different issues - The Assessing Officer had adopted one of the possible views in law, which has not been agreed upon by the Commissioner of Income-tax - the order passed by the Assessing Officer cannot be treated as erroneous order and prejudicial to the interests of the Revenue, thereby the provisions of section 263 of the Act have no role to play.
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2013 (9) TMI 637
Disallowance u/s 36(1)(iii) of interest expenditure of ₹ 95,69,72,766 allegedly incurred by the assessee for earning income exempt under section 10(23G) of the Act use of own funds or borrowed funds - Held that:- the assessee had made investments from its own funds and the borrowed funds - The assessee has made investment in certain order of preference, viz., infrastructure loans which are eligible for deduction under section 10(23G), thereafter in infrastructure equity for claiming benefit under section 80M and remaining amount of own funds in infrastructure loan for claiming exemption under section 36(1)(viii) Issue remitted to the Assessing Officer for limited purpose to determine whether at the time of making investments as claimed by the assessee its own funds were available to the extent of investment made. In case, the assessee had own funds at the time of making investments, the benefit be granted to the assessee Appeal allowed Decided in favor of Assessee.
Carry forward of loss under the head Capital Gains arising from sale of shares by treating the investment as eligible for exemption under section 10(23G) of the Act Held that:- The assessee cannot be allowed to take benefit both ways i.e. exemption u/s 10(23G) and setting off of loss - Since the income is not taxable, the loss incurred from the sale of shares cannot be allowed to be carried forward Decided against the Assessee.
Indexation of long term capital loss on listed securities Held that:- The provisions of section 48 of the Act provides that the benefit of indexation is not available in case of certain specified long-term capital assets. Apart from the specified assets the benefit of indexation is available to all long-term capital assets. The provisions of section 112 provides for the tax on long term capital gains at the flat rate of 20 percent In case listed securities/ shares/units are transferred without the benefit of indexation, then the long-term capital gain is taxable at the rate of 10 percent Decided in favor of Assessee.
Eligibility of underwriting commission for exemption u/s 10(23G) of the Income Tax Act Held that:- As per the provisions of section 10(23G) any income by way of dividend, interest on long-term capital gains is eligible for deduction. As per Explanation 1(f) to the proviso of section 10(23G) "interest" includes any fee or commission received by a financial institution for giving any guarantee or enhancing credit in respect of enterprises which has been approved by the Central Government for the purpose of this clause. Underwriting commission does not fall within the definition of "interest" as provided in Explanation 1 to the proviso of section 10(23G) Decided against the Assessee.
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2013 (9) TMI 636
Fair Market Value - Capital Gains - Section 55A - determination of FMV as on 1-4-1981 - average value of land adopted by the Revenue, at Rs. 27,030 per acre, on the basis of registered sale deeds Held that:- "Fair market value" in relation to a capital asset has been defined under section 2(22B) of the Act. The fair market value in relation to capital asset, means the price that the capital asset would ordinarily fetch on its sale in the open market on the relevant date - Therefore, adoption of the average value of land by the Revenue, at Rs. 27,030 per acre, on the basis of registered sale deeds, cannot be considered as "fair market value" within the definition of fair market value in relation to a capital asset, as contained under section 2(22B) of the Act.
The rationale and philosophy behind insertion of section 50C of the Act is that there is a wide gap between the sale consideration shown in the registered sale deed and the "fair market value" of the asset sold. Therefore, the Legislature deemed it fit, to introduce the deeming provisions of section 50C, which contemplate a deeming situation in respect of full value of consideration, for the purpose of levy of capital gains - Conceptually and factually, there is wide difference between the sale consideration, as recorded in the registered sale deed and the "fair market value" of the asset.
The "fair market value" represents the price that a seller is willing to accept and a buyer is willing to pay in the open market. The price or sale consideration as specified in the registered sale deed of an asset in India represents the price or sale consideration negotiated or determined not in the open market but in the parallel operating market where such transactions crystallised in a clandestine manner. In view of this, the sale consideration of an asset, as recorded in the registered sale deed is generally understated and, hence, cannot be taken as the "fair market value" as on April 1, 1981 for the purpose of computation of "capital gains" - Having regard to the fairness, the fair market value of the land in question, deserves to be taken at Rs. 3.50 lakhs per acre, as on April 1, 1981, for the purpose of
computation of capital gains Appeal of assessee partly allowed.
