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Income Tax - Case Laws
Showing 401 to 420 of 585 Records
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2013 (9) TMI 396
Exemption u/s 10A - allowing deduction under sec.10A before setting off of brought forward depreciation and losses. - Held that:- This issue was considered and decided by the Income-tax Appellate Tribunal, Chennai Bench in favour of the assessee, in the case of M/s. Scientific Atlanta India Technology Pvt. Ltd. (2010 (2) TMI 658 - ITAT, CHENNAI). - Hon’ble Karnataka High Court has considered this issue and decided in favour of the assessee in the case of CIT & Anr. Vs. Yokogawa India Ltd. and Others, [2011 (8) TMI 845 - Karnataka High Court]. The specific question considered by the High Court is, whether or not on the facts and in the circumstances, claim under sec.10A is to be allowed on the profits of the EOU without setting off of brought forward losses of earlier years of the non EOU? The Hon’ble Karnataka High Court again has considered similar issue and arrived at the same conclusion in the case of CIT & Anr. Vs. Tata Elxsi Ltd. & Others (2011 (8) TMI 782 - KARNATAKA HIGH COURT) - Decided in favor of assessee.
Excluding expenditure incurred in foreign currency both from export turnover and total turnover. This issue already stands covered by the Special Bench decision of the Tribunal in the case of ITO v. Sak Soft Ltd. (2009 (3) TMI 243 - ITAT MADRAS-D). The grounds raised in the appeals filed by the Revenue fail. - Decided against the revenue.
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2013 (9) TMI 377
Disallowance of interest - Disallowance of ex gartia interest - CIT(A) made an observation that the claim made under ex-gratia may not be covered under section 43B - However, confirmed the disallowance on the ground that the same was not paid before the due date for furnishing the return - Held that:- CIT(A) having held that ex-gratia is not covered by section 43B, is not justified in upholding the disallowance relying on the decision of Hon'ble Madras High Court in the case of CIT vs. Mettur Chemicals & Industrial Corporation Ltd. (1998 (3) TMI 69 - MADRAS High Court) as the amount of ex-gratia cannot be regarded as bonus and requirements of section 37 are fully satisfied - Decided in favour of Revenue.
Disallowance of interest - Diversion of funds - Held that:- issue should be remitted back to the file of the Assessing Officer with a direction to verify whether the investments made by the assessee is out of its own funds or from the borrowed funds. In case the investments are found to have been made from out of non-interest bearing own funds, there is no justification for any disallowance of interest in relation to such investment. Only in case it is found that the assessee does not have non-interest bearing funds of its own, disallowance out of interest claimed has to be worked out and made accordingly. We accordingly set aside the impugned order of the CIT(A) on this issue and restore the matter to the file of the Assessing Officer. The Assessing Officer shall re-decide the issue in the light of our above observations and in accordance with law, after giving due opportunity of being heard to the assessee - Decided in favour of Revenue.
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2013 (9) TMI 376
Chit Funds - Addition u/s 41(1) - ceasation of liability - Defaulted subscription - The assessee contended before the Assessing Officer that though the chit is closed and amounts become payable to the subscribers, since they are standing as 'guarantor' to other subscribers, the amount payable to them is withheld for appropriation against any default in case of the principle subscriber. The Assessing Officer observed that the amounts kept as "chit lien" are not actually disbursed to the defaulters even within the time allowed by the Chit Fund Act. - Held that:- the assessee has not claimed as a deduction in respect of these liabilities while computing the income of the assessee in any assessment year and also it cannot be said that there is cessation of liability. Being so, there is no question of invoking the provisions of section 41(1) of the Act. The addition made by the Assessing Officer is not justified and the same is deleted. - Decided in favor of assessee.
Bad debts - bid loss - writing off the bid loss - Held that:- Sometimes, successful bidder fails to furnish the surety and necessary documents during the stipulated time. In that event the bid claim of the bidder would be forfeited and the assessee has to conduct fresh auction of the respective chit. In the course of fresh auction, the assessee incurs certain loss i.e., the assessee receives lesser amount than the original bid amount. This amount has been claimed by the assessee as bid loss. This loss arose in the course of assessee's normal business and incurred wholly and exclusively for the purpose of its business and it cannot be considered as non- business expenditure and it is to be allowed u/s. 37 of the Act, as the amount is incurred wholly and exclusively for the purpose of its business - Decided in favour of assessee.
Disallowance of inadmissible expenditure - expenditures like donations, marriage gifts, festival expenses, Enams, etc. - Held that:- the assessee is a business concern. In the course of its business, the assessee has to incur certain incidental business expenditures. That expenditure is to be allowed except expenditure in the nature of capital expenditure or expenditure of personal nature and the expenditure incurred which is oppose to the public policy. Considering these facts we direct the Assessing Officer to disallow donations and expenditure in the nature of capital expenditure - Decided partly in favour of assessee.
Capital receipt or Revenue receipt - sale of land - capital asset or agricultural asset - transaction in the nature of trade - Held that:- land in question is classified in the Revenue records as agricultural land and there is no dispute regarding this issue and actual cultivation has been carried on this land and income was declared from this land in the return of income filed by the assessee for the earlier years as agricultural income. It is also an admitted fact that the AO has not brought on record any evidence to show that the agricultural land was used for non-agricultural purposes and the assessee has not put the land to any purposes other than agricultural purposes. It is also an admitted fact that neither the impugned property nor the surrounding areas were subject to any developmental activities at the relevant point of time of sale of the land.
One of the essential elements in an adventure of the trade is the intention to trade; that intention must be present at the time of purchase. The mere circumstances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. In a case where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise as strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. The presumption may be rebutted.
In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations and even there was no intention to sell the land in future at that point of time. It was due to the boom in real estate market came into picture at a later stage, the assessee has sold the land. Merely because of the fact that the land was sold for profit, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade. The period of holding should not suggest that the activity was an adventure in the nature of trade - when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income - Decided in favour of assessee.
