|
Advanced Search Options
Income Tax - Case Laws
Showing 321 to 340 of 585 Records
-
2013 (9) TMI 563
Valuation u/s 50C - Enhancement of sale consideration - Held that:- Commissioner of Income-tax (Appeals) called a specific report from the Tehsildar-cum-Sub-Registrar, Ludhiana, regarding location and applicable circle or collector rate in the financial year 2006-07 and the stamp valuation authority informed him that the land sold was situated at village Dhandari Khurd and applicable circle of collector rate for the said land in the year 2006-07 was Rs. 1,300 per sq. yd. and the sale consideration actually received by the assessee was much higher than the above circle rate.
CIT(A) rightly held that unless the property transferred has been registered by sale deed for the purpose of the value has been assessed and stamp duty has been paid by the parties then section 50C of the Act cannot come into operation. In such a situation, the position existing prior to section 50C of the Act would apply and the onus would be upon the Revenue to establish that the sale consideration declared by the assessee was understated with some clinching or comparable evidences.
Assessing Officer was working on the wrong location of the land sold and the learned Commissioner of Income-tax (Appeals) passed the impugned order on the basis of report submitted by the Revenue authority as well as the Sub-Registrar and he rightly held that the land sold was located at village Dhandari Khurd and the applicable collecteral rate on that land was Rs. 1,300 per sq. yd. and the assessee sold the land at much higher price than the collector or circle rate. Therefore, we are constrained to hold that the findings of the learned Commissioner of Income-tax (Appeals) in the impugned order are based on the reports of the Revenue authorities and there is no reason before us to interfere with the same - Decided against Revenue.
-
2013 (9) TMI 562
Unexplained investment u/s 69 - Sale and purchase of paintings - Personal effect - Purchases shown as stock in trade - Held that:- assessee is a connoisseur of art. The object of art is not only the pride possession but it also satiates the aesthetic quench for the art of the connoisseur. It gives joy to the possessor which is different from the pride of possession. The expression 'personal effect' as per the Black's Law Dictionary means articles associated with person, as property having more or less intimate relation to person of possessor - The apex court in the case of H. H. Maharaja Rana Hemant Singhji v. CIT [1976 (2) TMI 1 - SUPREME Court] has said that an intimate connection between the effects and the person of the assessee must be shown to exist to render them 'personal effects' within the meaning of that expression used in clause (ii) of the exceptions in section 2(4A) of the Indian Income-tax Act, 1922.
We make it clear that these holdings of paintings cannot be considered as personal effects. It is also on record that the assessee was holding these paintings in a packed condition and is preserving them according to the norms required and is not displaying them at his house. These aspects were admitted in the course of arguments. Therefore, these paintings cannot be held as personal effects. To that extent the assessee's contentions are rejected. - Decided against the assessee.
Whether the transaction is in the nature of "adventure in the nature of trade" so as to consider it as business or as an "investment" by the assessee. - For deciding whether trade or investment, it is to be examined afresh in the light of past conduct of the assessee and necessary details/evidences, including the running account in Synergy Art Foundation.
Additions u/s 69 - While accepting that the amount of Rs. 5 lakhs was made subsequent to the search and seizure proceedings, the Commissioner of Income-tax (Appeals) surprisingly confirmed the same as an afterthought to explain the discrepancies detected. - Held that:- There is no dispute with reference to the cost of the painting and also no dispute with reference to the payment over 2 years. The Assessing Officer has already accepted the payment of Rs. 15 lakhs which was stated to have been paid by way of cheques and subsequently Rs. 9 lakhs was paid in three instalments of Rs. 4 lakhs and Rs. 2.5 lakhs each and were evidenced by the statements of ICICI Bank. In the light of the facts above, no amount can be considered as unexplained investment, unless there is confirmation from the other party that the amounts were paid in cash other than what was stated by the assessee. - Decided in favour of assessee.
-
2013 (9) TMI 561
Addition u/s 41(1) - Addition of Capital Reserve - amount credited to capital reserve on account of waiver allowed by Centurion Bank of principal amount. - Held that:- The orders of the revenue authorities were not clear as to how the amount of principal waived by the bank was arrived at a sum - On the waiver of the principal amount due to the bank and the benefit that accrues to assessee on waiver of such waiver provisions under section 41(1) cannot be applied - One had to look at the statement of the Bank to identify what was the principal amount waived and the interest amount waived and the terms of the loan in respect of which the liability in question arose - It had also to be verified as to what was the interest expenditure that was claimed by the Assessee as deduction in the past while computing its taxable income and what was the amount that was actually allowed as deduction in the past assessments - Neither the order of the AO nor the that of the CIT(A) was clear on this aspect.
In principle the provisions of section 41(1) of the Act will not be applicable to waiver of principal amount - We direct the AO to examine the issue with regard to the actual quantum of principal waived and the quantum of interest that was waived by the bank and restrict the addition to be made under section 41(1) of the Act to the extent that the waiver relates to the interest liability of the assessee which had been claimed as deduction by the assessee while computing its income in the past.
Depreciation on Electrical Fittings – 15% or 25% - Held that:- The electrical installation once they form part of the block of assets, plant and machinery prior to A.Y 2003-04, depreciation has to be allowed on the written down value of the block - We are of the view that once a particular depreciable asset enters the block it losses its identity and it is not possible to apply the new rates of depreciation on the written down value of the electrical installation by carving out its WDV from the block of assets, plant and machinery - We, therefore, agree with the submissions of the assessee and direct the AO to allow depreciation as claimed by the assessee. - Decided in favor of assessee.
