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Income Tax - Case Laws
Showing 41 to 60 of 1912 Records
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2006 (12) TMI 194 - ITAT PUNE-A
Business Expenditure ... ... ... ... ..... o. vs. CIT (2002) 172 CTR (Guj) 339 (2002) 253 ITR 749 (Guj) observed as under The assessee which is a Private limited Company. is a distinct assessable entity as per the definition of person under s. 2(31) of the Act. Therefore, it cannot be stated that when the vehicles are used by the directors, even if they are personally used by the directors the vehicles are used for personal use . The limited company is an inanimate person and there cannot be anything personal about such an entity. The view that we are adopting is supported by the provision of s. 40(c) and s. 40A(5) of the Act. 22. The ground Nos. 6, 7, and 8 are accordingly allowed. Ground No. 9 23. This ground relates to the disallowance of wealth tax payment of Rs. 60,270 under s. 40(1)(iia) which was upheld by the CIT(A). During the hearing before us the learned Authorised Representative did not press this ground and, therefore, this is rejected. 24. In the result the appeal filed by the assessee is partly allowed.
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2006 (12) TMI 191 - ITAT PUNE-B
Expenditure incurred for acquiring licence - ''Capital Or Revenue'' - Licence fees paid on account of user of computer software programme - installation of R/3 software, ERP package - whether R/3 software was an 'intangible asset' within the meaning of clause (ii) of section 32(1) - It is seen that the decision of the Bombay High Court in the case of Premier Automobiles Ltd.[1993 (4) TMI 31 - BOMBAY HIGH COURT] was taken into consideration by the Rajasthan High Court in the case of Arawali Constructions Co. (P.) Ltd.[2002 (7) TMI 41 - RAJASTHAN HIGH COURT] with regard to the second part of its decision, namely, that the expenditure incurred for acquiring technical know-how was capital expenditure and was eligible for depreciation u/s 32 of the Act. The decision of the Bombay High Court was silent, insofar as the first part of the decision of the Rajasthan High Court, namely, that the purchase of computer software amounted to acquisition of technical know-how. It is this part of the decision of the Rajasthan High Court which is relevant for deciding the issue in this case.
The expressions 'a know-how', 'a patent', 'a copyright' and 'a trademark,' are examples of 'intellectual property' and are included in clause (ii) of section 32(1) as 'intangible assets'. The aforesaid 'intellectual properties', or a licence acquired in respect of such a property, are all 'intangible assets' under clause (ii) of section 32(1).
Therefore, taking guidance from the decision of the Rajasthan High Court, we are of the view the impugned R/3 software has to be treated as an 'intangible asset' within the meaning of clause (ii) of section 32(1) of the Act. And, consequently, a licence acquired by the assessee to use the same will also come within the ambit of clause (ii) of section 32(1). Therefore, we hold that, on the facts of the present case, the expenditure incurred for acquiring the impugned licence, was rightly treated by the Assessing Officer and the CIT(A) as capital expenditure, eligible for depreciation u/s 32(1).
In the result, the appeal filed by the assessee is partly allowed.
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2006 (12) TMI 189 - ITAT MADRAS-B
Block Assessment - Third party statement and unsigned agreement - difference between undisclosed purchase consideration and disclosed consideration - search and seizure operations u/s 132 - sale of 22 acres of land - addition of short-term capital gain - interest income - HELD THAT:- In our opinion, there is no valid seized material representing addition of Rs. 1.49 lakhs towards undisclosed purchase consideration. It is only on surmise basis and statement recorded from third party, K. Madhava Reddy, and M/s Shilpa Homes (P) Ltd. This cannot be acted upon. The Circular No. F. No. clearly refrains the AO from recording confessional statement during the course of search and seizure and survey operations and also warns the AO not to attempt to obtain any confessional statement as to the undisclosed income, and any action contrary shall be viewed adversely. It also states that the AO should rely upon the evidence and material gathered during the course of search.
Here, in the present case, the evidence is only agreement which reflects the purchase consideration at Rs. 2.40 crores and the recorded statement shows the sale consideration of 22 acres at Rs. 3,62,18,000. The third party statement and unsigned agreement cannot be acted upon.
Further, the loose papers found during the course of search at the premises of K. Madhava Reddy are a dumb form having no evidential value. No addition can be made on the basis of noting on loose sheets in the absence of corroborative material. The Revenue has not found any circumstantial evidence in the form of any investments in cash, jewellery or others. They found only Rs. 6,73,610 in cash at the assessee's place. The assessee is not expected to explain the loose papers found at the premises of K. Madhava Reddy. Further, there is no evidence for the payment of money to the assessee by any party other than entered in the books of accounts.
Similarly, there is no evidence for the payment of money towards purchase consideration by the assessee to M/s K.M.R. Estates & Builders (P) Ltd. other than Rs. 91 lakhs. The AO failed to establish the payment of Rs. 2.40 crores as purchase consideration for the acquisition of 22 acres of land and he has failed to prove the payment. Hence, we have no other alternative but to rely on the books of accounts maintained by the assessee according to which the purchase consideration was Rs. 91lakhs and this has properly tallied with the sworn statement of the assessee.
