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Income Tax - Case Laws
Showing 341 to 360 of 585 Records
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2013 (9) TMI 524
Disallowance u/s 40A(3) - payment in cash for purchase of land - Held that:- Contention of the assessee was that, firstly, these payments were made by cheques by its sister concern M/s. Zoom Developers and secondly the assessee has not debited these expenditure in the profit and loss account, therefore, no disallowance u/s 40A(3) can be made. - no disallowance - Decided in favor of assessee
Additions towards spped money / bribe - Through the letter, the Parker & Parker Associates had asked for payment of professional fee amounting to Rs.3 crore by 03.07.2006 through demand draft. The content of the letter has been interpreted by the AO as illegal payment made through them for bribing the .government officials in order to pursue their proposal for permission of purchase of lands. - Held that:- It is clear from the detailed findings recorded by the ld.CIT(A) that out of the total payment only a sum of Rs. 7 lakhs has been paid as speed money relevant to assessment year 2006-07, Rs. 4 lakhs in assessment year 2007-08 and Rs. 50,000/- in the assessment year 2008-09, he upheld the addition to this extent by observing that merely because the assessee has not debited this expenditure in the profit and loss account, no disallowance should be made.
However, such disallowance should be made only in the year in which assessee claimed such payment as expenditure in its profit and loss account and not in the years under consideration, wherein undisputedly no claim of any of such expenditure is made by the assessee as per the audited profit and loss account and balance sheet placed before the lower authorities, which also find placed in the paper book. We direct accordingly.
Undisclosed investment in land - addition u/s 69 - Held that:- , it is clear that the ld. CIT(A) ahs not deleted the addition by controverting the finding recorded by the Assessing Officer with respect to the applicability of provisions of Section 69 under which investment from undisclosed sources is added. The CIT(A) has simply deleted the addition by relying on the addition confirmed by him u/s 40A(3). We set-aside the order of CIT(A) on this ground and in the interest of justice, matter is restored back to the file of the Assessing Officer for deciding afresh after giving due opportunity to the assessee.
Deemed dividend - Advance Received Against Sale of Property u/s 2(22)(e) – Held that:- Genuineness of the agreement so entered by the assessee with the respective company was found to be after thought - As per agreement, the assessee was to receive the balance amount at the time of handing over the possession of the constructed area, however, till date neither possession has been handed over nor balance payment was received by the assessee.
In the respective balance sheet of the company amount had not been shown separately as advance against the land and properties and the same have been shown under the head “Other Advances” - Thus, even if the agreements were found to be genuine, the same have not been acted upon - The detailed findings recorded by the ld.CIT(A) to the effect that even in the audited balance sheet, the assessee had not shown the payments as advance against land and property, but was simply shown as other advances - The detailed finding recorded by the ld.CIT(A) had not been controverted by brining any positive material on record - Additions u/s 2(22)(e) confirmed - Decided against the assessee.
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2013 (9) TMI 523
Addition of Income Interest Accrued - Whether or not the assessee had a right to receive interest - Held that:- No income by way of interest on security deposit with MPEB, as accrued to the assessee in all the assessment years under consideration - Relying upon CIT vs. A. Gajapathy Naidu [1964 (4) TMI 6 - SUPREME Court] - the profit was to be included and could not be related back to earlier year during which the assessee actually supplied - It was also held that if the assessee followed mercantile system of accounting it is to be seen as to when the right to receive, accrued. The income is assessable in the year in which the right to receive accrued. - Decided in favor of assessee.
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2013 (9) TMI 522
Revenue or Capital Expenditure - principles to decided the nature of expenses - acquisition of a unit - Held that:- Expenditure incurred by appellant for successful or aborted acquisitions was capital in nature - While holding acquisition expenditure as capital expenditure we have considered type, nature and character of advantage as well as aim, intended object, effect of expenditure in larger context of necessity and expediency - Source /manner of payment or quantum of expenditure were not at all conclusive factors for deciding issue under consideration - issue has been decided after taking in to consideration basic facts i.e. where expenditure was for running business or not - expenditure was spent for purpose of bringing into existence a new asset /obtaining a new advantage.
Expenses in Connection with Development of Engine - Held that:- Claim of assessee that expenditure should be allowed u/s.35 also cannot be accepted - Expenditure incurred by assessee was not for scientific research, it was for transfer Technical know-how – CIT V. SWARAJ ENGINES LTD.[2008 (5) TMI 257 - SUPREME COURT] - appellant had acquired Technical know how from Austrian Company - Technical Know-how had been defined as ‘knowledge which would enable a company receiving such know-how to do project’ - If we take note of definition of Technical know-how it becomes clear that expenditure incurred by assessee had rightly been considered as Technical know-how by AO - As per agreement IPR were to remain with appellant and final product was to be exclusive property of assessee. - Depreciation was rightly allowed - not eligible for benefit u/s 35.
Development Expenses - Compact Project for Tractors - Premium Payable on ‘Foreign Currency Convertible Bonds’(FCCB) - Reversal of Premium payable on FCCBs - Held that:- CIT V. ITC Hotels Ltd.[2009 (11) TMI 582 - Karnataka High Court] and CIT v. Secure Meters Ltd.[2008 -TMI - 32081 - HIGH COURT RAJASTHAN ] even if debenture were to be converted into share at a later date, expenditure incurred on such convertible debenture had to be treated as a revenue expenditure - expenses incurred in connection with issue of FCCB were revenue in nature - No one was entitled to double deduction, so no one should suffer double taxation - AO should tax it only in one assessment year and appellant should make claim for said amount for one assessment year only.
Unutilsed CENVAT Credit on Raw Material u/s 145A - Held that:- AO had deliberated upon various issues with regard to Modvat credit - But, it appeared that he had not considered data available during appellate proceedings - Even if he had considered said data, he had not mentioned anything about it in assessment order - for arriving at a logical conclusion figures furnished by assessee had to be considered and commented upon - in interest of justice we remit back issue to AO - He was directed to give ‘proper effect to stocks, purchases and sales’ to arrive at a definite conclusion.