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2013 (9) TMI 375
Deduction u/s 10A or 10B - alternative claim - industrial undertaking - transfer of entire business including machinery from old unit to new - Held that:- A reading of the order of the Assessing Officer as well as the Commissioner of Income Tax (Appeals) shows that even though the assessee originally claimed relief under Section 10B, it was cautious enough to make an alternative plea under Section 10A in view of the fact that the assessee's vendor had the benefit under Section 10A. It is not denied by the Revenue that the assessee had the whole business transferred to its favour and that the factum of transfer was also intimated to the Software Technology Park of India. Thus, as a Software Technology Park, the assessee is entitled to place his claim under Section 10A. In any event, even assuming for a moment, the assessee had not referred to the Section correctly, the fact remains that if the claim could be favourably be considered under any of those special deduction provisions and on the conditions specified therein being satisfied, we do not think that there exists any justifiable ground for the Revenue to contend that the assessee shall not be entitled to have the benefit of Section 10A.
A cursory reading of the above Section shows that where an undertaking is formed by splitting up or reconstruction of business already in existence then the said undertaking would not be entitled to claim deduction under Section 10A. The other conditions is that the industrial undertaking should not be formed by transfer of plant and machinery already used for any purpose. Thus, what is prohibited in Section 10(A)(2)(iii) is that the transfer of used machinery and plant to a new business undertaking and forming of an industrial undertaking by splitting or reconstruction of the existing industrial undertaking. The intention thus under Section 10A being clear and that there is no specific prohibition or even by inference to an industrial unit formed by transfer of entire business, we have no hesitation in rejecting the Revenue's plea that by transfer of machinery, the assessee would be disentitled to the relief under Section 10A. As already pointed out, the fact herein is that the transfer was not that of plant and machinery alone but of sale of whole business unit to the transferor company which was primarily only of export of articles or things. In the circumstances, going by clear provisions of Act, we reject the Revenue's plea - Following decision of CIT v. SONATA SOFTWARE LIMITED [2012 (4) TMI 99 - BOMBAY HIGH COURT] - Decided against Revenue.
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2013 (9) TMI 374
TDS deduction u/s 195 - Purchase of software - Scope of term Copy Right - DTAA with Australia - Whether purchases of software or payment of Royalty be liable for deduction of TDS - Held that:- It is no doubt true the provisions of the DTAA overrides the provisions of the Income-tax Act. In the DTAA the term 'royalty' means payments of any kind received as a consideration for the use or the right to use any copyright of literary, artistic or scientific work whereas in the Income-tax Act, royalty means consideration for the transfer of all or any rights including the granting of a licence. Therefore, under the DTAA to constitute royalty there need not be any transfer of or any rights in respect of any copyright. It is sufficient if consideration is received for use of or the right to use any copyright. Therefore, if the definition of royalty in the DTAA is taken into consideration it is not necessary there should be a transfer of any exclusive right. A mere right to use or the use of a copyright falls within the mischief of Explanation (2) to clause (v) of sub-section (1) of section 9 and is liable to tax. - Decided in favour of Revenue.
The definition of "royalty" in the Income-tax Act, 1961 is, consideration for the transfer of all or any rights (including the granting of a license) in respect of a patent, innovation, model, design, secret formula or process or trade mark or similar property. Consideration for grant of the use of any of the above is also royalty. It also takes in the consideration for the transfer of all or any rights (including the granting of a license) in respect of any copyright, literary, artistic or scientific work. License is not confined to an exclusive license. When a software, over which a copyright is acquired and thus owned, is licensed for use to another or sold to another for his own use, the licensee or the purchaser gets the right to use the software without being held guilty of infringement of the copyright.
The words within brackets, "including the granting of a license" indicate an expansive definition. The word "includes" is an inclusive definition and expands the meaning. Therefore, license cannot be restricted to transfer of a right dealt with earlier by the provision and should be understood as taking in the grant of a license simpliciter.
A copyrighted article is nothing but an article which incorporates the copyright of the owner, the assignee, the exclusive licensee or the licensee. So, when a copyrighted article is permitted or licensed to be used for a fee, the permission involves not only the physical or electronic manifestation of a programme, but also the use of or the right to use the copyright embedded therein.
It is clear that under various agreements, what is transferred is only a licence to use the copyright belonging to the non-resident, subject to the terms and conditions of the agreement, as referred to above, and the non- resident supplier continues to be the owner of the copyright and all other intellectual property rights. It is well settled that copyright is a negative right. It is an umbrella of many rights and licence is granted for making use of the copyright in respect of shrink wrapped software/off-the-shelf software under the respective agreement, which authorizes the end user, i.e., the customer to make use of the copyright software contained in the said software, which is purchased off the shelf or imported as shrink wrapped software. The same would amount to transfer of part of the copyright and transfer of right to use the copyright for internal business as per the terms and conditions of the agreement. Therefore, the contention that there is no transfer of copyright or any part thereof under the agreements entered into by the Reliance with the non-resident supplier of software cannot be accepted. Under these circumstances, payment made by the Reliance to LTGL/ other suppliers can be said to be payment for the use of or right to use of copyright and does amount to royalty within the meaning of Artilce- 12(3) of the DTAA. It is accordingly held that the AO was justified in directing to deduct the tax at source u/s.195.
Since we have come to the conclusion that the amount paid by Reliance is to be treated as Royalty chargeable under the Act of the Income Tax, the order of the AO to that extent are upheld - Following decision of Agagrwal Chamber of Commerce Ltd. vs. Ganapat Rai Hira Lal [1957 (11) TMI 1 - SUPREME Court] - Decided in favour of Revenue.
Existence of Permanent establishment (PE) - LTHPL entered into an agreement for supply of hardware, software and also installation and that company is an Indian company. After entering into an agreement supply of software was assigned to the assessee Lucent by way of the Tripartite agreement between Reliance and LTHPL and assessee Lucent. Eventhough, installation was on Indian company there is no evidence of either deputing personnel of assessee Lucent to India nor there is any evidence in the record for invoking Service PE as in other case. Moreover for invoking Agency PE , facts do not support AO's contentions. The agreement entered is an independent agreement, entered on principle to principle basis and nowhere the Indian company has authorized or has undertaken any responsibility of the assessee Lucent. On the facts of the case we are of the opinion that there do not exist any PE, more so of agency PE. It is also not the case of the Revenue that the assessee deputed its personnel to India so as to invoke Service PE as per Indo-US DTAA. In view of the above, we hold that there is no PE to the assessee company in India and as there is neither any office in India nor it has any business connection in India nor carried out any business activities in India. Assessee's company is a standalone legal independent entity - Decided in favour of assessee.
