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Income Tax - Case Laws
Showing 81 to 100 of 141 Records
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2006 (10) TMI 135 - DELHI HIGH COURT
Reference - Recall of order - Assessee, Airports Authority paid to DDA some amount, for removal and rehabilitation of squatters in village – Tribunal held those expenses as “capital expenses” as it gave the assessee an advantage of enduring nature – HC by an ex parte order upheld the view of Tribunal – since fresh evidence given by assessee to the contrary to facts, could not be permitted, said amount could not be treated as revenue expenditure – reference is answered against assessee
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2006 (10) TMI 134 - MADRAS HIGH COURT
Allegation on assessee is that he is following cash system for interest and mercantile system for others – it cannot be said that it was impermissible for the assessee to have followed a mixed or a hybrid system of accounting – assessee could not be held to be disentitled to change the method of accounting on the ground that such a mixed system of accounting would result in loss to Revenue for that year - Tribunal was right in holding that interest should be taxed only on cash basis
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2006 (10) TMI 133 - PUNJAB AND HARYANA HIGH COURT
Legal charges - Whether Tribunal was right in holding that the legal charges paid to M/s. A. F. Ferguson and Co., were not hit by section 80VV, and were not subject to the ceiling fixed u/s 80VV – since payments were not made only for representation before the authorities but also for advice (consultancy) hence they are not hit by provisions of section 80VV – order of tribunal is justified – such legal expenses are allowable for deduction
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2006 (10) TMI 132 - ALLAHABAD HIGH COURT
Recovery Of Tax ... ... ... ... ..... r objections filed before the authorities below there is any whisper as to how the petitioner has sustained substantial damages in conducting the sale or in confirming the auction sale even if there was some variance with regard to the actual demand against him. The case of the Department is that it has through newspaper dated March 19, 1997, notified to the general public the correct demand against the petitioner. The publication of the correct demand in the newspaper as averred in the counter-affidavit has not been denied or disputed, specifically in the writ petition. This may be an additional ground for not granting any relief to the petitioner coupled with the fact that the sale has already been confirmed and the interest of the third party has intervened and on the face of record the demand is outstanding against the petitioner. In view of the above discussion, there is no merit in the writ petition. The writ petition is dismissed accordingly, but no order as to costs.
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2006 (10) TMI 131 - MADRAS HIGH COURT
Capital Or Revenue Receipt ... ... ... ... ..... paid only for obtaining the loan and hence the same does not bring into existence any asset of an enduring nature. If interest paid on borrowed amount could be held to be revenue expenditure, we fail to see how the present amount incurred for obtaining a loan for setting up of a new unit, could be regarded as capital payment. It is the condition precedent for obtaining the loan and also it is in the nature of processing fees for the bank to release the loan incurred for the purpose of the business and hence the same is only revenue expenditure. The Tribunal correctly followed the principle enunciated in the judgment reported in CIT v. Sivakami Mills Ltd. 1997 227 ITR 465 (SC) and decided the case in favour of the assessee. We find no error or legal infirmity in the order of the Tribunal, so as to warrant interference. Accordingly, we answer the second question in favour of the assessee and against the Revenue. With the above observation, the tax case is disposed of. No costs.
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2006 (10) TMI 130 - ALLAHABAD HIGH COURT
Penalty levied u/s 271(1)(c) by Tribunal - concealment of particulars of its income - unexplained cash credits - satisfaction of the Income-tax Officer - HELD THAT:- The Tribunal while dealing with explanation has recorded a finding of fact that the applicant has not been able to substantiate the explanation to the effect that the depositors have received gifts in any of the previous years or had any independent source of income; the applicant has not been able to prove that this explanation was bona fide; there was no documentary evidence in support of the assessee's contention; even the name of the person from whom the alleged gifts were received, were not disclosed to the Department; the minor depositors were intimately related to the partners of the assessee-firm; the explanation was baseless and the provisions of section 271(1)(c) of the Act were attracted in the present case.