Expenses related to discontinued business or not - Held that:- Following Triumph Securities Ltd. Versus Deputy Commissioner of Income-tax, Central Circle 40, Mumbai [2010 (4) TMI 874 - ITAT MUMBAI] and KNP Securities P. Ltd. Versus Assistant Commissioner of Income-tax [2009 (5) TMI 840 - ITAT MUMBAI] - The reasoning of the Tribunal is that the Assessee could not do business because of the ban imposed on its trading by SEBI which he was challenging and the business could not be carried on for reasons beyond the Assessee’s control - We therefore following the order of the co-ordinate bench hold that the Assessee is entitled to carry forward the loss for set off in subsequent assessment years as allowed by the AO. - Decided in favor of assessee.
-
2013 (9) TMI 560
MAT- Minimum alternate tax - Disallowance of Deductions out of Book Profits as per Explanation 1 to section u/s 115JB(2) - Adjustment on account of FBT - Held that:- There was no merit in the order of the Assessing Officer in not deducting the amount of expenditure relatable to fringe benefit tax from the profits of business, while computing the book profits of the assessee for the relevant assessment year - The said expenditure debited to the Profit & Loss Account was to be allowed as an expenditure and there was no merit in adding back the same while computing book profits under section 115JB of the Act
The circular provided that however this prohibition does not apply to the computation of book profits for the purpose of section 115JB and the same is to be allowed as a deduction. In view of the clarification issued by the CBDT vide Circular No.8/2005.
Adjustment on account of agricultural income - Held that:- The assessee had declared agricultural income in its Profit & Loss Account and the said agricultural income in view of the definition of book profits is to the reduced from the profits of the business in order to work out book profits of the company under the provisions of section 115JB of the Act.
Adjustment on account of prior period items - Held that:- where the assessee had shown receipts on account of prior period adjustment on account of income tax refund and reversal of provision of income tax, the said items of receipts are not income in the hands of the assessee and the same have to be excluded from the profits reflected in the Profit & Loss Account while computing books profits under section 115JB of the Act.
Allowability of Expenditure of Die Tooling Charges – Held that:- Following DCIT vs Metalman Auto Private Ltd [2000 (6) TMI 123 - ITAT CHANDIGARH-A] - To be revenue in nature since the expenditure were incurred for modernization of existing projects, which was already manufacturing the same products, and simply to increase the business more efficiently and more profitability, especially when the expenses were incurred for making technological changes - It was not the case of the revenue that new machinery was installed rather the assessee incurred expenses for the improvement of product and quality with an object of achieving maximum output by improving the already existing machinery, therefore, it cannot be said that it is setting up of altogether new business - The assessee company by incurring such expenditure had only improved the efficiency in manufacturing of existing products more economically for the purposes of getting maximum business advantage.
Allowability of Technical Know-How Expenditure – Held that:- Following CIT vs Mihir Textiles Ltd [2006 (3) TMI 108 - GUJARAT High Court ] and CIT vs Ashoka Mills Ltd. [1995 (10) TMI 35 - GUJARAT High Court ] - Technical service fee was deductible - the amount so paid under the agreement was revenue expenditure - composite payment for supply of technical know how and services for setting up plant and manufacture of product was held that the expenditure was of enduring benefit to the assessee, therefore, was of capital nature - the assessee was allowed and the appeal of the Revenue was dismissed.
-
2013 (9) TMI 559
Agricultural income or not - AO denied the exemption and treated the same as income from other sources - Held that:- finding of the lower authorities goes against the revenue records which show that the land was under cultivation during the financial year 2006-07 and for 2004-05 and also against VRO’s Certificate. Being so, in our opinion, the certificate issued by the VRO, who is concerned revenue authority to issue the said certificate has to be relied upon and it is not possible to reject the same without examining the deponent - the agricultural income declared by the assessee is to be accepted as agricultural income only. - decision of the Supreme Court in the case of Mehta Parikh & Company vs. CIT [1956 (5) TMI 4 - SUPREME Court] followed - Decided in favor of assessee.
Exemption u/s 54B - purchase of agriculture land - Computation of Capital Gains - Exemption u/s 54B - Treating the land sold by the assessee as nonagricultural land – Held that:- The lower authorities were justified in determining the land in question, as capital asset liable for income-tax - With regard to determination of cost of acquisition of the land disposed of, we are of the opinion that considering the proximity of the land to the city, it was reasonable to fix the value of as on 1.4.1981 at Rs.30,000 per acre, instead of Rs.10,000 determined by the Assessing Officer, as against Rs.1,40,000 claimed by the assessee. One of the reasons for which the claim of the assessee for relief under S.54B was rejected by the assessing officer was that what was paid by the assessee was only an advance for purchase, and unless it was actual purchase of land, assessee would not be entitled for relief under S.54B.
There was some merit in this reasoning of the assessing officer - However, in terms of S.54B of the Act, assessee had to purchase the agricultural land within a period of two years. Hence, though mere payment of advance does not entitled the assessee for relief under S.54B of the Act, if ultimately whole transaction of purchase of land was completed within a period of two years as contemplated under S.54B of the Act, assessee was entitled for relief under S.54B of the Act - we set aside the orders of the lower authorities, and restored this issue to the file of the assessing officer for verifying whether the assessee had purchased the agricultural lands within a period of two years, so as to qualify for relief under S.54B of the Act, and accordingly re-decide this issue in accordance with law and after giving reasonable opportunity of hearing to the assessee.