Octroi Incentive - Not Taxable Being Capital Receipt - Held that:- It was a known fact that Octroi was charge collected by local bodies on commodities or things entering local limits -It was collected on capital goods as well as on raw material - Sahney Steel And Press Works Limited And Others V. CIT[1997 (9) TMI 3 - SUPREME Court] - subsidy received by appellant to extent of purchase of raw material was concerned it cannot be held a capital receipt - question of Octroi received for capital/revenue items was neither raised before tribunal nor was it adjudicated upon - It was sufficient to say that sales tax subsidy cannot be compared with Octroi scheme in question.
Disallowance U/s. 40A(9)& 14A - Payments to Clubs - Held that:- Following Raasi Cement Ltd. V. CIT[2004 (12) TMI 55 - ANDHRA PRADESH High Court] – AO disallowed claim of assessee in view of provisions of section 40A(9) - provisions of section 40A(9) were very clear in providing that any payment or contribution made by an employer on behalf of employees to any fund, trust, society, association or person etc. would not be an allowable expense except payment made for expenses provided for u/s 36(1)(iv) and (v) - In earlier years matter was remanded back to AO - it was not decided in favour of appellant - issue in question in issue should be remitted back to AO as it was referred in earlier years - AO was directed to recompute disallowance considering materials submitted.
Adjustment u/s 92CA(3) to Arm’s Length Price of international transaction - Held that:- It was not responsibility of appellant to make payments to US company - As per agreement, appellant had to be reimbursed for payments made by it on behalf of AE - assessee was responsible only for insurance of products in course of transit, which became a liability of AE after it reached destination - No evidence in shape of expenditure had been divided to TPO or in DRP proceedings as to documentations kept.
Disallowance of Capital Loss on Sale of R&D Assets - Held that:- There was a fundamental, though unwritten, axiom that no Legislature could have at all intended a double deduction in regard to same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in absence of clear statutory indication to contrary, statute should not be read so as to permit an assessee two deductions - section 35 was part of head ‘Income from business,profession or vocation’- section 43 was part of same heading - provisions of head ‘Capital Gains cannot be imported here to allow assessee one more deduction.
Consideration Received on sale of LCV business in form of non-compete covenant treated as business income – Held that:- Amount received by appellant was of a revenue nature - Guffic Chem (P) Ltd. & Mandalay Investment P. Ltd v. CIT[2011 (3) TMI 6 - Supreme Court] - as per amended provisions whenever any fee or compensation is received by an assessee for not indulging in business activities, that were being undertaken by him before entering into such agreement, provisions of section 28(va) come into play.
Disallowance u/s40a(ia) - Held that:- Provisions of tax deducted at source were not applicable - GE India Technology Centre Private Ltd. V. CIT & Anr. [2010 (9) TMI 7 - SUPREME COURT OF INDIA] - AO had not examined issue about year-end payments - there was a difference between payments that were made during year and payments made at end of year - in 2nd category of payments tax had been detected in subsequent year when Bills were booked - amendment made to Sec.40(a)(ia) by finance act,2008, with retrospective effect from 1.4.2005.
Disallowance of Weighted Deduction u/s 35(2AB) – Held that:- Deduction u/s 35(2AB) for Kandivili should be allowed by AO as and when approval from DSIR was received and produced by appellant - appellant was entitled to claim weighted deduction,as far as Nasik unit was concerned - while deciding issue related with benevolent provisions like 35 (2AB) a liberal and practical approach should be followed, so that it fulfils objects with which said section was introduced.
Disallowance of Deduction u/s 801C – Short Credit of TDS - Held that:- AO had not quantified losses suffered by new unit nor had passed a speaking order in this regard - Assessing officer is directed to quantify loss for year under consideration and to give a clear finding - Credit for TDS should be given for year under consideration, even if same was filed before finalisation of assessment proceedings.
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2013 (9) TMI 521
Disallowance of Interest:- Held that:- There was no nexus between the interest bearing funds taken by assessee and the debit balances in the name of two accounts which can be considered as diversion of funds - The debit balances with the two concerns were running accounts in the course of purchase and sale of shares and were business transactions - Since there was no diversion of borrowed funds for non business purposes – Following S A Builders and other Vs CIT [2006 (12) TMI 82 - SUPREME COURT] - the funds advanced were for business purposes - there was no need for disallowance of any interest - It was also seen that AO in the assessment order compared the debit balance which does not pertain to the year under assessment - his comparison on facts was also not correct as he had taken the debit balances of later year for disallowing the interest this year – Decided against Revenue.
Disallowance of Finance Brokerage and Consulting Charges - Held that:- The borrowed funds were utilized for the purpose of business and interest was allowable as deduction allowed the brokerage and commission charges - the CIT (A) was correct in allowing the brokerage and consulting charges claimed by assessee for obtaining various loans – Decided against Revenue.
Disallowance of Sub-Brokerage – Held that:- During the course of assessment proceedings the appellant had furnished information of Shri Madhusudan Kela, though those were not treated sufficient by the AO to consider genuineness of the person as well as the payment of sub-brokerage - Assessee had not filed any confirmation either during the special audit or before AO, in view of the factual findings given by the CIT (A), we have no other option than to accept his findings in the absence of any contrary evidence placed by the Revenue - The Revenue had also not raised any ground with reference to admission of any additional evidence which indicate that the factual aspect that assessee filed confirmation letters before AO in the course of the assessment proceedings were to be accepted - It was also seen that the learned CIT (A) directed to verify the receipt of payments given to Shri Madhusudan Kela and after examination directed AO to allow the claim - We do not see any reason to interfere with the findings of the CIT (A) on this issue - It was for AO to examine the factual aspects and allowed the claim as the matter was restored to him by the CIT (A) – Decided against Revenue.
Deletion of Service Charges – Held that:- The service charges were debited to cost of shares, a copy of investment in shares account has also filed - It was claimed that the service charges was not shown in Profit & Loss A/c and in any other head - the claim appeared to be in order - Assessee filed copy of shares purchase account of Polaris Software shares and claimed that there is no double claim – Decided against Revenue.
