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Income Tax - Case Laws
Showing 61 to 80 of 6519 Records
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2013 (12) TMI 1633
Issues involved: The appeal challenges the order of the Ld. CIT(A)-I, Pune dated 15-06-2012 for the A.Y. 2009-10, specifically regarding the treatment of the assessee's income as agricultural income u/s. 2(1A)(b)(ii) of the Income-tax Act, 1961 and the exclusion of said income u/s. 10(1) of the Act.
Summary:
The assessee company engaged in plant floriculture, tissue culture, and horticulture activities, claiming the income derived as agricultural income and seeking exemption u/s. 10(1) of the Income-tax Act for A.Y. 2009-10. The Assessing Officer, despite a previous favorable decision by the ITAT, Pune, declined to follow the order due to an appeal filed by the Department to the High Court u/s. 260A. The Ld. CIT(A) referred to the ITAT decision in the assessee's own case for A.Y. 2004-05 and allowed the claim, leading to the Revenue's appeal.
The Tribunal found that the issue had been previously decided in favor of the assessee by the ITAT, Pune in various years, including A.Y. 2004-05 and 2007-08. The Tribunal upheld the decision based on detailed reasoning and legal precedents, concluding that the income from the agricultural operations should be treated as agricultural income u/s. 2(1A)(b)(i) of the Act and excluded from total income u/s. 10(1). The Tribunal confirmed the Ld. CIT(A)'s order based on consistency with previous decisions in the assessee's case.
Given the consistent decisions in the assessee's favor by the Tribunal in previous years, the Tribunal dismissed the Revenue's appeal for the current A.Y. 2009-10, upholding the order of the Ld. CIT(A) regarding the treatment of income as agricultural income and the exemption u/s. 10(1) of the Act.
Therefore, the Revenue's appeal was dismissed, and the order of the Ld. CIT(A) was confirmed based on the Tribunal's previous decisions in the assessee's case, establishing the income derived from agricultural activities as qualifying for exemption under the relevant sections of the Income-tax Act.
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2013 (12) TMI 1609
Issues Involved:
1. Disallowance of interest received on loans relating to earlier years.
2. Addition of stale drafts/pay orders as income u/s 41(1).
3. Levy of interest u/s 234B & 234D.
Summary:
1. Disallowance of Interest Received on Loans Relating to Earlier Years:
The Revenue challenged the deletion of disallowance of Rs. 3,24,32,000 claimed by the assessee towards interest received during the period under consideration pertaining to earlier years. The Revenue contended that the assessee should follow either the cash system of accounting or mercantile system of accounting and not a hybrid system. The assessee argued that it followed the mercantile system except for interest on loans and non-performing assets, commission on bank guarantees, and locker rent, as per the Karnataka Co-operative Societies Act, 1939 and RBI Guidelines. The Tribunal upheld the CIT(Appeals)'s decision, noting that the assessee's method was consistent with the Karnataka Co-operative Societies Act and validated by the Hon'ble Apex Court in UCO Bank V CIT (237 ITR 889). The Tribunal found merit in the assessee's consistent accounting method and dismissed the Revenue's appeal.
2. Addition of Stale Drafts/Pay Orders as Income u/s 41(1):
The Assessing Officer treated Rs. 73,58,708 as income of the assessee under section 41(1) of the Act, considering it a cessation of liability. The CIT(Appeals) upheld this addition. The assessee argued that these amounts were held in trust and never treated as an allowance or deduction. The Tribunal noted that the amounts were still reflected as liabilities in the books of accounts and that the RBI Circular required these amounts to be kept as liabilities for ten years before transferring to the RBI. The Tribunal found that the primary requisite for invoking section 41(1) was not established and deleted the addition, following decisions in similar cases of Canara Bank Ltd. and Vijaya Bank Ltd.
3. Levy of Interest u/s 234B & 234D:
The assessee contested the interest levied under sections 234B & 234D. The Tribunal upheld the Assessing Officer's action, stating that the charging of interest is consequential and mandatory. The Assessing Officer was directed to recompute the interest, if any, chargeable while giving effect to this order.
Conclusion:
The Revenue's appeal for Assessment Year 2007-08 was dismissed, and the assessee's appeal was partly allowed. The Tribunal upheld the CIT(Appeals)'s decision on the disallowance of interest and deleted the addition of stale drafts/pay orders as income. The interest levied under sections 234B & 234D was upheld but required recomputation.