-
2013 (9) TMI 558
Disallowance of Deduction u/s 80P(2)(a)(i) - granting the status of Cooperative Society - providing credit facilities to its members - Spcial auditor u/s 142A concluded that the assessee was not a primary agricultural credit society and was also not a cooperative bank. - Held that:- the assessee is primary co-op agriculture and rural development bank, entitled to benefit of deduction u/s 80P(2)(a)(i) of the Act. Merely because certain deficiencies were noted in not holding the meetings on periodic intervals or the membership number of members were not available in particular list, etc., does not make the activities under taken by the assessee society to be not in the nature of providing credit facilities to its members. The basic activity carried on the assessee society as enshrined in its bye laws was to provide long term loans to its members for specified purposes and the assessee admittedly is doing so. Once the primary activity of providing loans to its members has been undertaken by the assessee society, its entitlement for exemption u/s 80P(2)(a)(i) of the Act merits to be allowed.
Commissioner Of Income-Tax Versus Pondicherry Co-operative Housing Society Limited [1990 (11) TMI 132 - MADRAS High Court] - various objects of the society were distinct and independent objects - A perusal of clause 2(j) of the bye-laws of the society showed that to obtain a loan from the society, it was not necessary that the member should have constructed the house through the society or under its supervision - The restriction imposed on the user of the credit facilities extended by the assessee-society for house building could not be construed as means intended to secure one of the objects of the society, viz., house building - At best it could be regarded as imposition of a condition for obtaining credit facilities - The activity of the assessee-society in making funds available to its members had to be regarded as one of providing credit facilities to its members - the assessee was entitled to the benefit of special deduction under section 80P(2)(a)(i).”
The object of the assessee-society was to give long term loans to its members for its utilization for specific purposes and the assessee was carrying on such activities and had earned interest income on such loans provided to its members under various schemes - The Special Auditors have also admitted to the above said facts that the assessee had generally given credit to the members for agriculture and rural development activities - Once the assessee was found to be carrying on its primary activity and similar activity was being carried on in earlier years and accepted by the department from year to year, we find no merit in rejecting the claim of the assessee vis-à-vis its status under section 80P(2)(a)(i) of the Act - The deficiencies pointed out by the Special Auditors and even the Auditors of Govt. of Punjab which have been complied with by the assessee, does not justify the rejection of exemption under section 80P of the Act - Thus we direct the Assessing Officer to allow deduction under section 80P(2)(a)(i) of the Act – Decided in favour of Assessee.
Disallowance u/s 14A – Held that:- Following CIT Vs Kings Exports 2009 (8) TMI 54 - PUNJAB AND HARYANA HIGH COURT] - Where the income had not been claimed as exempt, we find no merit in applying the provisions of section 14A of the Act in computing the disallowance of expenses which were attributable to the earning of dividend income – Assessing Officer was directed to delete the disallowance made in view of the provisions of section 14A of the Act – Decided in favour of Assessee.
-
2013 (9) TMI 557
Adjustment of accrued demurrage charges - assessee contended that since the amount is not credited to profit and loss account, it is not taxable - Held that:- If a receipt has accrued but not shown in the books then it does not mean that such accrual of money is not to be considered for income. When a person gets a right to claim debt from others then such debt stand accrued - Decided against the assessee.
The auditor has pointed out that due to not making such entry of demurrage charges in profit and loss account, then loans and advances are understated by Rs.5,00,080/- and liability overstated by Rs.2,70,726/-. It means that assessee has to pay Rs.2,70,726/- to those parties from whom demurrage was to charged. Hence to this extent, the assessee can recover through journel entry without writing off debt unless demurrage is waived by Board of Directors and allowed by revenue u/s 37 of the I.T. Act.
CIT (A) was justified in confirming the addition of Rs.7,70,606/- - Decided against the assessee.
Payment of Privilege fees - Nature of expenditure - exclusive privilege for wholesale trade of Indian made Foreign Liquor & Beer - Held that:- The issue is whether the fee paid is for the purpose of business or not. If it is in conteravention of provisions of Excise Act, the Excise Authority will take appropriate action, but if the same is paid for business purpose, then the payment cannot be held as in genuine or held as not allowable in view of provisions of section 37 (1) of the Act. It is further seen that even there is no contravention in paying the privilege fee as the fee is paid under section 24 of the Excise and the provisions of section 28, 29 are not applicable as they are on separate aspect - held as business expenditure - Decided in favour of assessee.
-
2013 (9) TMI 556
Deduction under section 80IA – Infrastructure facility – Whether the contractor was synonymous with the developer within the meaning of section 80IA (4)(i) of the Act - Whether the condition placed in clause (c) was applicable to the case of a developer, who was not carrying on business of operating and maintaining the infrastructural facilities - The assessee claimed special deduction under section 80IA - The assessing officer rejected the claim but the commissioner (Appeals) Tribunal allowed it - Held that:– Assessee was engaged in the civil construction work like construction of flyover, bridge underpass, sewerage, water supply etc. for various local bodies, railways, Central/State Governments - Following COMMISSIONER OF INCOME-TAX Versus ABG HEAVY INDUSTRIES LIMITED [2010 (2) TMI 108 - BOMBAY HIGH COURT] - The main thrust of the decision was that a developer need not be the owner of the land on which development was made - Although that decision was rendered in the context of a developer of buildings and the deduction was in respect of 80IB(10), but the definition of ‘developer’ given in that case is also relevant for this purpose - Moreover, we are in agreement that in incentive provisions, the construction should be liberally given as held by the Hon'ble Supreme Court rendered in the case of Bajaj Tempo Ltd vs CIT [1992 (4) TMI 4 - SUPREME Court].
