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Income Tax - Case Laws
Showing 21 to 40 of 1783 Records
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2005 (12) TMI 459 - ITAT CHANDIGARH
Income escaping assessment ... ... ... ... ..... e CIT(A) in holding the reopening of assessment as invalid is contrary to the decision of the Hon rsquo ble jurisdictional High Court of Punjab and Haryana. We therefore, set aside the order of the CIT(A). So, however, no decision has been recorded by the CIT(A) on merits. Whereas reopening of assessment may be valid, it is still open to the assessee to show that there was no escapement of income. The ld. Counsel for the assessee insists that assessee is entitled to deduction under section 80-I even on the facts found in the course of assessment proceedings for assessment year 1995-96 coupled with some other facts which are relevant for deciding the issue. Since the CIT(A) has failed to decide the issue on merits we restore the appeal to his file for recording his decision on merits of this case after giving reasonable opportunity of being heard to the assessee and, if necessary, to the Assessing Officer as well. 10. For statistical purposes, appeal of the revenue is allowed.
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2005 (12) TMI 458 - ITAT MUMBAI
Penalty levied u/s 271(1)(c) - For concealment of income - HELD THAT:- We are of the opinion that mere rejection of a legal claim of the assessee for taxability of income under a particular head of income is not by itself sufficient to warrant imposition of penalty. Tax matters are highly complex and hence there is bound to be a genuine difference of opinion in matters of law between the tax collectors and the taxpayers. It is indeed very difficult for the assessee to predict, in advance, as to what view the Assessing Officer or appellate authorities would take on the legal claim made by the assessee. Cases involving genuine difference of opinion on matters of law between the assessee and the Assessing Officer are clearly outside the scope of Explanation 1 to section 271(1) provided the assessee has made full disclosure of all the relevant facts and also acted bona fide. Tested on the aforesaid parameters, we feel that the learned CIT(A) has correctly cancelled the impugned penalty. His order is, therefore, confirmed.
Appeal filed by the Department is dismissed.
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2005 (12) TMI 457 - ITAT MUMBAI
Unexplained investment/income u/s 69 - sale proceeds of shares of different companies - purchase of the flat - deduction u/s 54E - HELD THAT:- he assessee has purchased the shares of four companies viz., Allan Industrial Gases Ltd., Mobile Telecom, Rashee Agrotech and Centil Agrotech, during the previous years relevant to the assessment years 1999-2000 and 2000-01. The books of account maintained by the assessee for both the years clearly reflected the purchase of those shares. The shares are reflected in the balance sheets filed by the assessee along with the returns of income for the assessment years 1999-2000 and 2000-01. Therefore, it is seen that as a prima facie evidence, the purchases of shares have been contemporaneously entered into the books of account of the assessee.
From records, It is, very clear that the investment made by the assessee in shares during the previous periods relevant to the assessment years 1999-2000 and 2000-01 was supported by cash generated out of agricultural income. The above agricultural income have been considered in the respective assessments. Therefore, the contention of the assessing authority that the assessee had no sufficient resourcefulness to make investments in the shares is unfounded.
When the transactions were off-market transactions, there is no relevance in seeking details of share transactions from Stock Exchanges. Such attempts would be futile. Stock Exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the Stock Exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective Stock Exchanges. We are of the considered view that the materials collected by the assessing authority from the Stock Exchanges are not valid to dispel or disbelieve the contentions of the assessee.
We find that the explanations of the assessee seems to have been rejected by the assessing authority more on the ground of presumption than on factual ground. The presumption is so compelling that comparatively a small amount of investment made by the assessee during the previous year period relevant to the assessment years 1999- 2000 and 2000-01 have grown into a very sizable amount ultimately yielding a fabulous sum which was used by the assessee for the purchase of the flat at Colaba. The sequence of the events and ultimate realization of money is quite amazing. That itself is a provocation for the Assessing Officer to jump into a conclusion that the transactions were bogus. But, whatever it may be, an assessment has to be completed on the basis of records and materials available before the assessing authority. Personal knowledge and excitement on events, should not lead the Assessing Officer to a state of affairs where salient evidences are over-looked. In the present case, howsoever unbelievable it might be, every transaction of the assessee has been accounted, documented and supported. Even the evidences collected from the concerned parties have been ultimately turned in favour of the assessee. Therefore, it is, very difficult to brush aside the contentions of the assessee that he had purchased shares and he had sold shares and ultimately he had purchased a flat utilizing the sale proceeds of those shares.
