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Income Tax - Case Laws
Showing 421 to 440 of 585 Records
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2013 (9) TMI 342
Waiver of Interest u/s 234B - default in payment of advance tax - bonafide belief - Failure to comply with the conditions of section 54EC for claiming exemption from capital gains - Held that:- in order to obviate hardship to the assessees, the CBDT issued the order Annexure – N under Section 119(2)(a) of the Income Tax Act, 1961 permitting waiver of interest under Section 234(a), 234(b) and 234(c) of the Act on 26.6.2006.
Clause (b) of Subsection (3) of Section 54EC as it stood prior to its substitution by Finance Act 2007 was without any limit over the ‘capital gain’ investment in capital gains bonds for exemption under Sec. 54EC, from capital gain tax under Sec. 45 of the Act, moreso in the light of the order passed by the CBDT extending the period of limitation for such investment upto 31.3.2007. The substitution by Finance Act 2007 with retrospective effect from 1.04.2006 is to the detriment of the petitioner, dehors which petitioner would have had the benefit of exemption from capital gain tax as the entire capital gain of Rs. 1,82,00,000/-.
While there can be no dispute that the tax liability of Rs.29,09,800/- was discharged on 25.9.2007 nevertheless during the period from 1.4.2006 to 31.3.2007 and upto the Finance Act, 2007, receiving the assent of the President of India, petitioner was under the bonafide belief that he would be entitled to exemption from payment of capital gains tax under Section 54EC of the Act on Rs.1,82,00,000/-. In the circumstances, it would be incongruous to hold that paragraph 2(c) of the notification Annexure-N applies to cases where orders are passed by the High Court and are subsequently set-aside by a larger Bench of the Supreme Court or where there is retro activity of an amendment to the statutory provision. The very fact that the words ‘retrospective amendment of law’ used in paragraph 2(c) to establishes that it is one of the unavoidable circumstance by which an assessee would stand to benefit the waiver of interest under Section 234(b) of the Act.
Decision in Bhanuben Panchal And Chandrikaben Panchal Versus Chief Commissioner Of Income-Tax. [2004 (3) TMI 35 - GUJARAT High Court] followed wherein it was held that, when the circumstances leading to delay in filing of return of income are also the circumstances resulting into late payment of taxes and when the same set of circumstances are considered to be unavoidable circumstances responsible for the delay in filing of the return of income, ordinarily, such circumstances would also qualify to be considered as unavoidable circumstances responsible for the delay in late payment of taxes.
The retro active operation w.e.f. 1.4.2006 of clause (b) of explanation to sub-sec. (3) of Section 54EC of the Act substituted by the Finance Act, 2007, coupled with the voluntary payment of tax liability on 26.9.2007, the Chief Commissioner of Income-tax was not justified in declining the benefit of a waiver of interest under Section 234B. - Interest waived to the extent of 80% - Decided partly in favor of assessee.
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2013 (9) TMI 341
Charitable activity u/s 2(15) - Registration of application u/s 12AA - Charitable work or public utility - Construction of shushk (dry) shauchalya (latrines) in the villages for proper sanitation - Held that:- assessee's case falls within the ambit of carrying on an activity for consideration. The assessee has not constructed the shushk shauchalya as a part of a social service but it only executed the contract awarded by DUDA. If the contention of the assessee is accepted, then every contractor who is constructing the roads, bridges or airports, power generation plants etc. can claim that they are doing the charitable work. From the income and expenditure account of the assessee for the immediately preceding two years, it is evident that the only activity carried out was for the execution of the contract awarded by DUDA. In view of the above, in our opinion, the assessee's case squarely falls within the ambit of proviso to Section 2(15) and, since the assessee is carrying on the activity for consideration being the contract amount received from DUDA, the same cannot be said to be charitable purpose. Once the activity of the assessee does not fall within the ambit of definition of 'charitable purpose', the learned CIT rightly refused to register the society for the purpose of Section 12A - Decided against assessee.
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2013 (9) TMI 340
Revision u/s 263 - Conduct of the revenue officers - Unexplained expenditure u/s 69C - Repayment of housing loan - Held that:- In this case, even though the assessing officer called for the details, he has not discussed the same in the assessment orders. Therefore, the reasons for allowing the claim of the assessee / not including the increase in wealth in the assessment are not forthcoming from the assessment orders. This Tribunal is of the considered opinion that the failure of the assessing officer to record reasons for the conclusions reached in the assessment orders is an error which is prejudicial to the interest of the revenue. The non application of mind to the materials filed by the assessee is an error which warrants the exercise of powers by the Administrative Commissioner u/s 263 of the Act. - Decided against the assessee.
Allahabad High Court in a recent judgment [2013 (6) TMI 67 - ALLAHABAD HIGH COURT] expressed its shock and anguish the way in which the assessment orders and the revisional orders are being passed. - The Commissioner of Income- tax initiated proceedings to cancel the registration u/s 12A of the Act. However, it was dropped without recording any reason. Subsequently, the case was reopened and notice was issued u/s 147 of the Act. The assessee challenged the notice issued for reopening the assessment by way of writ petition. While considering the wit petition, the Allahabad High Court expressed its shock and anguish on the way in which the orders are being passed by the income-tax authorities.
Assessment order does not reflect the application of mind by the assessing officer to the material filed by the assessee. The non application of mind to the material filed by the assessee is an error which is prejudicial to the interest of the revenue. Therefore, the Administrative Commissioner has rightly exercised his jurisdiction u/s 263 of the Act - Decided against Assessee.