When the assessee makes investment and himself executes development work and carried out civil works, he was eligible for tax benefit u/s 80IA of the Act - the assessee was entitled to deduction u/s 80IA(4) of the Act.
Entering into a lawful agreement and thereby becoming a contractor should in no way be a bar to the one being a ‘developer’ - The assessee had developed infrastructure facility as per the agreement with Maharashtra Government/APSEB, therefore, merely because in the agreement for development of infrastructure facility the assessee was referred to as a contractor or because some basic specifications are laid down, it does not detract the assessee from the position of being a ‘developer’; nor will it debar the assessee from claiming deduction u/s 80IA(4) - Section 80IA(4)(i)(b) required development of infrastructure facility and transfer thereof as per agreement and it cannot be disputed in view of the material on record that the assessee had transferred the infrastructure facility developed by it by handing over the possession thereof to the concerned authority as required by the agreement - The handing over of the possession of developed infrastructure facility/project is the transfer of the infrastructure facility/project by the assessee to the authority.
The handing over of the infrastructure facility/project by the developer to the Government or authority takes place after recoupment of the developer’s costs whether it be “BT’ or ‘BOT’ or ‘BOOT’ because in ‘BOT’ and ‘BOOT’ this recoupment is by way of collection of toll therefrom whereas in ‘BT’ it was by way of periodical payment by the Government/Authority - The land involved in infrastructure facility/project always belongs to the Government/Local authority etc., whether it be the case of ‘BOT’ or ‘BOOT’ and it is handed over by the Government/Authority to the developer for development of infrastructure facility/Project. The same has been the position in the given case as well - So, deduction u/s 80IA(4) is also available to this assessee which had undertaken work of a mere ‘developer’ - Decided against Revenue.
-
2013 (9) TMI 555
Disallowance u/s 14A - Disallowance of 10% of dividend income - Held that:- Even prior to assessment year 2008-09, when rule 8D was not applicable, the Assessing Officer had to enforce the provisions of sub-section (1) of section 14A. - The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that determination, the Assessing Officer should provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case - Following decision of Godrej and Boyce Manugacturing Co. Ltd., Vs. DCIT 2010 (8) TMI 77 - BOMBAY HIGH COURT) - Decided in favour of assessee.
Deduction u/s 80IB - Held that:- Assessing Officer disallowed the deduction u/s.80-IB on interest income, lease rental and other income and the CIT(A) in appeal disallowed the deduction to the assessee on interest income and lease rental following his predecessor’s order for the assessment year 2001-02 in assessee’s own case and allowed deduction to the assessee on other income. The order of the CIT(A) was confirmed by the Tribunal in further appeal filed by the assessee. The assessee has therefore very fairly considered that the issue of allowing deduction u/s.80-IB on interest income and lease rentals are covered against the assessee. Therefore, the ground of appeal of the assessee is dismissed.
Regarding the deduction allowed u/s.80IB on other income, we find that all the facts regarding the details of income are not available from the order of the Assessing Officer and the CI(A) and neither party before us has filed the same. Therefore, we are not in a position to adjudicate the issue completely. Therefore, in our considerate opinion, the issue needs to be adjudicated afresh by the Assessing Officer after bringing all relevant details and facts on record by passing his speaking order. We therefore, set aside the orders of the lower authorities and remand the matter back to the file fo the Assessing Officer to adjudicate the matter afresh by passing his order after allowing reasonable opportunity of hearing to the assessee - Decided against assessee.
-
2013 (9) TMI 535
Disallowance of Commission - Held that:- similar commission was allowed by the A.O. in A.Y. 02-03, total turn over had gone up during the year - The Board had increased the salary on the basis of extensive knowledge, business skill, managerial experience and capability increasing in net profit and commercial expediency - The Revenue had not brought any material on record which contradicts the factual finding of the year under consideration to A.Y. 03-04 – Decided in favour of Assessee.
Disallowance of Deduction u/s 80IA - Held that:- The market value for electricity would be one at which it was supplied by GEB to other assessees inclusive of duty - Therefore, the rates taken by the assessee for the purpose of supplying electricity from CPP unit to general unit is upheld. The assessee succeeds on this point - Following ACIT vs. Jindal Steel & Power Ltd.[2007 (6) TMI 308 - ITAT DELHI ] - the market rate postulated by section 80IA (viii) shall be the price at which the assesses purchases electricity from the Electricity Board - the market value postulated by the provisions of section 80IA shall be the price at which the assessee purchases electricity from Electricity Board and not the one which is fixed by the legislative mandate – Decided in favour of Assessee.