Disallowance of Finance Charges - Held that:- The issue require fresh examination by AO keeping in view the above observations - The issue in the ground was therefore, restored to the file of AO to examine the nature of funds obtained by assessee and its utilization afresh without getting carried away by the observations in earlier years - It was also submission that in the trading account no interest was charged or paid on the debit/credit balance with the clients - Therefore, this aspect also had to be considered by AO while considering the allowance of interest claimed by assessee - The matter is accordingly restored to the file of AO for fresh examination and decision.
Three accounts which were maintained by assessee’s sister concerns were for the purpose of business and interest was allowed in assessment year 2000-01 on examination by the CIT (A) factually, the order of which was confirmed in that year - Since the facts in this year were at variance more so with reference to financial charges paid to Bank which was one of the major component and also brokerage paid for arranging inter corporate deposits aspect of which were neither discussed nor verified – Decided in favour of Assessee.
Disallowance of Depreciation - BSE Membership card - intangible asset - section 32(1)(ii) - Held that: - Following Technoshares & Stocks Ltd. and Others [2010 (9) TMI 6 - SUPREME COURT OF INDIA] - On the analysis of the Rules of BSE, it was clear that the right of membership (including right of nomination) gets vested in the Exchange on the demise/ default committed by the member; that, on such forfeiture and vesting in the Exchange the same gets disposed of by inviting offers and the consideration received thereof is used to liquidate the dues owed by the former/ defaulting member to the Exchange, Clearing House, etc. - the right of membership (including the right of nomination) vests in the Exchange only when a member commits default - Otherwise, he continued to participate in the trading session on the floor of the Exchange; that he continued to deal with other members of the Exchange and even had the right to nominate subject to compliance of the Rules - Moreover, by virtue of Explanation 3 to Section 32(1)(ii) the commercial or business right which is similar to a "licence" or "franchise" was declared to be an intangible asset - Therefore, the right of membership, which included right of nomination, was a "licence" or "akin to a licence" which was one of the items which falls in Section 32(1)(ii) of the 1961 Act - The right to participate in the market had an economic and money value - It was an expense incurred by the assessee which satisfied the test of being a "licence" or "any other business or commercial right of similar nature" in terms of Section 32(1)(ii) - the Tribunal was right in holding that depreciation was allowable on the cost of the membership card under Section 32(1)(ii) of the 1961 Act.
Disallowance of 20% Admissible Depreciation – Disallowance on Various Expenditure - Held that:- The issue of depreciation was allowed in favour of assessee in assessment year 2000-01 and the Revenue had not contested the same as can be seen from the issues raised in other appeals - there was no need for disallowing 20% of the depreciation as was done by the CIT (A) – the cars were reflected in assessee’s balance sheet and were used for assessee’s business, assessee was entitled for depreciation as claimed - There was no need for disallowing 20% of the claim.
Unexplained Cash Credit – Held that:- we are unable to understand how this entry will become unexplained cash credit - As far as the transactions to Shri I.R. Khandwala were concerned, money was ultimately received and paid and there was evidence on record that said transaction was a bonafide transaction - If we were to consider Shri I.R. Khandwala had not advanced money directly and the journal entry was passed without any basis, the actual credit was from Khandwala Securities Ltd in earlier year which was also not disputed by AO -Looking at either way, there was no basis for making addition under section 68 as unexplained income of assessee - Therefore, we have no hesitation in deleting the said addition made by AO and confirmed by the CIT (A).
Penalty u/s 271(1)(c) – The CIT (A) order per se cannot be faulted - as seen from the appeal for the assessment year in quantum, the issue of BSE Membership and interest claim of borrowed funds were restored to the file of AO for fresh consideration - Therefore, to that extent levy or deletion of penalty on the issue does not arise at this point of time as the issues were already restored to the file of AO for fresh adjudication.
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2013 (9) TMI 520
Depreciation on Assets – whether lessor was entitled to depreciation on assets leased by it in finance lease - Held that:- Following M/s INDUSIND BANK LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(3), MUMBAI [2012 (12) TMI 416 - ITAT MUMBAI] - Finance lease was for a fixed period & non-cancellable - Lessee used the asset for its entire economic life & all risks and rewards incidental to ownership were transferred to the lessee even though title may or may not be eventually transferred to him - There was a fixed obligation on the lessee for payment of lease money - the assessee’s lease agreement had all the characteristics of a finance lease - Further, RBI Circular No.FSCBC 18/24-01- 001/93-94 dated 14.02.1994 states that equipment leasing activity should be treated by banks “on par with loans and advances” - lease agreement under consideration was that of finance lease and not operating lease – Decided against Assessee.
Disallowance of Expenses – Financial Charges Allowable u/s 36(1)(iii) or Not – Held that:- Following United Phosphorus Ltd. Versus Joint Commissioner Of Income tax. [2001 (5) TMI 134 - ITAT AHMEDABAD-A] - Interest paid on funds borrowed for business purpose, including for the purpose of setting of anew unit of the existing running business was allowable u/s 36(1)(iii) of the Act - While examining the applicability of this tribunal decision, we have noted above that interest expenditure will be allowable if it was found that borrowed fund were used for the purpose of setting up of a new unit of the existing running business - borrowed funds were not used for setting up of a new unit of an existing running business but it was setting up of a new unit for production of an altogether new product i.e. power whereas the existing business of the assessee was production of lignite - Since this aspect was not fulfilled in the present case, even interest expenditure was not allowable in the present case u/s 36(1)(iii) because in the present case, the product to be manufactured by the new unit was an altogether new product – Decided against Assessee.
Disallowance as per Explanation u/s 37(1) - salary to staff against the guidelines of Gujarat Govt- Whether the expenditure incurred by the assessee was for any purpose which was an offence and/ or which was prohibited by law and if it was not so, the provisions of explanation to Section 37(1) was not attracted - Held that:- If the expenditure is incurred in violation of the guidelines of Government of Gujarat and against Article 192 of the assessee corporation then the remedy lies somewhere else and action can be taken as per law against the person responsible for such violation but this cannot be the basis for making disallowance of expenses without proving that it was not for the purpose of assessee’s business - This was not the claim of the revenue that this expenditure was not for the purpose of business and therefore, the disallowance was deleted – Decided in favour of Assessee.