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2013 (9) TMI 339
Disallowance u/s 14A - no exempt income was realized - Held that:- It is observed that the Special Bench of the Tribunal in the case of Cheminvest Ltd. v. ITO [2009 (8) TMI 126 - ITAT DELHI-B] has held that the disallowance u/s 14A is warranted even if there is no exempt income. - In the case of Godrej & Boyce Mfg. Co. VS. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - had held that the disallowance u/s 14A was required to be made as per Rule 8D in relation to the assessment year 2008-09 and subsequent years - For the earlier years, the direction was to compute the disallowance on some 'reasonable basis' - The disallowance u/s 14A was warranted even if there was no exempt income.
Treatment of Rental Income – Sub-letting of property - Held that:- The assessee was neither the owner nor the deemed owner of the house property, applying the provisions of section 22, the annual value of such property could not have been charged to tax under the head "Income from house property" - As it was a case of simple subletting or property, not facilitating the carrying on of the assessee's business in any manner, the rental income so realized by the assessee in the present circumstances cannot be considered as 'Business income' - In such a situation, it was directed that the same should be included under the head 'Income from other sources' - The impugned order on the issue was set aside and the matter was restored to the file of the AO for doing the needful accordingly - The Assessing Officer will allow eligible deductions and allowances as per the relevant provisions under Chapter IV-F - While allowing such deductions, the Assessing Officer will also ensure that no deduction is doubly claimed/allowed, firstly, in computing of income under the head "Profits and gains of business or profession" and then under the head "Income from other sources".
Transfer pricing adjustments – ALP - Reimbursement of expenses - Held that:- A pure reimbursement of expenses by one AE to another AE is very much a 'transaction' as per section 92F(v) and consequently was equally an international transaction as per section 92B requiring consideration as per section 92 of the Act - Be that as it may, the learned Departmental Representative could not demonstrate the fact that such reimbursement of expenses was without any markup - As the so called comparable case of Datamatics Financial Services Limited was included by the TPO in the final list of comparables, in our considered opinion, the same was liable to be excluded as it involves related party transactions at much higher level, as against the filter adopted by the TPO himself, being companies with less than 25% related party transactions – Following Assistant Commissioner of Income-tax, Circle 6(3) Versus Maersk Global Service Center (India) (P.) Ltd. [2011 (11) TMI 465 - ITAT MUMBAI] - the assessment order on this comparable case was also set aside and the matter was directed to be decided afresh by the AO/TPO in consonance with our ibid observations.
The relevant factor in choosing comparable cases is to find out similarity in the nature of services rendered - In that view of the matter a case in which services are outsourced and then provided to its customers cannot be compared with the rendering of in-house services. The pertinent criteria for selection of comparable cases should be similarity in the nature of services and not the higher or lower margin of profit in one case vis-à-vis the other. As there is a vast difference in the cases where the services are outsourced or provided in-house, in our considered opinion, there cannot be any comparison between such types of cases. - matter remanded back - Decided in favor of assessee.
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2013 (9) TMI 338
Addition u/s 68 – credit of earlier year, additions made during the current year under dispute - Held that:- After verification of the sub dealer deposit account, has noted that the addition was erroneously made - such deposits were received in A.Y. 2003-04 and 2004-05 for which the balance sheets for those years were filed. Further, the learned CIT(A) himself admits that technically the addition cannot be made u/s.68 during the year, still he had confirmed the addition, which in our opinion was not proper. Under these circumstances, the CIT(A), in our opinion, was not justified in confirming the addition made by the AO. Whatever remedy available with the department could have been utilised in the preceding years. However, the same cannot be a ground to make the addition during this year. In this view of the matter, we set-aside the order the CIT(A) and direct the AO to delete the addition. - Decided in favor of assessee.
Unexplained Loan Credits for Nonbusiness Purposes - Held that:- Since the assessee had produced the loan creditors before the AO who have confirmed to have given the loan - therefore, the same in our opinion should be allowed - The AO disallowed an amount on account of loan from 7 loan creditors on the ground that the assessee could not substantiate the identity, credit worthiness and the genuineness of the transactions - We find the assessee filed certain details before the CIT(A) who called for a remand report from the AO - the assessee has produced the loan creditors before the AO who recorded their statements and since the loan creditors filed their bank accounts and the AO was satisfied regarding the genuineness of the transaction and their credit worthiness, therefore, we find no reason as to why the same should not be accepted - We therefore set-aside the order of the CIT(A) on these 2 loans and direct the AO to allow these 2 loans as genuine. - Decided in favor of assessee.
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2013 (9) TMI 337
Disallowance of Interest - Loan to sister partnership firm - nature of loan, business purpose or personal purpose - Whether the interest-free amount advanced to AG Info Solutions (partnership firm) was for commercial expediency or not – Held that:- it has to be examined whether the funds advanced by the taxpayer company was used for the personal purpose or for business of the firm where the taxpayer company has its full interest. Since this aspect was not examined, this Tribunal is of the considered opinion that the matter needs to be re-examined. - In S. A. Builders Ltd. v. CIT [2006 (12) TMI 82 - SUPREME COURT] it was held that, whenever there was a nexus between the expenditure and the purpose of business which need not necessarily be for the business of the taxpayer itself, the payment of interest cannot be disallowed - the orders of the lower authorities are set aside and the issue is remitted back to the file of the Assessing Officer - decided partly in favor of assessee.
