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Income Tax - Case Laws

Showing 221 to 240 of 654 Records

• 2014 (2) TMI 994
  

  Validity of Notice issued u/s 148 of the Act – Validity of Letter issued by the AO – Held that:- The contentions of the petitioner deserve acceptance - Once the revenue found there was no basis to connect the petitioner with the May Fair Garden property, he ought to have dropped the reassessment proceedings - Nothing survived thereafter - He was acting outside jurisdiction when he issued a letter calling upon the petitioner to avail of the opportunity given to him to cross-examine the complainant – i.e., the person who was the author of the tax evasion petition.

  Instead of terminating the proceedings initiated under Section 148 of the Act by dropping them the revenue chose inexplicably to keep those proceedings alive - This is illegal and impermissible in law - This amounts to nothing but harassment of the petitioner - There appears to be some vested interest in keeping the proceedings against the petitioner pursuant to the notice alive – revenue have to act in accordance with law and not under any pressure - The AO, being a responsible officer should not be party or pressurised by someone to personal vendetta – thus, the notice issued under Section 148 of the Act as well as the letter set aside – Decided in favour of Assessee.

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• 2014 (2) TMI 993
  

  Deduction u/s 80HHC of the Act - Whether the Tribunal was right in law in holding that the components of sales tax and central excise do not form part of the sale proceeds for the purpose of Section 80HHC of the Act despite insertion of Section 145A – Held that:- The decision in CIT v. Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME Court] and Commissioner of Income Tax vs. Shiva Tex Yarn Ltd. [2012 (9) TMI 658 - SUPREME COURT] followed - sales tax and excise duty do not have any element of "turnover" which is the position even in the case of rent, commission, interest etc. - excise duty and sales tax are indirect taxes - They are recovered by the assessee on behalf of the Government - if they are made relatable to exports, the formula under Section 80HHC would become unworkable - The view which is taken in the light of amendments made to Section 80HHC from time to time – the Tribunal has not committed any error in holding that the components of sales tax and central excise do not form part of sale proceeds for the purpose of Section 80HHC of the Act despite insertion of Section 145 A of the Act – Decided against Revenue.

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• 2014 (2) TMI 992
  

  Allowability of deduction u/s 80IB(10) of the Act – Held that:- Nothing has been brought on record by the Revenue to demonstrate that the powers were exercised by the DVO to take the measurement of the flats when the same was denied by Assessee - the DVO has himself admitted in the noting "Property inspected from terrace - The flats from inside will not be available for verification of measurements in a day which could not be arranged today – the noting of DVO that he has inspected the property in question personally and had measured the same from terrace and the area is less than 1500 sq. ft. per unit shows that even by including the outer walls, while measuring from terrace, the area was less than 1500 sq. ft. per unit – Relying upon CIT vs Anriya Project Management Services (P) Ltd [2012 (5) TMI 196 - KARNATAKA HIGH COURT] - the definition of "built up area" inserted by Finance No 2 of 2004 which came into effect from 1.4.2005 is prospective in nature and has no application to the housing projects which were approved by the local authority prior to that date - Thus, the Assessee is eligible for deduction u/s 80IB(10) the order of CIT(A) set aside – Decided in favour of Assessee.

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• 2014 (2) TMI 991
  

  Determination of Arm’s Length Price – Transfer Pricing Adjustment - Held that:- The decision in Assistant Commissioner of Income-tax Versus DHL Danzas Lemuir (P.) Ltd. [2006 (9) TMI 498 - BOMBAY HIGH COURT] followed - The assessee shared profit in the ratio of 50:50 both on the payments made by it and the receipts of freight from its AEs - The assessee paid certain sum to its AEs abroad for doing the work similar to which it did for which it received freight revenue from its AEs - the assessee has earned/paid revenue from to its AEs in the same proportion – thus, the transactions have been recorded at arm's length price and there was no justification for making such addition – there is no reason to interfere with the order – Decided against Revenue.