The sale consideration for the sale of 22 acres of land for which the assessee is not a party and there is a valid agreement to which the assessee is a party and the payment in this agreement properly tallies with the books of accounts maintained by the assessee. Therefore, in our opinion, the sale consideration is properly disclosed by the assessee and the difference is interest for the delayed payment. This plea of the assessee, in our opinion, is having merit.
The valid agreement cannot be said that it is an after though since it is the part of seized material. The assessee is justified in offering the difference between Rs. 1,15,52,148 and Rs. 91,00,000 as undisclosed income at Rs. 24,52,148, Since we have already held that there is no purchase consideration of Rs. 2,40,40,000 there is no question of computing the short-term capital gain on the difference of sale consideration of Rs. 3,62,18,000. Accordingly. we allow the grounds taken by the assessee.
In the result, the appeal of the assessee is allowed.
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2006 (12) TMI 186 - ITAT JODHPUR
Block Assessment ... ... ... ... ..... mount shown in the regular returns. Concept of block assessment does not envisage the computation of undisclosed income on estimates unless there is some material to show that the assessee had in fact earned such undisclosed income or spent the amount. In our considered opinion, the learned CIT(A) was justified in deleting this addition. 18. Last ground of the Revenue s appeal about the levy of surcharge under s. 113 cannot be allowed in view of the fact that search was conducted on 10th April, 2002 whereas proviso to s. 113 relating to surcharge came into existence w.e.f. 1st June, 2002. The Special Bench of the Tribunal at Hyderabad in Merit Enterprises vs. Dy. CIT (2006) 102 TTJ (Hyd)(SB) 748 (2006) 101 ITD 1 (Hyd)(SB) has held that proviso to s. 113 inserted by the Finance Act, 2002 is prospective. In view of the order of the Special Bench, it is clear that levy of surcharge was rightly deleted by the learned CIT(A). 19. In the result, both the appeals are partly allowed.
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2006 (12) TMI 184 - ITAT JODHPUR
Addition u/s 69 - Income From Undisclosed Sources - bogus purchase - income from purchase and sale of agricultural produce and also from 'Arhat' - HELD THAT:- It is hardly a case of unexplained investment. The assessee has clearly shown and explained the alleged investment. In case the seller did not pay sales-tax and Mandi tax. the purchase in question cannot be taken as bogus. There are hundred and one reasons for the seller to tell untrue facts and unless the seller is confronted with by the assessee, the alleged statements do not have any useful meaning. The AO took the purchases made by the assessee from these parties as fictitious and bogus mainly on. the strength of the affidavits of these parties tendered before sales-tax authorities. These affidavits and even statement of the asstt. manager of the bank were never the subject-matter of cross-examination by the assessee.
In these circumstances, the decisions of Hon'ble Supreme Court in the case of Kishinchand Chellaram vs. CIT [1980 (9) TMI 3 - SUPREME COURT] and in the case of Tin Box Co. vs. CIT [2001 (2) TMI 13 - SUPREME COURT] come to the rescue of the assessee. The Hon'ble apex Court in these decisions have categorically held that unless the contents of the affidavits, etc. are confronted with the assessee by giving opportunity at cross-examination, the same cannot be read in evidence against the assessee.
Thus, it is clear that the purchase in question cannot be held to be bogus. As a result, the impugned addition stands deleted.
In the result, the appeal is partly allowed.
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2006 (12) TMI 182 - ITAT JAIPUR-B
Condonation Of Delay ... ... ... ... ..... be for the benefit of the whole of mankind. (ii) The object of promoting, protecting and providing facility to agriculturists or a particular section or a class of traders would be an object of general public utility. (iii) The object should not be propelled by profit motive. So long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be met and it is immaterial how the monies for achieving or implementing such purpose are found whether by carrying on activity for profit or not. (iv) The definition of the words charitable purpose is very wide and inclusive. (v) If the profit or surplus feeds the charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. 5. The grounds as well as appeal are, thus, allowed in favour of the assessee. 6. In the result, both the appeals are, thus, allowed in favour of the assessees.
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2006 (12) TMI 181 - ITAT JAIPUR-B
Condonation Of Delay ... ... ... ... ..... stitution and its charitable purposes. The Tribunal, therefore, did not see any hurdle in their claim relating to registration under s. 12AA of IT Act. 4.13 We are thus of the view that the learned CIT was not justified in raising the other objections like non-filing of return, etc. instead of examining the genuineness of charitable objects of the applicant, which as per Delhi Bench of the Tribunal in the aforesaid case of Market Committee, Sullar Gharat under the similar provisions in the State of Punjab held as charitable and entitled for registration under s. 12A(a) of the Act. We accordingly allow ground Nos. 1.2, 1.3 and 1.5 in favour of the assessee. 5. In result while setting aside the order in question, we direct the learned CIT to allow the application under s. 12A(a) of the Act filed by the assessee for registration for the purpose of exemption under ss. 11 and 12 of the Act for the claimed assessment years. 6. The appeal is, thus, allowed in favour of the assessee.