Disallowance of Depreciation - business premises known as "DD Milestone". - The depreciation with regard to "DD Milestone" building has already been remitted back to the file of the Assessing Officer - In respect of the other two flats in Link Horizon, Marine Drive, Ernakulam and in Uni-Housing at Ernakulam the claim of the taxpayer is that the flats were given to the directors for the purpose of the taxpayer's business. Therefore, it has to be examined whether the flats were in fact given to the directors for the business purpose of the taxpayer or not. For the sake of consistency, this Tribunal is of the considered opinion that this issue also needs to be re-examined by the Assessing Officer. Accordingly, the orders of the lower authorities on this issue are set aside and the issue is remitted back to the file of the Assessing Officer for re-consideration. The Assessing Officer shall re-examine the issue afresh and find out whether the flats in question were used by the directors for the business needs of the taxpayer and thereafter will decide the issue in accordance with law after giving opportunity of hearing to the taxpayer.
Exemption u/s 10A - whether, blending and packing of tea amounts to manufacture so as to qualify the taxpayer for claiming exemption under section 10A of the Act - Held that:- Commissioner of Income-tax (Appeals) had rightly allowed the claim of the taxpayer - The judgment of the jurisdictional High Court is binding on this Tribunal – Tata Tea Ltd. Versus ACIT [2010 (1) TMI 743 - Kerala High Court ] - industrial units engaged in the very same activity ; i.e., blending, packing and export of tea in the special economic zones and free trade zones, will continue to enjoy tax exemption under section 10A and section 10AA respectively. The still worse position is that the appellant would be denied of export exemption available under section 80HHC even to a merchant exporter - Provisions of section 10A and the EXIM policy and found that "manufacture" as defined under the EXIM policy has a wider and literal meaning covering tea blending as well - blending and packing of tea qualifies for exemption under section 10A of the Act. - Decided against the assessee.
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2013 (9) TMI 336
Disallowance as per the provisions of section 14A r.w Rule 8D of Income Tax Rules – Held that:- Following GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D of Income-tax Rules, 1962 is applicable only from assessment year 2007-08. As further held by Hon'ble High Court, the disallowance u/s 14A for the years prior to assessment year 2007-08 has to be made by adopting some reasonable method – the order of the CIT(Appeals) was set aside on this issue and restore the matter to the file of the AO with a direction to recompute the disallowance of expenses to be made u/s 14A by applying some reasonable method after giving the assessee an opportunity of being heard.
Addition made by Way of Transfer Pricing Adjustment – It was contended that since the price charged to AEs was more than the price charged to non AEs, the international transactions with AEs involving export of bathrobes should be considered at arms length. - Held that:- average price of bathrobes is likely to vary in a wide range depending on the type of bathrobes supplied and their product mix and in the absence of exact data made available by the assessee to compare the prices of similar products supplied to AEs and non-AEs, CUP cannot be applied as most appropriate method for the transfer pricing exercise. Moreover, there was also a difference in geographical location and size of the markets also in as much as the AEs of the assessee were in Italy whereas the non-AEs i.e. Wal Mart was based in USA having much bigger market than Italy. We, therefore, find no infirmity in the impugned order of the learned CIT(Appeals) confirming the action of the AO in rejecting the CUP method for benchmarking and applying the TNMM - Decided against the assessee.
Consideration of DEPB benfits for working out profit margin - Held that:- DEPB benefit received during the year under consideration should be considered as part of the turnover of the assessee for working out the profit margin to make the comparison of like to like and similar to similar. Since the profit margin of the assessee after taking into consideration the DEPB benefit as part of its turnover comes to 12.30% as against the average net profit margin of 13.05% of the comparables which is within the safe limit of 5%, we find ourselves in agreement with the learned CIT(Appeals) that no TP adjustment in respect of transactions made with the associated enterprises was required to be made in the case of the assessee - Decided against the revenue.
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2013 (9) TMI 335
Disallowance of Exemption u/s 11 - Charitable purpose 2(15) - Subscription paid to Chit Fund company - Violation of the nature specified in Section 13(1)(d) - As per the assessee, subscriptions paid to chit funds were not deposits nor investments and it could not have been a reason for denying it the exemption claimed under Section 11 of the Act. - Held that:- Subscription to chit funds itself will be utilization of the funds of the assessee since right of the assessee is only to prize a chit or participate in a draw of lots. It is not an investment or deposit of a money which is available as surplus with assessee.
Lower authorities fell in error in concluding that such subscriptions were investments which violated the modes specified under Section 11(5) of the Act. - The question of denial of exemption under Section 11 would arise only if investments were there. - assessee could not have been denied exemption claimed by it under Section 11of the Act, for a reason that it had subscribed to the chit funds. There is no case for the Revenue that any of the Trustees, Managers, contributors of relatives of such persons were having interest in the two chit companies. - assessee was eligible for exemption under Section 11 of the Act and its claim was denied unjustly.
Relying upon CIT v. Kottayam Co-operative Bank Ltd. [1974 (4) TMI 2 - KERALA High Court] - The annual income of the Trust against which, utilization for charitable purpose which was well above the limit of 85% prescribed u/d 11(1)(a) of the Act - As per the assessee, subscriptions paid to chit funds were not deposits nor investments and it could not have been a reason for denying it the exemption claimed u/s 11 of the Act - Subscription paid by a subscriber of a chit to a chit company acting as the foreman of the chit, in our opinion, cannot be considered as an investment. Subscribing to a chit fund is not with an intention to earn interest or dividend.
