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Income Tax - Case Laws
Showing 141 to 160 of 7553 Records
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2014 (12) TMI 1157 - ITAT CHENNAI
Transfer pricing adjustment - upward adjustment in Arm’s Length Price - selection of M/s Genesys International as comparable - Held that:- The assessee files before us annual report of this entity for 2008-09 stating it to be involved in land base mapping and in geographical information systems. This company also claims itself to be capable in GIS consulting, 3D mapping, Navigation maps, LiDAR, Photogrammetry remote sensing services, Utility services, Image processing, surveying, Business geographics & Logistics, Cadastral Mapping, City Scape and Telecommunications. These facts lead to an inference that there is mutually contradictory information in the public domain pertaining to the said entity. In other words, its functions in annual report and public domain differ. Faced with this situation, we are of the view that a remand order simpliciter will not meet the ends of justice. Thus, in the larger of interest of justice, we deem it appropriate that the impugned ‘PLI’ has to be decided somewhere between 20% and 32.8% i.e @ 23%. The assessee’s grounds are partly accepted. The Assessing Officer is directed to pass a consequential order computing upward adjustment accordingly. - Decided partly in favour of assessee.
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2014 (12) TMI 1156 - ITAT DELHI
Reopening of assessment - expenses incurred for development of certain products will give an enduring benefit to the assessee and same is in the capital field - CIT(A) deleted addition - Held that:- The assessee has incurred expenditure of ₹ 31.20 lacs on salaries, wages, stores & sapares, travelleing etc. No expenditure has been incurred on any asset of the nature fixed assets or capital in nature or which has resulted into any benefit of enduring nature. The expenditure had been incurred for improvement and enhancement of its existing business in the line of chemical manufacturing under the unity and control of same management with common funds etc. See Rama Synthetics India Ltd. Vs. CIT reported in (2009 (9) TMI 635 - Delhi High Court ) & CIT Vs. Priya Village Roadshows Ltd. reported in (2008 (5) TMI 142 - PUNJAB AND HARYANA HIGH COURT). CIT(A) is justified in deleting the disallowance of ₹ 31.2 lakhs - Decided in favour of assessee.
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2014 (12) TMI 1155 - ITAT MUMBAI
Payment of BMC charges - disallowance as enal in nature as per Explanation to section 37(1) of the Act - Held that:- There are series of decisions on the point wherein distinction has been carved out between the penalty paid for infraction and for irregularities. Accordingly, in the facts and circumstances of the case, we find that the payment in question does not fall under the category of a penalty for an offence which is prohibited by law. Hence the disallowance made by the Assessing Officer is deleted. - Decided in favour of assessee.
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2014 (12) TMI 1154 - ITAT HYDERABAD
Penalty u/s 221 - Non deduction of TDS - held that:- CIT (A) recorded that the assessee did not make any payment either in cash or in cheque, to PCL Projects Ltd, therefore, the question of deduction of TDS does not arise. It was THDC which made payments directly to Rithwik Projects Ltd. There is also a finding that M/s. THDC deducted the tax on the joint venture and that the joint venture admitted the gross receipts and took credit of TDS and claimed refund also. These facts are not disputed by the Revenue in the grounds of appeal - when the assessee has admittedly not paid any amount to M/s Rithwik Projects Ltd and when the assessee has accounted for only the commission, the question of the assessee deducting the tax at source does not arise - Decided against Revenue.
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2014 (12) TMI 1153 - ITAT CHANDIGARH
Penalty under section 271(1)(c) - Held that:- The assessee has disclosed all the particulars of the income and it cannot be stated that the assessee has concealed any particular and furnished incorrect particulars. Once proper disclosures have been made then penalty is not attracted in view of the decision of the hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts P. Ltd. [2010 (3) TMI 80 - SUPREME COURT]. Further the return was filed on the basis of the certificate issued by the chartered accountant and even if it is a mistake on the part of the chartered accountant, the assessee can always take the shelter that he was under bona fide belief on the basis of such advice that deduction was claimed on the basis of such bona fide belief. Therefore, in our opinion this is not a fit case for levy of penalty - Decided in favour of assessee.
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2014 (12) TMI 1152 - ITAT MUMBAI
Exclusion of stock in trade from average value of investment for the purpose of disallowance made u/ s 14A r.w. Rule 8D (2)(ii) - Held that:- When the assessee is in the business of share trading as well as future & option then the expenditure incurred by the assessee in the course of business activity of trading in shares would be considered exclusively for business activity and the same cannot be apportioned being an expenditure incurred for earning the dividend income.