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2006 (12) TMI 178 - ITAT DELHI-I
Computation ... ... ... ... ..... e during the course of hearing. We are well aware of the judicial precedent that an order passed by the co-ordinate Bench should not be lightly disregarded. In taking this view, we are supported by the decision of Hon ble Supreme Court in the case of Union of India vs. Paras Laminates (P) Ltd. (1990) 87 CTR (SC) 180 (1990) 186 ITR 722 (SC) wherein Hon ble Supreme Court has observed that it is true that a Bench of two Members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. The rationale of this rule is the need of continuity, certainty and predictability in the administration of justice. As the facts and circumstances of the instant case are in pari materia, respectfully following the proposition laid down by the co-ordinate Bench, the AO is directed to reduce the amount of tickets purchased by the punter relating to such horse race. 13. In the result, the appeal of the assessee is allowed, in terms indicated hereinabove.
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2006 (12) TMI 177 - ITAT DELHI-F
Powers Of Tribunal - application seeking admission of additional evidence under Rule 29 - documents found during the course of survey - Permanent Establishment (PE) in India - attribution of profits to the PE in India - ascertained the liability for tax payable in India - DTAA between India and USA - Profit from sale of equipment - quantum of turnover of supply of equipment - HELD THAT:- In our opinion, the first limb of condition stipulated in rule 29 clearly permits both the parties to the appeal to produce additional, evidence and seek the leave of the Tribunal for admission thereof making out a case that the same shall enable it to pass orders or for any substantial cause and if the Tribunal is satisfied that the additional evidence so produced is required to enable it to pass orders or for any other substantial cause, it can allow the parties including the revenue to produce such additional evidence exercising its discretion in terms of the said Rule.
It is a settled position that production of additional evidence at the appellate stage is not a matter of right to litigating public and allowing of production of additional evidence is in the discretion of the Tribunal. The said discretion however, is to be exercised judicially and not arbitarily. As held in the case of CIT v. Kum Satya Setia [1982 (4) TMI 22 - MADHYA PRADESH HIGH COURT], it is within the discretion of the appellate authority to allow production of additional evidence if the said authority requires any document to enable it to pass orders or for any other substantial cause.
The case of the revenue is that the common office of UOPIPL and UOP Asia Limited (LO) in Delhi was virtually the projection of the assessee-company in India and the additional evidence sought to be filed by the revenue in the form of relevant pages of assessee's official website as well as press release issued by the assessee-company itself, in our opinion, are apparently relevant to consider and decide the case being made out by the revenue.
It was also a case of the revenue that the employees of UOPIPL and UOP Asia Limited (LO) were working for the assessee-company in India and the nature of services rendered by them on behalf of the assessee-company to the Indian customers including negotiation and finalisation of contracts could not be classified as merely preparatory or auxiliary. This case of the revenue was based on a statement of Mr. K. J. Aspray, Managing Director of UOPIPL recorded on oath. The additional evidence comprising of various documents forming part of Annexures-B and C, as discussed, is relevant in this context inasmuch as it apparently supports the case of the revenue on this aspect and the same, therefore, in our opinion, takes a shape of requirement to decide the issue relating to PE involved in the present appeal more satisfactorily.
It is pertinent to note here that even as per Rule 27 of Order 41 of CPC which is admittedly pari materia to Rule 29 of Appellate Tribunal Rules, 1963, the production of additional evidence is permitted where the said evidence was not available to the party earlier despite exercise of due diligence. The said Rule thus envisages certain circumstances when additional evidence can be adduced and one of such circumstances is where the additional evidence was not available to the party at the relevant time. In the present case, the additional evidence sought to be produced by the revenue was collected during the course of survey carried out in the premises of UOPIPL/UOP Asia Limited (LO) only after the filing of this appeal by the revenue before the Tribunal and the same being not available to it when the case of the assessee came to be decided by the authorities below, we find that the situation envisaged in Order 41, Rule 27 of CPC for allowing the production of additional evidence was very much obtained in the present case.
The documents being sought to be produced by the Department as additional evidence were not in its possession or power at the relevant time when the matter came to be decided by the authorities below and the same having come to their possession as a result of survey carried out in March 2006, it cannot be disputed that they came to the knowledge of the Department subsequently. Moreover, neither the ownership of the said documents in the hands of the concerned persons from whose possession the same have been found and seized nor the contents thereof have been denied before us.
We are, therefore, of the view that if the peculiar facts of the present case as discussed are considered in the light of legal position emanating from the various judicial pronouncements on the issue of admission of additional evidence, it is a fit case wherein the additional evidence sought to be produced by the revenue be allowed to be admitted having regard to its relevancy and requirement for the purpose of deciding the point in issue raised in the present appeal before us as well as for the substantial cause of justice. In that view of the matter, we allow the application filed by the revenue seeking admission of additional evidence and admit the said evidence on record.