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2013 (9) TMI 334
Transfer pricing adjustments - Arm’s Length Price - selection of comparables - Rule 10B(4) - Held that:- the deviation took place in the final list of comparables relied on by the Assessing Officer as against the companies selected by the assesseecompany. The list of comparable companies relied upon by the assesseecompany has been rejected by the Transfer Pricing Officer without stating any reason, even though the Transfer Pricing Officer has, by and large, agreed with the general premises on which the assessee has computed its arm's length price.
Even though the Transfer Pricing Officer has adopted the transactional net margin method to compute the arm's length price, he has overruled the objections of the assessee without stating any reason. The arbitrary selection of comparables has in fact inflated the operating profit in the computation made by the Transfer Pricing Officer. - Deletion of transfer pricing adjustments by CIT(A) sustained - Decided against the revenue.
Disallowance of Dividend Tax delay charges, interest for delay in remitting TDS, expenses incurred for delay in UTI dividend payments, etc. It is to be seen that the delay charges attributable to dividend tax partakes the character of dividend tax itself. Dividend tax as such is not deductible - the delay charges also are not deductible - This is the same case in respect of interest for delay in remitting TDS - There cannot be a different view on expenses incurred for delay in UTI dividend payments - Therefore, these expenses claimed by the assessee are not deductible in computing its income. - Decided against the assessee.
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2013 (9) TMI 333
Exemption u/s 10(23)(v) / 10(23C)(iiiad) – Nature of Society – Educational institution - Exemption u/s 10(23C)(iiiad) – Held that:- If the donations were received compulsorily for admission of students, the assessee is not entitled for exemption either u/s. 10(23C) or u/s. 11 of the IT Act. Since the lower authorities were not examined the collection of capitation fees in this case, in our opinion, the matter requires to be examined by the assessing officer whether the assessee is collecting the capitation fees from students or not and it is necessary for bringing the actual facts on record for deciding the issue effectively. - Following the decision in Vasavi Academy of Education (2010 (1) TMI 1094 - ITAT HYDERABAD), matter remanded back.
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2013 (9) TMI 332
Reassessment proceedings - Defect in service of notice u/s 143(2) – Validity of Assesment as per Section 292BB - irregularity curable u/s 292BB - Whether the CIT(A) was right in holding that in absence of issuance of notice u/s 143(2), the assessment was null and void not appreciating provisions u/s 292BB – Held that:- Notice was not served within the stipulated time. Mere giving of dispatch number will not render the said finding to be perverse. In absence of notice being served, the Assessing Officer had no jurisdiction to make assessment. Absence of notice cannot be held to be curable under Section 292 BB of the Act - Following CIT v. Cebon India Ltd [2009 (7) TMI 26 - PUNJAB AND HARYANA HIGH COURT ] - It was held in this case that absence of notice is not curable defect under s. 292BB of the IT Act - the objection of the Revenue is not maintainable - Therefore, the learned CIT(A) was justified in setting aside the entire assessment order.
Section 292BB has been inserted by Finance Act, 2008, has no retrospective effect and is to be construed prospectively - The provision of s. 292BB of the IT Act would not apply in the case of the assessee - Further, no notice under s. 143(2) has been issued or served upon the assessee - The assessment order under appeal is 2001-02 - Therefore, the provision of s. 292BB of the IT Act would not apply in the case of the assessee - Further, no notice under s. 143(2) has been issued or served upon the assessee.
Reopening of Assessment u/s 148 -Disallowance of various heads like unexplained investment, loans raised and unexplained capital - when entire reassessment order has been set aside and quashed by the learned CIT(A) and confirmed - rest of the grounds in the Departmental appeal regarding reopening of assessment under s. 148 and deletion of addition on merits were left for academic discussion only. Therefore, we do not propose to decide the same at this stage, as no notice under s. 143(2) was issued in this case. Therefore, there would not be any valid reassessment proceedings under s. 147 of the IT Act and all resultant additions made in such reassessment order would stand deleted.
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2013 (9) TMI 331
Revision u/s 263 - Nature of Expenditure – Capital Expenditure OR not - web site development expenses - order u/s 263 was passed setting aside the order under Section 143(3) of the Income Tax - Held that:- In view of the nature of expenses, we have no hesitation to come to a conclusion that the expenditure in question is in the revenue field – Following CIT vs. Indian Visit.Com Pvt.Ltd. [2008 (9) TMI 8 - DELHI HIGH COURT] - Expenditure on development of web site with a view to disseminate information about assessee’s business activities amongst its clients is revenue expenditure even though resulting in enduring benefit. - Decided in favor of assessee.
Assessee was capitalizing the expenditure in the earlier years - Held that:- Applying project completion method does not mean that the expenditure which is not claimed in the current year, becomes a capital expenditure. In fact project completion method comes into play only when the expenditure is in the revenue field. Otherwise, it would have been called “capital work-in-progress.” The difference between project completion method and percentage completion method is the year of allowability of expenditure and the year of booking of income. - Decided in favor of assessee.
Revision u/s 263 is not correct - CIT is wrong to direct the AO to treat the entire expenditure of Rs.9,49,039/- as capital in nature and disallow the same.