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2013 (9) TMI 373
Deemed Dividend u/s 2(22)(e) - receipt of loan - assessee contended that since the accumulated profits was not sufficient to cover the transaction, the same should not be treated as deemed dividend. - Held that:- Assessee is a shareholder of KDPML owning more than 10% of its equity. - amount received by the Assessee will have to be considered as deemed dividend but only to the extent of accumulated profits of KDPML as on the date of granting of loan/advance. - matter remitted to the file of AO to determine the extent of ccumulated profits as deemed dividend u/s 2(22)(e) - Following decision of CIT vs. P.K. BADIANI [1970 (2) TMI 3 - BOMBAY High Court] - Decided in favour of Revenue.
Disallowance of wages - AO has disallowed the expenses mainly for the reason that the details of wages were not submitted in the format asked for, P.F was deducted only in cases of 53 employees though the Assessee had stated to have employed 197 employees. Further according to the Assessing Officer, there was no co-relation between wages and production figures. - Held that:- Assessee submitted that the wages in proportion to production for A.Y. 2008-09 was Rs.0.7265 per kg. whereas for the year under appeal it was Rs. 0.7297 per kg which is more or less comparable. The Assessee has further stated that the PF was deducted in the cases where it was applicable. Before us, the Revenue could not point out any instance where though the Assessee was required to deduct PF but the same was not deducted. Further the Revenue could not controvert the calculation of wages with respect to the production as submitted by the Assessee. - deduction allowed - Decided against Revenue.
Disallowance of packing expenses - Held that:- The non production of details is surprising more so in the light of the fact that Assessee could obtain the tax Audit report of CPC Trading for year ended 31.03.2009. Further just confirming the transaction without any supporting evidence cannot be said to discharging of onus by the supplier. It is also a fact that in the line of business of the Assessee packing material would have been used by the Assessee for supply of goods. - some addition needs to be made in the present case to meet the ends of justice. We therefore feel that a lump sum disallowance of Rs. 25 lac would meet the ends of justice instead of Rs. 1.25 crore being the disallowance of entire purchase made by Assessing Officer. We therefore direct accordingly - Decided partly in favour of Revenue.
Unexplained sale of wood - Held that:- Assessee has stated to have purchased the goods on credit. However, no supporting evidence of purchases of credit has been filed by the Assessee either before Assessing Officer or CIT(A). Before us, the learned A.R. could not satisfactorily explain the outstanding of sales for more than one year more so when as per the agreement the payment was to be made immediately. It is not the case of the Assessee that the parties with whom it had entered into transaction are related or known parties which resulted in giving of unusually long credit. - the action of Assessing Officer in disallowing 5% of the sales amount to be justified. We thus upheld his order on this ground - Decided in favour of Revenue.
Disallowance of brokerage expenses - Held that:- CIT(A) noticed that certain details called for by the Assessing Officer were filed before him. From the details furnished and placed on record, it is seen that the rate of brokerage in most of the cases was 0.75% except in two cases. Assessee has also placed on record, the copy of confirmations received from the brokers which contains their PAN numbers and address. CIT(A) while deleting the addition has noted that though the remand report was called vide letter dated 21.03.2012 but was received on 13.07.2012 i.e. adequate time was available with the Assessing Officer for examining the evidence. In the time made available by CIT(A), the Assessing Officer had not brought out any material on record to controvert the submissions of Assessee. Further CIT(A) has noted that the brokerage payment is not excessive as compared to earlier years - Decided against Revenue.
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2013 (9) TMI 372
Taxability of retention money - taxable in the year of receipt or on accrual basis - assessee is following mercantile system of accounting - Held that:- the retention money has to be brought to tax in the year in which the same has actually been received by the assessee from the contractees. - However, the claim of the assessee of having offered the retention money to tax in the year in which the same has actually been received, is required to be ascertained, before the addition made in the year under appeal is deleted. - matter remanded back - Following decision of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971 (8) TMI 10 - SUPREME Court] and Dy. CIT V/s. Deccan Mechanical & Chemical Industrial (P)Ltd., (2005 (6) TMI 267 - ITAT PUNE-B) - Decided in favour of Revenue.
Depreciation on technical know how - Held that:- It is evident from the material on record that there was transfer of technical know-how in favour of the assessee company, whereby the assessee company the came the owner of such technical know-how, which was used by it in its business. In the facts and circumstances of the case, we agree with the CIT(A) that the two ingredients for grant of depreciation, viz. ownership and user of the asset, are clearly fulfilled, and the assessee is entitled for depreciation on the technical know - Decided against Revenue.
Disallowance of revenue expenditure - Repayment of assets taken on finance lease - Held that:- principal repayment of assets taken on finance lease is clearly an expenditure of capital nature and the Assessing Officer has correctly allowed depreciation alone on such amount capialised. The CIT(A) has not given any valid reason for substantiating his finding, while allowing the claim of the assessee - Decided in favour of assessee.
Disallowance of warranty provision - Held that:- item of disallowance, viz. warranty provision, is merely a provision and not an expenditure already incurred and laid out for the purpose of business. Unless the liability for such expenditure crystalises, assessee is not entitled to calim for deduction in respect of such expenditure. The CIT(A) has not given any valid reason for substantiating his finding, while allowing the claim of the assessee. We accordingly, set aside the impugned order of the CIT(A), and restore the disallowance made by the Assessing Officer in this behalf - Decided in favour of Revenue.
Disallowance of advance given to subsidiary - Held that:- CIT(A) has deleted the addition made by the Assessing Officer on account of the interest attributable to the advance made by the assessee to its subsidiary, accepting the contention of the assessee that it has already charged interest on the advance made to the subsidiary company, M/s. Progen Systems & Technologies Ltd. This fact, which weighed with the CIT(A) while deleting the addition made by the Assessing Officer, requires verification at the end of the Assessing Officer, who has arrived at an opposite conclusion. We accordingly set aside the impugned order of the CIT(A) on this issue, and restore the matter to the file if the Assessing Officer with a direction to redetermine the issue relating to disallowance of interest after verifying the correctness of the contention of the assessee before the CIT(A) that it has already charged interest on the amounts advanced to the subsidiary company. The Assessing Officer shall pass appropriate orders on verification of the contentions of the assessee on this aspect, in accordance with law and after giving reasonable opportunity of hearing to the assessee - Decided in favour of Revenue.