  Denial of benefit of Percent range as per section 92C(2) of the Act – Held that:- The lower authorities have erred in denying the benefit of the proviso to Sec. 92C(2) of the Act while computing the ALP – thus, the benefit of the proviso to Section 92C(2) of the Act should be given to the assessee – Decided in favour of Assessee.

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• 2014 (2) TMI 990
  

  Claim of Deduction u/s 80P(2)(a)(i) of the Act - Co-operative society – Whether the gross total income of a cooperative society includes income from carrying on the business of banking or providing credit facilities to its members and is allowed as deduction or not – Held that:- The decision in ACIT, Circle 3(1), Bangalore v. M/s. Bangalore Commercial Transport Credit Co-operative Society Ltd. [2011 (4) TMI 1222 - ITAT BANGALORE] followed - section 80P(4) is applicable only to cooperative banks and not to credit cooperative societies - The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks - the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessee’s case – thus, it is entitled to deduction u/s 80P(2)(a)(i) of the Act.

  The Revenue’s contention cannot be accepted that section 80P(4) would exclude not only the cooperative banks other than those fulfilling the description contained therein but also credit societies, which are not cooperative banks – thus, the assessee is not a credit co-operative bank but a credit cooperative society - Exclusion clause of sub-section(4) of section 80P would not apply – Decided against Revenue.

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• 2014 (2) TMI 989
  

  Service of Notice u/s 143(2) of the Act - Applicability of Section 292BB of the Act - Whether the notice was issued and served within the time contemplated u/s. 143(2) of the Act - Held that:- The notice issued by the AO u/s. 143(2) of the Act in the present case will not fall within any mistake, defect or omission which is in substance and effect in conformity with or according to the intent and purpose of this Act - The requirement of giving of notice because completion of the assessment proceedings cannot be dispensed with by taking recourse to the provisions of Sec.292B of the Act – Relying upon Manish Prakash Gupta v. CIT [2014 (2) TMI 657 - ALLAHABAD HIGH COURT] & CIT v. Parikalpana Estate Development (P.) Ltd. [2012 (10) TMI 617 - ALLAHABAD HIGH COURT] the provisions of section 292BB cannot be applied in a case where admittedly no notice u/s. 143(2) had been issued within the time limit prescribed in law.

  The provisions of Sec.292BB lay down presumption in a given case - It cannot be equated to a conclusive proof - The presumption if rebuttable - The provisions of section 292BB cannot extend to a case where the question of limitation is raised on admitted factual position in a given case – thus, the provisions of section 292BB of the Act will not be applicable to the present case - the assessment proceedings are invalid for the reason that the notice u/s. 143(2) of the Act had not been issued and served within the time limit prescribed by those provisions - The order of assessment is accordingly annulled – Decided in favour of Assessee.

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• 2014 (2) TMI 988
  

  Claim of depreciation u/s 32(1) of the Act – Computation of income u/s 11(1)(a) of the Act - Whether the computation of income u/s 11(1)(a) of the Act, without classification under various heads as set out in section 14 of the Act amount to double deduction – Held that:- The decision in DIT vs. Vishwa Jagriti Mission [2012 (4) TMI 289 - DELHI HIGH COURT] followed - claim of depreciation on fixed assets utilized for the charitable purposes has to be allowed while arriving at the income available for application to charitable and religious purposes, since the income of the society should be computed on the basis of commercial principles - there is no business activity - As seen from the computation of income placed on record, assessee has not claimed any application of income towards purchase of assets in this year - A.O. has not brought out anything on record that assets purchased by assessee have been claimed as deduction in earlier years and without examining the issue A.O. cannot disallow the amount, simply because there was a case law establishing the principle that double deduction is not allowable – the order of the AO and CIT(A) set aside and the claim of the depreciation is allowed – Decided in favour of Assessee.