Disallowance of Obsolete Stores/Stock – Held that:- Writing off of the value of closing stock should be allowed to the extent it brings the value of closing stock at level with cost or market price whichever was lower - The market price of obsolete items of stock will be definitely very low than its cost. At the same time, it is not acceptable that the value of such obsolete items will be ‘nil’ - Now, the question was what can be the scrap value of such obsolete items. Ld. CIT(A) has considered the same @ 25% of the cost - the same was reasonable - the assessee was following mercantile system of accounting and hence, scrap value had to be considered in the present year itself and it could not be deferred till the actual sale of scrap - the scrap value of stock had to be considered as opening stock in the year of sale.
Deletion of Disallowance of Expenses – the fact had to be brought out on record as to whether the expenses in question have crystelised during this year and if the assessee is able to do so, no disallowance should be made - The A.O. should pass necessary order as per law as per above discussion after providing adequate opportunity of being heard to the assessee – Decided in favour of Revenue.
Deletion of Addition of Bonus and Royalty – Held that:- Following Kedarnath Jute Manufacturing Co. Ltd Vs CIT [1971 (8) TMI 10 - SUPREME Court] - If liability was crystallized during the year, the same was allowable even if not claimed in the books of accounts - The fact that the liability or expenses were covered U/s. 43B, the disallowances also cannot be upheld since the liability had been filed before filing of return of income within the prescribed period - the expenses cannot be held even U/s. 43B of the Act and the addition/ made therefore cannot be sustained and accordingly deleted - as per the provisions of Section 43B, deduction had to be allowed with regard to these expenses because the payment was made before the due date of filing of return of income – Decided against Revenue.
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2013 (9) TMI 519
Allowability of Service Charges - AO held that the services agreement between the assessee and its holding company has been entered into with the clear intention of reducing the tax liability of the assessee and increasing the non-taxable profits of SSL. - Held that:- The assessee had placed each and every head of expenditure and this Expenditure has been bifurcated under the three heads- STP unit entitled to deduction under section 10A, non STP not entitled to deduction u/s.10A and support services - the basis of allocation amongst the three heads is actual expenses, number of employees and ratio of fixed assets, floor area and turnover ratio - Thus, on the basis of above five criteria, expenditure has been allocated to the three heads - The issue regarding the allocation of expenses in respect of service charges arose in the case of SSL - In that case, the Assessing Officer was of the view that allocation of expenses for Non-section 10A unit (not eligible for exemption) was excessive as exempted unit was much more expenditure oriented - allocation of support services expenses on the basis of turnover was justified. - Decided in favor of assessee.
Allowability of Deputation Charges - Reimbursement of Various Expenses – Held that:- The terms of the Agreement between the Assessee and SSL by which SSL agreed to render some common services in the areas of Finance, Accounts, Taxation, Legal, Administration, HRD, education, Training, Research etc. Clause-3 of the said agreement which have been referred to in the earlier part of this order clearly shows that the expenses covered by that agreement cannot and do not relate to expenditure incurred on deputing employees to work on specific projects of the Assessee - Therefore the expenses on account of deputation charges as well as other expenses were not covered under the aforesaid agreement - The other reasons given by the AO for making the impugned disallowance cannot also be sustained.
Royalty u/s. 91 (1)(vi) OR Not - Purchase of Software from Various Resident Entities - Held that:- Payment received by the assessee was towards the title and GSM system of which software was an inseparable parts incapable of independent use and it was a contract for supply of goods - Therefore, no part of the payment therefore can be classified as payment towards royalty - The consideration received by the Assessee for software was not royalty - The receipts would constitute business receipts in the hands of the Assessee - Admittedly the Assessee who was a non-resident does not have a permanent establishment and therefore business income of the Assessee cannot be taxed in India in the absence of a permanent establishment.
Following Director of Income-tax Versus Ericsson A.B. & Ericsson Radio System A. B. & Metapath Software International Ltd. [2011 (12) TMI 91 - Delhi High Court] - The consideration received by the Assessee for software was not royalty - The receipts would constitute business receipts in the hands of the Assessee - Admittedly the Assessee who was a non-resident does not have a permanent establishment and therefore business income of the Assessee cannot be taxed in India in the absence of a permanent establishment.
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2013 (9) TMI 491
Deemed Dividend u/s 2(22)(e) - Weather the CIT(A) erred in deleting the addition made by the A. O. on account of deemed dividend uls. 2(22)(e) - Held that:- The amount involved was a pure and simple business transaction-it was neither loan nor advance - The assessee had informed the AO from time to time about the transaction entered by him with KSEPL - In the books of accounts of KSPEL there entry was about flat - We have also considered the agreement - From these papers it can safely be said that transactions in question were business advances - We find that the FAA had dealt the issue about the provisions of Company-Act in detail and there was no legal infirmity in his order - He had taken note of minutes of meeting of KESPL – Following Smt. Tarulata Shyam And Others Versus Commissioner of Income-Tax, West Bengal [1977 (4) TMI 3 - SUPREME Court] - there were four conditions that must be satisfied before section2(22)(e) could be invoked - trade advance which were in the nature of money transacted to give effect to a commercial transaction could not be treated as deemed dividend – Decided against Revenue.
Disallowance of Labour Charges - Whether the CIT(A) erred in deleting the addition of made by the A. O. on account of disallowance of part of the labour charges claimed by the assessee and directing to estimate the net profit at the rate of 8% of turnover and make suitable addition - Held that:- The assessee had maintained regular books of accounts and same were audited, that audit report u/s. 44ABwas filed, that the AO had not pointed out any specific defects, that he only stated that the bills were prepared on the last day without pointing out as to how he reached to that conclusion, that the reason for high percentage of labour charges was, that the the assessee had undertaken de-sludging and cleaning of drainage lines which was mainly labour oriented, that the AO could have only rejected the books of accou -nts and estimated 8% of the contract value as income from this business as per the provisions of section 44AD of the Act. As the AR of the assessee did not object to said estimation of 8% profit on the contract value in respect of M/s. Appollo so he directed the to rework the addition.