Liability for payment of liquidated damages - accrual of liability - Held that:- Since the very contracts entered into by the assessee with various parties for execution of works, categorically specify not only the liability to liquidated damages, but even mode of computation of the same for each week of delay in the completion of the work, it cannot be said that the liability to liquidated damages has not crystalised. - The CIT(A) in our considered opinion was justified in accepting the claim of the assessee in this behalf and deleting the addition made by the Assessing Officer. - Decided in favor of assessee.
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2013 (9) TMI 371
Disallowance of revenue expenditure - Non commencement of business - the appellant company was of preoperative nature and the commencement of the business would start only when the appellant company starts exploitation of the project - Held that:- The main object of the Assessee as per Clause 3(A)(10) of the Memorandum of Association is to "To promote Schemes for irrigation and water supply in the State for utilization of water from the Sardar Sarovar". Thus in the light of the facts prevailing in Assessee's case, it can be said that the Assessee by supplying water through its main canal had in fact achieved the purpose for which it was established. One of the purpose for which the Assessee was set up was to supply water through canals. The canal was complete in respect of part of the stretch and that enabled supply of water through such canal to certain destinations. The fact that the entire stretch of canal up to the desired destination was not completed would not be sufficient to hold that the Assessee's business was not set up.
The AO as well as CIT(A) have misdirected themselves in this regard by laying emphasis on flow of revenue as a condition precedent for coming to a conclusion that business of the Assessee has been set up as the flow of revenue from supply of water is not relevant as has been laid down in the case of CIT v. Sarabhai Management Corpn. Ltd. (1991 (8) TMI 6 - SUPREME COURT ). - In fact in the past the revenue has been taking a stand that flow of water through the canal would be the point of time when the business of the Assessee can be said to be set up. When that happened, the revenue is taking a stand that there should be flow of revenue on supply of water and only then it can be said that the business of the Assessee has been set up. This apparent contradiction in the stand taken by the Revenue is not acceptable, thus the stand taken by the revenue regarding absence of flow of revenue would be irrelevant.
As the business of the Assessee was set up on 21.2.2001 when water was supplied through the main canals and all revenue expenditure after that date have to be allowed as deduction. As on pursuing the details of Schedule-I to the Balance Sheet as on 31.3.2001 which gives the break of the incidental expenditure pending capitalization. The salary, wages, gratuity and allowances and other employee costs, rent electricity would be in the range of Rs. 122 crores , the interest and discount on deep discount bonds is Rs. 566.99 crores and Rs. 148.10 Crores respectively. The interest income sought to be brought to tax by the revenue in this assessment year is Rs. 26,13,28,117/-. If business of the Assessee is held to be set up on 21.2.2001 then the proportionate expenses as set out above for the period from 21.2.2001 to 31.3.2001 would be much more than the interest income brought to tax. Therefore the other issues raised by the Assessee in its appeal do not require any adjudication in view of our above conclusion on the commencement/setting up of business - Following decision of Sardar Sarovar Narmada Nigam Ltd. Versus Assistant Commissioner of Income-tax, Gandhinagar Circle [2012 (9) TMI 300 - ITAT AHMEDABAD] - Decided in favour of assessee.
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2013 (9) TMI 370
Bogus Purchases - Business of Supplying Fabrics OR Not – Maintaining Stock Register - Weather the CIT (A) had erred in deleting the addition made by AO on account of bogus purchases by ignoring details and if the purchases were genuine when the suppliers, who had supposedly sold the material had confessed to the fact that they were not in the business of supplying fabrics - and was it correct in basing his findings on stock statements submitted by the assessee when the assessee did not maintain quantitative stock register and had been unable to link purchases with corresponding production and sale - Held that:- Additions have been solely based on the statement of few parties - Two parties had filed affidavit making the averments that the statements obtained from them were obtained under duress - Furthermore, statement of Sh. Rakesh Gupta was obtained behind the back of the assessee - Assessee was never given an opportunity to cross examine him, despite requests - profit disclosed by the assessee were comparable profits and there was no evidence to establish the bills represented bogus bills - The assessee had also furnished bill wise, details of fabric and its utilization in manufacturing garments alongwith the corresponding invoices issued and money realized subsequently from the purchasers in the bank account of the assessee - CIT (A) had given a reasonable order touching upon all the aspects raised by the Assessing Officer - There was no infirmity in the order of the Ld. Commissioner of Income Tax (A).
As regards the statement of Sh. Rakesh Gupta was concerned, it emanates that assessee has wanted an opportunity to cross examine - But that opportunity was not given by the Assessing Officer - Hence, statement of Sh. Rakesh Gupta cannot be the sole basis of addition - As regards the statement of Sh. Rajeev Gupta and Sh. Parmesh Kumar Garg was concerned, when assessee was confronted the assessee immediately filed affidavits of both the persons wherein they have clearly stated that the statements were recorded under duress and undue pressure - Hence, the same cannot be the basis of treating the purchase as bogus - It is further noted that Sh. Sat Narayan Gupta, the proprietor of M/s Chaavi Trading Company and Sat Narayan & Sons (HUF) had not given any statement - Hence, purchases from these companies cannot be treated as bogus.
Applicability of Precedents – Whether the Commissioner of Income Tax (A) was correct in holding that the assessee’s case was not covered by the ratio of the judgement of Hon’ble Supreme Court in the case of Sumati Dayal vs. C.I.T. [1995 (3) TMI 3 - SUPREME Court] - The assessing officer relied on the case of Sumati Dayal v Commissioner of Income tax [1995 (3) TMI 3 - SUPREME Court] -mentioned that if all, the surrounding circumstances indicated that the apparent was not real, the ratio of Hon'ble Supreme Court would apply - Decided against Revenue.
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2013 (9) TMI 369
Transfer pricing adjustments - ALP - Commission Received – Whether commission @ $ 30 per MT received by the assessee from its AE, its parent company is at ALP - Held that:- The benchmarking adopted by the TPO as well as the DRP treating the assessee itself as a comparable was not correct - The assessee was involved in the manufacturing activity also and marketing its own products i.e. iron powder - The assessee was importing iron product and marketing the same that was a trading activity - Nothing had been brought out on record by the DRP as well as the TPO that the assessee has to incur cost for the sales achieved by the parent company as in the case of its own marketing - the risk involved and asset employed by the assessee-company compared to its own marketing with that of the marketing of the parent company, of which commission was paid, was unmatched.