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• 2014 (2) TMI 987
  

  TDS u/s 194H - nature of expenditure on foreign travelling of its dealers/sub-dealers - Commission or Discount - Held that:- The assessee had paid incentives/commission to its dealers, which had been debited in the Profits & Loss Account under the head of foreign travel expenses - the expenses had been claimed under the garb of foreign travel expenses - there is nothing other than incentive/commission - this fact was evident since the higher sales achieved by the dealers would result in more bonus points to the dealers - commission includes any payment received directly or indirectly by a person acting on behalf of another, for services rendered in the course of buying or selling of goods - The Assessing Officer has miserably failed to appreciate the real controversy - He has totally misconstrued the explanation given by the assessee - The dealers and sub-dealers had purchased the goods directly from the assessee - They have not acted as a commission agent for third person where upon sec. 194H would be applicable – Decided in favour of Assessee.

  Disallowance of interest paid – excessive and unreasonable expenditure - Held that:- Section 40A(2)(b) is not applicable on a public limited company - The premises in question, consisting of 21000 sq. ft. of office area, was taken on rent in Assessment Year 1999-2000 - During the year, total rent amounted to Rs. 48 lacs - In addition, Rs. 11.35 crores had been paid as interest free security deposit, which was as per clause (2) of rent agreement dated 31.12.2008 - it had been agreed to keep the rent @ Rs. 4 lacs per month and to increase the security deposit by Rs. 6 crores, which facts do not stand disputed – Decided in favour of Assessee.

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• 2014 (2) TMI 986
  

  Denial of deduction u/s 80IB(8A) of the Act - Profits derived from Medicinal Chemistry and Clinical Pharmacology Division – Held that:- The decision in GVK Biosciences Pvt. Ltd., Versus Addl. CIT [2014 (2) TMI 597 - ITAT HYDERABAD] followed - The prescribed authority under the Act, having approved the assessee as a research and development company, assessee is eligible for deduction under S.80IB(8A) and also renewed such approval from year to year, the learned CIT(A) cannot override the approval/renewal granted by the prescribed authority and deny the benefit to the assessee - deduction u/s 80IB cannot be denied to the assessee, till such time, the assessee is approved as a Research and Development Organisation - the assessee is entitled to deduction under S.80IB of the Act – Decided in favour of Assessee.

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• 2014 (2) TMI 985
  

  Liability to deduct TDS u/a 194A of the Act – Held that:- The decision in Income-Tax Officer Versus M/s. Neeladri Chit Fund (P) Ltd[2014 (2) TMI 456 - ITAT HYDERABAD] followed - the amount disbursed by a chit fund company to the members from the contribution cannot be treated as interest - the payment made/disbursed to the subscribers/members is not interest, the question of deducting any tax at source from it would not arise - In the case of a chit fund, there is no borrowing of money nor any debt is incurred and as such the provisions of section 194A and 2(28A) of the Act are not attracted – there was no infirmity in the order of the CIT(A) – Decided against Revenue.

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• 2014 (2) TMI 984
  

  Disallowance of expenditure U/s 37 read with Section 40A(3) - Cash payment - disallowance to lower percentage – site development and construction – Held that:- The decision in M/s. Lahari Homes, Hyderabad [2014 (2) TMI 596 - ITAT HYDERABAD] followed - CIT(A) directed the the assessing officer to exclude the cheque payments out of the disallowance and with regard to balance payments, to restrict the disallowance to 15% of cash payments made on account of such items of expenditure which have been considered by the Assessing Officer.

  In the absence of any material to contradict the findings of the CIT(A) brought on record by the Revenue – there was no infirmity in the impugned order of the CIT(A) – Decided in favour of Revenue.