The department has no case that the survey was a staged enactment. A survey is always unexpected. So, it is not possible to presume that the assessee had collected certain fabricated documents and kept at his business premises so as to hoodwink the survey party to lead them to believe that the assessee had entered into share transactions. Atleast such an inference is not possible in law. The department has no defence against the forcible argument of the learned counsel that the survey conducted by the department has out and out upheld the contention of the assessee that he had purchased and sold shares. We find that this solitary evidence collected in the course of survey is sufficient to endorse the bona fides of the share transactions made by the assessee.
Therefore, in short on the basis of the internal evidences available with the assessee and the fact that the sale proceeds were collected through bank accounts and coupled with the external evidence of survey and statement of parties, we have to hold that the sale proceeds has been explained. Therefore, the said addition is deleted.
As we have held that the sum has been explained by the assessee, the assessee is entitled for the benefit of section 54E against the purchase of flat at Colaba, in accordance with law. The assessing authority is, therefore, directed to grant the benefit of section 54E to the assessee.
Realization of loan outstanding - The assessee has explained the availability of cash necessary for making bank deposits with the help of his accounts and account of copies of the other party along with his confirmation. In these circumstances, we find that the addition is not justified. Therefore, it is, deleted.
In result, the appeal filed by the assessee is allowed.
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2005 (12) TMI 456 - ITAT BANGALORE
Charitable or religious trust ... ... ... ... ..... He has also filed details of the fees collected from students for each and every course with the names of the students, salaries paid to the whole of the staff member of each of the institution and the details of the corpus donors etc. The assessee rsquo s educational institutions are affiliated to the Bangalore University. All these undisputed facts put together, we find much force in the stand taken by the assessee. Therefore, we hold that the assessee-trust is entitled to registration under section 12A of the Income-tax Act, 1961. We also feel that in the facts and circumstances of the case and for the reasons adduced and considering that the Trust is running Educational institution, the delay in filing the application under section 12A of the Income-tax Act, 1961 is condoned and the registration under section 12A of the Income-tax Act, 1961 should be granted to the Trust from 1-4-2001. It is ordered accordingly. In the result, the appeal filed by the assessee is allowed.
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2005 (12) TMI 455 - ITAT DELHI
Free trade zone ... ... ... ... ..... in export by various Government authorities. On each remittance received from the USA, the assessee has been given export realization certificate by Indian authorities. The Assessing Officer shall be well advised to go into this aspect as well. If the relevant exercise for the issue involved in this appeal has already been carried out by some other Government agency, the Assessing Officer should keep that aspect in view while deciding the matter afresh. We are not commenting in any manner upon the availability or otherwise of deduction under section 10A to the assessee because, in our view, the first and foremost question is determination of the profits attributable to the permanent establishment in India. It is only thereafter the assessee rsquo s claim of deduction under section 10A can be considered in the light of the requirements of and the conditions stipulated in the provisions of section 10A. 21. For statistical purposes this appeal shall be treated as partly allowed.
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2005 (12) TMI 454 - ITAT DELHI
Business expenditure - software development expenses - Income from manufacturer of automotive safety glass of two types viz. tempered and laminated - agreement of licensing the software and for providing services - HELD THAT:- We have to be clear on the fact that manufacturing activity of the assessee is the main source of its income. Purchase and sales activities go to fulfil this basic objective of the company whereas accounting and management information systems only helps the assessee to know its own state of affairs on which rest the decisions to be taken. To further clarify the matter, at the cost of repetition we may state that sophisticated accounting and management systems do not actually generate income for the assessee but it only aids the management in taking important decisions.
The consideration for getting the right to use the software is in the form of licence fees and not in the form of any purchase price. Over and above the licence fees, since the agreement is also for providing maintenance services, the assessee is liable to pay fees for support and maintenance to Oracle. The licence given under the agreement is liable to be terminated under the provisions of the agreement. Thus, from the various clauses of the agreement, we find that the assessee has not acquired the software in its own right but has acquired only the right to use the software. In other words, what we are trying to emphasize is the fact that by paying the impugned amount, the assessee has not acquired any tangible asset, much less any asset which provides any new source of income or which augments the present source of income. Therefore, the expenses incurred by the assessee cannot be said to be of capital nature.