The principles for determining the ALP were well settled by different judicial pronouncements - What was to be considered while adopting the comparable were the functions performed, capital utilized and risks assumed - It was pertinent to note here that the DRP as well as TPO had not questioned the nature of the functions to be performed by the parent company - The assessee's claim was that there was a minimal risk and no cost was involved for acquiring the business by the parent company, for which assessee was paid commission - The sale price of the product was not considered but weight was considered - The assessee received commission which worked out to 1.49% to the sales achieved by the parent company i.e. Hoganas AB Sweden minimum risk was involved as the assessee was not directly involved in any of the sale transactions by the parent company.
As per the agreement with Hoganas AB Sweden, the sales directly made by the parent company in India and other Asia region, the assessee had to receive commission @ $ 30 per MT - The assessee-company worked out the profit level indicator as operating profit or operating revenue of the aforesaid distribution activity at 15.37% and according to the assessee the arithmetic mean of the profit level indicator of the comparable trading companies was at 1.96% only - While filing the working before the TPO as well as the DRP, the assessee aggregated the sales of the manufactured goods and traded goods and accordingly worked out the percentage of SADA – Decided in favour of Assessee.
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2013 (9) TMI 368
Revision u/s 263 - erroneous or prejudicial to revenue order - Disallowance of Free Airtime to Distributors u/s 40(a)(ia) – Held that:- The issue had not at all been examined by the Assessing Officer in the course of assessment proceedings for the assessment year 2007-08 - No reference thereof was there in the assessment order – the Assessing Officer had not issued any query in this regard and not obtained necessary details - Hence, it cannot be said that the Assessing Officer had applied one of the two views possible - It was observed that assessee was liable to TDS on these payments under section 194H but has failed to do so – Following CIT v. Idea Cellular Ltd. [2010 (2) TMI 24 - DELHI HIGH COURT] - it was the submission of the assessee's counsel that on these issues, there were case law in favour of the assessee at that time. Hence, the Assessing Officer had applied one of the two views possible - Hence, the order cannot be said to be erroneous and prejudicial to the interests of the Revenue.
Disallowance of Roaming Charges Paid u/s 40(a)(ia) - Held that:- The Assessing Officer had mechanically accepted what the assessee wanted him to accept without any application of mind or enquiry - Similarly, no evidence had been placed that the claim made by the assessee was objectively examined or considered by the Assessing Officer either on record or in the assessment order – Following Arvee International v. Addl. CIT [2006 (1) TMI 173 - ITAT BOMBAY-High court ] - The perusal of the assessment order passed by the Assessing Officer does not show any application of mind - It is simply says in one line that loss returned by the assessee is accepted - It was held that no greater evidence is required than the mere reproduction of the aforesaid order from the assessment order to establish that it was a case where the Assessing Officer has mechanically accepted what the assessee wanted him to accept without any application of mind or enquiry - No evidence had been placed that the claim made by the assessee was objectively examined or considered by the Assessing Officer either on record or in the assessment order - It was because of such non-consideration of the issues on the part of the Assessing Officer that the loss claimed by the assessee stood automatically allowed without any scrutiny - The assessment order was clearly erroneous as it was passed without proper examination or enquiry or verification or objective consideration of the claim made by the assessee - The Assessing Officer had completely omitted the issue in question from consideration and made the assessment in an arbitrary manner.
Gee Vee Enterprises v. Addl. CIT [1974 (10) TMI 29 - DELHI High Court] - the Income-tax Officer should have made further enquiries before accepting the statements made by the assessee in his return - The Assessing Officer in this regard had not made any enquiry and had accepted the statements made by the assessee in his return.
Revisional Jurisdiction u/s 263 - The Assessing Officer had completely omitted the issue in question from consideration and made the assessment in an arbitrary manner - it was a fit case for the Commissioner to exercise his revisional jurisdiction under section 263 which he rightly exercised by cancelling the assessment order and directing the Assessing Officer to pass a fresh order, in view of the above two issues, after giving reasonable opportunity of hearing to the assessee and make a speaking order.
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2013 (9) TMI 367
Disallowance of Expenditure on TDS u/s 40(a)(ia) - the issue was as to the disallowance of claim of expenditure on the basis that the assessee deducted the tax but not deposited in the Government account within the period as prescribed under the statute and section 40(a)(ia) of the IT Act - Held that:- The amendment by Finance Act, 2010 to section 40(a)(ia) cannot be applied to the assessment year in dispute i.e., 2009-10 - Because of difference in judicial opinion, the case was referred to the Special Bench and the Tribunal Special Bench, Mumbai after considering the entire issue in the case of Bharati Shipyard Ltd. vs. DCIT [2011 (9) TMI 258 - ITAT MUMBAI ] - amendment to section 40(a)(ia) made by Finance Act, 2010 was with retrospective effect from 1st April 2010 extending the time limit for depositing of tax deducted at source in the case of one category of cases was neither aimed at removing any unintended hardship to the assessees nor it was curative or declaratory of the provisions of law and, therefore, it cannot be given retrospective effect - the issue raised in the Revenue appeal in was decided in favour of the Revenue and against the assessee.
Expenditure u/s 40(a)(ia) - Disallowance due to non deduction of TDS - whether the provisions of section 40(a)(ia) applied only to that expenditure which is payable as of 31st March and not to the expenditure which had already been paid during the year itself - Held that:- The order of M/s. Merilyn Shipping & Transports vs. ACIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM ] was suspended by the High Court for the time being - Matter remitted back to AO – Decided in favour of Revenue.
Difference in TDS as per Form no. 26AS and as claimed in the return - Confirmation of Addition on the Ground Of Price Variation - Held that:- The assessee failed to reconcile the figures mentioned in Form No. 26AS and Profit & Loss Account - The assessee had not been able to file any confirmation from the contractors regarding the price variation claimed - it cannot be denied that as per Form No. 26AS, the assessee had itself shown the gross receipts.
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2013 (9) TMI 366
Condonation of Delay - Held that:- There had been no willful neglect on the part of the Assessee - In such matters the advice of the professional would be the point of time at which the Assessee would begin to explore the option of exhausting all legal remedies - The advice was given by the counsel who appeared on behalf of the Assessee before the Hon’ble High Court - The decision of the Hon’ble High Court was rendered on 28.2.2012 - Following the Principles of Collector, Land Acquisition v. Mst. Katiji & Ors. [1987 (2) TMI 61 - SUPREME Court] - substantial justice should prevail over technical considerations - a litigant does not stand to benefit by lodging the appeal late - every day’s delay must be explained does not mean that a pedantic approach should be taken. The doctrine must be applied in a rational common sense and pragmatic manner - The appeal had been filed by the Assessee before the Tribunal on 26.3.2012 - by condonation of delay there was no loss to the revenue as legitimate taxes payable in accordance with law alone would be collected - the reason given for condonation of delay in filing the appeal was accepted - The delay in filing the appeal is accordingly condoned.