The expenditure attributable towards the earning of the exempt income directly related to the dividend income has to be disallowed as the same cannot be claimed against the taxable income of the assessee. Therefore, the disallowance computed under Rule 8D of the Income Tax Rules cannot be more than the actual expenditure incurred by the assessee for the dividend income excluding the activity of share trading which is the business activity of the assessee. Even the computation of disallowance arrived as per the Rule 8D should be restricted only to the extent of actual expenditure or to the extent of the expenditure which can be attributable to the activity of the dividend income excluding the business activity of share trading. Accordingly, we direct the Assessing Officer to re-compute the disallowance u/s 14A with the rider to the actual expenditure which can be attributable to the receipt or earning of the dividend income excluding the expenditure related to business activity of share trading. - Decided partly in favour of revenue.
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2014 (12) TMI 1151 - ITAT HYDERABAD
Unexplained deposits in the bank accounts - CIT(A) deleted the addition - Held that:- On perusal of the order passed by ld. CIT(A), it appears that CIT(A) has accepted assessee’s claim merely on its face value without properly making any enquiry to find out whether assessee’s claim is correct. Further, CIT(A) is under misconception that AO has only considered the deposits without taking into account the withdrawals. As can be seen from the assessment order, AO has considered both the deposits and withdrawals and worked out the peak credit of ₹ 31,13,502 for the purpose of addition. In these circumstances, ld. CIT(A)’s finding is not sustainable.
However, fact remains that AO has also not properly appreciated the facts and could not make effective enquiry due to constraint of time as assessment was getting time barred. Thus the entire issue relating to deposits into assessee’s bank account requires examination afresh in view of the claim made by assessee before the first appellate authority. - Decided in favour of revenue for statistical purposes.
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2014 (12) TMI 1150 - ITAT PUNE
Disallowance of corporate cost of allocation expenses - Admission of additional evidence - Held that:- Court admits the additional evidences filed by the assessee. Since these evidences go to the root of the matter for adjudication of the allowability of corporate cost of allocation expenses, we deem it proper to restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to explain his case. The AO shall decide the issue afresh and as per law after giving due opportunity of being heard to the assessee. - Matter remanded back - Decided in favour of assessee.
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2014 (12) TMI 1149 - ITAT MUMBAI
Interest receivable on the loans advanced to the associate enterprise - Held that:- It is an admitted fact that the loan was given in the year 2005. It is also undisputed fact that interest rate charged as LIBOR plus 200 basis points have been accepted in completed assessments from AYs 2005-06 to 2008-09. Thus, by taking a different view on the same set of facts violates the rule of consistency. Secondly, the DRP erred in considering the loan as loan from India. The fact of the matter is that it was a foreign currency loan which was given abroad. Therefore the most appropriate method is taking the LIBOR as correct benchmark. A similar view has been taken by the Tribunal in the case of Hinduja Global Solution Ltd. [2013 (6) TMI 420 - ITAT MUMBAI] . Considering the past history and the decision of the Tribunal (supra), we find that the benchmarking done by the assessee is correct and the AO is directed to delete the addition.- Decided in favour of assessee.
Disallowance u/s. 40A(2)(b) - Held that:- As decided in assessee's own case for A.Y. 2005-06 neither the assessee has provided any comparable rates to the revenue authorities nor the revenue authorities have made any attempt either by asking the assessee to provide for the comparable nor they suo moto collected any data from the market. What the revenue authorities have done is that they have relied on the internal comparable only to arrive at a figure of estimated charges per carat. In fact, the AO should have collected independent data or have asked the assessee to provide comparable periodic rates prevailing in the market at Deesa to set the bench mark. This exercise has not been done by the AO or by the CIT(A), which according to us, the revenue authorities should have done to arrive at some definite estimate. Thus matter is restored to the file of the AO to be decided afresh - Decided in favour of assessee for statistical purposes.
Disallowance of deduction for donations made u/s. 80G - assessee stated that for some reason the donation receipts could not be produced before the AO. Further, if one more opportunity is given, necessary details will be submitted before the AO - Held that:- We direct the AO to consider the documentary evidence submitted by the assessee for the claim of deduction on account of donation u/s. 80G of the Act. The assessee is directed to submit necessary details in support of its claim. - Decided in favour of assessee for statistical purposes.
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2014 (12) TMI 1148 - ITAT BANGALORE
Default u/s 201(1) - non deduction of taxes u/s 194C and 194J - Held that:- According to the assessee on the payments made with regard to Brain Lara Event, it had deducted the tax and deposited to the govt. treasury. These facts ought to have been verified by the Assessing Officer before raising a demand against the assessee. Taking into consideration these details, we are of the view that the issue needs to be re-looked at the end of the Assessing Officer. The assessee is directed to submit complete details of the payments including the challan Nos. indicating that the TDS was deducted and it was paid to the govt. treasury. Our observation will not impair or injure the case of the Assessing Officer and will not cause any prejudice to the defense/explanation of the assessee. The assessee will be at liberty to raise any plea or submit any evidence in support of its explanation. - Matter remanded back - Decided in favour of assessee.