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• 2014 (2) TMI 983
  

  Denial of deduction u/s 80IB(10) of the Act – Effect of amendment - Non receipt of completion certificate - Held that:- The decision in Opel Shelters (P) Ltd. Vs. ACIT [2014 (2) TMI 593 - ITAT PUNE] followed - The law as it existed in the A.Y.04-05 when the Assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17.11.2003 and when the Assessee commenced development is to be applied - the legislature would not have intended to take away a vested right without clear words to that effect in the provisions of Sec. 80-IB(10) as amended by the Finance Act, 2005, w.e.f. 1-4-2005 - By applying the principle of harmonious construction to interpret the provisions under Sub-section (10) to Section 80IB as amended w.e.f. 1.4.2005, the Legislature always intended that the project must be approved by the local authority, thus in those approved projects where construction has been started much earlier than 1.4.2005, the assessees are required to complete the plan as it has been approved - The project was approved on 12-10-2001, i.e. prior to 01-04-2005 – thus, the amended provisions of section 80IB(10) w.e.f. 01-04-2005 restricting the commercial area in a housing project are not applicable and the assessee is eligible for deduction u/s.80IB(10) of the Act.

  The assessee has applied to the PMC for issue of completion certificate and that possessions were given to all the respective flat owners before 31-03-2008, Corporation has started levying taxes to all the individual flat owners, electricity connections have been given to all the flat owners and the final completion certificate is also obtained by the assessee on 09-05-2008 – the decision in Runwal Multihousing Pvt. Ltd. Vs. ACIT [2014 (2) TMI 595 - ITAT PUNE] - the assessee cannot be denied the benefit of deduction u/s 80IB(10) for not obtaining the completion certificate before 31-03-2008 – thus, the order of the CIT(A) set aside and the Assessing Officer is directed to allow the claim of deduction u/s 80IB(10) to the assessee – Decided in favour of Assessee.

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• 2014 (2) TMI 982
  

  Disallowance of claim of deduction u/s 80IB(10) of the Act – Entire project not eligible for deduction – Project not completed - Housing project "Leela Garden" - Held that:- The assessee has obtained the completion certificate before the statutory due date - the assessee has obtained the completion certificate before 31-03-2008 and out of the 83 flats the assessee has claimed deduction u/s.80IB(10) in respect of 61 flats where the built up area is less than 1500 sq.ft. - thus, the deduction u/s.80IB(10) has to be allowed on proportionate basis with reference to the qualified residential units and that the assessee would not be denied claim of deduction u/s.80IB(10) of the Act - the assessee is entitled to deduction u/s.80IB(10) in respect of the 61 flats of the housing project "Leela Garden”.

  Housing project "Hill View Residency" – Held that:- Out of the 5 Buildings, the assessee was able to obtain completion certificates for 4 Buildings and therefore it is the case of the assessee that the deduction u/s.80IB(10) should be allowed in respect of the 4 Buildings – The decision in Runwal Multihousing Pvt. Ltd. Vs. ACIT [2014 (2) TMI 595 - ITAT PUNE] Followed - It is the case of the Revenue that since the completion certificate for Building D has not been obtained before 31-03-2008, therefore, deduction u/s.80IB(10) should not be allowed.

  There was substance in the contention of the AR that approval of the housing project and approval of building plan are two different concepts - plan for development is only a work order and not final plan sanctioned by the local authority - the assessee has claimed deduction u/s.80IB(10) in respect of Buildings A, B, C on which profit has been earned on sale of units and the completion certificate has been obtained before the statutory date and none of the units in the above building is in excess 1500 sq.ft. - thus, the assessee is entitled to deduction u/s. 80IB(10) in respect of buildings A, B and C of the project "Hill View Residency" – thus, the order of the CIT(A) set aside and the AO is directed to allow the claim of deduction u/s 80IB(10) in respect of the housing projects "Leela Garden" and "Hill View Residency" – Decided in favour of Assessee.

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• 2014 (2) TMI 981
  

  Transfer pricing adjustment – Interest received on loans given to Associated enterprises – Held that:- The decision in Siva Industries & Holdings Ltd. Versus Assistant Commissioner of Income-tax, Co. Circle VI(4), Chennai [2012 (10) TMI 890 - ITAT CHENNAI] followed – LIBOR rate which has to be considered while determining the arm's length interest rate in respect of the transaction between the assessee and the Associated Enterprises - no addition on this count is liable to be made in the hands of the assessee - The AO is directed to examine whether the rate of interest received was at LIBOR + percentage points - The adoption of Prime lending rates is not approved in various coordinate bench decisions – thus, assessee lending at LIBOR plus rates can be considered as arm’s length provided there is no other expenditure on the borrowed funds - Since some of the loans are reflecting rate at ordinary percentage points, conversion to LIBOR plus is required –It can also be taken as arm’s length rate for the loans advanced during the year. AO is directed to examine – Decided in favour of Assessee.