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2013 (9) TMI 330
Addition on Account of Low GP - Whether the Ld. CIT (A) erred in restricting the addition on account of G.P. @ 5% to 2% on the ground that the turnover for the year has been reduced compared to preceding year and in not appreciating the fact that the G.P. for the immediately preceding year was 10.84% and that the substantially increased figures show by the assessee in manufacturing expenses like power, fuel addition other expenses has resulted the G.P. in negative figure and addition on facts in partly confirming the addition on account of gross profit - The confirmation of such addition being unjust and unlawful be deleted - Held that:- The books of accounts have not been rejected by A.O. nor has any defect been pointed out in the books of accounts - CIT (A) though has granted partial relief to the assessee has held that in the context of reduced turnover in the current year, increased expenditure partly explains the negative G.P. during the year - the A.O. was not right in making addition.
Following CIT vs. Amitbhai Gunwatbhai [1980 (6) TMI 10 - GUJARAT High Court] - if there was no challenge to the transactions represented in the books then it is not open to Revenue to contend that what is show by the entries is not the real state of affairs - Secondly, even if for some reason, the books are rejected it is not open to the A.O. to make any addition on estimate basis or on pure guess work - No specific discrepancies or defects in the books of account of the assessee have been pointed out before us nor was any material brought to our notice to establish that purchases were inflated or receipts suppressed - CIT vs. Vikram Plastic [1998 (8) TMI 43 - GUJARAT High Court] - there were no discrepancies or defects pointed out in the books of account and further that they were regularly maintained addition also on the finding that there was no material brought on record to establish that purchases or expenses were inflated or sales suppressed and also in view of the finding that it was not the case that there was no method of regular accounting employed, the Tribunal was fully justified in coming to the conclusion that the provisions of Sec. 145(2) of the Income Tax Act,1961, could not be invoked - This conclusion was based on a finding of fact and raised no question of law - this ground of the assessee is allowed and that of Revenue is dismissed.
Disallowance of Deduction u/s. 40(a)(ia) - Whether the expenditure on which TDS is deducted and paid after the due date as prescribed u/s. 200, calls for disallowance in view of the provisions of Sec. 40(a)(ia) - Held that:- Following M/s. Alpha Projects Versus DCIT, Ci rcle-1(1), [2012 (4) TMI 466 - ITAT, Ahmedabad] - No disallowance is called for in the present case since the TDS has been deposited before filing of return - it is also a fact that the A.O. has not examined the issue of disallowance u/s. 40(a)(ia) in light of the aforesaid decision of coordinate Bench - We therefore feel that in the interest of justice the issue be remanded to the file of A.O. for verification - We accordingly direct the A.O. to examine as to whether the assessee had paid the TDS to the account of Government, before filing of Return of income - If the assessee has deposited the TDS before filing of Return of Income the deduction be allowed following the aforesaid decision of Co-ordinate Bench - By this order, we also direct the assessee to furnish all the information required by the A.O. to decide the issue. The A.O. shall also grant an opportunity of being heard to the assessee. Thus this ground of the assessee is allowed for statistical purposes.
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2013 (9) TMI 329
Penalty u/s 271(1)(c) – Claim of exemption u/s 10(38) where no STT was paid - long term capital gain from sale of shares - Penalty was questioned to the extent it was in respect of addition made on account of long term capital gains - Held that:- The assessee has not been able to show satisfactorily that the so called mistake committed by him while making a wrong claim for exemption u/s 10(38) is a bonafide and genuine mistake and the assessee having not disclosed fully and truly all the material facts relevant to the said claim, we are of the view that it is a fit case to impose penalty u/s 271(1)(c). In that view of the matter, we uphold the impugned order of the learned CIT(Appeals) confirming the penalty imposed by the AO u/s 271(1)(c) and dismiss this appeal of the assessee. - Decided against the assessee.
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2013 (9) TMI 328
Nature of Income - The dispute is regarding the nature of income from sale and purchase of shares by the assessee - Whether the income from sale and purchase of shares in a particular case should be treated as capital gain or as business income – Held that:- we have no hesitation to hold that the assessee is engaged in the business of purchase and sale of shares considering the peculiarity of the facts and circumstances in which the transaction has been done - Once it is established that the nature of transactions are such that the assessee is trading in shares, it does not make any difference whether he has transacted in the same shares more than four times or less than four times. - income is liable to taxed as income from business - Decided against the assessee.
Claim of Set Off of Business Loss - Held that:- In the light of the provisions of Sec. 43(5), the AO was of the opinion that only the income earned from the trading in derivatives before 25.1.2006 is allowed to be set off against the brought forward speculation loss from the activity of trading in derivatives. However, as we have held that the income from shares is to be treated as business income, we accordingly restore this issue back to the files of the AO. The AO is directed to consider the claim of loss in the light of our decision, as per provisions of the law.
Disallowance of the Set Off of Loss - Loss disclosed under the head brought forward Long Term Capital loss – Held that:- As the underlying nature of the transaction was the same i.e. F&O, therefore brought forward losses which were erstwhile treated as speculative losses were allowed to be set off against subsequent years F&O profit - the loss which the assessee claims to set off is Long Term Capital loss and there is no such amendment so far as claim of such loss is concerned. Therefore we do not find any merit in the claim of the assessee to allow set off of Long Term Capital loss against business income - prior to the amendment to Sec. 43(5), F&O transactions were treated as speculative transaction but post amendment, the same was treated as business transaction.