If we look at the break-up of the expenditure for the two years, we find that the major heads under which the payment is made are license fees, annual technical support fees, professional charges, data entry operator charges, training charges and travelling expenses. This goes to show that by incurring these expenses, no new asset has come into existence nor any new source of income has arisen to the assessee. All the expenses are of recurring nature required either to upgrade the systems or to run the systems. Therefore, there is no substance in the argument of the revenue that these expenses have brought in benefit of enduring nature to the assessee.
The above observations of the Supreme Court in the case of Alembic Chemical Works Co. Ltd.[1989 (3) TMI 5 - SUPREME COURT] hold equally true for the rapid strides made in the information technology sector. In fact, the pace of advancement is so rapid that whatever technology we install today becomes obsolete within a wink of the eye. In other words, the test of enduring benefit is more prone to failure in the present days than it was when the above observations were made. Therefore, upgradation of technology is the order of the day and to treat the outlay on such up-gradation in the realm of capital would not be proper. It would be like taking a step backward on a conveyor belt which is moving ahead. The observations of the Supreme Court with regard to non-partibility, confidentiality and secrecy and also with regard to the mere right to use are equally applicable to the facts of the present case.
Thus, we allow the claim of the assessee on software development expenses as revenue expenditure. We need not re-emphasize that the turnover of the company which hovered around Rs. 150 crores during those years would have reached at that level even without this outlay. It has only benefited the company to run its business more efficiently.
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2005 (12) TMI 453 - ITAT MUMBAI
Appellate Tribunal,Interest chargeable, Business expenditure, Interest on borrowed capital, Minimum alternate tax, Collection and recovery of tax,
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2005 (12) TMI 452 - ITAT MUMBAI
Refunds - Interest u/s 244A on excess payment of self-assessment tax u/s 140A - HELD THAT:- In the present case the assessee had claimed the interest on excess payment of self-assessment tax u/s 140A of the Act. In accordance with the provisions of clause (b) to section 244A(1) of the Act, interest is payable on such payments of tax. We do not agree with the contention of the Assessing Officer with regard to the applicability of provisions of Explanation to clause (b) to section 244A(1) of the Act. The provisions of the statute are to be given its full effect and in the instant case once the return has been processed u/s 143(1)(a) and refund is determined as payable to the assessee. The provisions of the Act clearly provide that in addition the interest is payable on such sums which are held and utilized by the Government over and above the tax dues of the assessee under the provisions of Income-tax Act. Accordingly in addition to the refund of the money the assessee was entitled to receive interest on the said excess amount paid by him. We find support from the decision of the Calcutta Bench in the case of Hooghly Mills Co. Ltd. v. Dy. CIT [1999 (9) TMI 116 - ITAT CALCUTTA-A].
Thus, we hold that the assessee is entitled to the interest under section 244A of the Act on the excess self-assessment tax paid u/s 140A of the Act by it. We accordingly, confirm the order of the learned CIT(A) and reject the ground of appeal raised by the revenue.
In the result, the appeal of the revenue is dismissed.
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2005 (12) TMI 451 - ITAT MUMBAI
Adventure in nature of trade ... ... ... ... ..... of development of land in question because the facts of the assessee are identical with that of Madras High Court decision in the case of MLM Mahalingam Chettiar (supra), wherein, the High Court held that the developing of lands into building sites with a view to realize the best price without anything more is consistent with the realization of the capital investment and the surplus received by the assessee will not be a trading or business profit. 17. In view of the foregoing and keeping in view the totality of the facts and circumstances of the case, in our considered opinion, the ld. CIT(A) is legally and factually correct in holding that both the assessees have not engaged in an adventure resulting in their receipts being chargeable to tax under the head Income from business and profession . We, therefore, endorse the reasoning as well as conclusion of the CIT(A) and reject both the appeals of the revenue. 18. In the result, both the appeals of the revenue are dismissed.