  Claim of bad debts – Held that:- It is not necessary to prove that the debt has become irrecoverable and is enough if bad debt is written off in the accounts of the assessee - There is no dispute that the amount claimed is towards supplies made and the debtor company is not in the position to repay – the decision in TRF. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] followed - the AO is directed to allow the amount as claimed – Decided in favour of Assessee.

  Disallowance made u/s 40(a)(ii) of the Act – Held that:- As decided in assessee’s own case for the previous assessment year, since no services are rendered in India, sales commission cannot be disallowed under the provisions of section 40(a)(ia) – the amounts covered by sales commission are not accruing or arising to the non-residents in India – thus, provisions of section 195 does not apply and, section 40(a)(ia) cannot be invoked.

  Product registration and filing fee – Held that:- Without examining the nature of the amount and whether the other non-resident has any permanent establishment in India or made available anything in India or rendered any services In India, the amount cannot be considered under the provisions of section 40(a)(ia) - Since complete details of the amounts and to whom they are paid are not forthcoming on record – thus, the matter is remitted back to the AO for fresh adjudication - If the non-resident has not rendered any services in India, or the amount paid is not taxable in India, provisions of section 195 does not apply and disallowance under section 40(a)(ia) does not arise – Decided in favour of Assessee.

  Disallowance of claim u/s 35D of the Act – Held that:- The assessee's contentions are to be accepted - Even though assessee made claim under section 35D, the claim is allowable under section 37(1) as in Mahindra & Mahindra Limited vs. CIT [2009 (10) TMI 639 - ITAT MUMBAI] – The assessee is eligible for deduction under section 37(1) - Since the issue of allowance under section 37(1) was not examined by the AO – thus, the matter remitted back to the AO – Decided in favour of Assessee.

  Disallowance of payment u/s 40(a)(ia) of the Act – Held that:- The order of the AO cannot be upheld which mainly focus on non-obtaining of TDS certificate and also there is no clarity in the order of the A.O. about nature of payments and its taxability under the IT Act - even the DRP also expressed difficulty to conclude whether the payments are in the nature of income or not - since the nature of payment and whether any services are rendered in India or not have not been examined in detail, item-wise along with the applicable DTAA provisions – The matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (2) TMI 980
  

  Additions made u/s 143(3)/153A of the Act – Block assessment - Admission of additional evidence under Rule 46A(3) – Held that:- The revenue wants to adopt an unfair course for ascertaining the tax liability, firstly by making an arbitrary and untenable sort of ex parte assessment and secondly not ensuring the process for proper evidence to come on record - Thus there is no justification for revenue to challenge the CIT(A)s action in admitting the additional evidence after following the due procedure laid down by the act - CIT(A) has been vested with powers coterminous to that of AO, over and above it to undertake further inquiries and even to enhance the assessment - Observations of CIT(A) clearly indicate the fact that the AO not only had an opportunity of submitting its comments on the merits of the case but also he actually submitted requisite comments - the assessments were completed in unjustifiable manner violating even the basic principles of natural justice.

  Neither sufficient opportunity of hearing nor time was given to the assessee to represent his case - The questionnaire issued by AO had no question about the agricultural income already assessed -This income was not being shown for the first time and has been regularly accepted year to year by department in preceding years – thus, the assessee had no remedy except to file additional evidence in first appeal – thus, assessee was prevented by sufficient cause in filing these papers during the course of 153A assessment proceedings – Relying upon COMMISSIONER OF INCOME TAX Versus TEXT HUNDRED INDIA PVT. LTD. [2013 (6) TMI 72 - DELHI HIGH COURT] - In 153A/C assessments additions cannot be made unless they are based on any incriminating material or inquiries based on such material.