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2013 (9) TMI 635
Income from house property - Interest claim as deduction u/s 24(a) of the Income Tax Act Held that:- Rental income from the individual flats owned by the assessee and her husband Shri Gurdas Mann have been included in their respective hands, the deduction on account of the interest paid on borrowed capital utilised for the purchase of the said flat is to be allowed in the equal proportion in the hands of the assessee and her husband Shri Gurdas Mann - The UTI bank in their certificate has clearly mentioned the name of the applicant to be Shri Gurdas Mann and name of co-applicant to be Smt. Manjit Mann. The total loan of Rs. 1.50 crores has been utilised for the purchase of the two flats - Claim of the assessee in relation to the interest paid on housing loan totalling Rs. 5,14,802 has been allowed Decided in favor of Assessee.
Ad-hoc disallowance of expenditure made by assessee Held that:- The assessee had booked the expenditure and the Assessing Officer had disallowed 3 per cent, resulting in addition of certain amount - The addition made by the Assessing Officer is ad hoc addition as the assessee had furnished partial vouchers and bills raised by parties, were not maintained - In the interest of justice and to plug the leakage of revenue, restricted the disallowance at one per cent of the total expenditure.
Disallowance of expenditure under the head "repair and maintenance" Expenditure was incurred on replacement of electricity installation and also for the purchase of new furniture Held that:- No merit in the claim of the assessee that it was a case of mere replacement and not the case of coming into existence of new fixed asset. The expenditure incurred on purchase of new furniture cannot be held to be replacement and the same being in the nature of capital expenditure, is not to be allowed as a deduction while computing the income of the assessee Further, assessee had failed to bring on record any evidence to establish its claim of having replaced the electric installation or the nature of the electric installation so replaced Decided against the Assessee.
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2013 (9) TMI 634
Nature of receipt of Rs. 108 crores from Gillette USA for repayment of its debts pursuant to sales of its entire shareholding in the assessee-company to Newell - Capital receipt or revenue receipt - Gillette was neither its shareholder nor it increased the shareholding of Gillette USA or its subsidiaries in the assessee company. - Held that:- it is not correct that the assessee company obtained any subsidy or grants in aid or compensation as a result of remittance of a sum to the banks. The Delhi Bench of the Tribunal in the case of Deputy CIT v. Lurgi India Co. Ltd. [2007 (8) TMI 379 - ITAT DELHI-A] relied upon by the learned authorised representative has held that the receipt of Rs. 13 crores by an assessee as a non-refundable grant from its parent company was a capital receipt, despite the fact that the payment was made to compensate the assessee for trading loss since it did not stem from any business consideration. - Decided against the revenue.
Taxability of amount credited in the account of Assessee in the absence of reasonable explanation to the said credit in the account Held that:- Commissioner (Appeals) has sustained this addition out of the addition of Rs.118.09 crores on the basis that M/s. Gillette Co., USA, had paid the said amount to the credit of the assessee's account - Since the assessee had already credited a sum of Rs. 1.99 crores to its profit and loss account, and offered it to tax, the learned Commissioner of Income-tax (Appeals) restricted the addition to Rs. 9.58 crores, since the amount was credited to the bank account of the assessee. Hence, in the absence of any contrary and satisfactory explanation by the assessee, the learned Commissioner of Income-tax (Appeals) has rightly treated this amount as income of the assessee Decided against the Assessee.