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2013 (12) TMI 1605
Addition to be made under section 40A(3)- payments made on Sundays and Holidays - Held that:- In the present case, there is no denying the fact that persons to whom payments were made in cash are villagers and may not be having bank accounts. It is also a fact that payment has to be made to them immediately to secure the lands in question which may require the payments to be made in cash on Holidays and Sundays, otherwise, they would have sold the lands to some other persons. In these circumstances, if the assessee would have insisted for payment by way of cheque or DD or have deferred it, it might have resulted in a loss of business opportunities as the land owners would not have agreed to sale the lands to the assessee. Therefore, the expression ‘required to be made’ understood in this context and keeping the intention of legislature in mind can be construed to mean that payments required to be made for the purpose of the business of the assessee. In these circumstances, payments made on Sundays and Holidays have to be held to be coming within the ambit of Rule 6DD(j), hence provisions of section 40A(3) will not apply to such payments. Therefore, payments made in cash atleast to the extent made on Sundays and Holidays cannot be disallowed u/s.40A(3) of the Act. We, therefore, direct the AO to verify such payments made on Sundays and Holidays and delete the addition of these amounts.
So far as addition of the rest of the amount sustained by the CIT(A) we do not find any infirmity in the impugned order to interfere with the same. It is not only a fact that assessee has paid the amount of ₹ 2,32,20,500/- to third parties but such payments have also been made through cheques. The assessee has also furnished back account copies, TDS particulars, PAN of the said parties. Therefore, the entire transactions having been made through proper banking channel is transparent. Only because third parties have withdrawn the amount and paid the same in cash to landlords, assessee cannot be brought within the mischief of section 40A(3) of the Act. Accordingly, we confirm the order of ld CIT(A) on this issue.
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2013 (12) TMI 1604
Issues involved:
The issues involved in the judgment are the deduction of Tax at Source (TDS) by the Treasury Department for stamp papers sold by a registered society of Stamp Vendor Association, and whether the stamp vendors are liable to pay income tax on the amount received from the Treasury Department.
Details of the Judgment:
Issue 1: TDS deduction on stamp papers sold by the association
The petitioner, a registered society of Stamp Vendor Association, challenged the action of the Treasury Department in deducting TDS for stamp papers sold to the members of the association. The Treasury Department relied on Section 194H of the Income Tax Act, 1961, which mandates the deduction of income tax on commission or brokerage payments. The challenge was based on the communication directing TDS deduction for stamp papers sold by the association's members.
Issue 2: Nature of payment received by stamp vendors
The main issue was whether the amount received by stamp vendors from the Treasury Department for selling stamp papers constitutes commission or brokerage, making them liable for TDS deduction. The petitioner argued that the payment was in the nature of a discount, not commission, citing a decision of the Gujarat High Court. The court examined whether the stamp vendors acted as agents of the Treasury Department or engaged in a contract of sale.
Judicial Interpretation and Decision:
The Division Bench of the Gujarat High Court determined that the payment received by stamp vendors was a discount, not commission, as it was part of a sale transaction rather than an agency relationship. The court distinguished between commission and discount, emphasizing the transfer of ownership in the sale of stamp papers. The court held that the stamp vendors were not agents of the State Government and were not liable for TDS deduction.
Precedent and Application:
The judgment of the Gujarat High Court was followed by the Kerala High Court, supporting the position that stamp vendors are not liable for TDS deduction on payments received for selling stamp papers. The Uttarakhand High Court upheld the Gujarat High Court's decision, quashing the communication for TDS deduction and allowing stamp vendors to seek refunds from the Income Tax Department.
Conclusion:
The judgment clarified that the payment received by stamp vendors for selling stamp papers was a discount, not commission, and they were not liable for TDS deduction. Stamp vendors were deemed not to be agents of the State Government, and the communication directing TDS deduction was quashed, allowing for potential refunds to the affected vendors.