Adjustments u/s 145A - Addition on Account of Modvat Credit in Opening Stock and Closing Stock – Held that:- Section 145A has been amended and as per Section all the taxes or cess whatever name it was called is to be added in the valuation of the closing stock in preparing the accounts of the appellant – Following COMMISSIONER OF INCOME TAX Versus MAHAVIR ALLUMINIMUM LTD. [2007 (11) TMI 41 - HIGH COURT, DELHI] - The A.O. only added excise duty / modvat credit in purchase, sale and closing stock but had not allowed any adjustment in opening stock – decided in favour of Assessee.
Addition of Book Profits u/s 115JB – Dividend Stripping u/s 94(7) – Held that:- As per Section 94(7), any loss on security or unit was to be ignored for the purposes of the computing his income chargeable to tax where the transactions made within a period of 3 months prior to the recorded date and sales these securities within 3 months or within 9 months after such date. Ld. A.O. had given details of security purchased and sold in the assessment order, which were made within 3 months before the recorded date - The Explanation (f) of Section 115JB was clearly applicable in case of the appellant - The amount or amounts of expenditure relatable to any income to which [Section 10 (other than the provisions contained in Clause (38) thereof) or Section 11 or Section 12 applied] is to be increased by him – Decided against Assessee.
Notional Disallowance u/s 14A – Interest Expenses u/s 115JB - The matter had been already allowed by the CIT(A), particularly, on the calculation of interest which had been accepted by the ld. Counsel in his argument. Therefore, the issue was restored back to the A.O. to re-calculate the disallowance as per the submission made by the appellant - The appellant had borrowed funds which were interest bearing - Therefore it can be said that if there were surplus funds then the appellant could have reduced its interest burden and by not doing so it was very clear that the interest bearing funds were in fact utilized for the purpose investment and therefore the disallowance of interest for earning of dividend income u/s.14A is in order.
Disallowance of Depreciation - Held that:- The appellant had changed the method of depreciation in A.Y. 02-03, which had been accepted by the department - Now he had changed the method of depreciation from SLM to WDV method on Vareli as well as Jolva power plant - As per sub-section 2 of Section 115JB, the appellant can adopt the method and rate for calculating the depreciation, this shall be same as have been adopted for the purpose of preparing such account including P&L Account and laid before the company at its annual general meeting in accordance with the provisions of Section 210 of the Companies Act, 1956, which was conducted on 28.09.2004 by the Management - on adjustment u/s. 115JB, it was held that the A.O. doesn't have any power to make adjustment except provided in Section 115JB itself - Thus, we direct the A.O. to calculate thebook profit u/s. 115JB on the basis of depreciation WDV method.
-
2013 (9) TMI 534
Violation of provisions of section 40A(3) of the Income Tax Act read with Rule 8DD - Payment in cash - Assessee is a 100% Exporter of fish and fish products which are allowed to be purchased in cash as per the provisions of Rule 6DD – Held that:- Assessee is covered by sub-clause (3) of Rule 6DD when fish or fish products can be purchased in cash and the payment can be made to the cultivators, grower or producers of such articles produced or products when the producers of fish or fish products has been specifically defined would include besides the fisherman any headman of fishermen, who sorts the catch of fish brought by fishermen from the sea, at the sea-shore itself and then sells the fish or fish products to traders, exporters, etc – As per genuineness and the business practices insofar as the assessee being an exporter of such magnitude would have received all payments by way of export in bank which he would have withdrawn from the bank for incurring such expenditure - Intention of the legislation to allow benefit to such exporter keeping in mind the cash is incurred for procuring fish and fish products was delicate and risk involved therein was to be allowed – Decided in favor of Assessee.
Restricting the seeds purchase in cash to10% being the wild seeds – Held that:- Business conducted by the assessee is of such magnitude that it was nobody's case that wild seeds has to sprout in accordance with the arithmetical projection - Other purchases being the fish and fish products insofar as he explained that the value of the hatchery seeds which is higher and the wild seed may or may not grow was nobody's case which was again at the mercy of the nature when the seller of the prawn seeds also raises his hand for not hatching into prawns of desired quality. Therefore, keeping in view the magnitude of the export made by the assessee that 10% sustenance on account of seed purchase is fit for deletion.
Disallowance u/s 40A(3) of the Income Tax Act – Held that:- Various facts leading to this part sustenance of the disallowance not maintainable insofar as payment for diesel, labour and places where banking facilities are not available are allowed under the provisions of Rule 6DD - There is no violation of Rule 46A insofar as the learned CIT(A) had on the basis of finding tried to assign a percentage for sustaining the disallowance which is not in accordance with the provisions of the I.T.Act for disallowance u/s.40A(3) - Directed the Assessing Officer to delete the addition so made and partly sustained by the learned CIT(A) on the issues as mentioned.
-
2013 (9) TMI 533
Interest earned on the parking of share capital to be chargeable under the head ‘Income from other sources’ or to be capitalized – Interest payable on borrowing of such money to be disallowed u/s 14A of the Income Tax Act – Held that:- Interest cannot be taxed as income from other sources in the hands of the assessee and therefore, the subsequent disallowance of expenses claimed at 10% to earn that income has been infused in the total project cost cannot be disallowed insofar as the whole of the income has been capitalized was rightly considered for revision by the assessee before the Assessing Officer – Decided in favor of Assessee.
Meaning to the insertion of the proviso to Section 36(1)(iii) - Held that:- Interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession was being allowed as deduction u/.s.36(1)(iii) of the Act as revenue expenditure was amended w.e.f. 1.4.2004 when the amount of interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business or profession whether capitalized in the books of account or not for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction, holds true for the income insofar as once having identified that the income from interest is from the Banks where the share capital was parked was to not earn interest to be balanced interest on capital borrowed.