Waiver of loan to be treated as revenue receipt taxable under the Income Tax Act or capital receipt not taxable - Waiver of loan of Rs. 3.34 crores by M/s. Gillette Co., USA Held that:- Reliance has been placed upon the Honble Delhi High Court in the case of Logitronics P. Ltd. v. CIT [2011 (2) TMI 12 - DELHI HIGH COURT], wherein it has been held that if a loan was taken for acquiring a capital asset, waiver thereof would not amount to any income exigible to tax. On the other hand, if the loan was for trading purpose and was treated as such from the very beginning in the books of account the waiver thereof may result in income more so when it was transferred to the profit and loss accounts - Unless it is examined in the present case as to what was the purpose of taking the loan amount which was waived, the taxability of the waived amount as income cannot be adjudicated upon - Since this material aspect of the facts has remained to be examined by the authorities below before holding the waived amount as income exigible to tax - Remanded the matter to the file of the Assessing Officer with direction to adjudicate upon the issue afresh in view of the decision of the Hon'ble Delhi High Court in the case of Logitronics P. Ltd. v. CIT [2011 (2) TMI 12 - DELHI HIGH COURT].
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2013 (9) TMI 633
Repairs and renovation work in the leased property to be treated as revenue expenditure of capital expenditure Held that:- Repairs conducted on tenanted/leased property and is purely in the nature of business expenditure - Assessee had undertaken repairs and renovation work in the leased property, meant to be for the purpose to showcase the products under the Brand TATA - Time has come that there has to be a proper display and single roof display of ones own products shall boost the business, if the business is multi product Relying upon the decision in the case of Lakshmi Sugar Mills Co. (P) Ltd. v/s CIT reported in [1971 (8) TMI 13 - SUPREME Court], it is held that the expenditure of renovation is revenue in nature Decided in favor of Assessee.
Disallowance on account of system software development expenses Held that:- Relying upon the judgment Honble Jurisdictional High Court of Bombay in the case of CIT Vs Raychem RPG Ltd., Mumbai [2011 (7) TMI 953 - Bombay High Court], it has been held that expenses are revenue in nature and hence deleted the addition made by revenue authorities.
Forfeiture of deposit to be treated as revenue loss, allowable for deduction or capital loss not allowed in the profit & loss account - AEPC had forfeited its Earnest Money Deposit Held that:- Reliance has been placed on the order of the co-ordinate Bench of Delhi ITAT in the case of Pyoginam vs. ACIT, reported in [2010 (2) TMI 819 - ITAT, Delhi], wherein it has been held that amount on account of non-fulfillment of quota cannot be treated as penalty - Assessee got quota allotted on the basis of past performance of export business and not on the basis of the earnest money deposited. The earnest money was paid on percentage basis of quota allotted. Therefore, the payment of earnest money was in the course of business activities and hence, cannot be treated as capital in nature. - Decided in favor of assessee.
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2013 (9) TMI 632
Transfer pricing adjustments - DRP order being non-speaking Rejection of comparables selected by assessee allowance of benefit of Aρ 5 per cent. - Held that:- Reliance has been placed upon the similar case namely Evalueserve.com P. Ltd. v. ITO [2011 (11) TMI 111 - ITAT, DELHI], wherein it has been held that directions passed by the Dispute Resolution Panel under section 144C(5) are not speaking about what objections were raised by the assessee and how they have been found to be not acceptable. The Dispute Resolution Panel has simply observed that all the questions raised by the assessee have been answered in detail by the Transfer Pricing Officer and by the Assessing Officer in the draft order. The rejections of comparables are based on detailed reasoning and after applying reasonable filters. The denial of working capital adjustment as also capacity adjustment is based on cogent reasoning, use of current data has been found more appropriate and fresh search has been rejected as there is no valid reason. Similarly, the Dispute Resolution Panel has rejected the other grounds. Therefore, the order passed by the learned Dispute Resolution Panel is a non-speaking order not stating the objections raised by the assessee and the reasons have also not been given as simply the order of the Transfer Pricing Officer and the Assessing Officer are referred.
In the present case, matter restored back to the file of the Dispute Resolution Panel to pass a speaking order stating all the objections of the assessee and disposing them by giving cogent reasons for adjudication of the objections of the assessee Decided in favor of assessee for statistical purpose.
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2013 (9) TMI 631
Transfer Petition - Validity of amended provisions of Section 40(a)(ia) was challenged - Held that:- Court order for transfer of Writ Petition pending before the High Court of Andhra Pradesh at Hyderabad for consideration to the Apex Court - Registry was directed to list the matter.