If FAA had tried to restrict the disallowance on percentage method no fault can be found with his decision - No addition can be made by the AO on ad-hoc basis without relying on some documentary or oral evidences-for fastening tax liability to an assessee some kind of material was required proving that he had higher income than shown in the books of accounts - Suspicion, however strong, cannot take place of evidence – Decided against Revenue.
Deemed Rent - Whether the CIT(A) erred in deleting the addition made by the A. O. on account of deemed rent in respect of Vishwa Ganga Flat out of the total addition made - Held that:- Vishwa Ganga flat was used for the purpose of providing temporary accommodation to the tenant, that the assessee was in the business of redevelopment of the building, that the AO had summarily rejected the claim of the assessee on the ground that no documentary evidence was filed, that the AO had mentioned that as when and what type of documentary evidence he required from the assessee, that the AO did not prove that that the property was not used for giving accommodation to the tenant by conducting appropriate enquiry - the addition made by the AO was deleted under the head deemed rent in respect of Vishwa Ganga flat.
Disallowance on Interest Expenses - Whether the CIT(A) erred in deleting the addition made by the A. O. on account of disallowance of part of interest expenses claimed by the assessee - Held that:- The assessee had claimed interest amount of only Rs. 1. 31lacs whereas the AO mistook the same as Rs. 1, 35, 950/- and made addition in the assessment order, that the assessee had contended before the AO that the borrowals were made in the earlier years and same were used for business of redevelopment, that the AO did not conduct further verification and disallowed the interest on the ground that the assessee had made Investment in fixed assets as seen from the balance-sheet, the AO did not examine the issue in right perspective, that the addition was made on the basis of assumption and suspicion without examining the facts thoroughly, that there were minimum borrowing during the year under consideration, that the funds were used for the business of redevelopment in the earlier year, that same were entitled to deduction while computing the business income - AO was directed to delete the addition made – Decided against Revenue.
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2013 (9) TMI 490
Disallowance of Depreciation - lease transaction - finance lease or operating lease or otherwise - Held that:- The transaction was neither operating lease not financial lease - Therefore, the claim of depreciation cannot be allowed - In the course of arguments when questioned why only six days lease was offered, Ld. Counsel fairly admitted that assessee may be entitled for 50% of the depreciation claim as per the provisions - In case, at any point of time, the findings given by us in this order are to be modified, as the claim before Hon’ble Delhi High Court in liquidation proceedings seems pending, then assessee was entitled for only 50% of the depreciation claim and not full, as the assets were used for less than 180 days during the year - In fact, the usage of asset admittedly by lessor is itself doubtful, but as assessee offered lessee rent to that extent usage issue was not material as per the judicial pronouncements on the issue of ‘use’.
the agreement in question cannot be called as a financial lease agreement - it was a simple case of advancing of loan by the assessee to the lease and the so called lease agreement had been attempted to be used as a device to reduce tax liability of assessee - the assessee lessor was not entitled to depreciation - Only the lessee can be treated as owner of the asset in case of a finance lease - It was he who was entitled to claim depreciation as per law - No depreciation can be allowed to the lessor in such a case of a genuine finance lease - it was a case of mere advancing of loan by the assessee to Indo Gulf Fertilizers - There was, in fact, no genuine leasing of boiler, neither operating nor finance - In that view of the matter also no depreciation was admissible to the assessee-lessor. - Decided against the assessee.
Validity of Lease Transaction - Whether the lease transaction was treated as non-genuine or finance transaction then lease rentals may not be taken as income for the relevant and subsequent years and directions may be accordingly given – Held that:- The only amount offered was only Rs. 60,000/- in this year stated to be six days lease - Even though assessee accepted 96 lakhs deposit but accounted Rs.84 lacs as lease rental receivable and nine lakhs as advance received in the books - Since the agreement itself was not genuine, we cannot direct the AO to examine the same to determine the principle and interest out of this amount - Since the entire exercise was to claim depreciation at 100%, no such direction can be given in the facts of the case, in other years which were not before us. Assessee had to take necessary steps in relevant years or to face the consequences of its actions. - Decided against the assessee.
Interest u/s 220(2) – Whether the Commissioner of Income-tax (A) erred in confirming the order of A.O. levying interest u/s 220(2) without appreciating that demand becomes due only on the making of fresh assessment and not from the original assessment order which was set aside and hence the interest levied u/s 220(2) may be deleted - Held that:- Under the said section, interest at a specified rate is chargeable in case the demand raised on the assessee as per the demand notice was not paid within the time allowed in the notice - The issue raised in this ground was as to when the original assessment had been set aside by Tribunal and fresh assessment had been made by the A.O., the period for levy of interest u/s.220(2) should be reckoned from the date of default as per the original assessment order or as per the fresh assessment order - We find that this issue has already been examined by the CBDT who had clarified the issue vide Circle No.334 Dt.3.4.1982 - the interest can be levied only from the date of default of the demand notice issued in pursuance of the fresh assessment order - The AO was directed to levy interest from the date of re-assessment order only – Decided partly in favour of Assessee.
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2013 (9) TMI 489
Revision u/s 263 - Capital expenditure or Revenue Expenditure - Expenditure registration of trade mark - reasons for disallowance not given - Held that:- it is obligatory on the part of the assessing officer to record reasons in the assessment order. Recording of reason would not only enable the revisional / appellate authorities to discharge their function effectively but also repose confidence in the system - there was an error in the order of the assessing officer inasmuch as that the assessing officer has not recorded his reasons for reaching a conclusion - Following decision of Commissioner of Income-tax vs Sunil Kumar Goel [2005 (1) TMI 34 - PUNJAB AND HARYANA High Court] - Decided against the assessee.