  There is neither reference nor reliance on any incriminating material - Besides there is no reference to any inquiries conducted by AO based on any incriminating material – the additions have been rightly deleted by the CIT(A) on this count – the assessee owns a fairly large agricultural holding known as Prag Farms - Agricultural income has been returned and accepted by department year after year - Confirmation from agricultural tenant is on record - AO cannot reject documentary evidence on surmises and conjectures - Assessee has supported his claim based on relevant agricultural record - The tenant has confirmed that the agricultural expenses were borne by him and not by the assessee – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.

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• 2014 (2) TMI 979
  

  Deletion made u/s 40A(3) of the Act – Cash payment - Whether the assessee’s case falls under exception contained in Rule 6DD(b) of the I.T Rules – Held that:- CIT(A) held that the Rule 6DD(b), would not hold water in so far as exemption provided is in Rule 6DD - The various clauses of the said Rule would have to be considered - Even otherwise, the said Rule is not exhaustive - The State Government has closed its doors in so far as the local treasury is concerned and the payment for the purchase of country spirit or country liquor has to be made to the warehouse, run by the government - This shows that any payment made to the warehouse, which is under the direct control of the state government, is a payment made directly to the government.

  Once, this is accepted then the provisions of Rule 6DD(b) of the I.T Rules 1962 which clearly spells out that the payment made to the government in legal tender under the rules framed by the Government, is exempted from the rigours of section 40A(3) of the Act - the payments made by the assessee for purchase of country spirit and country liquor is to the government as per the notification issued by the government and is in legal tender specified by the notification - the payment made by the assessee for the purchase of country liquor and country spirit from the territorial licensee bottling plant is protected by the exemption in terms of Rule 6DD(b) of the I.T Rules 1962 - the addition as made by the AO and as confirmed by the CIT(A) by invoking the provisions of section 40A(3) of the I.T Act 1961 stands deleted – Decided in favour of Assessee.

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• 2014 (2) TMI 978
  

  Modvat Excise Duty credit - Closing stock of raw material and packing goods – Held that:- The decision in ADDL COMMISSIONER OF INCOME TAX Versus M/s JOHNSON & JOHNSON LTD [2013 (6) TMI 286 - ITAT MUMBAI] followed - merely because Modvat credit is an irreversible credit available to the manufacturers upon purchase of duty paid raw material, it would amount to income which is liable to be taxed under the Act, is not acceptable – thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

  Disallowance of provision for Executive Retirement Scheme (ERS) – Held that:- The decision in ADDL COMMISSIONER OF INCOME TAX Versus M/s JOHNSON & JOHNSON LTD [2013 (6) TMI 286 - ITAT MUMBAI] followed - the AO is directed to allow the expenses on account of ERS on the basis of actual payment made during the relevant assessment year as business expenses – thus, the matter remitted back to the AO to allow the deduction on account of ERS on payment basis as against provision basis claimed by the assessee – Decided in favour of Assessee.

  Disallowance on account of provision for cash discount – Disallowance of expenditure on repairs, maintenance - Held that:- The decision in ADDL COMMISSIONER OF INCOME TAX Versus M/s JOHNSON & JOHNSON LTD [2013 (6) TMI 286 - ITAT MUMBAI] followed – the matter remitted back to the AO for fresh adjudication to allow cash discount which has been actually paid by the assessee – The Tribunal has allowed the claim of the assessee because the assessee has successfully explained the nature of expenses by filing necessary details – the details have not been properly examined by the lower authorities – thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

  Disallowance u/s 80HHC of the Act - Liabilities/provisions written back - Gross rental income - Sundry receipts - Held that:- The decision in M/s. Johnson & Johnson Limited Versus The Addl. Commissioner of Income-tax [2013 (4) TMI 228 - ITAT MUMBAI] followed – the Tribunal has remitted the matter back to the AO for fresh adjudication in the light of the decision taken in earlier years following the direction of the Tribunal in assessee's own case – For rental income, the Tribunal directed that netting off of rent paid against rent received should be allowed and only 90% of the net rent income should be considered for disallowance u/s. 80HHC of the Act - Decided in favour of Assessee.