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2013 (9) TMI 612
Rectification of mistake u/s 154 - Simultaneous taxability of addition on account of non-allowability of deduction u/s 32AB and lease rental Held that:- Assessee claim of deduction u/s 32AB made in the original return with consequential lease rental income - Machineries, subject matter of the lease transactions were not purchased by the lessees and the claim of deduction u/s 32AB was surrendered by the assessee by a revised return along with reduction on non- accrued rental income - Withdrawal of deduction u/s 32AB has a direct consequence on the non- earning of lease rental Thus, withdrawal of deduction u/s 32AB and taxation of lease rental cannot be taxed together Decided against the Revenue.
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2013 (9) TMI 611
Nature of Land - purchase and sale to be agricultural land Whether the land sold accrues business income or income under the head capital gain - Held that:- The land in question is recorded as agriculture land, in the revenue record, on the date of purchase and sale of the same. The land is assessed to land revenue. The assessee has not taken any step till the date of sale, to convert the agricultural land to non- agricultural purposes and to undertake any improvement project on such land - Cumulative effect of all the material evidences clearly suggests that the land in question is agricultural land and the land does not fall under the definition of capital asset, within the meaning of Section 2(14)(iii) of the Act - The fact that the land was sold to industrialist for setting up industrial units, is of no legal consequence, in determining the nature and character of the land in question. The land remained agricultural land till it was sold to various parties. The future use by the purchaser is also irrelevant and immaterial for the purpose of determination of true character and nature of the land in question.
Lands in question do not constitute capital asset within the meaning of Section 2(14)(iii) of the Act. Therefore, surplus realized on sale of such lands cannot be taxed as capital gains u/s 45 r.w. Section 10(37) of the Act. The provisions of Section 10(37) were inserted by the Finance Act 2004 (No.2) w.e.f. 1.4.2005. The revenue merely made an assertion and treated the surplus realized from the sale of rural agricultural lands as business profit, which don't fall u/s 2(14) of the Act. Therefore, having regard to the fact-situation of the present case, relevant record and judicial verdicts, the surplus realized on sale of such land, is not taxable receipts Appeal of the assessee is allowed Decided in favor of Assessee.
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2013 (9) TMI 610
Royalty u/s 9(1(vi) - non resident assessee - lump sum payment - Whether the payment received is to be considered as capital gain or royalty income for the transfer of technology, know-how and trademark etc. - Taxability of the amounts received by the assessee in terms of the agreement for transfer of technology, know how and trademark to German Remedies/Cadila Health care Ltd. - Held that:- The agreement had originally been entered into with German Remedies on 17.2.2003 but later on merger of German Remedies with Cadila Healthcare Ltd., a fresh agreement on the same terms and conditions was entered into with Cadila Healthcare Ltd. on 2.12.2003 - True nature of transaction cannot be determined only on the basis of the words "transfer", "assignor", "assignee" used in the agreement but on careful consideration of the real nature of transaction after taking into account the effect of all the clauses in the agreement.
Clauses of the agreement shows that the assessee has not been given ownership right over the technical information and trademark and there are limitations placed on exercise of such rights by the assignee Assignee cannot use or utilize the technical information or the trademark for sale of products either directly or indirectly outside the territory without prior approval of the assessee, which would be at its absolute discretion - Further the assignee cannot license or assign or transfer the technical information and trademark to any person other than the Cadila affiliates - There are also several restrictions on the assignee in the matter of use of technology, know how and trademark which makes it quite clear that the assignee has not been given ownership rights and only right to use - Such payment for use of technical information and know how has to be considered as royalty both under the provisions of Income Tax Act and under the provisions of DTAA between India and Germany even if the payment is lump sump and not recurring - The royalty is taxable in India under section 9(1)(vi) as well as under the provisions of DTAA Decided against the Assessee.