Keeping in view the fact that the additional evidence so produced by the revenue as well as elaborate explanation offered by the assessee to rebut the same is voluminous running into several pages which requires indepth examination, we find that it would be fair and proper and in the interest of justice to restore the issue relating to PE to the file of the Assessing Officer for deciding the same afresh after examining the additional evidence as well as explanation offered by the assessee while rebutting the same. The assessee shall also be at liberty to adduce further evidence to support its case before the Assessing Officer who shall take into consideration the same in accordance with law. Since the other issues raised in this appeal related to the main issue of PE, we deem it appropriate to restore these issues also to the file of the Assessing Officer for fresh decision along with the main issue.
In the result, the appeal of the assessee is treated as allowed for statistical purposes.
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2006 (12) TMI 175 - ITAT DELHI-C
Expenditures are in relation to advertisement, publicity, trade shows, etc - Capital Or Revenue Expenditure - enduring benefit - HELD THAT:- There is no concept of deferred revenue expenditure known to the IT Act. The expenditure is either revenue expenditure or capital expenditure. The allowability of the same is to be looked into as per provisions of ss. 28 to 44 of the IT Act. The expenditures were treated as deferred revenue expenditure by the AO and 1/5th of such expenditure were allowed. At first instance, it can be said that having satisfied himself that the expenditures are genuine and allowable as such, the AO allowed 1/5th of the same. Since the expenditures are in relation to advertisement, publicity, trade shows, etc., it can be held that the same are revenue in nature. Such expenditures do not bring any capital asset into existence. Thus, the same were rightly treated as revenue expenditures by learned CIT(A).
It is also true that the CIT(A) is competent to examine the allowability or otherwise of such expenditure. When the details were called for, the assessee has submitted that the sum out of such expenses was never claimed as expenses as the same were claimed in earlier years. The provision made in this regard for earlier year is now reversed. Thus, there is no question of any disallowance of such expenditure. We accordingly delete the disallowance.
In our opinion, the claim of assessee could not have been dismissed holding the same as prior period expenditure. Any liability though relating to earlier year depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the year, cannot be disallowed as deduction merely on the basis that the accounts are maintained on mercantile basis and that it related to a transaction of the previous year, The expenses are contractual in nature and not statutory payments. Thus, the same will be allowed as liability in the year in which such liability crystallizes. Thus, the expenditures which were earlier in dispute and in view of the fact that the dispute is settled during the year under consideration, the same are allowable in such year. We accordingly delete the disallowance.
Disallowance on foreign exchange fluctuation loss - HELD THAT:- The Hon'ble Supreme Court in the case of Sutlej Cotton Mills Ltd. vs. CIT [1978 (9) TMI 1 - SUPREME COURT] held that where profit or loss arises to assessee on account of appreciation or depreciation in the value of foreign currency held by him, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business.
Admittedly, in the present case, the foreign currency loan was taken for working capital requirement. The decision of Hon'ble Supreme Court will, therefore, squarely apply. The liability on the date of balance sheet has to be reckoned in the accounts on the basis of fluctuation in the rate of exchange during the year and not merely when the loan is repaid, particularly when the assessee is following mercantile system of accounting. The Special Bench of the Tribunal held that such loss cannot be called as notional or contingent loss.
We also find that the loss was allowed while deciding the appeal of assessee for asst. yr. 2001-02. The decision of Special Bench of the Tribunal as well as that rendered in the case of Maruti Udyog Ltd. squarely applies. Thus, the loss of Rs. 87,52,111 is allowable as claimed.
Disallowance u/s 43B - customs duty paid during the year and included in the closing stock valuation - HELD THAT:- We find that similar issue has been decided in favour of the assessee by the earlier decision of the Tribunal for AY 1996-97 and 1997-98. Hon'ble Supreme Court in the case of Berger Paints India Ltd.[2004 (2) TMI 4 - SUPREME COURT] held that the entire amount of customs duty paid by assessee in a particular accounting year is allowable u/s 43B as a deduction in respect of that year irrespective of the amount of customs duty included in the valuation of assessee's closing stock at the end of accounting year as relating thereto. While so holding, Hon'ble Supreme Court approved the decision of the Special Bench of the Tribunal in the case of Indian Communication Network (P) Ltd.[1994 (1) TMI 245 - ITAT DELHI]. We accordingly dismiss this ground.
In the result, the appeal of assessee is allowed and that of Revenue is dismissed.
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2006 (12) TMI 174 - ITAT DELHI-C
Foreign Technician ... ... ... ... ..... applicant does not qualify for exemption under section 10(5B) are not legally justified inasmuch as the same are not based on any legal precedent. The observation of the Ld. CIT(A) seems to be based on his personal perception about the information technology. We, therefore, set aside the impugned order. It is, however, seen that other condition viz., the assessee was not resident in India in all the four financial years immediately preceding the financial year in which he arrived in India has not been examined by authorities below. For this limited purpose the matter is set aside and restored to the file of the Assessing Officer who examine the same after affording a reasonable opportunity of being heard to the assessee. If the assessee is found to have satisfied this condition, the Assessing Officer is directed to allow the exemption claimed by the assessee under section 10(5B) of the Act. 9. In the result, the appeal filed by the assessee is allowed for statistical purpose.