-
2013 (9) TMI 532
Speculative loss - Setting off the Brought Forward Losses – Proportionate Expenses - Whether the CIT(A) was erred in not setting off the brought forward losses on shares as per last assessment order against current year profit from share activities and in not considering the proportionate expenses out of the expenses capitalized – Whether or not the activity of the assessee regarding sale and purchase of shares was similar to the activity carried on by it in respect of sale and purchase of shares with regard to assessment year 2007-08 - Held that:- There being lack of clarity on facts, it would be just and proper to restore the issue to the file of AO to bring all the facts on record and give a specific finding that where or not assessee's activity of sale and purchase of shares during the year remains same as it was in respect of assessment year 2007-08 and after determining this fact the AO will determine that whether such activity is speculative in nature - If such activity is speculative in nature then set off of earlier determined speculative loss is to be granted to the assessee - With these observations the issue was restored to the file of AO.
According to the provisions of the Act brought forward speculative loss can be adjusted against speculative profit only - The AO in the computation of income had not determined the profit arising out of activity of sale and purchase of shares as speculative profit - the reason given by AO for disallowance of the claim of the assessee was absence of details regarding eligible losses.
In the light of the material palced, The relevant observation of AO on the issue in respect of assessment years 2004-05 and 2005-06 from respective assessment orders have already been reproduced - The department cannot take different stand on the year under consideration as principle of consistency has to be followed - However, for verification of the quantum claimed by the assessee the issue was restored to the file of AO - After verifying the quantum the AO will allow the claim of the assessee according to the stand taken by revenue in respect of A.Ys 2004-05 and 2005-06 – Decided in favour of Assessee.
-
2013 (9) TMI 531
Disallowance u/s 14A - Whether CIT(A) erred in deleting the disallowance made by the AO u/s 14A of the IT Act, 1961 without appreciating the fact that the assessee failed to prove that all the expenses debited to Profit & Loss Account were incurred for earning other than the income exempt from tax - Held that:- The Tribunal had not gone into merits of the case and remitted the issue to the record of the Assessing Officer because Rule 8D was not applicable as held by the Hon’ble jurisdictional High Court in the case of Godrej & Boyce Ltd v ACIT [2010 (8) TMI 77 - BOMBAY HIGH COURT].
Because the most of the investments were already made in the earlier years; however, for the Assessment Years 2002-03 to 2004-05, the issue of disallowance u/s 14A was pending before the Assessing Officer as it was remanded by the Tribunal - Therefore, to this extent, the issue for the year under consideration was remitted to the record of the Assessing Officer to work out the availability of assessee’s own funds, even if it is put into the common pool as held by the Hon’ble jurisdictional High Court in the case of Commissioner of Income-tax v. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY ].
During the year under consideration, half of the total investments of Rs.23.81 crores made by the assessee from the total sales of investment; therefore, issue of disallowance u/s 14A on account of interest expenditure had to be decided after taking into consideration the available funds from sale of investments and other own funds - As we have already made it clear that upto the Assessment Year 2001-02, the issue had been allowed by the Tribunal and therefore, no disallowance can be made for the investments made upto Assessment Year 2001-02.
Disallowance of Interest Expenses - Whether CIT(A) erred in deleting the disallowance out of interest expenses in respect of interest free advances to subsidy company without appreciating that the issue of business expediency was not proved by the assessee - Held that:- The assessee made interest free advance to its subsidiary company which was incorporated for doing life insurance business - The assessee’s group was carrying general insurance business and the main activity of the assessee was that of financing - The Hon’ble Supreme Court in the case of S.A.Builders Ltd. Vs. CIT [2006 (12) TMI 82 - SUPREME COURT ] - wherein interest bearing funds were lent to the sister concern without interest, the A.O. needed to examine the purpose of loan - If the loan was advanced for commercial expediency and not utilized by the Directors of the sister concern for their personal benefit, then the deduction of interest had to be allowed - the learned CIT(A) had rightly relied on this judgement in deleting this addition.
Addition to the Book Profits computed u/s 115JB being the Expenses Disallowed u/s 14A – Held that:- The principle of apportionment as provided u/s 14A cannot be applied while computing the book profit u/s 115JB - However, the Assessing Officer had power and jurisdiction to make the adjustment as provided under Explanation 1 - Accordingly, in our view the amount of expenditure which is directly relatable to the income, which was exempted u/s 10, 11 and 12 shall be adjusted for the purpose of computing the book profit - Hence, this issue was required to be examined and considered afresh for making the adjustment only to the extent of actual expenditure incurred in respect of the earning of income claimed as exempt.
-
2013 (9) TMI 530
Penalty u/s 271(1)(c) - Held that:- The revenue has to prove that the assessee has either concealed particulars of his income or has furnished inaccurate particulars of his income -There is no finding by the A.O. that the surrendered cash creditors are bogus - the penalty cannot sustained - under section 271(1)(c) penalty can be levied only if either the act of "concealment of particulars of income" or "furnishing of inaccurate particulars of income" is found to have been committed by the assessee – Following Dilip N. Shroff vs JCIT & Another [2007 (5) TMI 198 - SUPREME Court] and CIT vs Reliance Petroproducts Pvt. Ltd.[ 2010 (3) TMI 80 - SUPREME COURT] The assessee has claimed to have loans from 45 parties. Out of them the assessee had produced duly attested and properly sworn-in affidavits of 23 parties, wherein, they not only have confirmed the factum of their deposit but have also explained the source(s) thereof. It was only when the A.O. asked the assessee to produce all the 45 parties before him, the assessee not finding it feasible and being unable to comply, made a bonafide surrender of the total amount qua them.