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2013 (9) TMI 609
Revision u/s 263 - Eligibility of deduction u/s 10B and 10A of the Income Tax Act - Assessee filed reply before Ld. CIT in the proceeding under section 263 of Income Tax Act dt. 21/02/2012 in which the assesse explained that the assessee company is registered under Software Technology Park of India being 100% export unit under Software Technology Park Scheme for developing / manufacturing of computer software / IT enabled services, copy of the certificate was also filed Held that:- Deduction under both the provisions of section 10A and 10B are entitled to such undertaking who have begun or beginning the manufacturing or produce articles or things or Computer Softwares. There is further requirement to furnish audit report from the Chartered Accountant certifying claim of the assessee in Form 56 F under section 10A and report 56 G in case deduction has claimed under section 10B of the Income Tax Act - Report and balance sheet as certified by Chartered Accountant in Form No. 56 F was filed before AO and copy of the same was also filed before Ld. CIT. It was also explained that assessee company had claimed deduction under section 10A of the Income Tax Act and complied with provision of Law.
The assessee further filed reply before Ld. CIT on dt. 12/03/2012 in which the assessee explained that complete books of accounts and all the material were furnished before AO at the assessment stage to claim deduction under section 10A of the Income Tax Act. Similar facts were explained that assessee claimed deduction under section 10A being the assessee company 100% EOU for Computer Software and is duly registered with Software Technology Park in India. Form No. 56 F was also filed before AO and the AO after examining the complete details and reply allowed the genuine claim of assessee of deduction under section 10A of the Income Tax Act. It was also explained that the AO examined the complete books of accounts and was satisfied with the explanations of assessee and profit earned out of said business. The AO was satisfied with reasonableness of the profit earned by the assessee - Therefore assessee was rightly granted deduction under section 10A of the Income-tax Act Decided in favor of Assessee.
Assessee duly complied with the provisions of Section 10A, therefore the AO at the original assessment stage even if passed a cryptic order was justified in granting deduction in favour of the assessee in accordance with provision of Section 10A of the Income-tax Act. The Ld. CIT in proceeding under section 263 of the Income Tax Act also had all these details and material before him, but had not been able to point out defects conclusively in the material / evidences for arriving at a conclusion that exemption under section 10 A is not allowable in the case of the assessee. Therefore the revision order under section 263 of the Income tax Act cannot be sustained Reliance has been placed upon decision of Hon'ble Gauhati High Court in case of Smt. Lila Choudhury Vs. Commissioner of Income-Tax And Others [2006 (3) TMI 112 - GAUHATI High Court]
When all the evidence and material on record clearly support the case / explanation of the assessee that assessee is entitled for deduction under section 10A of the Income-tax Act, the Ld. CIT should have examined the explanation of the assessee and passed the order of revision in accordance with law. Merely because AO passed a cryptic order or might have made inadequate enquiry would not be a ground to set aside the assessment order The order passed by the AO thus cannot be termed as erroneous in so far as it is prejudicial to the interest of the revenue. - Decided in favor of Assessee.
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2013 (9) TMI 608
Disallowance u/s 14A by invoking Rule 8D - Whether the assessee was claiming exempt income and whether any expenditure had been incurred to earn the exempt income - Held that:- It cannot be said that no borrowed funds had ever been utilized by assessee for the purpose of making investment or undertaking transactions which yielded dividend income, which had been claimed as exempt - The assessee had not disputed the fact that it failed to produce any cash flow statement or any other material which could establish that borrowed funds had not been utilized for earning of exempt income.
The contention of AR that no satisfaction had been recorded by AO before invoking Rule 8D, according to us, had no merits particularly when the AO at the time of making the assessment confronted the assessee in respect of investment in shares and expenses claimed and particularly when the AO asked the assessee as to why disallowance be not made u/s 14A read with Rule 8D of the Act in respect of the exempt dividend income.