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2006 (12) TMI 172 - ITAT CHANDIGARH-A
Manufacture Or Production ... ... ... ... ..... act that it is the assessee who is engaged in an activity of manufacture. The parity of reasoning enunciated by the Madras High Court in the case of Taj Fireworks Industries is squarely applicable in the instant case. We, therefore, are of the opinion that on this issue the assessee has to succeed. 17. In the result we conclude by holding that the assessee is carrying out manufacturing activity and is therefore, entitled to claim the benefits of s. 80-IA of the Act. We have noted that apart from the aforesaid objections there is no other objection brought out by the Revenue for denying the deduction under s. 80-IA of the Act. We, therefore, set aside the order of the CIT(A) and direct the AO to allow deduction to the assessee under s. 80-IA of the Act with respect to the profits derived from its industrial undertaking (Parwanoo Unit). 18. In the result since the fact situation in all the three years stand on identical footing, the appeals of the assessee are allowed as above.
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2006 (12) TMI 171 - ITAT CALCUTTA
Minimum Alternate Tax - loss declared - Whether, the provisions made for doubtful debts, advances & investments, i.e., for unascertained liabilities, falls within the purview of adjustments u/s 115JA and whether the Assessing Officer was justified to make adjust of Rs. 1,56,00,000 in this case in computing the books profits? - diminution in the value of asset or for known liability of which the amount cannot be determined with substantial accuracy? - HELD THAT:- The provision for bad and doubtful debt is the provision for diminution in the value of asset, i.e., debt. The provision for bad and doubtful debt cannot be said to be a provision for liability, because even if a debt is not recovered, no liability would be fastened upon the assessee. In the above example if as against the outstanding debt of Rs. 1 crore only Rs. 90 lakhs has been realized, then due to non-realisation of the debt of Rs. 10 lakhs there is no question of any liability upon the assessee. The debt is the amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision towards irrecoverability of the debt cannot be said to be provision for liability. Once it is held that the provision for bad and doubtful debt is not a provision for any liability, the question whether the liability is ascertained liability or unascertained liability does not arise.
Whether clause (c) of the Explanation to section 115J A would not be applicable in respect of provision for bad and doubtful debts - We agree with the view taken by the ITAT, Pune Bench in the case of I.G. Vacuum Plasks (P.) Ltd. [2001 (4) TMI 203 - ITAT PUNE], !TAT, Delhi Bench in the case of Eicher Motors Ltd. [2006 (1) TMI 183 - ITAT DELHI-C] and the !TAT, Kolkata Bench [2000 (3) TMI 170 - ITAT CALCUTTA-E] in the assessee's own case. At the cost of repetition, we reiterate that the provision for bad and doubtful debt is not a provision for liability but it is a provision for diminution in the value of the assets. Once the provision is not for any liability, the question whether the liability is ascertained or unascertained does not arise. We, therefore, hold that clause (c) of the Explanation to section 115J A would not be applicable in respect of provision for bad and doubtful debts.
We find that in the accounts, the assessee had made the provision for bad and doubtful debts of Rs. 2.20 crores as on 31-3-1997. The provision as on 31-3-1996 was Rs. 64 lakhs. Thus the additional provision of Rs. 1.56 crores is made for the year under consideration. The balance sheet of the assessee is duly audited and certified by the Chartered Accountants and it has nowhere reported that the provision for bad and doubtful debt is excessive in the opinion of either directors or auditors. We also find that the total outstanding debt as on 31-3-1997 was more than Rs. 86 crores against which the provision for bad and doubtful debt was Rs. 2.20 crores, which is even less than 3 per cent of the total debt. The Assessing Officer in the assessment order has nowhere stated that the provision made by the assessee for bad and doubtful debt is excessive or unreasonable considering the purpose for which the provision is made. At the time of hearing before us also, the revenue except making a claim that the provision for bad and doubtful debt should be considered as 'reserve' under clause (b) of Explanation to section 115JA, has not proved how the provision made for bad and doubtful debt is excessive or unreasonable.
Thus, we are unable to accept the revenue's claim that the provision for bad and doubtful debt in the case of the assessee, viz., Usha Martin Industries Ltd. Would fall within clause (b) of the Explanation to section 115JA of the Income-tax Act. Accordingly, we uphold the order of the CIT(A) deleting the addition of Rs. 1.56 crores made by the Assessing Officer in respect of provision for bad and doubtful debt.
In the case of Usha Martin Industries Ltd. The Assessing Officer has also made the addition of Rs. 1,25,000 in respect of provision for wealth-tax. The same was deleted by the CIT(A) - We have already stated above that for the purpose of section 115JA the addition to the book profit, which is computed as per Parts-II & III of Schedule-VI to the Companies Act, can be made only if it is permissible by item Nos. (a) to (f) of the Explanation to section 115J A. We find that as per clause (a) to Explanation "any amount of income-tax paid or payable and the provision therefore" is liable to be added to the book profit. However, there is no such provision for making the addition with regard to wealth-tax.
Since the provision for wealth-tax does not fall within any of the items of the Explanation to section 115JA, we hold that the CIT(A) was justified in deleting the addition made by the Assessing Officer in this regard. Hence, we reject the revenue's appeal in the case of Usha Martin Industries Ltd.