By the mere reason of such concealment or of furnishing of inaccurate particulars alone, the assessee does not, ipso facto, become liable to a penalty. Imposition of penalty is not at all automatic. Meaning thereby, any addition in quantum would not lead to automatic levy of penalty and this is also true in respect of furnishing of inaccurate particulars of income – Decided in favour of Assessee.
-
2013 (9) TMI 529
Addition of Opening Excess Cash - Held that:- If there is some recording mistakes and if this fact is found to be correct, the same has to be considered and adjusted - There is no absolute rule that the opening balance of a year only has to be taken as a gospel truth even when it is due to mistaken accountancy - the issue has not been properly dealt with by the authorities below - Therefore, we restore this issue to the file of the Assessing Officer with a direction that he shall properly consider the above reply of the assessee and after giving plausible reasoning decide this issue afresh - He will not summarily reject the same. In case the contention of the assessee is found to be correct, the same has to be considered in correct perspective - Needless to mention, that he will give opportunity of being heard to the assessee - Hence this ground is allowed for statistical purposes –Decided in favour of Assessee.
Treatment of Transactions - Actual Expenses OR Speculative Transaction - Held that:- There is enough proof qua the possession of biscuits - As to who brought these biscuits and what was the mode of travel is not of much relevance for this matter. The bill proves purchase of the biscuits. The non-recording of this purchase in the books on the date of survey also stands explained - The assessee has explained, through his elder brother [the manager] from the time of survey, the procurement of these ten biscuits. He has also given the source of purchase of these ten biscuits. He has also given the source of the purchase amount.
Transactions Recorded in the 'Order Book' – Held that: -The A.O. has not properly dealt with these issues – all the issues were restored to the file of the A.O. for de novo consideration - This issue is the subject-matter of all the remaining grounds of assessee's appeal and the sole ground of revenue's appeal - Neither the A.O. nor the ld. CIT(A) had articulated the issues and have not given their clear-cut finding - The issues have been so jumbled and mixed up that it is impossible to cull out clearly full and final facts of the case.
-
2013 (9) TMI 528
Disallowance of deduction u/s 80IB(10) of the Income Tax Act - Non-furnishing of completion certificate of the Housing Project – Held that:- There was no requirement for furnishing a completion certificate from the municipal authority. In that view of the matter, the claim of deduction u/s 80IB(10) cannot be denied for not submitting the completion certificate from the local authority. Similarly, it is not a requirement under the Statute that the undertaking must be owner of the land for claiming deduction u/s 80IB(10). However, it is a fact that the Assessing Officer has rejected the claim of deduction u/s 80IB(10) by alleging that the assessee has not furnished any information or evidence with regard to the housing project and whether the conditions for claiming deduction u/s 80IB(10) have been fulfilled. The Assessing Officer had further alleged that the assessee had not submitted and not obtained auditor's certificate in Form No. 10CCB - Remitted the matter back to the file of the Assessing Officer who shall consider the claim of deduction u/s 80IB(10) afresh after affording a reasonable opportunity of being heard to the assessee. It is open for the assessee to produce all the information and evidence in support of its claim of deduction u/s 80IB(10). The Assessing Officer shall consider all the information and evidences that may be produced by the assessee and decide the issue.
Determination of the income from house property by applying the rate of 7% on the investment of the assessee subject to cost inflation index – Held that:- The Tribunal in its order dated 23rd October, 2009 for the previous assessment years, directed the Assessing Officer to recompute the income from house property by following the return on investment method, applying the rate of 7% on the assessee's investment in the property as enhanced by applying the cost inflation index applied for the respective years to arrive at the ALV for the relevant assessment year. The facts being identical, since the CIT(A) has followed the direction of the Income-tax Appellate Tribunal while directing the Assessing Officer to recompute the income from house property - The order of the CIT(A) on this issue is sustained.
Disallowance of 10% expenditure claimed by assessee – Held that:- When the assessee has not submitted the details called for by the Assessing Officer, he was left with no option but to disallow part of the expenses on ad-hoc basis - Considering the totality of the facts and circumstances, disallowance of 5% of the expenditure under both the heads i.e. under head construction expenses and administrative expenses, would serve the purpose – Decided against the assessee.
-
2013 (9) TMI 527
Determination of Capital Gains - Determination of Fair Market Value - Deduction from FMV - cost of improvement - Held that:- The number of lifts is only toward adequate 'lift capacity', which would rather depend on the number of people residing in the building who would be ordinarily requiring that facility and, besides, the number of lifts would also stand to be determined by the carrying capacity of the lifts themselves. The same (number of lifts), thus, would not assume any significance of its own, and the increase, if any, in valuation of the house property on account of a higher number of such units would be marginal, and not in any case in linear proportion to the number of lifts. - no infirmity in the valuation adopted by the A.O. - Decided against the assessee.