We find that under the provisions of the Act, the Income-tax Officer is not required to record his satisfaction in a particular manner or reduce it in writing. It can be gathered from the assessment order itself. In D. M. Manasvi [1972 (9) TMI 5 - SUPREME COURT], the apex court has clearly held that the Income-tax Officer should be satisfied during the course of the assessment proceedings that the assessee had concealed his particulars of income or has furnished inaccurate particulars of such income. The satisfaction can be gathered from the assessment order.
In the present case, we find that the Income-tax Officer had material before him for being satisfied that the applicant has concealed the particulars of his income and, therefore, penalty proceedings have rightly been initiated. We are, therefore, with great respect unable to persuade ourselves to follow the view taken by the Delhi High Court in case of Ram Commercial Enterprises Ltd. [1998 (10) TMI 13 - DELHI HIGH COURT] and Diwan Enterprises [1998 (11) TMI 27 - DELHI HIGH COURT].
Thus, we answer the question referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee.
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2006 (10) TMI 129 - ALLAHABAD HIGH COURT
Refence u/s 256 - cash book seized during the search operation - Tribunal refused the assessee's right to cross-examine the persons whose statements were relied on for making the addition - HELD THAT:- We find that the copies of the rough cash book and the statements of the partners of M/s. Vishwakarma Oil Traders which were recorded, have been provided to the applicant and, in fact, the applicant had also submitted its reply. In the letter, an opportunity to cross-examine was asked for only in case the statements have not been recorded.
Further, we find that the applicant had proper opportunity to controvert the material gathered by the assessing authority and used against it, there has been compliance with the principles of natural justice. Thus, we are of the considered opinion that the Tribunal was fully justified in the view it had taken.
We accordingly answer the question referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.
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2006 (10) TMI 128 - MADHYA PRADESH HIGH COURT
Challenged the Order passed by Tribunal - Royalty payment - technical know-how - capital expenditure for acquiring an asset or advantage of enduring nature, or expenditure properly attributable to revenue - HELD THAT:- When one is dealing with tangible assets, it is generally not very difficult to reach a decision. Things, which the trader uses in his business to produce what he has to sell are part of his fixed capital and their cost is a capital outlay although their useful life may be short. Things, which a trader turns over in the course of his trade, are circulating capital and their cost is a revenue expense. However, when one comes to intangible assets there is much more difficulty. To help the conduct of his business a trader may obtain a right to do something on someone else's property or an obligation by someone to do or refrain from doing something or makes a contract which affects the way in which he conducts his business; and the right or obligation or the effect of the contract may endure for a short or a long period of years. The question then arises whether the sum, which he has paid for that advantage, is a capital or revenue expense. If the asset, which is acquired, is in its intrinsic nature a capital asset, then any sum paid to acquire it must surely be capital outlay; and we do not see how it could matter that the payment was made by sums paid annually or periodically. It appears to us, however, that an asset, which is nothing more than a right to enjoy a certain advantage over a period, is intrinsically of a different character from a thing, which a person buys and can immediately use or consume in any way he chooses.
We are dealing with payments made to MMC to secure technical know-how and to sell LCVs under their brand name during the currency of the agreement subject to periodic payment of royalty for using the licence. The Supreme Court in CIT v. Ciba of India Ltd. [1968] 69 ITR 692; AIR 1968 SC 1131 has enunciated the principles applicable to such cases. In that case, the assessee a subsidiary of the Swiss company paid certain payment to Ciba Ltd., Basle (the Swiss company) pursuant to the agreement dated December 17, 1947, whereby the latter agreed for "technical and research contribution" in so far as they relate to pharmaceutical products which were manufactured, processed and sold by the assessee in India. It was held that the agreement merely give the right to the assessee, without any thing more, to draw upon the technical knowledge of the foreign collaborator for the purpose of carrying on its business and did not acquire an asset or advantage of enduring nature for the benefit of its business. Considering the effect of payment, it was held to be a revenue expenditure.
We think, it is more reasonable to regard the periodic royalty payment to MMC as an outlay for earning profits in the normal course of business than as expenditure with the object of acquiring an advantage or asset of enduring and/or lasting nature for the benefit of the trade. Thus, we have no hesitation to hold that the Tribunal rightly decided the issue relating to question No. 1 in favour of the assessee and against the Revenue.