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2005 (12) TMI 450 - ITAT MUMBAI
Losses - Under head ‘Income from other sources’ ... ... ... ... ..... the amount of loss incurred by the assessee in the activity of owning and maintaining race horses shall be carried forward to the following assessment year and it shall be set off against the income, if any, from the source specified in clause (c) of sub-section (2) assessable for that assessment year, provided that the activity of owning and maintaining race horses is carried on by him in the previous year relevant to that assessment year. 8. During the course of hearing these facts were confronted to the learned counsel for the assessee that the impugned issue is squarely covered by the aforesaid judgment of the Hon rsquo ble Calcutta High Court against the assessee. But the learned counsel for the assessee could not produce any contrary judgment of any other High Court. I, therefore, following the judgment of the Calcutta High Court cited supra decide the issue against the assessee and confirm the order of the CIT(A). 9. In the result, appeal of the assessee is dismissed.
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2005 (12) TMI 449 - ITAT BANGALORE
Lease rent income - Income from other sources - disallowance - whether such expenses are incurred wholly and exclusively for the purpose of earning the income - HELD THAT:- The perquisites payable to the Managing Director and vehicle expenses for the motorcar used by Managing Director are allowable as expenses incurred wholly and exclusively for earning the income. If the Company is to earn the income, it has to incur such expenses. It has to maintain its office. Accordingly, security charges are also to be paid. For maintaining the office, the power, fuel and water charges are to be incurred. The office is to be repaired and kept in useful condition. Thus, the repairs and renewal expenses are also required to be incurred. Similarly, for corres-pondence, stationery and printing expenses are also to be incurred. When the staff is to be employed, they are to be provided with welfare activities. To maintain the office in its proper decorum, flowers and plants are to be put therein or nearby. The assessee has also to entertain its guests or the officials from the lessee. Hence, such entertainment expenses are also inevitable and is to be considered as incurred wholly and exclusively for earning the income. The assessee has also to visit places and hence, vehicle has to be maintained.
Similarly, the assessee has also to communicate with several agencies as well as the lessee. For this purpose, telephone, telex expenses are also to be incurred. Other general expenses like advertisement, interest on purchase of car, rent for executive’s residence are also spent out of necessity to indirectly facilitate or earning of the income. Insurance is also necessarily to be paid to effectively safeguard the assets. When the expenses are incurred which are either under compulsion or obligatory on the ground of commercial expediency, it is not for Assessing Officer to decide as to what can be the reasonability or necessity for the same. What is to be seen is whether such expenses are incurred wholly and exclusively for the purpose of earning the income.
Hon’ble Supreme Court in the case of CIT v. Rajendra Prasad Moodi [1978 (10) TMI 133 - SUPREME COURT] held that it is not necessary that income should be derived in the year under consideration. Even though income is not received, yet if the expenses are incurred for earning the income, the same are allowable u/s 57(iii) of the Act. We accordingly hold that the expenses claimed by the assessee for these years are to be allowed u/s 57(iii) of the Act. None of the expenses can be classified as not incurred wholly and exclusively for the purpose of earning the income.
It is seen that though the income is assessed under the head ‘Income from other sources’, the assessee was required to maintain its status as Limited Company and to incur certain necessary expenditure. Expenses for preserving and maintaining the source of income and the expenses were obligatory in nature. The same were on the ground of commercial expediency in order to indirectly facilitate the earning of income. Thus, there is some connection, direct or indirect, between the expenditure incurred and income earned and hence, the expenditure are to be allowed. The expenses incurred are legitimate and bona fide, which is not doubted by the Assessing Officer. The assessee had no option except to incur the expenditure and hence, the same are allowed. We accordingly direct the Assessing Officer to allow the expenses claimed as they are incurred wholly and exclusively for the purpose of earning such income.
In the result, the appeals of assessee are partly allowed and the appeals of revenue are dismissed.