Deductibility of the sum of Rs. 35 lakhs claimed from the sale consideration of Rs. 175 lakhs of the residential flat under reference in computing the capital gains arising on its transfer during the year - Basis of deduction being that the same represents a condition precedent subject to which only the said property stands bequeathed to, among others, is of assessee - Held that:- the assessee has not been able to show of the impugned sum as representing a condition precedent, with the succession of rights being given effect to without the said payment having been made, with even the transfer deed not recognizing the interest of any party other than the legatees in the subject property. - Decided against the assessee.
Under section 48, only sums specified for being adjusted against the consideration accruing or arising on the transfer of a capital asset in computing the capital gains are, (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of improvement thereto - Assessee's case as not maintainable both in law as well as on facts – Decided against the Assessee.
-
2013 (9) TMI 526
Exemption u/s 10(15)(iv)(f) - interest income - Withdrawal of exemption by Central Government - Utilization of ECB - foreign currency loans - Interest income being exempt in the hands of non-resident investors - Withholding tax u/s 195 - Held That:- by imposing a condition by Dy. Director (ECB) during the progress of the scheme was like changing the rules of the game in mid-way and the change of the rule was in respect of a game already played to alter its outcome. A retrospective or ex post facto change in such a manner is an arbitrary approach having no legal sanctity.
Decision in the case of Reliance Industries Ltd V/s Dy. Director of Income Tax (IT) [2005 (2) TMI 445 - ITAT BOMBAY-I]
Disallowance of Interest u/s 10(15)(iv)(f) - It was catastrophic to withdraw the exemption already granted u/s.10(15)(iv)(f) - Due to the withdrawal of the exemption the impugned order u/s.195 (2), now under dispute was passed directing to deduct withholding tax @ 20% - Held that:- conditions of the scheme, evidences of utility of the funds and the legal matrix of the case, the withdrawal of exemption was unwarranted - the appellant company was not liable to deduct withholding tax in respect of the interest payment.
So the basic question was that once because of the letter or notification the provisions of the statute have been negated or diminished by an executive order then what was the course left to a tax payer - Naturally the answer was that a tax payer had no option but to knock the door of the judiciary - In a plethora of decisions it was unequivocally held that the full effect of the provision had to be given in preference to supporting legislature such as rules, notifications, approvals etc.
The Tribunal does have the power to deal with the validity of such rules or notification and by applying the doctrine of “reading down” can strike down such rules if held to be in contradiction with the provisions of the statute itself - the rules were made only for the purpose of carrying out the provisions of the Act which cannot be taken away or whittle down the effect conferred by the statute - ITAT had both the power and duty to deal with such rules or notification and decide whether the same were in agreement with the main provisions of the statute - The provision of the statute provides in an unambiguous terms to grant exemption in respect of interest payable to an international investor who has lent money to industrial undertaking in India under a loan agreement as approved by the Central Government - The Government of India had properly regarded the need for industrial development only thereafter issued the notification and floated this scheme of ECB.
Relying upon Radhasoami Satsang V/s CIT [1991 (11) TMI 2 - SUPREME Court] - Strictly speaking, res judicata does not apply to income-tax proceedings - Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years had been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year - in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken.
Decided in favor of assessee.
-
2013 (9) TMI 525
Transfer pricing adjustments - ALP - addition made for guarantee amounting to Rs. 29.18 lakhs - addition made towards notional interest amounting to Rs. 5.64 Crores on loan to subsidiaries - Held that:- following the decision in Four Soft Limited [2011 (9) TMI 634 - ITAT, Mumbai] matter remanded back to AO.
TDS on Dealer Incentive and Service Coupons - disallowance under Section 40 (a)(ia) r.w.s. 194 H and 194C - Held that:- as sale took place between the assessee and the dealers, provisions of section 194 H would not be applicable in the case under consideration. - Decision in Jai Drinks (2011 (1) TMI 1035 - Delhi High Court) followed - transaction between the assessee and the dealers were on principal to principal basis. In other words there are certain terma and conditions in the agreement that are clearly indicative of the fact that the transactions were between principal and principal and that even in the matter of sales that were effected by the dealer it did not act as an agent of the assessee company.
AO has categorically stated that plan of incentives was not filed before him. In the paper book we do not find any documents related with the incentive scheme. We are of the opinion that matter of incentives allowed by the assessee to its dealers needs to be restored to the file of the AO. He is directed to decide the issue afresh with regard to the provisions of section 194C of the Act. Assessee is directed to furnish the AO details like plan adopted by it, method of calculating the incentives, incentives actually allowed etc. to the AO. - partly decided in favor of assessee.
Depreciation of Rs.13,09,000, on intangible assets - evidence regarding use of technical know–how - Held that:- The assessee had acquired technology for defence vehicles from one company of Israel. The assessee had acquired IPR of the said technology. We are of the opinion that existence of an agreement is not sufficient to claim depreciation. Neither before the Assessing Officer nor before us the assessee had shown as to how the technical know–how was used passively during the year under consideration. - Decided against the assessee.
Provisions for medical benefits as prior period expenses - Held that:- this is merely a provision and an unascertained liability - The claims also do not relate to the year under consideration. Further we also find that there are no specific approved funds for the provisions. The claim is also against the matching principle. The important fact also to be noted is that this amount has neither been paid to the employees during the year nor it has been deposited in a separate fund. In line with the foregoing, the disallowance is upheld - Decided against the assessee.
............
|