Rebate u/s 88E on account of STT paid by the assessee - Interest u/s. 234B and 234C - Whether the CIT(A) erred in not allowing the entire loss arising on account of valuation of closing stock and the shares written off as per the recognized method ‘cost or market value whichever is lower’ - Held that:- The issues were Restored back to the file of the AO. The AO is directed to examine the claim of loss of the assessee in the light of the decision that entire STCG is to be taxed under the head business income, after giving reasonable opportunity of being heard to the assessee – Rebate also requires verification by the AO - The AO is accordingly directed to consider the claim of the rebate u/s. 88E as per the provisions of the law after giving a reasonable opportunity of being heard to the assessee.
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2013 (9) TMI 327
Revision u/s 263 - Held that:- an order erroneous or prejudicial to revenue - Held that:- At the time of original assessment, the A.O. has made the necessary enquiries and called for the necessary explanation and material from the assessee - The ld. Authorised Representative has demonstrated as discussed in submission of the ld. Authorised Representative above that the A.O. has made the assessment after considering all relevant records and materials. - The CIT has wrongly invoked section 263 of the Act. Therefore, order of the CIT is quashed - Decided in favor of assessee.
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2013 (9) TMI 309
Disallowance of premium paid for acquiring lease - nature of payment - TDS u/s 194I - default u/s 201 - Held that:- A careful reading of the said lease deed transpires that the premium is not paid under a lease but is paid as a price for obtaining the lease, hence it precedes the grant of lease. Therefore, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent. It is also seen that the MMRD in exercise of power u/s. 43 r.w. Sec. 37(1) of the Maharashtra Town Planning Act 1966, MRTP Act and other powers enabling the same has approved the proposal to modify regulation 4A(ii) and thereby increased the FSI of the entire 'G' Block of BKC. The Development Control Regulations for BKC specify the permissible FSI. Pursuant to such provisions, the assessee became entitled for additional FSI and has further acquired/purchased the additional built up area for construction of additional area on the aforesaid plot. Thus the assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area - Following decision of The ITO (TDS) 3 (5), Versus M/s. Wadhwa & Associates Realtors Pvt. Ltd. [2013 (9) TMI 261 - ITAT MUMBAI] - payment for acquiring leasehold land is a capital expenditure - not liable for TDS u/s 194I - Decided against Revenue.
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2013 (9) TMI 308
Interest on NPA - non accrual of income, - the outstanding balance was converted into equity capital in the investee- company - non-recognizing interest income on NPAs by the assessee-bank following RBI guidelines - Held that:- a settlement was arrived at between the parties, whereby while the assessee waived the interest receivable to the extent of Rs. 17.37 lacs, the borrower issued it shares for the balance amount due, i.e., Rs.83 lacs. Any lender, for whom interest income is a primary source of income, would resort to such a measure only with a view to safeguard his capital, i.e., as a measure of last resort. This is as this would put a stop to its regular source of income; the dividend income on the shares being uncertain and, in any case, would arise only subject to adequate profits being earned by the borrower, and then, again, only at the discretion of the management.
In fact, it needs to be appreciated that this amounts to conversion of a trading asset (interest bearing advance) to a capital asset, with an uncertain remunerative potential, which is neither an easy nor a desirable proposition for any business enterprises. Further, on what basis does the Revenue state it to be a device (for tax avoidance) is not understood, and which allegation cannot be lightly made. In fact, the borrower also would not book the liability to this extent, so that until and unless the transaction is not genuine would not be entered into. In any case, such an allegation has to have its basis in fact/s and support of materials, while we find it to be de hors any basis. As such, we are unable to appreciate the Revenue's case.
At the same time, there is no finding by either of the authorities below that the borrower has not booked this liability in its accounts. This is fundamental to the validity of the financial arrangement under reference. The assessee has also in fact neither claimed so, i.e., of the borrower having not booked the liability to interest, or of having after booking reversed it pursuant to this arrangement, nor placed the settlement agreement on record. As such, subject to the confirmation of the borrower having not booked this liability in its accounts, i.e., toward interest for Rs. 17.37 lacs, we confirm the non accrual of the same as income to the assessee for the year - Decided against assessee.
Interest on assumed value of shares - Held that:- accommodation provided is non-fund based. There is no charge of the assessee being entitled to any guarantee fee or commission, and which was also clarified by us during hearing from the ld. AR, and which, in any case, is not the Revenue's case. Under these circumstances, we are unable to comprehend or appreciate the Revenue's case in the least. All that has transpired is that, being a part of the RPJ group, the assessee has placed its investment by way of shareholding in the group concerns with the trustee as a part of the financial arrangement to enable funds being borrowed by its group concerns from the financial institutions. The assumption of interest under the circumstance is purely notional, without basis either in fact/s or in law - Decided in favour of assessee.