Hence, we dismiss these appeals by holding that the affirmative answer to all the three questions must go in favour of the assessee and against the Revenue.
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2006 (10) TMI 127 - RAJASTHAN HIGH COURT
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... ... ..... 4-95 onwards, and it was not a mandatory requirement for the assessment year 1993-94 to assess profit of civil construction at such rate, yet the rate which is mandatorily required to be applied in the cases of business which the assessee was carrying, where income returned was less than 8 per cent. of its gross receipts, it cannot be said to be an irrelevant consideration while considering the rate to be applied for estimating the income from like businesses for earlier years in its discretion by the authorities under the Act. In the facts and circumstances of the case, it cannot be said to be perverse finding of fact. Hence, no question of law arises on that ground. So also considering the investment by way of cash credit from the income of very first year of business came out of additions made in the returned income also cannot be said to be based on irrelevant consideration. Thus, no substantial questions of law arise in this appeal. Accordingly, the appeal is dismissed.
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2006 (10) TMI 126 - ALLAHABAD HIGH COURT
Proceedings initiated u/s 147 - income escaping assessment - Notices issued u/s 148 - mere change of opinion - assessment sought to be reopened after four years - business of subscription agent of foreign technical and scientific journals and other information products - claim for deduction u/s 80-O - HELD THAT:- We find that in respect of the assessment years 1992-93, 1993-94 and 1994-95 the notices u/s 148 of the Act have been issued on October 25,2001, i.e., much after the expiry of the period of four years from the end of the relevant assessment year. It can be justified only if there has been failure on the part of the petitioner to disclose fully and truly all material facts necessary for that assessment year. It is not in dispute that the petitioner had in its letter dated October 7, 1993, filed during the course of the assessment proceedings for the assessment year 1992-93, had made a claim u/s 80-O of the Act by stating that it is also extending its service to several customers outside India and earning commission from foreign publishers in convertible foreign exchange for such service.
The assessing authority apart from finding that the petitioner had received commission from foreign enterprises for services rendered outside India, had also found that it had specialised in marketing scientific and technical knowledge and has developed several database with the help of advance computers concerning various research projects, activities, books, periodicals, corporate publications, technical reports, patents and standards for use by its foreign clients and has received commission in convertible foreign exchange in U. S. dollars and U. K. pounds.
The claim was accepted and the deduction u/s 80-O of the Act was accordingly allowed. In respect of the assessment years 1993-94 and 1994-95, the assessing authority did not dwell in the matter in detail but mentioned that the claim is in respect of commission earned for the services rendered outside India as in the past. Thus, it cannot be said that the petitioner had not made full and true disclosure of all material facts in the assessment years 1992-93, 1993-94 and 1994-95.
In the reasons recorded by the respondent for forming the belief that the petitioner was not entitled to get deduction, the respondent has not found that the basis on which the deduction has been allowed, viz., specialising in marketing scientific and technical knowledge and developing several database with the help of advance computers concerning various research projects, activities, books, periodicals, corporate publications, technical reports, patents and standards for use by its foreign clients was false.
In this view of the matter, the principles laid down in the case of Parikh Petrol Chemical Agencies P. Ltd. v. Asst. CIT [2003 (2) TMI 14 - BOMBAY HIGH COURT] is squarely applicable and, therefore, the notices dated October 25, 2000, issued u/s 148 in respect of the assessment years 1992-93 to 1994-95 appear to have been issued only on the basis of mere change of opinion and are wholly illegal and without jurisdiction. The principles laid down by the apex court in the case of Phool Chand Bajrang Lal [1993 (7) TMI 1 - SUPREME COURT] would, therefore, not apply in the present case as there is no information on record to show that the claim made by the petitioner was false.
So far as the notice dated September 4, 2000, issued under section 148 of the Act for the assessment year 1997-98 is concerned, it is within four years from the end of the relevant assessment year. In this case, the assessment has not been made u/s 143(3) of the Act and only an intimation u/s 143(1)(a) of the Act has been sent to the petitioner. The claim of deduction u/s 80-O of the Act had only been processed without there being any application of mind. The reasons recorded by the respondent, insofar as the assessment year 1997-98 is concerned, cannot be said to be based on mere change of opinion. The principles laid down by this court in the case of Pradeep Kumar Har Saran Lal [1997 (3) TMI 62 - ALLAHABAD HIGH COURT] is squarely applicable in the present case. They are based on relevant consideration and, therefore, it cannot be said that the notice dated September 4, 2000, is without jurisdiction.