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2013 (9) TMI 488
Disallowance of business expenses - Repairs and maintenance expenses - CIT deleted disallowance - Held that:- when a categorical finding was given by the AO in the assessment order while making the impugned disallowance that the supporting bills and vouchers were not produced by the assessee and the claim made by the assessee of having produced the said vouchers and bills during the course of assessment proceedings was contrary to the finding of the AO, the ld. CIT(A) ought to have given an opportunity to the AO to verify the claim of the assessee in the light of said documentary evidence and this position has been fairly accepted even by the ld. Counsel for the assessee - matter remanded back.
Addition on basis of annual information report - Difference in the receipts as per the AIR and the receipts as shown by the assessee - Held that:- assessee has not been able to prove that reconciliation was actually pre-paid and submitted before the AO - assessee thus has failed to reconcile the difference pointed out by the AO on the basis of Annual Information Report - no justifiable reason to interfere with the impugned order of the ld. CIT(A) confirming the addition made by the AO on account of said difference - Decided in against assessee.
Unexplained expenditure u/s 69C - Expenditure on marriage - CIT confirmed addition - Held that:- It is not in dispute that the hotel booking for the wedding guests was done in the name of the assessee company and the expenses were incurred on payment made to concerned hotels against the said bookings - if the said expenses on payment made against hotel booking done in the name of the assessee company were incurred by somebody else and not by the assessee as claimed the burden is on the assessee to prove its claim by producing the relevant documentary evidence on record - Since the hotel booking was done in the name of the assessee company, there was a presumption that expenses on payment against said hotel booking were incurred by it and the assessee having failed to rebut the said presumption by bringing any documentary evidence on record - CIT was justified in invoking section 69C - Decided against assessee.
Disallowance of business income - CIT marked up the cost by 20% - Held that:- In the earlier years, the AO worked out the addition by applying a net profit ret of 5% while in the year under consideration, he has applied a 20% mark-up on the total cost incurred by the assessee - Therefore addition is deleted - Decided in favour of assessee.
Capital or Revenue income - Damages received on termination of rental agreement - Held that:- at the time of hearing in the reply to query raised by the bench, there was no agreement entered into between the parties in writing for termination or cancelation of the live and license agreement. The amount of security deposit in question was actually forgone by the licensee as per the order of the arbitrator - It is manifest from the operative portion of the arbitrator's order reproduced that the property of the assessee was sealed by the committee of the Hon'ble Supreme Court as a result of which the exiting tenant was not in a position to use the said property and even the assessee was not in the position to find out any other tenant - The said amount thus was received by the assessee on revenue account and not on capital account which constituted business income of the assessee as the rental income received from the property earlier was offered to tax as business income by the assessee itself - Decided against Assessee.
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2013 (9) TMI 487
Exemption u/s 11 - Violation of section 13 - Surplus fund not applied for charitable purpose - accumulation of funds - Held that:- CIT(A) was not justified in sitting in Judgment over the order passed by the DIT (Exemption) in condoning the delay and approving the accumulation and setting apart of the surplus fund by the assessee as per section 11 (2) of the Act. From para 7.2 of the CIT(A)'s order, it is very much clear that the Assessing Officer, in his remand report, has also very clearly submitted that after condonation of delay in accepting revised Form No. 10, the assessee is eligible for deduction under section 11 of the Act. That being the case, the CIT(A) was not justified in denying exemption under section 11 of the Act.
Denial of exemption on the ground that persons specified u/s 13 are benefited - Held that:- Section 13(2)(h) of the Act provides that the income or the property of the trust be deemed to have been used or applied for the benefit of a person referred to in sub-section (3), if any funds of the trust or institution are continue to remain invested during the previous year in any concern in which such person as referred to in sub-section (3) has a substantial interest. The person referred to in sub-section (3) are the Author of the Trust or founder of the Institution, any person who has made a substantial contribution to the trust or institution where his contribution up to the end of the relevant previous year exceeds ₹ 50,000/-, any trustee of the trust or manager of the institution any relief of such other founder person, Member, Trustee or Manager any concern in which any of the persons referred to hereinabove has a substantial interest - The person who has shareholding in Matrix Laboratories of only 17.09% which cannot be considered as substantial for the purpose of section 13(2)(h) - Therefore, exemption to the assessee under section 11 is granted - Decided in favour of assessee.
AO directed to o grant exemption to the assessee under section 11 of the Act. - Decided in favor of assessee.
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2013 (9) TMI 486
Assessment of other person pursuant to search - Jurisdiction u/s 153C - Conditions prescribed u/s 153C - Held that:- condition precedent for assumption of jurisdiction u/s 153C is, the AO must be satisfied that the seized materials belongs to such other person - Undisputedly seized document on the basis of which proceeding u/s 153C is initiated against the assessee is a loose sheet - Thus a condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the said requirement is not satisfied, recourse cannot be had to the provisions of section 153C of the Act - it is an admitted position as emerging from the record of the case, that the documents in question, namely the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner inasmuch as his name is reflected in the list under the heading Samutkarsh Members Details and certain details are given under different columns against the name of the petitioner along with other members, however, it is nobody's case that the said documents belong to the petitioner. It is not even the case of the revenue that the said three documents are in the handwriting of the petitioner - Consequentially the assessment order passed must be declared as without jurisdiction - Following decision of P. Srinivas Naik Vs. ACIT [2007 (11) TMI 443 - ITAT BANGALORE] - Decided in favour of assessee.
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2013 (9) TMI 485
Rejection of comparables - Adjustment in arm's length price - Held that:- main reason for excluding Wipro BPO is on the basis of higher turnover claimed by that BPO when compared to the assessee in that case - But assessee's turnover is not small - The company which was once selected as comparable cannot be rejected in other similar circumstances - Decided in favour of assessee.
Deduction under S.10A - Foreign exchange gain - Held that:- since foreign exchange gain is on account of fluctuations of the foreign exchange received for the services rendered by the assessee, this has to be treated as business income and it has to be considered as profits of the business for computing the deduction under S.10A of the Act - Decided in favour of assessee.