Non accrual of interest on NPA as per RBI guidelines - Held that:- So, however, the issue before us is not on the merits of the issue, but as to whether the decision by the apex court in Southern Technologies Ltd. (2010 (1) TMI 5 - SUPREME COURT OF INDIA) covers the issue qua recognition of income on NPA accounts in view of the RBI guidelines. The same, as aforesaid, is in our view a question of fact. The same being subject to two different, in fact, opposite, views by the orders by the coordinate benches of this tribunal, the matter was put across to the assessee. It admitted to, firstly, the matter being a question of fact and, two, of being subject to different, irreconcilable views. Strictly, per the procedure, the matter ought to be referred to a special bench of the tribunal. On this proposition being mooted, the ld. AR, after taking time for seeking instructions from his client, the assessee-appellant, confirmed that it was in a position to meet the case on the merits of the addition on quantum inasmuch as the interest under reference has not been received even by now, i.e., after a lapse of a number of years. The matter may, therefore, be proceeded with on the footing of the applicability of decision by the apex court in the case of Southern Technologies Ltd. (supra), i.e., on merits, and restored back to the file of the assessing authority for necessary determination. - matter remanded back.
Addition in respect of interest in the sum of Rs.157.20 lacs assumed on the value of the shares (Rs.1309.94 lacs) pledged by the assessee-company to IDBI Trusteeship Services Ltd. - Held that:- the accommodation provided is non-fund based. There is no charge of the assessee being entitled to any guarantee fee or commission, and which was also clarified by us during hearing from the ld. AR, and which, in any case, is not the Revenue's case. - All that has transpired is that, being a part of the RPJ group, the assessee has placed its investment by way of shareholding in the group concerns with the trustee as a part of the financial arrangement to enable funds being borrowed by its group concerns from the financial institutions. The assumption of interest under the circumstance is purely notional, without basis either in fact/s or in law. - Decided against the assessee.
Disallowance of bad debts - Held that:- write off by the assessee in its accounts of a debt as irrecoverable would itself deem or signify it as having become bad. No doubt, this would not preclude the Revenue from disallowing the claim where the write off is not genuine, but we are unable to come to any such finding. In fact, the amount has been written off, as clarified in the notes to the accounts, on the basis of the decision by the Board of Directors. Further, the interest arising on the said loans has remained unpaid and, as it would appear to us, for a period beyond the current year, i.e., when the two, the amount of interest and the amount of the principal, are compared (with each other). In any case, the onus to establish that the claim is not genuine is only on the Revenue, while its case rests solely on the non-discharge by the assessee of the onus on it to establish the debts under reference as having become bad - Decided in favour of assessee.
Reversal of provisions for NPA - assessee had written back the provision against the NPA outstanding in its accounts for Rs.160 lacs - Held that:- If no deduction, as claimed, had been claimed or allowed to the assessee for an earlier year qua the provision now written back, how we wonder the same, i.e., its write back, or to this extent, gives rise to any tax liability for the current year. There is surprisingly no clarity on this aspect of the matter in the orders of the Revenue authorities. This aspect having not been verified by the A.O. at the assessment stage, the matter is to be remitted to him for the purpose.
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2013 (9) TMI 307
Income from salary - TDS u/s 192 - Perquisite value of the residential accommodation - ownership of accommodation - Section 17(2)- Whether License fee determined under the Punjab Civil Service Rule shall only be taken as taxable perquisite under Rule 3(1) of the Income-tax Rules - Assessee in default u/s 201 - Held that:- accommodations provided by the BBMB to the State Government employees were the properties owned by the Government of Punjab and the other States. Admittedly, the said properties were not owned by BBMB and in terms of section 79 of Punjab Reorganization Act, 1966, the residential accommodation established for the employees of the Beas Project was the work pertaining to Bhakra Project, which was owned by Punjab Government and later by partner States. Consequently we find no merit in the order of the Assessing Officer in treating the residential accommodation provided to the employees by BBMB as owned by BBMB.
Since the accommodation to the employees of BBMB had been provided by the respective State Governments, and where the Government of Punjab was the owner of the land originally allotted to the Bhakra Project and since BBMB was functioning under the direct control of the Central Government, wherein the employees of BBMB were to be treated as the employees of the Central or State Government, the ingredients of Sr.No.1 of Table-1 under Rule 3 of the Income-tax Rules stand fulfilled. The said provisions relates to the accommodation provided by the Central Government or any State Government to its employees or employees serving with any body or undertaking under the control of such Government on deputation. The employees employed with BBMB were the employees of the State Government, which in turn was functioning under the control of Central Government and consequently the perquisite value of the rent free accommodation provided to such employees was to be the licence fees determined by the State Government as reduced by the rent actually paid by the employees.
Admittedly in the facts of the present case the licence value had been determined in accordance with Rule 5.23 of Punjab Civil Service Rules, Vol. I, Part-I and had been included as taxable perquisite under Rule 3(1) of the Income-tax Rules, in the case of the assessee - The accommodation in the present case provided to the employees of BBMB was owned by the respective States and was not owned by BBMB and since the basic condition of ownership of the accommodation has not been specified in the present case, nor the premises had been taken on lease by the BBMB from the respective States, the provisions of Rule 3(1) of the Income-tax Rules is not applicable - Decided against Revenue.
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2013 (9) TMI 306
Addition u/s 145- Unutilised modvat credit in closing stock - Held that:- valuation of purchases and sale of goods and inventory is required to be made in accordance with method of accounting regularly employed by assessee and further adjustment is required to be made to include amount of any tax, duty cess or fees actually paid or incurred by assessee to bring goods to place of its location and condition as on date of valuation . It is therefore clear that adjustment on account of tax, duty etc. is required to be made not only to closing stock but also in purchases, sales and opening stock. In present case, AO had made adjustment only in closing stock. CIT (A) has directed him to make adjustment in opening stock also in addition to closing stock. He has however omitted to consider aspect that adjustment is also required to be made to purchases and grievance of assessee is only on this account. We therefore modify order of CIT (A) by holding that adjustment on account of tax duty will also be made in purchases - Decided in favour of assessee.