Deduction u/s 80-IB(10) - To be eligible for exclusion from the built up area, whether the common areas have to be shared with all the residents, who have occupied the residential units, or even if it was shared with one, the assessee would be entitled to the said benefits - Held that:- The Assessee should get the benefit of the provisions of Sec.80IB(10) which were exemption provisions - the Assessee would be entitled to deduction u/s.80-IB(10) of the Act on the profits of the 16 flats which were excluded by the CIT(A) in the order - The fact that it was not common area for all the flats in the building cannot be the basis to apportion the area of covered balcony in measuring the area of the two adjoining flats to which the covered balcony was common. The definition of the built up area in the provisions of sec.80-IB(1) does not speak of common area for all flats in a housing project.
The balcony areas, which were added as forming part of the built of area of the 16 flats which were considered as exceeding the built up area of 1500 sq.ft., were common areas and had to be excluded while measuring the built up area - There was covered balcony area in the 16 flats and such covered balcony could be used by two adjoining flats and was common between them - The DVO in measuring the area of these flats divided the covered balcony area and apportioned them between the two flats - The definition of built up area for the purpose of Sec.80-IB(10) of the Act excluded area which are meant for common use – Decided in favour of Assessee.
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2013 (9) TMI 365
Reopening of Assessment - reason to believe - change of opinion - Held that:- The Assessing Officer had miserably failed to show that there was any tangible material to hold that there was escapement of income from assessment - Assessing Officer not only examined the documents/evidence originally submitted by the assessee but had asked for further documents – The notice issued under section 148 of the Act was nothing but mere change of opinion - The issues which have already been considered in the original assessment cannot be reappreciated in reassessment proceedings under the garb of income escaping assessment - If the Assessing Officer had not given any finding after considering the evidence on record, it cannot be said that the income had escaped assessment on account of concealment of income of the assessee.
Relying upon Kelvinator of India Ltd.[ 2010 (1) TMI 11 - SUPREME COURT OF INDIA ] - the Assessing Officer had power to reopen the assessment provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment - the information was supplied by the assessee, if the Assessing Officer fails to take note of the same or does not appreciate the evidence from all dimensions in the first instance, he cannot be permitted to reopen the assessment under section 147 of the Act to cover up his own folies - Once the entire evidence as required by the Assessing Officer was submitted by the assessee, duty was cast upon the Assessing Officer to take cognisance of the evidence and pass assessment order under section 143(3) of the Act - The Assessing Officer cannot review his own order under the guise of section 148 and reappreciate the evidence which was already before him at the time of original assessment – Decided against Revenue.
Method of accounting in certain cases - Whether u/s 145A the excise duty element cannot be added to the value of closing in stock on the last day of the accounting year - Following Loknete Balasaheb Desai S. S. K. Ltd. [2011 (6) TMI 48 - BOMBAY HIGH COURT] - central excise liability was not incurred and consequently the addition of excise duty made by the assessing officer to the value of the excisable goods was liable to be deleted - The assessee had provided for excise duty on closing stock in accordance with AS 2 - The assessee in its letter had categorically stated that the amount appearing in annexure 10B of tax audit report represents excise duty provision on the closing stock of finished goods as on March 31, 2005 - This amount was paid before the clearance of goods from the factory prior to the date of tax audit report as certified by the tax auditors - An amount was debited in the profit and loss account under the head "manufacturing and other expenses" - This amount represents difference between opening provision of excise duty on stock as on April 1, 2004 and the excise duty on closing stock as on March 31, 2005. The Assessing Officer has erred in coming to the conclusion that since the sale is net off excise duty, the debit towards excise duty in the profit and loss account cannot be allowed. With regard to compliance with the provisions of section 43B was concerned, the assessee had stated that the amount of excise duty debited in the profit and loss account had been paid in the next year before the due date of filing of return and therefore, disallowance on this ground was not warranted.
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2013 (9) TMI 364
Disallowance u/s 14A - Earlier CIT(A) held that interest on nostro account is Not taxable - later decision of CIT(A) reversed - Held that:- Once the income itself was chargeable to tax, there can be no question of computing any disallowance under section 14A, the mandate of which operates to disallow deduction for expenses incurred in relation to income which does not form part of the total income under the Act - The interest income on nostro account was liable to be included in the total income - Accordingly, grounds raised by the assessee against the enhancement done by the learned Commissioner of Incometax (Appeals) by invoking the provisions of section 14A were also consequently allowed.
Allowability of Broken Period Interest as Expenditure – Held that:- The interest paid in respect of the broken period be set off against the interest received in respect of the broken period - following its decision for the assessment year 1991-92, had decided this issue against the Revenue.
Exemption of Gross Interest u/s 10(15) - the issue was against the exemption in respect of "gross interest" earned from tax-free security under section 10(15) of the Act – Held that:- Exemption under section 10(15) was on gross basis and in the facts and circumstances of the case, there can be no disallowance under section 14A qua the investment in taxfree securities - Following Dresdner Bank AG v. Addl. CIT [2006 (10) TMI 175 - ITAT BOMBAY-F] - it becomes apparent that exemption under section 10(15) was to be allowed on gross interest and not on the net interest - East India Pharmaceutical Works Ltd. v. CIT [1997 (3) TMI 5 - SUPREME Court] - if there be interest-free funds available to the assessee sufficient to meet its investment and at the same time loan has been raised, it can be presumed that the investments were made from interest-free funds and resultantly no disallowance of interest can be made – Decided against Revenue.
Deduction u/s 44C – Following The Joint Commissioner of Income-tax Versus M/s. American Express Bank Limited [2012 (8) TMI 371 - ITAT MUMBAI] - Exclusive expenses incurred by the head office for Indian branch were outside the purview of sec. 44C and only common head office expenses were governed by this section - Once the amount was found to be incurred exclusively by H.O. towards the Indian branch, the same was required to be allowed in terms of section 37(1) without any reference to section 44C.