Revised Long Term Capital Gain Method of Charging Depreciation - Whether the assessee was justified to allocate the WDV of the Bombay Stock Exchange card to the cost of acquisition during the course of assessment proceedings and was to be allowed or not Held that:- The ld. CIT(A), was not justified in not considering the revised Long Term Capital Gains on sale of shares - The said revised computation of Long Term Capital Gains filed by the assessee had to be considered to adjudicate the issue as per law - Hence, we set aside the orders of authorities below and restore this issue to the file of AO with a direction to compute Long Term Capital Gain by considering the cost of shares taking into account the WDV of the Stock Exchange card - Long Term Capital Gain in respect of the shares hae to be considered after assigning the WDV of the Bombay Stock Exchange Card to the cost of 10000 shares allocated to the assessee - It was observed that the assessee in the assessment year under consideration has sold 4562 shares, therefore, proportionate cost of said Bombay Stock Exchange card has to be assigned to the said shares while computing the Long Term Capital Gains.
From section 55(2)(ab) of the Act, it was evident that on demutualization or corporatization of the Bombay Stock Exchange, in the case before us, the cost of acquisition of ownership right and trading rights have been split - The trading rights were based on deposit system and in the case of existing member its cost deemed to be nil - The entire value of Bombay Stock Exchange card, as stands in the books of account of the assessee on the date of demutualization of Bombay Stock Exchange would be assigned to the shares allocated to said members - the claim of assessee to claim depreciation on demutualization or corporatization of the stock exchange of the Bombay Stock Exchange Card was not justified and legal - Therefore, the same was rightly denied by AO in the assessment year under consideration the appeal taken by assessee were allowed for statistical purposes by restoring the issue to the file of AO with a direction to compute Long Term Capital Gains.
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2013 (9) TMI 607
Long Term Capital Gain u/s 45 - transfer u/s 2(47) - whether assessee is liable to capital gain tax in the year under consideration i.e assessment year 2007-08 in view of the Joint Development Agreement. The assessee is a member of Defence Services Co-op House Building Society Ltd. The Society has transferred 27.3 acres of land to the Developer i.e. M/s Tata Housing Development Company Ltd. and M/s Hash Builders Pvt Ltd. A Member having plot of 500 sqyd was entitled to monetary consideration of Rs. 80 lakhs and furnished flat measuring 2250 sqft which has been estimated by the Revenue at Rs. 5000 per sqft.
Principal issue of taxation decided against the assessee following the decision in Charanjit Singh Atwal Versus Income-tax Officer, Ward -VI (1), Ludhiana [2013 (8) TMI 364 - ITAT CHANDIGARH]
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2013 (9) TMI 606
Disallowance of provision of Sludge Disposal Charges - Held that:- Sludge is generated in the Effluents treatment, which has to be disposed off as per the rules and regulation of GPCB, and the liability of sludge disposal .charges accrues the moment sludge gets generated. The Company is following mercantile system of accounting and accordingly provided for the sludge disposal charges to be incurred on the sludge generated upto 3I.March of the relevant year but could not be disposed off as on that date. The Average rate of sludge disposal works out to Rs.430/- per MT, to be on the conservative side the provision for disposal charges have been made at the rate of Rs.330.72 per MT on 5371.820 MT of sludge that could not be removed as on 31.03.2001 - assessee digs the pits, the liability does arise and it is entitled for deduction of the expenses which it is supposed to incur for filling those pits, as the assessee is following the mercantile system of accounting. It can claim the expenses incur as soon as it digs the pits. In view of the aforesaid facts and circumstances and relying upon the decision of Rajasthan High Court in case of Udaipur Mineral Development Syndicate Pvt. Ltd. vs. DCIT [2002 (8) TMI 26 - RAJASTHAN High Court], we allow the liability of sludge disposal charges accrues the moment the sludge is generated and accordingly the provision for sludge disposal charges ought to be allowed as deduction under section 37 of the Act as the same is provided following the mercantile system of accounting. In the result, the issue is decided in favour of the assessee - Decided in favour of assessee.
Assessee has considered 10% of interest income amounting to Rs. 2,53,882/- as being expenses incurred for earning the interest income. We find that whether the expenditure incurred has a connection or nexus with the interest receipt has not been examined by lower authorities and there is no finding to that effect - Assessing Officer is therefore directed to verify the nexus between the expense incurred and the interest income and thereafter consider its allowability the same as per law and after giving a reasonable opportunity of hearing to the Assessee - Decided in favour of assessee.