Data link charges considered as attributable to delivery of computer software outside India should be excluded from export turnover as well as total turnover, while computing the deduction under S.10A. Further, out of the data link charges spent by the assessee, how much is for intra and inter office services and how much is for delivery of services has not been examined by the Assessing Officer - In case any amounts are to be excluded as attributable to delivery of services outside India, the same should be excluded both from export and total turnover, while computing deduction under S.10A.
Non-consideration of profits of overseas branch of the assessee as arising from export of ITES. - For allowing the deduction under S.10A/10B, other conditions are required to be satisfied, including the questions (a) whether the branch is rendering any BPO services; (b) whether the functions are similar; and (c) whether the incomes can be considered as income of STPI eligible for deduction. - matter remanded back for reconsideration.
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2013 (9) TMI 484
Reassessment u/s 147 - Assessment of any other income other than income on which assessment was reopened - Held that:- while completing the assessments for the previous years u/s 143(3) read with section 147 of the Act, the Assessing Officer has not disturbed the exemption claimed u/s 10B of the Act which was allowed in the original assessment - Assessing Officer disallowed the claim of set off of unabsorbed depreciation relating to assessment years 1995-96 and 1996-97 against the business income declared for the aforesaid assessment years. Thus, it is very much clear in the reassessment proceedings the Assessing Officer has made assessment of income other than the income which was subject matter for reopening as per the reasons recorded while initiating proceedings u/s 147 of the Act - reasons recorded for reopening the assessment has no nexus with the income ultimately assessed u/s 147 of the Act. The Assessing Officer without assessing the escaped income as per the reasons recorded has considered some other income which was never the subject matter of reopening as per the reasons recorded - Following decision of M/s Swarnadhara IJMII Integrated Township Development Company Versus DCIT, Hyderabad [2013 (6) TMI 624 - ITAT HYDERABAD] - Decided against Revenue.
Assessing Officer is empowered to assess any other escaped income which comes to his notice in course of the reassessment proceedings along with escaped income which was the subject matter of reopening as per the reasons recorded therein. Without assessing the income as per the reasons recorded, the Assessing Officer cannot assess any other income which was not the subject matter of reopening. Therefore, in the facts of the present case, the Assessing Officer could not have independently assessed such other income without assessing the income which escaped assessment as per the reasons recorded and on the basis of which the proceedings u/s 147 were initiated.
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2013 (9) TMI 483
Penalty u/s 271(1)(c) - Unexplained cash credit - Non speaking order - Held that:- ld. Commissioner of Income Tax(A) has not passed a speaking order on various issues raised in the appeal before him, we consider it fair and appropriate to set aside the order of Commissioner of Income Tax(A) and restore the matter to his file for deciding the appeal afresh in accordance with law after allowing sufficient opportunity to both the parties. Needless to say that while re-deciding the appeal, the Commissioner of Income Tax(A) shall pass a speaking order keeping in mind and addressing the legal contentions of the assessee and reply of the revenue to the same as mentioned hereinabove as per mandate of provisions of section 250(6) of the Act. - matter remanded back.
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2013 (9) TMI 482
Taxability of amount received after closure of business / profession - Discontinued business u/s 176 - addition on account of receipt of arrears of professional fees - Discontinuation from legal profession - CIT deleted disallowance - whether the CIT (A) has rightly allowed the claim of the assessee for exemption from tax, the receipt of arrears of his professional fees, such arrears having been received by the assessee after his elevation as High Court Judge - Held that:- before his elevation as a Judge, assessee was carrying on legal profession as an advocate, arrears of professional receipts received after discontinuation of legal profession were not assessable in his hands after he has discontinued his legal profession.
Even in spite of introduction of Section 176 (4) in the Act, the receipts in question cannot be treated as the assessee's income falling under the head "Profits and Gains of Business, Profession or Vocation", even though they were, being the fruits of the assessee's professional activities, the profits and gains of a profession, under the very same head of "Profits and Gains of Business, Profession or Vocation - It is due to the absence of any legislative provision that these receipts cannot be treated as business income falling under the head "Profits and Gains of Business, Profession or Vocation" carried on by the assessee during the relevant year. They cannot be included in the total income of the assessee, even though the amount was received by the assessee before the discontinuance of his profession due to his elevation as High Court Judge - Following decision of Commissioner of Income Tax v. Justice R.M. Datta [1989 (7) TMI 59 - CALCUTTA High Court] and Nalinikant Ambalal Mody. Versus S. A. L. Narayan Row, Commissioner Of Income-Tax, Bombay City I. [1966 (5) TMI 13 - SUPREME Court] - Decided against Revenue.
Disallowance of expenses - Expenditure on printing and stationery, conveyance, telephone and accounting, etc. - Held that:- since the gross receipts are not liable to tax, the expenditure incurred for recovery of outstanding fees and for maintaining books of account cannot be disallowed and no such disallowance was called for - Decided against Revenue.
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2013 (9) TMI 481
Disallowance of expenditure - Provision for Expenditure in regard to trade fair and exhibition in Singapore - CIT upheld disallowance - Held that:- The assessee has made provision for the expenditure with regard to the sponsorship of its major distributors and customers for participating in trade fair and exhibition in Singapore. This provision was made on the basis of estimated expenditure to be incurred on such trade fair and expenditure. This trade fair and exhibition in Singapore was actually held during the period relevant for assessment year 2005-06 for which the bills and vouchers have been produced - such a provision cannot be allowed in this year and if at all it is to be allowed, the same can be allowed only in the assessment year 2005-06, wherein such expenditure has been incurred - Decided against assessee.
Disallowance of office expenditure - Invoices not filed - Held that:- Bill for partial amount is is dated 2nd April 2003 and was received in this year for the services of security guards though pertaining to the month of March 2003. In such cases, expenditure relating to rendering of services can be allowed in the year when bill is received - But the expenditure incurred on tea table cannot be allowed because no details or invoice could be filed before any of the authorities and, therefore, the same cannot be allowed - Decided partly in favour of assessee.
Disallowance of depreciation - Held that:- assets on which the depreciation has been claimed in this year are forming part of block of assets and the written down value on such assets is coming from the earlier years. On such assets, depreciation has been allowed by the Department in the assessment year 2000-01 and 2002- 03 and also in the subsequent assessment years. Once the depreciation has been allowed on "Block of Assets", the same cannot be disallowed in this year on the written down value - Decided in favour of assessee.