In the result, the appeals filed by the revenue in the cases of respective assessees are dismissed and appeal filed by the assessee, Balmer Lawrie & Co. Ltd., is allowed.
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2006 (12) TMI 170 - ITAT BOMBAY-J
Validity of the reassessment proceedings u/s 147 - Capital Gains - deemed transfer u/s 2(47)(v) - sale of plot of land - meagre - whether the transferee to have 'performed or is willing to perform' his obligations under the agreement - HELD THAT:- It is not possible to hold that the transferee was willing to perform his obligations in the financial year 1995-96 in which the capital gains are sought to be taxed by the Revenue. We hold that this condition laid down u/s 53A of the Transfer of Property Act was not satisfied. Once we come to the conclusion that the transferee was not 'willing to perform', as stipulated by and within meanings assigned to this expression u/s 53A of the Transfer of Property Act, his contractual obligations in this previous year, it is only a corollary to this finding that the development agreement dt. 12th Oct., 1995, based on which the impugned taxability of capital gain is imposed by the AO and upheld by the CIT(A), cannot be said to be a "contract of the nature referred to in s. 53A of the Transfer of Property Act" and, accordingly, provisions of s. 2(47)(v) cannot be invoked on the facts of this case Chaturbhujdas Dwarkadas Kapadia vs. CIT's case [2003 (2) TMI 62 - BOMBAY HIGH COURT] undoubtedly lays down a proposition which, more often that not, favours the Revenue, but, on the facts of this case, the said judgment supports the case of the assessee inasmuch as 'willingness to perform' has been specifically recognized as one of the essential ingredients to cover a transaction by the scope of s. 53A of the Transfer of Property Act. Revenue does not get any assistance from this judicial precedent. The very foundation of Revenue's case is thus devoid of legally sustainable basis.
In the present case, the situation is that the assessee has received only a meagre amount' out of total sales consideration, the transferee is avoiding adhering to the payment schedule on one ground or the other, and there is no surety that the sales consideration will actually be realized by the assessee, and yet the assessee is expected to pay capital gains on the entire agreed sales consideration. It is also important to bear in mind that this order, it was specifically agreed between the parties under the agreement in question that "that the Lok Housing will not issue stop payment instructions in any circumstances nor put forward any excuses of any type to avoid presentation and consequent encashment of the said cheques on their respective due dates. Further encashment of the said cheques on presentation shall be as of the essence of the contract". This condition of the contract was, by no stretch of logic, fulfilled. The transferee did request the assessee to reschedule the payments. When payment on time is essence of the contract, and the payments are not made in time, it cannot be said that such a contract confers any rights on the transferee to seek redressal u/s 53A of the Transfer of Property Act. This agreement cannot, therefore, be said to be in the nature of a contract referred to in s. 53A of the Transfer of Property Act. It cannot, therefore, be said that the provisions of s. 2(47)(v) will apply in the situation before us.
For all these reasons, we are of the considered view that the assessee deserves to succeed on both the counts-i.e. for the reason that the reopening of assessment was not justified, as also for the reason that the capital gains, on sale of plot in question, could not have been taxed in the particular assessment year in appeal before us. For our purposes, it is not necessary to go into the question as to in which year the capital gain on sale of plot will be taxable. We leave it at that.
In the result the appeal is allowed.
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2006 (12) TMI 169 - ITAT BOMBAY-F
Reopening of assessment u/s 147 - Non issuance of notice u/s 143(2) - procedural in nature - Income Escaping Assessment - amendment to section 148 by the Finance Act - retrospective effect - time-limit for completion of assessment - Whether the assessment framed without issuing the notice u/s 143(2) of the Act is a valid assessment? - HELD THAT:- In the present case, admittedly, the notice u/s 148 was issued validly. The return was also deemed to have been filed by the assessee by virtue of letter dated 25-6-2001 wherein, it was stated that original return filed by him should be treated as filed in pursuance of notice u/s 148. We have already held that this amounted to filing of return in view of the case of Tiwari Kanhaiya Lal [1984 (5) TMI 15 - RAJASTHAN HIGH COURT]. Therefore, it cannot be said that the assessment proceedings was not validly initiated and, therefore, on this ground, it cannot be said that assessment proceedings were void ab initio.
Once the notice u/s 148 has been issued validly, the Assessing Officer is vested with the powers to assess or reassess u/s 147 of the Income-tax Act. Therefore, jurisdictional power for making reassessment is vested in the Assessing Officer by virtue of section 147 and, therefore, it cannot be said that the assessment order was without jurisdiction.
The combined reading of all the judgments leads to the only one conclusion that the provisions of section 143(2) is only the procedural provisions though mandatory and does not give jurisdiction to assess and does not vest in the Assessing Officer to make the assessment. The real purpose behind provisions of section 143(2) is to provide an effective opportunity to the assessee to support and explain the return filed by him and the books of account maintained by him. This requirement is part of the natural justice, which has been incorporated in the Act. Noncompliance of the same may invalidate the assessment order but certainly it does not render the assessment without jurisdiction. Accordingly, we hold that non-compliance of provisions of section 143(2) in the present case does not render the assessment as null and void since valid jurisdiction was vested in the Assessing Officer by virtue of clear provisions of section 147/148 itself.