  Transfer pricing adjustment – Determination of arm's length price – Held that:- The application made by the assessee to RBI for brand usage agreement specifically mentions that the royalty to be remitted is net of taxes - the approval was received from the RBI to remit the royalty on brand usage by the assessee @ 1% net of taxes - taxes were liability of J&J India under the terms of agreement - The assessee has entered into a commercial arrangement with J&J US and it has been so arranged that the payment of taxes have to be borne by the assessee being a commercial arrangement, the same should not be questioned while calculating arm's length price – Relying upon Dresser Rand India (P.) Ltd. v. Dy. CIT [2012 (10) TMI 127 - ITAT MUMBAI] – the order of the CIT(A) set aside – Decided in favour of Assessee.

  Enhancement made in respect of brand usage royalty – Held that:- The CIT(A) erred in ignoring the copy of draft brand usage royalty agreement which was submitted by the assessee alongwith application to RBI on 10.8.2001 - If the assessee which carries on a business find that it is commercially expedient to incur certain expenditure directly or indirectly, it would be open to such an assessee to do so notwithstanding the fact that a formal deed does not precede the incurring of such expenditure – Relying upon CIT v. Associated Electrical Agencies [2003 (12) TMI 36 - MADRAS High Court ] there is no merit in the enhancement made by the CIT(A) – thus, the AO is directed to delete the addition made by the CIT(A) – Decided in favour of Assessee.

  Disallowance of tax and R&D cess paid on technical know-how royalty – Held that:- Royalty payments has been approved by RBI and therefore deserves to be allowed - as the payments have been made in the light of the agreement with J&J US and as per the approval/guidelines of the RBI, there is no reason to disallow the tax and R&D Cess paid on technical royalty - the AO is directed to delete the addition made – Decided in favour of Assessee.

  Deletion of the disallowance on account of royalty payment on sale of traded finished goods - Restriction on technical know-how royalty to 1% instead of 2% - Held that:- As it has been held in assessee's appeal, it has already been held that the agreements between J&J India and J&J USA for payment of royalty has to be considered in the light of the approval of the RBI – there is no substance in the findings of the TPO that there is no need for paying royalty for technical/marketing know-how - The CIT(A) has rightly considered the relevant clauses of the agreement between J&J India and J&J USA – Decided against Revenue.

  Deletion on account of unaccounted production and sales –Deletion of publicity expenses being expenses on advertisement films – Held that:- The CIT(A) observed that the AO has not pointed out any mistakes or manipulations in the records maintained by the assessee nor he has invoked provisions of Sec. 145 for making the addition - As decided in assessee’s own case for the previous years - the production loss depends on number of factors and in absence of any comparable to show that the loss shown by the assessee is excess and decided the appeal in favour of the assessee - no evidence of purchase/sales outside the books of account have been brought on record – thus, there is no reason to interfere in the findings of the CIT(A) –Decided against Revenue.

  Disallowance of 10% of payment made to M/s. Crawford Bailey & Co. – payment made to Crompton Corporation - Held that:- The decision in M/s. Johnson & Johnson Limited Versus The Addl. Commissioner of Income-tax [2013 (4) TMI 228 - ITAT MUMBAI] followed - the Tribunal has deleted the addition mentioning that in order to make any disallowance u/s. 40A(2)(b), it is for the AO to bring on record some material to indicate that the payment was in fact excessive having regard to the fair market value of goods or services for the legitimate needs of the business - CIT(A) has deleted the addition holding that for the payments for legal counseling, it is futile to think of comparables because counsels may not charge standard fee but may charge according to the issue involved - there is no reason to interfere with the findings of the CIT(A) – Decided against Revenue.