Disallowance u/s 40(a)(ia) - Fees for technical service - Held that:- assessee's case has been that the nature of said payment falls within Article-7 of Indo-Malaysian DTAA as Insight Asian Pacific to whom payment was made was doing business and it was its business income and, therefore, in view of the Article 7(1), the same cannot be held to be taxable in India, as it had no P.E. Further, under the Indo Malaysian DTAA, there is no clause of "fee for technical service", thus, there was no reason to deduct TDS on such payment.
With regard to the reimbursement of expenses, it is also not clear as to what was the nature of payment and what was the services rendered to the assessee company for which the payment was made by the A.E. and reimbursement of such expenses was made by the assessee. Even if the debit note has been issued against the credit, then also the nature of expenditure has to be ascertained. Accordingly, this issue is also restored to the file of the Assessing Officer for denovo adjudication. However, if it is found that the payment made to the A.E. is only in the nature of reimbursement of expenditure, then surely there cannot be any liability the assessee to deduct the TDS on such payments - Decided in favour of assessee.
Disallowance of sample demonstration expenses - Held that:- assessee was unable to produce any documentary evidence or proper explanation about the sample distribution expenses. There has to be some iota of evidence or material to show that such an expenditure was for the purpose of business and these are the requirement of carrying out the business activity. If it is distribution of samples, the same should have been taken into account in stock account. If it is a direct expenditure, then nature of expenditure can be verified from relevant vouchers or placed any details on record - Decided against assessee.
Adjustment of Arm's Length Price - Purchase price of international transaction - Held that:- Before the TPO, the assessee also did not justify as to how the bench marking of its transactions has been carried out except for stating that the price on which plates have been purchased / imported from the A.Es is based on their price list worldwide. Thereafter, before the TPO, the assessee took a different plea that CUP method should be followed based on certain data on which third parties have been importing similar kind of plates. This has been rejected by the TPO on the ground that the assessee could not show as to whether similar kind of plates were imported by third party as the Kodak will sell its plates only to its A.E. and not to the third party - Ultimately, he has bench marked the gross profit margin of the assessee on sales of various other segments which was at 28.56% and thereby made the adjustment in trading segment of plates - entire issue needs to be restored back to the file of the TPO for denovo adjudication - The assessee can file before the TPO all the additional evidences which have been filed before us to justify that unrelated parties / third parties were also procuring similar products by and large on the same price range. Secondly, all the relevant details which are required for adjudication of this issue can be furnished by the assessee to justify its arm's length transactions - Decided in favour of assessee.
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2013 (9) TMI 480
Penalty u/s 271(1)(c) - deduction u/s 80IA disallowed as the assessee which was awarded a contract for construction of four lane road was acting merely as a contractor, therefore, the deduction will not be allowable in view of the amended provisions of section 80IA(4) brought in the statute by the Finance Act, 2007 with retrospective effect from the year 2000-2001 - Held that:- As decided in case of DCIT v/s Unity Chopra (Joint Venture)[2013 (5) TMI 373 - ITAT MUMBAI] after the decision in the case of ABVG Heavy industries Ltd. (2010 (2) TMI 108 - BOMBAY HIGH COURT) has allowed the claim of deduction u/s 80-IA on similar facts claim of appellant, even on merit (in quantum proceedings) is valid and sustainable.
The assessee company was under a bonafide belief that it is eligible for deduction u/s 80-IA. Moreover, from the decisions cited above, it is clearly evident that the said issue is a highly debatable one. It is well settled law that no penalty u/s 271(1)(c) can be levied when the issue is a debatable one as decided in CIT vs. Reliance Petroproducts [2010 (3) TMI 80 - SUPREME COURT] - thus the orders passed by the Commissioner (Appeals) deleting the penalty levied under section 271(1)(c) confirmed - Decided against Revenue.
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2013 (9) TMI 479
Income from house property - License fees - CIT followed previous decisions and held it as income from business - Held that:- mere fact that income is attached to property cannot be said to be assessable as income from house property if the main intention is not simply letting the property or any portion thereof. If the main intention is of exploiting immovable property by way of commercial activity, then the income must be held to be business income - appellant company with its professed objects as contained in its articles and memorandum as also reflected in its manner of activities and the nature of its dealings with the Haat properties, it is possible to say that the activities are part of its business activities - Folloing decision of Pfh Mall And Retail Management Limited. Versus Income-tax Officer, Ward - 8(3), Kolkata [2007 (5) TMI 258 - ITAT CALCUTTA-A] and Radhasoami Satsang Versus Commissioner of Income-Tax [1991 (11) TMI 2 - SUPREME Court] - Decided against Revenue.
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2013 (9) TMI 478
Interest u/s 244A(b) - Rectification of error in assessment done - whether interest u/s 244A is to be paid on on self-assessment tax paid ignoring the Explanation section 244A(b) - CIT allowed interest on refund - Held that:- Even though the short title to s. 140A reads as self-assessment, the charging phrase employed in s. 140A, namely, where any tax is payable on the basis of any return required to be furnished under s. 115WD or s. 115WH or s. 139 or s. 142 or s. 148 or s. 153A, as the case may be, the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return, makes it clear that there is no difference between : (i) the tax paid under s. 115W], which deals with advance tax in respect of fringe benefits; or (ii) the tax collected at source under s. 206C; or (iii) any tax paid by way of advance tax or any tax treated as paid under s. 199, which deals with credit for tax deducted, which are provided under s. 244A(1)(a). That apart, the law is well-settled that even for the refund of tax paid under s. 140A on self-assessment, the assessee is entitled to interest. It is also trite law that wherever the assessee is entitled to refund, there is a statutory liability on the Revenue to pay interest on such refund on general principles to pay interest on sums wrongfully retained - following decision of CIT v/s Cholamandalam Investment 7 Finance Co. Ltd. [2007 (6) TMI 69 - HIGH COURT , MADRAS] - Decided against Revenue.
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