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2014 (12) TMI 1146 - ITAT COCHIN
Rejection of the application for registration under section 12AA - Held that:- The assessee is at the preliminary stage for carrying out the charitable object. The assessee claims that buildings were under construction for starting the educational institution. However, no material is available on record to show that the assessee has started the construction of the building. The fact remains is that the assessee has not applied for permission/approval from the concerned authority for starting the educational institution. Therefore, as of now no charitable activity is carried on. - society has not done any charitable work during the relevant period. Therefore, it does not entitle for registration under section 12AA of the Act. The Division Bench of the Kerala High Court confirmed the liberty given by the learned single judge for filing a fresh application immediately after starting the charitable work. - assessee is not entitled for registration since no charitable activity was carried out. However, it is made clear that the assessee will be at liberty to file fresh application before the Commissioner as soon as the charitable activity, viz., the educational institution starts functioning. If such an application is filed, as observed by the Kerala High Court in the case of Self Employers Service Society [2000 (9) TMI 47 - KERALA High Court], the Commissioner shall consider the same on merit. - Decided against assessee.
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2014 (12) TMI 1145 - ITAT CHENNAI
Disallowance of depreciation - depreciation on assets - Held that:- Following decision of assessee's own previous case [2015 (1) TMI 310 - ITAT CHENNAI] - No infirmity in the order of the Commissioner of Income-tax (Appeals) - Decided against Revenue.
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2014 (12) TMI 1114 - BOMBAY HIGH COURT
Reopening of assessment u/s 147 - AO after examining the records and the documents filed by the Assessee, allowed the expenses as revenue expenditure – Whether, merely because the audit party has raised objections in relation to the allowability of the expenditure, the assessment cannot be reopened on the basis of change of opinion – Held that:- The Tribunal was rightly of the view that there is much substance in the contention of Assessee's representative – revenue could not produce the reasons recorded for reopening the assessment and opportunity was given to the departmental representative by the Tribunal to produce these reasons or a copy of thereof - However, beyond producing a copy of the letter written by the AO to the CIT seeking permission for reopening the assessment, nothing was produced by the revenue - the AO has initially given his own reason in the body of assessment order - the AO in the assessment has mentioned that the assessment was reopened with the prior approval of CIT(A) on the objections raised by the audit - the assessment made u/s. 143(3) r.w.s. 147 is devoid of any application of mind on the part of AO - AO has no reason to believe that income has escaped assessment or the assessee has filed inaccurate particulars of income as no new facts are brought on record - all the expenses claimed by the assessee have been verified in detail in the original assessment therefore the reopening of assessment to disallow the same merely on the basis of audit report is not justifiable.
The Tribunal proceeded to consider the correctness of the submission of the departmental representative that compliance u/s 148 was made in this case and by relying on the audit report - The audit objections could form the basis for initiation of the proceedings was the Department's stand and further that reasons are recorded in the letter which has been addressed by the AO to the Commissioner - an opinion was given by the audit party with regard to the receipts from the occupation of conference hall and rooms - in every case, the ITO must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment - The basis of his belief must be the law of which he has not become aware - The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law - the true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO - It is his belief and the statutory exercise contemplated by section 147(1) and 148(2) must be carried out by him - The Tribunal has rightly held that once the audit party raised objections, one of which was not accepted, then, the AO was expected to record reasons for his belief - Those reasons have not been recorded, as is clear from the material placed before the Tribunal – as such no substantial question of law arises for consideration – Decided against revenue.
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2014 (12) TMI 1113 - BOMBAY HIGH COURT
Validity of notice for reopening of assessment u/s 148 – Failure on its part to disclose truly and fully all material facts necessary for assessment or not - Held that:- The condition precedent to clothe the AO with jurisdiction to reopen an assessment are reason to believe that income chargeable to tax has escaped assessment (a mere change of opinion would not be reason to believe) - An additional jurisdictional condition for reopening of an assessment beyond a period of four years from the end of the relevant assessment year is the failure to truly and fully disclose all material facts necessary for assessment – the notice has been issued beyond a period of four years from the end of the relevant AY - the reasons itself indicate that it is on perusal of record and details filed by the Petitioner that claim of the Petitioner in respect of export of trading goods is concerned, is disproportionately higher - there has been no failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment.