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2005 (12) TMI 448 - ITAT BANGALORE
Income from house property - Annual value, Interest on borrowed capital ... ... ... ... ..... e disallowance. As per the terms of partnership deed, the assessee was required to pay interest to the firm for having borrowed the sum from the firm. Accordingly, the assessee was to claim the some as deduction. If such income is not accounted by the firm, appropriate action lies only in case of firm and not against the person who is factually and legally entitled to claim the deduction. In regard to disallowance of a sum of Rs. 95,961 the Assessing Officer has not meted out the case that the interest bearing fund is diverted to interest free advances. There is no justification to allow the interest only to the extent the interest received while allowing the claim. What is to be seen is whether the sum is paid wholly and exclusively for the purpose of business. Non-receipt or short receipt of interest will not be criteria to disallow the interest, which is legally admissible. This issue is accordingly to be decided against the revenue. In the result, the appeal is dismissed.
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2005 (12) TMI 447 - ITAT DELHI
Business expenditure, Zero-tax companies ... ... ... ... ..... ties is contrary to the judgment of the Supreme Court in the case of Apollo Tyres Ltd. (supra). 14. In any case there is no justification for saying that the assessee deliberately made a wrong claim of expenditure in order to reduce the net profit, to avoid the applicability of section 115JA. We have already held that the expenditure by way of Loan Procurement Expenses is allowable as business expenditure under section 37(1) of the Act. Consequently, the view that the assessee deliberately claimed the expenditure to avoid the applicability of section 115JA cannot be countenanced. For this reason also the assessee must succeed. 15. For the above reasons we allow the grounds and direct the Assessing Officer to reduce the book profit by Rs. 2,35,000. 16. Ground No. 6 is general and requires no decision. 17. In the result the appeal is allowed with no order as to costs. Decision pronounced in the Court at the conclusion of the hearing in the presence of the parties on 22-12-2005.
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2005 (12) TMI 273 - ITAT PUNE-A
Speculative Loss ... ... ... ... ..... ustified. The decisions relied on by the learned Departmental Representative are not applicable to the instant case, inasmuch as interest income earned by the assessee on FCDs is first to be adjusted against the loss arising from the sale of shares and then net amount of loss is to be treated as a loss arising from the business consisting of sale and purchase of shares and then the amount is to be treated as a speculative loss within the meaning of Explanation to s. 73 of the Act. In this view of the matter, we, therefore, uphold the order of the CIT(A) in directing the AO to consider interest income of Rs. 26,27,472 received on FCDs as income from business consisting of sale and purchase of shares and to treat the same as speculative income along with the speculative loss within the meaning of Explanation to s. 73 of the Act. This ground raised by the Revenue is, therefore, rejected. 13. In the result, the assessee s appeal as well as the Revenue s appeal are both dismissed.
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2005 (12) TMI 270 - ITAT RAJKOT
Income From Undisclosed Sources ... ... ... ... ..... ried forward as the loss under the head Capital gain . When there is a clear finding on the part of the AO as to this part of the transaction being clearly in the nature of capital gain, the CIT(A) was not justified in treating the balance part of the same transaction as falling under the head Business or profession . After all, the result of a singular transaction cannot be divided into two parts, so as to have one fraction falling under one head and the other into other head. 21. From the order of the AO we found that he has not considered the filing of loss return belatedly and, therefore, declining the claim of carry forward of short-term capital loss. In the interest of justice we restore the issue of revised return which was of loss, but filed well within the statutory provisions of s. 139(5), to the file of the AO for deciding de novo keeping in view our above observations and discussions. In the result, the appeal of the assessee is allowed in part as indicated above.
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2005 (12) TMI 268 - ITAT RAJKOT
... ...
... ... ..... nsequential in nature. No standard form is prescribed for a notice and a notice under section 148 served on and addressed to three brothers who also well understood it was meant for them is a valid notice. 52. The only requirement for invoking section 147 is that there should be some valid and cogent reason to believe about escapement of income and those reasons should be recorded before issue of notice under section 148. Both these conditions were satisfied in the instant and hence there was nothing illegal about issue of notice under section 148. We, therefore, do not find any infirmity in the order of CIT(A) for holding that reassessment proceedings were validly initiated and are inclined to agree with learned DR Mr. D.R. Adhia that the ground raised by the assessee in the CO is devoid of any merit. We, therefore, dismiss this ground of CO. In the result, the appeals of the revenue and the cross-objections of the assessee are allowed in part in terms indicated hereinabove.