This view of ours is also fortified by the recent judgment in the case of Areva T&D India Ltd. v. Asstt. CIT [2006 (11) TMI 166 - MADRAS HIGH COURT]. The facts of that case are similar to facts of the present case. In that case, it was held in that case that not issuing the notice u/s 143(2) and not considering the objections of the assessee for reopening were only irregularities and the matter was set aside to the Assessing Officer with a direction to consider the matter afresh, particularly the objection given by the assessee for reopening and to issue notice u/s 143(2) of the Act and after providing opportunity to the assessee of being heard.
We feel that after this change regarding making the notice u/s 143(2) valid even if the same is issued after prescribed period of 12 months but before the expiry of time-limit for completion of assessment, the purpose of issuing notice is nothing but to provide natural justice to the assessee to enable him to explain his case before the Assessing Officer completes the assessment. In view of this, we are of the considered opinion that after this amendment in section 148, this Tribunal judgment rendered in the case of Raj Kumar Chawla [2005 (1) TMI 334 - ITAT DELHI-F] is not valid in the present case because in the present case also, return is deemed to have been filed by the assessee in pursuance to notice u/s 148 issued during this period, i.e., during 1-10-1991 to 30-9-2005.
Having held that the impugned assessment order is only irregular and not illegal, we feel that the correct course of action is to set aside the same and restore the matter to the Assessing Officer for framing a fresh assessment order after issuing notice u/s 143(2) to the assessee but we also feel that this whole exercise will be academic only and will not serve any real purpose because in the present case, although, no notice u/s 143(2) was issued but queries were raised by issuing notice u/s 142(1) and the assessee has participated in the assessment proceedings, has submitted his explanations and the Assessing Officer has considered the submissions made by the assessee. The issue of setting aside of assessment order in such a case merely to give a fresh notice to the assessee has been discussed elaborately by the Special Bench of Lucknow ITAT in the case of Nawal Kishore & Sons Jewellers [2003 (8) TMI 194 - ITAT LUCKNOW]. In this case, it has been held that if principles of natural justice have otherwise been met then setting aside the assessment order would be a futile exercise and in such a situation, the appellate authority should proceed to decide the case on merits.
Thus, we do not set aside the assessment order but we want to make it clear that where proper opportunity was not provided to the assessee, the assessment order should be invariably set aside under these circumstances.
Deduction on account of interest - HELD THAT:- The sale of shares by the company is on behalf of those shareholders and it is at par with sale by the shareholders. Hence, the nature of income remains same, i.e., capital gains. Since, in the present case, it was offered by the assessee wrongly under the head 'Income from other sources', it cannot assume the character of 'Income from other sources' although the Assessing Officer accepts the same but still it cannot be held that the investment in shares is also for the purpose of earning 'Fraction Entitlement' taxable under the head 'Other sources'. We, therefore, reject this contention of the assessee also.
We find force in this argument of the learned AR of the assessee and we direct the Assessing Officer that deduction should be allowed for interest expenses incurred during 1-4-1997 to 31-5-1997. He should quantify the amount of deduction allowable for these 2 months after providing adequate opportunity of being heard to the assessee. The issue is restored to him for allowing deduction on account of interest for this period of 2 months. Ground Nos. 1 to 3 are rejected and Ground No. 4 is partly allowed.
In the result, this appeal of the assessee stands partly allowed.
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2006 (12) TMI 168 - ITAT BOMBAY-F
Addition u/s 45(4) on account of revaluation of assets - relinquishment of rights in the firm's assets on the reconstitution of the firm - whether short-term capital gain arises on surrender of rights in the revalued partnership assets - HELD THAT:- the partnership asset was revalued by the partners at the start of the year and the difference on account of revaluation of asset was credited to the partners account. The revaluation of partnership assets was anterior to the introduction of new partners. Revaluation of assets by partnership firm does not attract capital gains. The revaluation of assets of partnership and the credit of revalued amount to the capital account of partners in their respective share ratio does not entail any transfer as defined u/s 2(47) of the Income-tax Act. The introduction of new partners to a partnership firm owning immovable assets and consequent reduction in the share ratio of present partners does not entail any relinquishment of their rights in the partnership property. On introduction of new partners, there is realignment of share ratio inter se between the partners only to the extent of sharing the profits or losses, if any of the partnership business.
When any new partner is introduced into an existing partnership firm, the profit sharing ratios undergo a change, which does not amount to transfer as defined under section 2(47) of the Act, as there is no change in the ownership of assets by the partnership firm. As during the subsistence of the partnership firm, the partners have no defined share in the assets of the partnership and thus on realignment of profit sharing ratio, on introduction of new partners, there is no relinquishment of any non-existent share in the partnership assets as the asset remained with the firm. Such an arrangement is not covered by the provisions of section 45(4) of the Act, which covers the case of dissolution of partnership firm.