Thus, the writ petition succeeds and is 4 allowed in part. The notices dated October 25, 2000, issued u/s 148 of the Act and consequential proceedings taken in pursuance thereof in respect of the assessment years 1992-93 to 1994-95 are hereby quashed. However, the notice dated September 4, 2000, issued for the assessment year 1997-98 is upheld.
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2006 (10) TMI 125 - DELHI HIGH COURT
Application u/s 254(2) - mistake apparent in the order passed by the Tribunal - Not adjudicated particular ground - HELD THAT:- Where it is shown to this court in appeal that a ground that has been specifically raised in the memo of appeal before the Tribunal has not been considered by it, that can persuade this court, if the circumstances so justify, to remand the case to the Tribunal for consideration of that ground. What clearly appears to have happened here is that having failed to urge this ground in the appeal before this court, the assessee took a chance by filing a rectification application on that very ground before the Tribunal after the dismissal of the appeal by this court and nearly two years after the Tribunal's first order. This, to our mind, was an attempt at doing indirectly what could not be done directly, i.e., seeking a review of an order of the Tribunal that had already attained finality.
Since on the facts of the present case we are of the view that there was no mistake apparent from the record in respect of its earlier order dated July 12, 2002, warranting the exercise by the Tribunal of its power of rectification u/s 254(2) of the Act, we do not consider it necessary to discuss in detail the cases cited by the counsel for the assessee. We may nevertheless refer to the decision rendered by us today in CIT v. Honda Siel Power Products Ltd.[2006 (10) TMI 67 - HIGH COURT, DELHI] where we have given detailed reasons explaining the narrow scope of the power of rectification u/s 254(2).
Thus, we are of the view that the impugned order of the Tribunal dated September 13, 2004, cannot be sustained in law and it is accordingly set aside. The appeal is allowed with no order as to costs.
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2006 (10) TMI 124 - MADRAS HIGH COURT
Addition on the closing stock - difference between the value of closing stock declared to the bank and to the income-tax authorities - maintaining books of account on day-to-day production - derives income from manufacture of tape back up units for personal computers and computers - HELD THAT:- We find there is evidence to show that stock declared to the Income-tax Department was supported by books of account. No detailed inventory was also available in the statement made to the bank. Except a mere value declared for overdraft purposes to the bank, there were no detailed items of stocks in support of the declared value. It was also pointed out that there was no physical verification of stock, either by the assessee or the bank at the time of furnishing the stock statement.
The Tribunal as well as the CIT(A) have given a concurrent finding that the assessee declared closing stock for assessment purpose which is based on actual physical verification. There are enough materials available on record and the conclusion reached by the Tribunal is based on valid materials and evidence. In view of the same, there is no basis to treat the difference in value as the assessee's under-valuation of stock or undisclosed income. The Tribunal also rightly followed the principles enunciated by this court judgment reported in CIT v. Sri Padmavathi Cotton Mills [1997 (3) TMI 26 - MADRAS HIGH COURT].
Thus, we are of the view that there is no error or legal infirmity in the order of the Tribunal so as to warrant interference. Hence, we answer the questions of law in favour of the assessee and against the Revenue and the tax case is dismissed.
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2006 (10) TMI 123 - MADRAS HIGH COURT
Capital gain - co-owners sold the land - Valuation of the property - CIT(A) deleted the addition made to the capital gains by the AO and substituted the value taken by the assessee on the basis of value estimated by the registered valuer - HELD THAT:- It is trite that if during the same assessment year the same quantity of wealth in the possession of one co-sharer is subjected to a lower rate of taxation, it would be highly improper to burden a similarly situated co-sharer with a higher rate of tax. If such an action on the part of the assessing authorities is sanctioned, it would militate against the principle of equality of laws enshrined in article 14 of the Constitution, vide Jaswant Rai v. CWT [1977 (2) TMI 22 - PUNJAB AND HARYANA HIGH COURT].