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2005 (12) TMI 267 - ITAT RAJKOT
General Merchant and Warehousing and JCB Loader Hire Charges - whether the income from warehousing should be assessed as business income as returned by the assessee, or as income from house property as assessed by the Assessing Officer? - HELD THAT:- In the instant case, even though the customers making payment to the assessee had booked the expenditure in their books of account under the head 'Rental expenditure/payment' and deducted TDS thereon under section 194-I, yet the income so received is assessable in the assessee's hands as income from business 'and not' as income from rent or income from house property. As per our considered view for deciding the nature of income, no general principle can be laid down which is applicable to all the cases, these cases have to be decided on its own merits, facts and circumstances.
In each case, what is to be seen is whether the asset is being exploited commercially by letting out or whether it is being let out for the purpose of enjoying the rent. The distinction between the two is narrow and one has to depend on certain facts peculiar to each case. Thus, in the instant case, the entire activity systematically undertaken by the assessee since years together is adventure in the nature of trade, therefore, liable to be assessed as 'business income' and not as 'income from house property'.
We are, therefore, inclined to agree with the contentions of learned A.R., CA that pure and simple commercial assets like machinery, plant, tools, industrial assets and godowns having high business potential stands on a different footings from the assets like land and building. The hire charges income of such godowns has to be taxed under Part 'D' of Chapter IV of Income-tax Act, as "income from business" rather than income from house property.
In the result, all the appeals of revenue are dismissed.
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2005 (12) TMI 266 - ITAT RAJKOT
Minimum Alternate Tax ... ... ... ... ..... fit for the purpose of section 115JB. We are, therefore, no hesitation in holding that contention of learned CIT Departmental Representative was erroneous and devoid of any merit. 5.3 In view of the above discussion, we are persuaded to agree with the learned A.R. Shri R.K. Doshi, C.A. that addition of Rs. 73.92 lakhs made by the Assessing Officer for computation of book profit treating the same as unascertained liability under Explanation (c) to sub-section (2) of section 115JB, out of provision for repairs amounting to Rs. 84.22 lakhs due to earthquake claimed by the assessee as deduction for the purpose of computation of profit under section 115JB of the Act, was not legally and factually sustainable. 5.4 In the result, we are inclined to reverse the finding of lower authorities and direct the Assessing Officer to delete the disallowance of Rs. 73,92,610 while computing book profit under section 115JB of the Income-tax Act. In the result, the appeal of assessee is allowed.
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2005 (12) TMI 262 - ITAT NAGPUR
... ...
... ... ..... formed first leaving all business aside. The nexus for establishing the construction having been met out of the borrowed funds was clearly established by the Assessing Officer insofar as it was under construction which was shown by the assessee as capital work in progress. The borrowings, therefore, were utilized in the construction which has not been disputed by the assessee. Therefore, we do not find merit in the deletion of addition of Rs. 50,000 and Rs. 25,000 being the proportionate interest on the investment in construction of the temple as relating to the business of the assessee. The order of the learned CIT (Appeals) on these two grounds stand reversed and the order of the Assessing Officer is restored insofar as the assessee has not been able to establish the business purposes involved in the incurring of such expenditure. 10. In the result, the appeal filed by the Revenue is partly allowed wherein ground No. 1 has been dismissed and ground Nos. 2 and 3 are allowed.
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2005 (12) TMI 259 - ITAT MADRAS-D
Chargeability ... ... ... ... ..... er certain circumstances. We have considered the facts of the case and also gone through the provisions of law, and seen that once the income is computed under s. 115JA under Chapter XII-B, where deemed income of certain companies is considered as total income as defined under s. 2(45) and computed in the manner laid down in this Act, the consequences of all other provisions will follow, including ss. 234B and 234C of the Act. In view of the facts and legal provisions of the Act and respectfully following the Hon ble jurisdictional High Court s judgment in the case of CIT vs. Holiday Travels (P) Ltd. and of Hon ble Punjab and Haryana High Court judgment in the case of CIT vs. Upper India Steel Mfg. and Engg. Co. Ltd., we are of the view that levy of interest under ss. 234B and 234C where the tax is chargeable under deemed income under s. 115JA is within the provisions of the Act. Accordingly we uphold the levy of interest. 7. In the result, the Departmental appeal is allowed.
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