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2013 (12) TMI 1603
Penalty u/s 271(1)(c) - additional income declared and assessed in the returns filed u/s 153A(1)(a) of the Act over and above the income declared earlier in the returns filed u/s 139 - Held that:- The only point raised by the assessee is that the ground canvassed before the CIT(A) to the effect that the quantum of concealed income for the purposes of section 271(1)(c) of the Act could not be equated to the ‘additional income’, has not been addressed by the CIT(A). This is primarily for the reason that the CIT(A) has allowed relief to the assessee by setting-aside the penalty levied on a point of law canvassed before him, which we have already discussed in earlier paragraphs, wherein the stand of the CIT(A) has been disapproved. Therefore, under these circumstances it would be in fitness of things that the instant plea of the assessee, which was raised before the CIT(A) but not considered by him, be remanded back for consideration and adjudication as per law. The point raised by the learned Departmental Representative against the plea of the assessee on this aspect, in our view, touches upon the merits of the plea, with which we are not presently concerned with. Therefore, we uphold the plea of the assessee for remanding the matter back to the file of the CIT(A) to address the grounds raised by the assessee with regard to the quantification of 15 concealed income liable for penalty of section 271(1)(c) of the Act. - Appeals of the Revenue are allowed for statistical purposes.
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2013 (12) TMI 1602
Issues Involved:
1. Whether the Commissioner of Income Tax(A) erred in upholding the penalty levied u/s 271(1)(d) of the Income Tax Act, 1961.
2. Whether the appellant's suo moto offer of disallowed expenses affects the imposition of penalty.
3. Whether the penalty was justified given the circumstances of the case.
Summary:
Issue 1: Penalty u/s 271(1)(d)
The assessee appealed against the order of the Commissioner of Income Tax(A) upholding the penalty levied by the Assessing Officer (AO) u/s 271(1)(d) of the Income Tax Act, 1961. The AO had observed that an amount of Rs. 11,55,634/- on account of conveyance was not included in the value of fringe benefit, leading to a disallowance of 20% of these expenses. The AO imposed the penalty citing judicial precedents, including Commissioner of Income Tax vs Gurbachan Lal and UOI vs Dharmendra Textile Processors. The Commissioner of Income Tax(A) upheld the penalty, stating that the appellant had furnished inaccurate particulars leading to a false claim.
Issue 2: Suo Moto Offer of Disallowed Expenses
The assessee contended that the disallowance was suo moto offered during the course of hearing and not due to any concealment or inaccurate particulars detected by the AO. The assessee argued that the mistake was a bona fide error in calculating the value for FBT and not a deliberate act of concealment. The Tribunal noted that the assessee had declared a significant amount of Rs. 2.54 crore as the value of fringe benefit and the impugned amount was relatively meager. The Tribunal referenced the ITAT Delhi judgment in Mr. Saket Agarwal vs ITO, which held that voluntary surrender to avoid litigation does not automatically justify penalty imposition.
Issue 3: Justification of Penalty
The Tribunal considered the rival arguments and legal precedents. The Tribunal observed that the assessee's explanation was not disproved and there was no evidence of deliberate concealment. The Tribunal highlighted that the penalty u/s 271(1)(d) can only be imposed if the explanation is found to be false or if the assessee fails to substantiate the explanation. The Tribunal found that the authorities below did not properly adjudicate the explanation provided by the assessee. The Tribunal concluded that the explanation offered by the assessee was acceptable and the penalty was not imposable. The Tribunal canceled the penalty orders, allowing the appeal of the assessee.
Conclusion:
The appeal of the assessee was allowed, and the penalty u/s 271(1)(d) was canceled. The Tribunal emphasized that the voluntary surrender of the impugned amount and the bona fide nature of the mistake did not justify the imposition of the penalty.
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2013 (12) TMI 1600
Revision u/s 263 - Held that:- Once the Tribunal had come to the conclusion that the loan advanced was on account of commercial expediency as well as in the orders of the BIFR, we do not find any ground to disturb the said finding. Rightly, the Revenue had not raised any question of law on this. Even though on the aspect of jurisdiction, the Revenue succeeds, yet, the further question on the merits being a pure question of fact and rightly not raised, we do not find, any useful purpose would be achieved in setting aside the order of the Tribunal and further remanding the matter. In the circumstances, except for holding that the Revenue is justified in its plea in invoking jurisdiction under Section 263 of the Act, we do not think, the order calls for any interference to remand the matter.