  Adhoc disallowance of Travelling expenses – Held that:- The assessee is a company and therefore in such a case disallowance on account of personal expenses cannot be sustained - The AO has made an adhoc disallowance presuming that such expense have personal element – there is no logic/basis for making disallowance which are based on presumptions and surmises – thus, there is no reason to interfere with the findings of the CIT(A) – Decided against Revenue.

  Deletion made on Club Membership fees – 10% adhoc disallowance of expenses incurred on professional sponsorship – Held that:- As decided in assessee’s own case for the previous years, the Tribunal decided in favour of Assessee, Relying upon Otis Elevator Co. (India) Ltd. v. CIT [1991 (4) TMI 53 - BOMBAY High Court] - once the expenditure is held to be for business purposes, there is no question of adhoc disallowance of such expenses by treating same as non-business expenditure - Decided against Revenue.

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• 2014 (2) TMI 977
  

  Power of the CIT(A) for setting aside the assessment passed by AO – Held that:- Assessee contended that the CIT (A) has enabled the Assessing Officer to make such inquiry as he deems fit to verify the cash statement to be produced by the assessee - The CIT (A) has deleted the addition made by the Assessing Officer and it is not a case of setting aside the assessment and remitting the matter to the Assessing Officer - the directions given by the CIT (A) were not required to be given and the same are liable to be expunged – thus, the order of the CIT(A) upheld – Decided against Revenue.

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• 2014 (2) TMI 951
  

  Depreciation - Legality of lease agreements – Genuineness of the transaction - Entitlement for depreciation – Assets put to use or not - Whether the lease agreements entered by the assessee with the six concerns are sham transactions and whether they are entitled for a claim for depreciation and whether the assets purchased by the assessee before 31.03.2001 were put to use – Held that:- The transaction is a fraudulent transaction by noticing the conduct of the asessee in the manner in which the lease transactions were finalised, much prior to the sanction of the loan by IREDA. Further, the certification of the lanterns were in the godown of PHOTON and not in the place where it was installed or in the premises of the so called lessees to whom it was stated to have been despatched. – assessee is not entitled to the claim for depreciation. - decided against Assessee.

  Claim of advance in the income - Whether the amount received by the assessee from DLWL claimed by the assessee as advance, is income of the assessee for the relevant assessment year – Held that:- The advances shown by the assesssee are nothing but payment received on account of the completion of work executed by the assessee and the Assessing Officer made the addition - The Tribunal after carefully analysing the entire facts and referring to the MOU and the FIR rightly held that payments received by the assessee and shown as outstanding in the accounts are to be treated as income and assessed to tax – Decided against Assessee.

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• 2014 (2) TMI 950
  

  Re-opening of assessment of income u/s 148 of the Act – Held that:- The reassessment proceedings initiated by the revenue are nor sustainable - The Assessing Officer has to apply his mind to any information in form of the valuation report and must form a belief thereon that there is escapement of income - The opinion of the DVO is per se not an information for the purpose of reopening of an assessment - The Assessing Officer has to apply his mind to the report of the DVO and only if on application of mind, if he forms a belief that there is escapement of income, he can seek to reopen the assessment under section 147 of the Act.

  Relying upon Assistant Commissioner of Income-tax Versus. Dhariya Construction Co. [2010 (2) TMI 612 - Supreme Court of India] - For the report of the Valuation Officer to become a basis for the reopening, the Assessing Officer should have applied his mind to the report of the Valuation Officer - The Assessing officer has clearly not applied his mind to the report of the Valuation Officer - Perusal of the Balance Sheet of the Assessee for the year ending 31.03.2005 shows that the Assessee has shown an amount as an expenditure of capital nature on the Bayadgi Unit towards the School building - The Assessing Officer has taken the amount shown as nil - For the year ending 31.03.2006 the Assessee has shown an investment as expenditure of capital nature on the Bayadgi unit and the value of the school building as on 31.03.2006 – thus, the assessing officer has merely intended to revisit the concluded assessment and it is a clear case of change of opinion which is not permissible in law – Decided in favour of Assessee.

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