Interest Received u/s 244A – Held that:- Interest under section 143(1)(a) was assessable to tax in the year in question. The proposition as raised by the learned authorised representative is about the rate of tax which should be applied on such interest – Relying upon CIT v. Clough Engineering Ltd. [2011 (5) TMI 562 - ITAT, DELHI ] - the claim for refund of income-tax cannot be said to be effectively connected with the receipts of permanent establishment and hence interest on refund of tax was taxable under article 11(2) of the Double Taxation Avoidance Agreement between India and Australia and not under article 7 read with article 11(4) - if the Assessing Officer was directed to adopt the rate at which such interest on income-tax refund should be charged by examining the relevant clauses of the Double Taxation Avoidance Agreement between India and France, in conformity with the aforenoted Special Bench order.
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2013 (9) TMI 363
Exemption u/s 10(23G) – infrastructure capital company - exemption of interest income - investment in bonds of SSNNL and GIPCL - Held that:- Following Gujarat Power Corpn. Ltd. Versus ACIT [2010 (11) TMI 626 - ITAT, Ahmedabad] and VBC Ferro Alloys Ltd. v. Asst. CIT 2005 (9) TMI 253 - ITAT HYDERABAD-B] - Explanation 2 to section 10(23G), as introduced by the Finance Act, 1999 was declaratory and had to be construed as retrospective as it was retroactive in nature - Therefore, the assessee was entitled to exemption u/s. 10(23G) in respect of the investments made prior to 1-6-1998 - the assessee was entitled to exemption under section 10(23G) of the Income-tax Act - there was no reason to take a contrary view in the present year - Decided in favour of assessee.
Disallowance u/s 35E – extraction and production of mineral - Held that:- No serious argument was made regarding eligibility of the assessee for deduction under section 35E and a clear finding was given by the authorities below that the assessee was not eligible for deduction under section 35E because the assessee had not fulfilled the required conditions - the learned authorised representative could not controvert these findings of the authorities below and hence, the aspect was decided against the assessee - the only argument raised was that deduction should be allowed under section 37(1) of the Income-tax Act - No deduction was allowable in the present year because even if the expenditure were to be debited in the profit and loss account, the same had to be considered in the credit side of the profit and loss account also as closing stock of work-in-progress and there will be no resultant deduction in the present year – there was no merit in this ground of the assessee - Decided against Assessee.
Disallowance of Deduction u/s 35D - increase in share capital - fee paid to Registrar of Companies - stamp fee - in connection with the extension of the industrial undertaking or setting up of a new industrial undertaking - Held that:- The findings of the AO were not controverted by the CIT (Appeals) or by the learned authorised representative by showing that the assessee was fulfilling the requirements of subsections (1) and (2) of section 35D of the Act and we have also discussed that in the name of rule of consistency, mistake cannot be perpetuated and, therefore, we hold that the learned Commissioner of Income-tax (Appeals) was not justified in deleting the disallowance made by the Assessing Officer under section 35D - We, therefore, reverse the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore that of the Assessing Officer – Decided in favour of Revenue.
The disallowance was made by the Assessing Officer by giving a specific finding that the assessee was not fulfilling the conditions imposed under subsections (1) and (2) of section 35D - Regarding the rule of consistency followed by the learned Commissioner of Income-tax (Appeals) in deleting this disallowance - the view taken by the Assessing Officer in the earlier year was a possible view then there may be a case for taking the same view in the present year as per the rule of consistency - But if the view taken in the earlier year was not a possible view then a mistake cannot be perpetuated in the name of consistency. - Decided against the assessee.
Disallowance of Depreciation on Leased Assets – Held that:- Following Indusind Bank [2012 (3) TMI 212 - ITAT MUMBAI] - Principal portion of lease rent had to be excluded from the income and depreciation was not allowable to the lessor in case of financial lease - there was no serious argument was made by the assessee regarding the allowability of deduction on account of depreciation of leased assets and hence, this ground of the assessee was rejected in all the three years.
Disallowance of Rates and Taxes - Held that:- The assessee was claiming deduction of this expenditure under section 37 - As per the provision of section 37(1), business expenditure not in the nature of capital expenditure or personal expenditure was allowable - But before this, one more condition was to be fulfilled that the business for which the expenditure is incurred has been set up and commenced - the land was purchased for the proposed joint venture power project and none of the power projects has commenced business - the rates and taxes before commencement of production in a project was a capital expenditure - Even if it does not enhance the value of the land in question then also it cannot be allowed as revenue expenditure because the business had not commenced and therefore, it was a preoperational expenditure – Decided in favour of Assessee.
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2013 (9) TMI 362
Deletion of Bogus Purchase – Held that:- Following Nishant Housing Development Vs. ACIT [1994 (9) TMI 139 - ITAT PATNA] - if any addition was made on the ground of expenditure incurred the source of which was to be treated as unexplained, then similar amount will have to be simultaneously allowed as expenditure to earn that income - rejection of part to be also accepted - On the basis that the purchases have been entered into stock register - Although the linkage of these purchases with the sale was not ascertainable because the purchases of raw material had undergone the various processes before its sale as a finished product - The raw material and finished goods have different entity and cannot have direct link – the evidences had clearly shown the authenticity of the purchases - The addition was not justified as per law and facts of the case.
Deletion of Payment of Interest for Sales Tax Deposit - Held that:- Non-payment of statutory dues like sales tax, income-tax etc. may entail penalty but late payment of the same may not necessarily attract penalty but interest for such delayed payment/deposit - interest paid by the assessee to the sales tax department on arrears of sales tax/purchase tax was an admissible deduction - Following CIT Vs. Western Indian State Motors [1988 (3) TMI 22 - RAJASTHAN High Court] and CIT vs. Lachhman Das Mathura [1980 (1) TMI 63 - ALLAHABAD High Court ] – the addition was directed to be deleted.
Deletion of Deduction u/s 80IB - Consideration of interest of FDR for calculating deduction u/s 80IB – Income from Business – profit from Duty Entitlement Passbook Scheme (DEPB) and Duty Drawback Scheme – Held that:- Following M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] - Duty drawback, rebate etc. should not be treated as adjustment (credited) to cost of purchase or manufacture of goods - They should be treated as separate items of revenue or income and accounted for accordingly - for the purposes of AS-2, Cenvat credits should not be included in the cost of purchase of inventories - duty drawback, DEPB benefits, rebates etc. cannot be credited against the cost of manufacture of goods debited in the Profit & Loss account for purposes of Sections 80-IA/80-IB as such remissions (credits) would constitute independent source of income beyond the first degree nexus between profits and the industrial undertaking - Duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80-IA/80-IB of the 1961 Act.