Advancing of funds by the assessee into the sister concern was in terms of the BIFR's order. That being the case, no useful purpose would be served by again directing a remand on the merits of the claim of the assessee.
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2013 (12) TMI 1599
Disallowed u/s 40(a)(ia) - TDS u/s 194C - Transportation charges - non-submission of Form No. 15J within time-limit - Sub-Contract or not - HELD THAT - Mere non submission of Form No. 15J (having received Form No. 151 from his subcontractor for non deduction of TDS under Rule 29D to the AO within prescribed time limit cannot pave way for disallowance of expenses under section 40(a)(ia).
Payments to lorry owners is not a sub-contract, hence, TDS provisions are not applicable. It was contended by the assessee that assessee himself executed the contract of transportation and the lorry owners have simple placed the vehicle at the disposal of the assessee without involving themselves in carrying out any part of the work undertaken by the assessee.
The decisions in the case of Mythri Transport Corporation vs ACIT, 124 ITD 40(Vis) [2009 (1) TMI 337 - ITAT VISAKHAPATNAM] and VALIBHAI KHANBHAI MANKAD VERSUS DEPUTY COMMISSIONER OF INCOME-TAX (OSD), CIRCLE-9, AHMEDABAD [2011 (4) TMI 887 - ITAT, AHMEDABAD] are followed.
In the result, the appeal of the revenue as well as cross objection filed by the assessee are dismissed.
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2013 (12) TMI 1595
Registration granted u/s 12AA (1) (b) cancelled - Held that:- The observation of the CIT is only a general observation and is not substantiated by any facts. It is pertinent to note that CIT has not pointed out that any part of the income spent other than the objects of the trust. In the absence of any such factual findings recorded by CIT, it cannot be said that the tribunal committed an error in setting aside the order of CIT and directing the CIT to renew the registration under Section 80G and also grant registration under Section 12AA of the I.T Act. - Decided in favour of assessee.
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2013 (12) TMI 1594
Money received attributable to within India activities - P.E. in India - Held that:- One has to read Article 5 of the Agreement in order to understand what a permanent establishment is, in terms whereof "permanent establishment" means a fixed place of business through which business of an enterprise is wholly or partly carried on. In the instant case, according to the revenue, the Project Office of the appellant in Mumbai is the "permanent establishment" of the appellant in India through which it carried on business during the relevant assessment year and 25 per cent of the gross receipt is attributable to the said business. Neither the Assessing Officer, nor the Tribunal has made any effort to bring on record any evidence to justify the same.
That being the situation, we allow the appeal, set aside the judgment and order under appeal as well as the assessment order in so far as the same relates to imposition of tax liability on the 25 per cent of the gross receipt upon the appellant in the circumstances mentioned above, and observe that the questions of law formulated by us, while admitting the appeal, have not, in fact, arisen on the facts and circumstances of the case, but the real question was, whether the tax liability could be fastened without establishing that the same is attributable to the tax identity or permanent establishment of the enterprise situate in India and the same, we think, is answered in the negative and in favour of the appellant.
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2013 (12) TMI 1592
Issues Involved:
1. Whether the Appellate Tribunal was right in law in upholding the order of the CIT(A) directing to exclude sales tax and excise duty while computing total turnover for the purpose of deduction u/s. 80HHC of the I.T. Act?
Issue-wise Detailed Analysis:
1. Substantial Question of Law:
The primary issue in the appeal was whether the Appellate Tribunal was correct in law in upholding the CIT(A)'s decision to exclude sales tax and excise duty from the total turnover for the purpose of deduction under Section 80HHC of the Income Tax Act, 1961.
2. Legal Precedents and Applicability:
The court noted that the substantial question of law raised is not res integra (an unsettled question) and has been settled against the Revenue by the Supreme Court in the cases of Commissioner of Income Tax vs. Lakshmi Machine Works and Commissioner of Income Tax vs. Shiva Tex Yarn Ltd. The Supreme Court in these cases held that excise duty and sales tax should be excluded from the total turnover for the purpose of Section 80HHC.
3. Arguments by Revenue:
The Revenue's counsel attempted to distinguish the aforementioned Supreme Court decisions by arguing that Section 145A of the Income Tax Act had not been considered in those decisions. However, the court observed that there had been no amendment to Section 80HHC and that the Supreme Court's observations in the Lakshmi Machine Works case were still applicable.