Accordingly, no capital gains arises on such relinquishment of share ratio in the partnership firm. We confirm the order of CIT(A) and dismiss the grounds of appeal raised by the revenue.
In the result, the appeals filed by the revenue are dismissed.
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2006 (12) TMI 167 - ITAT BOMBAY-E
Condonation Of Delay ... ... ... ... ..... a long period of 13 years. We find that this does not constitute a sufficient cause for the delay caused in filing the appeal before us. Therefore, in the facts and circumstances of the case we decline to condone the delay and hold that the appeal is liable to be rejected in limine on the ground of limitation. 24. Next we will consider the remaining three appeals relating to penalties levied under ss. 271(1)(a), 273(1)(b) and 221(1). All the three appeals have been dismissed by the CIT(A) on the ground of limitation as the appeals were filed before him after a period of 12 years from due dates. The CIT(A) did not condone the delay. The question of delay has been considered in detail in our order passed in ITA No. 996/Mum/2004. On the same analogy we have to hold that the CIT(A) was right in not condoning the delay. Therefore we have to confirm his orders. These appeals are also liable to be dismissed. 25. In result, all these four appeals filed by the assessee are dismissed.
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2006 (12) TMI 166 - ITAT BOMBAY-E
Liability to pay tax u/s 115-O - Life Insurance Corporation - deemed dividend u/s 2(22) (e) - Payment made to Central Government out of the surplus profit - Whether the assessee can be said to be in default u/s 115Q of the Act on account of non-payment of tax on distributed profits u/s 115-O - HELD THAT:- The Hon'ble Supreme Court had to consider the question with reference to section 2(6A) of 1922 Act corresponding to section 2(22) of the Act of 1961; held that - "'Dividend', in its ordinary connotation, means the sum paid to or received by a shareholder proportionate to his shareholding in a company out of the total sum distributed."
In the present case, the assessee is the creation of Life Insurance Corporation Act, 1956. Section 5 of the said Act provides that original capital of the Corporation would be 5 crores of rupees which shall be provided by the Central Government.
Reading of section 5, clearly shows that capital of the company is not divided into shares and therefore Central Government cannot be said to be shareholder. The position of the Central Government is akin to the sole proprietor of a business concern. The learned CIT(A) has himself given a finding that Central Government cannot be called a shareholder. This finding has also been upheld by us in the earlier part of the order. Therefore, in our considered opinion, the payment made by the assessee to the Central Government could not be treated as 'dividend' within the ambit of definition clause (22) of section 2 of the Act.
Having held that payment by assessee to Central Government is not dividend, it is not necessary for us to deal with the other arguments of the parties since payment of dividend is the condition precedent for invoking the provisions of section 115-O. Accordingly, it is held that the provisions of section 115-O of the Act were not applicable to the present case. Consequently, the assessee could not be declared as assessee in default u/s 115Q of the Act. In view of the same, the orders of both the authorities below are quashed. The payment, if recovered, shall be refunded to the assessee in accordance with law.
In the result, appeal of the assessee is allowed.
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2006 (12) TMI 165 - ITAT AMRITSAR
Search And Seizure ... ... ... ... ..... oth the parties. We order accordingly. The various grounds of appeal of the revenue are treated as allowed for statistical purposes. 8. As regards other two appeals in cases of M/s. Trimurti Deposits and Advances Pvt. Ltd. and M/s. Sidhant Deposits and Advances Pvt. Ltd. in IT(SS)A. No. 12 (ASR)/2005 and IT(SS)A. No. 13 (ASR)/2005, the facts of the cases and submissions of both the parties are the same as in the case of Sh. Vinod Goel. Therefore, the findings recorded in the case of Sh. Vinod Goel are squarely applicable to the facts of the two cases. For parity of-reasons, we set aside the orders of the CIT(A) and restore the appeals to the file of the CIT(A) for deciding the grounds relating to the merits of the additions after allowing reasonable opportunity to both the parties. We order accordingly. The grounds of appeals are treated as allowed for statistical purposes. 9. In the result, all the three appeals of the revenue are treated as allowed for statistical purposes.
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2006 (12) TMI 164 - ITAT ALLAHABAD
Income Escaping Assessment ... ... ... ... ..... t decided on the quantum of capital gains on the ground that he has cancelled the assessment, we restore the matter to his file to adjudicate, in the light of the material available on record and to be furnished by the assessee and Assessing Officer on the quantum of capital gains in accordance with law. 26. As a result, we allow the appeal of the revenue for statistical purposes. The C.O. filed by the assessee is, therefore, dismissed. ITA. No. 193/All./2005 and CO No. 85/All./2005 1. Since the facts and circumstances are identical with the facts and circumstances in the case of Shri Alok Banerjee, we set aside the order of the ld. CIT(A) in cancelling the assessment and restore the matter to the file of the CIT(A) to workout the quantum of capital gains in the light of evidence furnished or to be furnished by the assessee and the Assessing Officer. 2. As a result, the appeal filed by the revenue is allowed for statistical purposes. The CO. filed by the assessee is rejected.
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