Applying the ratio laid down in Jaswant Rai v. CWT, to the facts of the case on hand would lead to the firm conclusion that the assessee, who is also a co-owner of the property, is entitled to the benefit enjoyed by the other co-owner, whose valuation of the same property, at the same rate as that of the assessee, was accepted by the CIT and recorded in the order under appeal by the Tribunal.
Finding no reason to interfere with the order of the Tribunal, this appeal is dismissed.
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2006 (10) TMI 122 - MADRAS HIGH COURT
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... ... ..... nd services like restaurant, bar room, health clinic, gymnasium centre, swimming pool, music, floor dance etc. These services are not only intended to attract the customers as opined by the Commissioner, in our considered opinion, is a part and parcel of the hospitality of the hotel. Therefore, the entire building has to be treated as a composite building and could not be segregated in any manner such as part of the building is used for hotel purpose and other part is used for accommodating the officers and staff of the hotel and housing the bank and shopping complex, etc., and therefore, such portion is not entitled for exemption of 20 per cent. under sub-item 3(i) of item I of Appendix I. In the result, the entire composite building is entitled for exemption of 20 per cent., giving benefit under sub-item 3(i) of item I of Appendix I read with rule 5 of the Rules. The appeal is dismissed and the questions of law are answered against the Revenue and in favour of the assessee.
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2006 (10) TMI 121 - MADRAS HIGH COURT
Penalty levied u/s 271 - assessee filed revised returns before the issue of notice u/s 148 - HELD THAT:- In the instant case, the assessee filed the revised return only after the search was conducted in the premises of the assessee. The Appellate Tribunal, on the facts of the case, found that the omission or wrong statement by the assessee in the original return was not due to any bona fide or inadvertence or mistake on his part, but the revised return was filed only after the search action.
Though it is the case of the assessee that with a view to purchase peace he offered the sums as non-taxable income, the Appellate Tribunal held that there is no material with the assessee to show that the mistake had crept in the original return accidentally without any intention warranting deletion of penalty. On the other hand, the Appellate Tribunal found that the reasons assigned by the Assessing Officer to hold that the assessee had concealed the income are genuine and accordingly, confirmed the penalty.
With regard to the third question, the Appellate Tribunal has rendered a finding of fact that the Revenue had established the reasons for additions and proved that the addition was on account of concealed income, and we do not find any reason to interfere with the finding of the Appellate Tribunal.
Thus, we are of the considered opinion that the Appellate Tribunal was justified in confirming the penalty levied by the Assessing Officer. We do not see any merit in the appeal. Accordingly, finding no question of law, much less a substantial question of law, the appeal stands dismissed.
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2006 (10) TMI 120 - MADRAS HIGH COURT
Power exercised by Commissioner u/s 263 - erroneous and prejudicial order - Income from hiring of air conditioners to its directors - 'income from business' Or "income from other sources - HELD THAT:- In any event, when there are sufficient materials to support the claim of the assessee to treat the income derived from the hiring of air conditioners as business income for over two decades, the Commissioner has no authority to invoke the revisionary jurisdiction u/s 263 of the Act, merely on the surmise that the order of the Assessing Officer is erroneous or the order is prejudicial to the Revenue, on the ground of change of the lessee. Hence, in our considered opinion, the Tribunal had rightly held that the Commissioner had erroneously exercised the power u/s 263 of the Act.
In the instant case, as referred to in the order of the Tribunal, the object clause of the memorandum of association of the assessee/company specifies that the object of the company is to carry on the business of running cinema house and lease out the climate control device and other machineries and as the assessee could not get the no objection certificate for running the cinema house, it was carrying on the business by regularly leasing out the air conditioners. Merely because of the change in the parties to whom the air conditioners were leased, in our considered opinion, that would not be a conclusive premise to change the assessment of the same from the head "Business income" to "Income from other sources".
Thus, finding no substantial question of law arises, this appeal is dismissed.