4. Supreme Court Observations:
The Supreme Court in Lakshmi Machine Works emphasized that the formula in Section 80HHC is intended to exclude receipts like brokerage, commission, interest, and rent from business profits as they do not have a nexus with export activity. The court highlighted that excise duty and sales tax do not involve any element of turnover and should be excluded from the total turnover to make the formula workable.
5. Purposeful Interpretation:
The court noted that a purposeful interpretation of Section 80HHC is necessary. The section is based on a formula designed to segregate export profits from business profits. Including excise duty and sales tax in total turnover would distort the calculation of export profits, which is not the legislature's intent.
6. Subsequent Decisions:
The court also referenced the Supreme Court's decision in Shiva Tex Yarn Ltd., which followed the Lakshmi Machine Works ruling even after considering Section 145A, reinforcing that excise duty and sales tax should be excluded from total turnover.
Conclusion:
Applying the Supreme Court's ratio decidendi from the Lakshmi Machine Works and Shiva Tex Yarn Ltd. cases, the Gujarat High Court concluded that the Tribunal had not erred in excluding excise duty and sales tax from the total turnover for the purpose of Section 80HHC deduction. Consequently, the Tax Appeal was dismissed with no costs.
Final Judgment:
The Tax Appeal was dismissed, affirming that the exclusion of excise duty and sales tax from the total turnover for Section 80HHC deductions was correct.
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2013 (12) TMI 1591
Disallowance made u/s.43B(b) - unpaid PF/ESI amount which remained unpaid even during the grace period available - Held that:- It was the case with respect to employer's contribution as per section 43B(b) of the Act and it is not in dispute that employer's contribution with respect to PF/ESI amount was as such deposited before the due date of filing of the return under section 139 of the Act. Considering the fact that second proviso to section 43B came to be deleted and as per the decision of the Hon'ble Supreme Court in the case of Aloma Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] the deletion of second proviso to section 43B of the Act and amendment in the first proviso to section 43B is held to be retrospective in operation, it cannot be said that the learned Tribunal has committed any error and/or illegality in deleting the disallowance made under section 43B(b) - Decided against the revenue.
Ee-compute the interest under section 234B of the Act after allowing credit of MAT.
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2013 (12) TMI 1590
TPA - determination of ALP - comparable selection - Held that:- Tax payer is not stopped from pointing out a mistake in the assessment though such mistake is the result of evidence adduced by the taxpayer. It has further held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. Further the other side cannot claim to have a vested right in injustice being done due to some mistakes on its part. In view of the aforesaid facts and considering the peculiarity of the facts of the present case we are of the view that Vakrangee Software should be excluded while working out the OP/TC%. We therefore restore the matter to the file of AO for fresh consideration after considering the foregoing and thereafter decide the issue as per law and after giving a reasonable opportunity of hearing to the Assessee. Thus this ground of the Assessee is allowed for statistical purposes.
Expenditure incurred by the assessee as community welfare expenses is allowable.
Computation of deduction u/s 10B - brokerage on sea freight and insurance claim non considered to be part of profit for deduction u/s 10B - Held that:- It is seen that the respected Special Bench of the Tribunal in Maral Overseas Ltd. case [2012 (4) TMI 345 - ITAT INDORE] has held that once an income forms part of the business of the undertaking, the same would be included in the profits of the business of the undertaking and will be eligible for deduction. Respectfully following the aforesaid Special Bench decision, we are of the view that the Assessee is eligible for deduction on the brokerage on sea freight and insurance claim which it has credited to its profit and loss account. Thus this ground of the Assessee is allowed.
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2013 (12) TMI 1589
Claim for deduction u/s 54F - Held that:- Board vide circular no. 672 after referring Circular No. 471 extended the facility of exemption u/s 54 & 54F in respect of allotment of flat/house. Thus, as per the CBDT Circular also, the assessee acquired the rights/title in the flat by way of allotment letter on 22.1.2005. This allotment letter was duly confirmed by the assessee by making various payment as narrated above. Out of total payment of ₹ 33.15 lakhs, the assessee made payment of ₹ 6.23 lakhs in the month of allotment itself i.e. January, 2005. Subsequent payment was also made as per the terms agreed with the builder. Only after receipt of entire amount, the builder has executed agreement with the assessee on 27.2.2009. The assessee has sold the said flat on 05.03.2009. Since the assessee has acquired all the rights in the flat on 22.01.2005, the period of holding is to be computed with respect to the date of allotment i.e. 22.01.2005. Taking the date of sale as 05.03.2009, the holding period of flat with the assessee was more than 36 months, therefore, there is no infirmity in the order of CIT(A) for allowing assessee's claim for exemption u/s 54/54F, by treating the capital assets so sold as long term capital assets.