Disallowance of bad debt - Held that:- It is settled legal position as held by Hon’ble Supreme Court in case of TRF Ltd.(2010 (2) TMI 211 - SUPREME COURT) that after amendment of provisions from assessment year 1998-99, burden is no longer on assessee to establish that debt has actually become irrecoverable. only conditions which are required to be fulfilled for allowance of bad debt is that debt should have been taken into account in computation on inomce of earlier year and should have been written off in books of accounts. There is no dispute that bad debt had actually been written off in books of accounts. CIT (A) has held that assessee had not produced any detail and evidence to show that such debts had been taken into account in computating income of ealier year. Issue is restored to file of AO for fresh decision after allowing opportunity of hearing to assessee to show that debt had been taken into account in computation of income of earlier year - Decided in favour of assessee.
Disallowance of discount and commission expenses - Held that:- assessee could not submit complete details along with names and addresses of parties with supporting evidence which was specifically requisitioned by AO. Such details were also not been filed before CIT(A), and, therefore, he upheld disallowance. Merely because no disallowance had been made in earlier years or in subsequent year cannot be basis for making claim for relief in this year, because it is not possible for AO to make detailed examination of each and every issue relating to assessment every year. This year he has taken up matter for detailed examination and found that expenses were not supported by details and evidences. It is however settled legal position that even in cases where details and evidences are not available, AO is required to compute disallowance on an objective basis on basis of material available on record. In this case from comparative details of expenses filed we find that expenses on account of discount and commission have been claimed at .55% total sales of ₹ 344 crore compared to .43% on turnover of ₹ 345 crore in immediate preceding year. Therefore, if we compute expenditure this year at same percentage as in immediate preceding year, expenditure comes to ₹ 1.47 crore against claim of ₹ 1.89 crore. Thus on basis of claim in preceding year, there is an excess claim of about 42 lakhs. AO has made estimated disallowance of only ₹ 5,00,000/- - Decided against assessee.
Computation of deduction u/s 80HHC - 90% exclusion of net interest/rent or gross interest/rent – Held that:- Ninety per cent of not gross interest/rent but only net interest/rent, which has been included in profits of business of assessee as computed under heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining profits of business. Matter remanded back to A.O. to work out deductions – Following decision of M/s ACG Associated Capsules Pvt. Ltd. (Formerly M/s Associated Capsules Pvt. Ltd.) & Others Versus Commissioner of Income Tax, Central-IV, Mumbai & Others [2012 (2) TMI 101 - SUPREME COURT OF INDIA] - Decided in favor of assessee.
Transfer pricing adjustment - Import of Bisoprolol Fumarate - Admission of additional evidence - Held that:- certificate dated from factory manager of assessee had been produced which had been rejected by authorities below as being not contemporary. Quality of product is important as it affects comparability of transactions and it influence pricing of product. There was however no independent evidence produced before lower authorities to show superior quality of assessee’s product. assessee vide letter has filed an additional evidence before Tribunal in form of quality certificate from Bee PharmLabs (Pvt.) Ltd. an independent accredited third party and also comparative selling rate of same product produced by Torrent Pharmand Unichem Laboratories Ltd has been filed and it has been requested that additional evidence may be submitted. It was argued that assessee was made aware of these additional evidence only after passing of order by CIT (A) and accordinlgy it has been requested for admission of same. In our view an independent evidence regarding quality of products and comparative prices will be useful in deciding issue - Decided in favour of assessee.
Import of pigments - Held that:- assessee had placed sufficient material on record in support of its plethat low margin in case of pigment was not because of high import price but because of low selling price in domestic market which was highly competitive. comparison made by AO of pigment segment with non AE trading which had no pigment, in our view is not justified on facts of case. best comparison would have been with an independent party importing pigments from same foreign market and trading in local market but no such comparative case has been placed on record by TPO. though it was TPO who separated pigment segment for purpose of transfer pricing study - Addition of TPO deleted - Decided in favour of assessee.
Payment of technical know how fees - Held that:- law is quite clear on subject that TP adjustment is required to be made by applying one of prescribed methods. TPO has not applied any prescribed method and has only disallowed part of expenses as done in normal assessment, which is not permitted under tranfer pricing regulation as per which adjustment on account of any internationl transaction is required to be made as per method prescribed. TPO thus had applied CUP method and made adjustment on account of nine services on average basis - agreement listed certain services on which assessee requires guidance/assistance from time to time. assessee was thus entitled to any of services as and when required. Therefore, applying CUP method to service not availed by assessee during year is not justified. It would have been appropriate if AO had applied CUP method to payment made during year by assessee for three services and compared with similar payment for such services by an independent party. No efforts have been made by TPO/AO to determine market value of services received by assessee during year relating to SAP implementation and quality control to show that assessee had paid more compared to any independent party for same services. assessee had submitted that in case assessee had paid to AE at man hour rate for technical services provided during year in relation to SAP implementation, fees payable would have been significantly higer - Following decision of McCann Erickson IndiPvt. Ltd., Versus Addl. Commissioner of Income Tax Range 6 [2012 (7) TMI 728 - ITAT, DELHI] - Decided in favour of assessee.
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