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2013 (9) TMI 605
Exemption u/s 10B - inflated profits - Interest on Capital and Remuneration not debited to profit and loss account Held that:- payment of interest on capital and remuneration to partners is not hit by section 40(b) of the Income-tax Act. The mere fact that the partners have chosen to forego interest on capital and remuneration payable to them does not ipso-facto mean that they are not admissible for deduction. The fact that the assessee has not debited such interest and remuneration payable to partners to its profit & loss account in spite of their admissibility to deduction makes its intention quite evident, namely, to inflate the profits eligible for exemption u/s 10B. The Assessing Officer has correctly worked out interest on capital and remuneration payable to partners and excluded them from the overall profits of business for working out the profits eligible for exemption u/s 10B of the Income-tax Act. - Decided in favor of revenue.
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2013 (9) TMI 604
Disallowance u/s 14A rws Rule 8D - CIT upheld disallowance - Held that:- investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. A perusal of the order of the CIT(Appeals) shows that out of total investment of ₹ 64,18,19,775/-, ₹ 63,31,25,715/- is invested in wholly owned subsidiary. This fact supports the case of the assessee that the assessee is not into the business of investment and the investments made by the assessee are on account of business expediency. Any dividend earned by the assessee from investment in subsidiary company is purely incidental. Therefore, the investment made by the assessee in its subsidiary are not to be reckoned for dis-allowance u/s. 14A r.w.r. 8D. The Assessing Officer is directed to re-compute the average value of investment under the provisions of Rule 8D after deleting investments made by the assessee in subsidiary company - Decided in favour of assessee.
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2013 (9) TMI 603
TDS on Arrangers Fees - whether fee for technical services (FTS) or commission - u/s 195 r.w.s. 40(a)(i) - Held that:- Following M/s. Credit Lyonnais (through their successors : Calyon Bank) and Others Versus The Asstt. Director of Income-tax (International Taxation) - 1(2) And Others [2013 (5) TMI 639 - ITAT MUMBAI] - The amount paid by the assessee to the non-residents sub-arrangers was not a fees for managerial or technical or consultancy services - Hence, the same cannot be brought within the ambit of 'fees for technical services' as per section 9(1)(vii) of the Act - If this payment was not fees for technical services but only commission, the provisions of section 195 requiring the assessee to make deduction of tax at source before remitting or crediting the amount to the accounts of sub-arrangers, cannot apply - If no deduction of tax at source was required, obviously the provisions of section 40(a)(i) do not come into play - Once it was held that the said commission/brokerage was not chargeable to tax in the hands of non-resident sub-arrangers under the provisions of the Act, there remains no need to examine the taxability or otherwise of this amount in their hands under the respective Double taxation avoidance agreements - CIT(A) was justified in reversing the AO's order insofar as the applicability of section 40(a)(i) was concerned Decided against Revenue.
Exemptions u/s 10(15) and 10(33) - 'Interest from tax free bonds - UTI dividend - Whether the CIT(A) erred in holding that since there was no nexus proved between tax free income and interest bearing funds, no disallowance can be made from the gross income claimed as exempt u/s. 10 of the I.T. Act Held that:- No nexus had been proved between tax-free-income and interest bearing funds by the AO, that there were sufficient funds the findings shares/tax free securities that the action of the AO in disallowing exemption u/s 10 of the part of dividend/interest on tax free securities could not be sustained - AO had not given any details as how the alleged borrowed funds were used for earning tax free income, whereas the FAA had given a categorical finding; after considering the submissions made by the assessee bank during the appellate proceedings before him; that the interest free funds available to the assessee were far more than the investment made during the year The order of the FAA does not suffer from any legal or factual infirmity Decided against Revenue.
Head office expenditure - section 44C - AO held that expenses incurred by the H.O. which were not debited to the books of account of the assessee were not allowable, that expenditure which was executive and administrative in nature had to be treated as office expenses in respect of which deduction was allowable only as per the provisions of section 44C of the Act. - Held that:- following the decision in assessee's own case [2012 (7) TMI 703 - ITAT MUMBAI] decided in favor of assessee.
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