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2013 (12) TMI 1584
Deduction under section 54F - Held that:- In the present case, the assessee is said to have incurred expenditure in the form of modular kitchen, TV, show case, bath room fittings and POP work. In our opinion, if these expenditure have been incurred for the purpose of remodeling of flat in normal course after purchasing the readymade flat, it is allowable expenditure. However, if it is for beautifying the flat by removing the previous one, it cannot be considered for deduction under section 54F. We, therefore, remit the issue to the file of the Assessing Officer to examine this issue with reference to the agreement entered by the assessee with the builder/developer (construction agreement) thereafter decide whether the developer has provided these things or not and decide the issue in accordance with law. Accordingly, this issue is remitted to the file of the Assessing Officer for fresh consideration.
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2013 (12) TMI 1579
Disallowance u/s 14A - Held that:- It is a fact that the relevant assessment year is 2007-08 under consideration is outside the scope of provisions of Rule 8D. The said provisions cannot be treated as applicable to the A.Y.2007-08 under consideration indirectly when the same is precluded by the Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT, reported in (2010 (8) TMI 77 - BOMBAY HIGH COURT ) Bom). Ppercentage of the exempt income can constitute a reasonable estimate for making disallowance in the years earlier to the assessment year 2008-09
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2013 (12) TMI 1578
Assessment u/s 153C - Held that:- To invoke the jurisdiction for “Assessment in case of search or requisition” there are two aspects, the searched person on whom notice u/s 153A shall be served and as a consequence of which assessment u/s 143(3)/153A shall be made. The other aspect is that in the course of search if certain documents are found, which would pertain to a third person, in such a situation, the AO having jurisdiction over the searched person shall record reasons and hand over the material to the AO having jurisdiction over the third person. In that case, the AO having jurisdiction over the person other then the person searched, shall initiate the proceedings by the issue of notice u/s 153C. The instant case pertains to this aspect, i.e. proceedings u/s 153C.
In the case before us, search took place on the new management and admittedly no document as such was found which indicated that there was certain income belonging to the assessee, which had not been disclosed to the department in the impugned assessment years. Since the search was on the new management, the assessee company became the person other then the person searched. In these circumstances, issue of notice u/s 153C and assessment to be framed under this provision is imperative, as the provision is non obstante. In these circumstances, we hold that the additions made u/s 153C are sustainable.
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2013 (12) TMI 1577
Deemed dividend addition u/s 2(22)(e) - Held that:- Inter-corporate deposits cannot be treated as a loan falling within the purview of section 2(22)(e) of the Act. In view of the decision taken by the coordinate Bench that intercorporate deposits received cannot be considered as a loan or advance so as to visit an assessee with the hazards of section 2(22)(e) of the Act, Ld. CIT(Appeals) was in our opinion justified in deleting the addition
Disallowance under section 14A - Held that:- CIT(Appeals) after verifying the cash flow statement came to a conclusion that loans raised were not used by the assessee for the purpose of any investment earning dividend income claimed as exempt. Disallowance of interest as stipulated in sub-clause (ii) of clause (2) of Rule 8D can be done only when an assessee has incurred expenditure by way of interest which is not directly attributable to any particular income or receipt. Ld. CIT(Appeals) had given a clear finding after verifying the cash-show that the loan amounts were not used for any investment resulting in the dividend income. Nothing has been brought on record by the Revenue to show that the finding of ld. CIT(Appeals) is not according to facts. We are therefore not inclined to interfere with the order of ld. CIT(Appeals)
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2013 (12) TMI 1576
Issues Involved:
1. Status of the assessee as an AOP or firm.
2. Preparation of Profit & Loss account and Balance Sheet by the assessee.
3. Allocation of contract work and payments among members.
4. Applicability of TDS provisions under section 194C.
5. Re-allocation of contracts and its classification as sub-contracting.
6. Control and responsibility of the assessee over the contract.
7. Applicability of the Supreme Court judgment in the case of Ch. Achaiah.
8. Differentiation from the case of Geoconsultant ZT GMBH.
Issue-wise Detailed Analysis:
1. Status of the Assessee:
The Assessing Officer (AO) initially mentioned the status of the assessee as a firm, but the assessee clarified that the status was an Association of Persons (AOP) as reflected in the returns filed manually till A.Y. 2006-07. The error in electronic filing from A.Y. 2007-08 was due to a computer glitch. The CIT(A) confirmed the status as AOP, noting that the status was consistently shown as AOP in the computation of total income and PAN application forms.
2. Preparation of Profit & Loss Account and Balance Sheet:
The assessee argued that the joint venture did not execute any contract work itself but was formed to obtain contract work and distribute payments among members based on their share of work done. The contract account and Balance Sheet of the joint venture showed only the apportionment of contract receipts, assets, and liabilities between members, without booking any expenditure or preparing a Profit & Loss Account. The CIT(A) accepted this explanation, noting that no profit or loss arose to the assessee per se.
3. Allocation of Contract Work and Payments:
The joint venture allocated the contract work and corresponding payments to its members in the ratio of the work done. The CIT(A) observed that the joint venture transferred the gross revenue and corresponding TDS to its members, who accounted for the revenue in their respective returns. The CIT(A) found no relationship of contractor and subcontractor between the joint venture and its members, negating the applicability of TDS provisions under section 194C.
4. Applicability of TDS Provisions under Section 194C:
The CIT(A) held that there was no applicability of TDS provisions under section 194C as the joint venture did not retain any share in the revenue and passed the entire gross revenue along with TDS to its members. The CIT(A) noted that the Department had issued tax apportionment certificates every year to enable the members to claim TDS credits in their respective cases.
5. Re-allocation of Contracts and Classification as Sub-contracting:
The CIT(A) rejected the AO's view that the re-allocation of contracts among members amounted to sub-contracting. The CIT(A) distinguished between revenue sharing and sub-contracting, noting that in revenue sharing, there was no principal-agent relationship, and the joint venture did not retain any share in the revenue.
6. Control and Responsibility of the Assessee over the Contract:
The CIT(A) found that the joint venture acted as a conduit between the contractee and its members, with no control over the execution of the contract work. The CIT(A) noted that the joint venture's role was limited to receiving payments and distributing them among members based on their work share.
7. Applicability of the Supreme Court Judgment in the Case of Ch. Achaiah:
The CIT(A) distinguished the present case from the Supreme Court judgment in Ch. Achaiah, noting that the joint venture did not execute any contract work itself and did not retain any share in the revenue. The CIT(A) held that the AO's reliance on the Ch. Achaiah judgment was misplaced.
8. Differentiation from the Case of Geoconsultant ZT GMBH:
The CIT(A) accepted the assessee's stand that the facts of the present case were distinguishable from the case of Geoconsultant ZT GMBH, where the joint venture was held to be an AOP. The CIT(A) noted that in the present case, the joint venture did not execute any contract work and acted only as a conduit for distributing payments among members.
Conclusion:
The appeal filed by the revenue was dismissed, with the CIT(A)'s findings upheld. The CIT(A) rightly held that there was no question of disallowance under section 40(a)(ia) of the Income-tax Act, 1961, in this case. The Tribunal found no reason to interfere with the CIT(A)'s order, following the reasoning in the assessee's own case for A.Y. 2008-09 and similar cases decided by the ITAT Pune Bench.
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2013 (12) TMI 1575
Transfer pricing adjustment - Held that:- By our detailed reasoning we have held that the departments stand is correct as unique geographical market conditions of the source country in the present facts of the case have no relevance for bench-marking purposes. We have held the focus has to be on India prices as the market for the product of the assessee is India and any third uncontrolled entity for selling similar product would pay the price for the said product going by India specific prices as such they should form the basis for benchmarking. Accordingly we set aside the impugned order and restore the issue back fact to the TPO to readjudicate the issue afresh by way of a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. The TPO shall also consider the benefit of +/- 5%, it available to the assessee on facts of the case. The impugned orders as such are set aside.
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9911796707