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2013 (9) TMI 361
Nature of Income - Dealing in vegetable seeds - Agricultural Income OR Business Income - The solitary issue that the AO exceeded his jurisdiction to convert the total agricultural income rendered by the assessee proportionately as business income - without indicating as to how the adoption of percentage for business and agriculture separately could be held when the past history of the assessee's case had been acceptance of the entire income from agricultural operation being seeds producing farm maintained by the partners in the firm – Held that:- The Assessing Officer himself misdirected that purchases ought to have been accounted for which was never the case of the assessee - the Assessing Officer had tried to invoke his own method of carrying out the agricultural operation to compute the income from business separately but on the basis of the same facts that the activities were carried out for the purpose of germinating seeds which were certified seeds not fit for human consumption.
The Assessing Officer in his enthusiasm had tried to dilute his own finding by adopting percentage method for segregating "business" activity for generating agricultural income - The books of account of the assessee were audited and the financial statements were certified as per the audit report in Form 3CB - Maintenance of records was not disputed and the expenditure incurred for the agricultural operation carried out were also not doubted - Determination of gross margin and net margin therefore do not appear to be a requirement of agricultural operation when the assessee is reaping the nature's bounty.
The denial made by both the authorities in not accepting the actual version of the assessee in spite of finding from spot verification which the Inspector of Income-tax Department in earlier years had noted that agricultural operations were being carried out by the assessee could not be changed to earning of income from trading of seeds, when the assessee was able to maintain three crops in a year dealing in vegetable seeds alone - the assessee has submitted the copies of the orders of the authorities below for the assessment years 2003-04 and 2007-08 passed under section 143(3) when exemption under section 10(1) has been granted to the assessee.
No specific defects have been found out in the books of account therefore could not be a material for determining correct income involving the provisions of section 145(3) by changing the nature of the very income claimed exempted under section 10(1) - The expenditure incurred for carrying out agricultural activity would yield agricultural produce and the percentage of margin earned on sale of agricultural produce cannot be the basis for bifurcating margin from business activity and margin from agricultural activity when whole of the expenditure is allowable by the Assessing Officer as for carrying out agricultural operations – Decided in favour of Assessee.
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2013 (9) TMI 360
Rejection of books of account - accounting for scrap - AO rejected the books of account by invoking provisions of Section 145(3) on the plea that method of valuation of closing stock as adopted by the assessee was not within the accepted principle of account - Part Deletion of addition on Difference Between Generation of Scrap and Average Rate of Scrap Sale - Held that:- Periodically when the waste material accumulated, it was sorted out by the shop floor technical persons and segregated - If there was no possibility of using it that material was segregated and entered in the excise register after such segregation and then only it was sold to the scrap dealer - The price varies from item to item as well as material to material. There is a difference in selling price of stainless steel (SS) scrap, mild steel (MS) scrap, copper scrap, tube scrap etc. – no discrepancy was found in the books of account, therefore, the Assessing Officer was not justified in rejecting books of account - After giving detailed reasoning with regard to the quantum of scrap generated and the value for which it can be sold vis-à-vis valuation arrived at by the DVO, after recording detailed finding, as reproduced hereinabove, the ld. CIT(A) deleted the substantial part of the addition on account of scrap sale. - Decided in favor of assessee.
The assessee was engaged in business of manufacturing and fabrication of engineering items on the basis of specific orders from its customers - Variety of raw materials were used by the assessee - The valuation of the inventory done by the DVO was much less than the valuation done by the assessee - Even the Assessing Officer has accepted the assessee’s valuation, which clearly show that DVO’s report suffers from inconsistency, mis-classification and defects and discrepancies - Even during course of valuation and assessment proceedings, the assessee has highlighted discrepancies in adoption of valuation rates of various materials including scrap by the DVO, but the same was not taken care of - When no defect was pointed out in the books of account even during the course of scrutiny assessment and when the valuer’s report was not accepted by the Assessing Officer, there was no reason for rejection of books of account u/s 145(3) and the CIT(A) had correctly observed that the Assessing Officer was not justified in rejecting the books of account u/s 145(3) - Even during the course of search, no documents or papers were found by the Assessing Officer to indicate that there was any scrap sale outside the books of account, whereas addition has been made by the Assessing Officer in all the assessment years under consideration on account of unaccounted sale of scrap, which is not only based on the estimate but also without any corroborative evidence - during scrutiny assessment, no addition was made on account of such generation of scrap and sale outside books of account.
Disallowance of salary u/s 40A(2)(b) - Excessive salary - Held that:- The disallowance of salary was restricted to the extent of 50% of the remuneration so paid to Mrs. Irene Valentine – Mrs. Irene Valentine was a qualified engineer and experience in business and salary paid to her was commensurate with qualification and the services provided to the assessee company - neither there was excessive payment nor unreasonable payment was made to Irena Valentine looking to her qualification, experience and services so provided to the assessee company.
The onus was on the Revenue to show that payment so made were not as per legitimate needs of the business or the benefits derived from such payment, was not according to the services so rendered - the Assessing Officer had disallowed the payment by observing that services rendered by Mrs. Irene Valentine was not substantially proved alongwith the documentary evidence - As per provisions of Section 40A(2)(a), where the assessee incurs any expenditure in respect of which payment has been made to a person referred to in clause (b) of Section 40A(2) - Keeping in to view these findings of CIT(A) vis-à-vis observation of the Assessing Officer, we direct to restrict disallowance of salary to the extent of 50% of the remuneration so paid to Mrs. Irene Valentine. - Decided partly in favor of revenue.
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2013 (9) TMI 347
Computation of income - works contract - determination of expenditure incurred for execution of works contract - Held that:- Having taken 95% of the total contract amount receivable by the assessee from the society for determining the accrued income as on 31.3.2006, the Assessing Officer ought to have deducted 95% of the total expenditure incurred by the assessee for forming layout as accrued expenditure for the year ending 31.3.2006.
The CIT(A), for determining the income, had considered the entire contract receipt and total expenditure incurred by the assessee. We find that the action of CIT(A) cannot be faulted. - Decided against the revenue.
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