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2006 (10) TMI 119 - KARNATAKA HIGH COURT
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... ... ..... cepted a reasonable cause of the assessee having no control over the accounts. The Gujarat High Court, in a judgment reported in Rajkot Engineering Association v. Union of India 1986 162 ITR 28 has noticed the reasonable cause in accepting the case of the assessee. The same High Court in a subsequent case reported in CIT v. Tea King 2002 123 Taxman 162, has noticed the books of account were ready and the same could not be audited and has accepted the reasons for the delay. Unfortunately, for the earlier three assessment years, no reasonable cause is shown. But, however, we have softened the rigour of law for the assessment year 1994-95 in the case on hand. In the result, this appeal is partly accepted. Questions of law are answered against the assessee. However, penalty for the assessment year 1994-95 is set aside in the light of the binding judgment of this court in I.T.R.C. No. 269/98 connected with I.T.R.C. No. 270/98 dated November 25, 1999. Ordered accordingly. No costs.
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2006 (10) TMI 118 - MADRAS HIGH COURT
Cessation of liability - surrendered the Group Gratuity Scheme with LIC - Tribunal quashed the order passed by the CIT u/s 263 - HELD THAT:- From a reading of the reasoning of the Tribunal, it is clear that the assessee has continued to show the admitted amount as liability in the balance-sheet. The undisputed fact is that it is a liability reflected in the balance-sheet. Once it is shown as liability by the assessee, the CIT is wrong in holding that the same is assessable u/s 41(1) of the Act. Unless and until there is a cessation of liability, section 41 will not be pressed into service.
Thus, we find the reasoning by the Tribunal was based on valid materials and evidence and hence there is no error or legal infirmity in the order of the Tribunal so as to warrant interference. Hence, no substantial questions of law arise for consideration of this court and the tax case is dismissed.
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2006 (10) TMI 117 - MADRAS HIGH COURT
Expenditure incurred on flooring and partitions, etc - Newly extended area of space - Revenue Or Capital - co-owners of the property and the directors of the assessee-company are same persons? - HELD THAT:- The co-owners were admitting the rental income. They were also paying tax on the profits arising out of the hospital. The lease deed spoke of the normal requirements which the co-owners provide. The assessee was putting the building to a special use. No landlord would ever incur or undertake to bear the expenditure. Here the expenditure was incurred by the assessee on a leased property and the same has to be allowed as revenue expenditure.
The Tribunal has correctly followed the judgment in the case of CIT v. Madras Auto Service P. Ltd.[1998 (8) TMI 1 - SUPREME COURT] held that the expenditure incurred on construction of a leased premises by the assessee was deductible as revenue expenditure. The nature of the expenditure indicates that it is only revenue expenditure for the purpose of carrying on business.
Thus, it is clear that if the lessee incurs capital expenditure on the building of the nature mentioned above, the said provision treats the building as if owned by the assessee. The Explanation is an exceptional one which permits depreciation in cases were the assessee does not own a building. In the present case, the Tribunal had given a finding that it is a revenue expenditure on the ground that the expense is incurred only towards painting, re-laying of the damaged floors, partitions, etc. This expenditure can never be considered to be a capital expenditure of the nature mentioned in the above Explanation.
Hence, we find no error or legal infirmity in the order of the Tribunal and the same does not require interference. Thus, we answer the questions of law in favour of the assessee and against the Revenue and the tax case is dismissed.
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2006 (10) TMI 116 - MADRAS HIGH COURT
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... ... ..... section 148 of the Act. The second one relates to the addition of a sum of Rs. 2,43,080 as income from other sources. The third one relates to the consequential charging of interest under sections 234A, 234B and 234C of the Act. The Tribunal has considered the first issue alone holding that reopening of the assessment under section 148 of the Act, is unsustainable and is not valid in law. In view of the same, the Tribunal did not consider the other two issues. The remaining two issues relate to the merits of the case. As we stated earlier that reopening is valid in law, the Tribunal has to consider the case on the merits, i.e., the other two issues stated above. Hence, we direct the Income-tax Appellate Tribunal to take up the other two issues and decide the same after giving opportunity to both the parties to raise all the contention and pass orders on the merits, in accordance with law, as soon as possible. With the above observation, the tax case is disposed of. No costs.
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