No invoice wise details of purchase of trading goods exported and failure to corelate the trading export with the purchases has resulted in failure to make a true and full disclosure - the reasons for re-opening cannot be supplemented by affidavits - The reasons have to be read as they are and cannot be improved upon by filing affidavits in Ajanta Pharma Ltd. Versus Assistant Commissioner of Income-Tax And Others [2003 (11) TMI 32 - BOMBAY High Court] wherein it has been held that the petitioners have categorically stated about the disclosure of details of trading goods exported along with direct cost of purchases for the assessment year along with their return and the fact also finds corroboration from the affidavit of the Assistant Commissioner of Income Tax wherein he has made a grievance only of non-furnishing of documents in support of those details - the reasons for issuance of notice did not disclose to be borne out from the records - the so called reasons are totally flimsy, as has been contended on behalf of the petitioners, and, by no stretch of imagination, can be said to be sufficient to draw the conclusion about escapement of income which could empower the authorities to invoke powers under Section 148 - there was no material on the basis of which the Department could have reopened the case in exercise of powers u/s 148.
Set off of trading profits against the loss of manufactured exports for purposes of claiming deduction u/s 80 HHC – Held that:- The Petitioner had pointed out in its return of income that the loss on account of export of manufactured goods is ignored for the purpose of calculation of deduction u/s 80HHC of the Act as it is an incentive provisions - there was a complete disclosure – the notice is hit by the first proviso to Section 147 – in IPCA Laboratories v/s. Deputy Commissioner of Income Tax [2001 (7) TMI 99 - BOMBAY High Court] - the loss in any of the two segments has to be set off against the other for the purpose of determining the deduction available u/s 80HHC – thus, the notice u/s 148 is unsustainable in view of no failure on the part of the Petitioner to fully and truly disclose all facts necessary for assessment, the notice is set aside on the above ground alone – Decided in favour of assessee.
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2014 (12) TMI 1112 - BOMBAY HIGH COURT
Principle of mutuality - Contribution paid towards heavy repair fund chargeable to tax or not - contribution paid or made by the members to the co-operative society was occasioned by transfer of the flat – Revenue argued that:- If the amount is received on account of transfer of a flat and which is not restricted to ₹ 25,000/- but much more, then different consideration may apply - what has been argued and vehemently is the amount was received by the Society when the flat and the garage were transferred – it must be presumed to be nothing but transfer fees - It may have been credited to the fund and with a view to demonstrate that it is nothing but a voluntarily contribution or donation to the Society, but still it constitutes its income.
Held that:- for rendering such a conclusive finding there has to be material brought by the Revenue on record. Beyond urging that it has been received at the time of a transfer of the flat and credited to such a fund will not be enough to displace the principle laid down in the decision of Sind Cooperative Housing Society [2009 (7) TMI 15 - BOMBAY HIGH COURT]. The attempt of the Revenue therefore is nothing but overcoming the binding judgment of this Court.
It is a typical relationship between the member of the Co-operative Society and particularly a Housing Society and the Society which is a body Corporate and a legal entity by itself that is forming the basis of the principle laid down by the Division Bench - Co-operative movement is a socio economic and a moral movement - It has now been recognized by Article 43A of the Constitution of India - It is to foster and encourage the spirit of brotherhood and co-operation that the Government encourages formation of Co-operative Societies - The members may be owning individually the flats or immovable properties but enjoying, in common, the amenities, advantages and benefits. The Society as a legal entity owns the building but the amenities are provided and that is how the terms "flat" and the "housing society" are defined in the statute in question - following the decision in Sind Coop. Hsg. Society Versus Income Tax Officer [2009 (7) TMI 15 - BOMBAY HIGH COURT] - there is substance in the argument that the AO had before him the material in the form of the bye-laws of the Society - The bye- laws also are in consonance with the Government Resolution and stipulate a sum of ₹ 25,000/- towards transfer fees – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 1111 - ANDHRA PRADESH HIGH COURT
Determination of Rent - AO enhanced the rent on the presumption that actual rent is low - taxable in the hands of deceased assessee as well as the Trust - double taxation – Held that:- Where the premises, are leased to the Government or its organisations, the scope for an assessee to show the rent at a lower figure, does not arise - there does not exist any particular standard, to fix the rent of any premises - much would depend upon the location and condition of the building and the demand in the locality - where the lessee is a Government, the transaction is regulated by the fixed parameters - even if the building has potential to fetch a higher rent, the Government departments are not expected to pay such rent - in case the owner of the premises is willing to lease them to the Government or its agencies, for reasons of safety and security or assured payment of rent, the discretion of the AO to determine the reasonable rent of his choice, gets virtually restricted - He cannot ignore the actual payments and fix an imaginary figure, based upon the alleged information or potential of the building - once the penalty proceedings were dropped, the suggested figure virtually loses its significance - the rent for the premises must be taken at ₹ 13,500/-, unless there was any enhancement by the lessee itself, for any subsequent period.
Period regarding which the assessee is under obligation to pay the tax – Held that:- The original assessee died on 16.09.1994 and her legal representative filed returns for the period from 01.04.1994 to 16.09.1994 - Tax was also paid on the income derived from house property - For the subsequent period, the Trust, which became the legatee, filed returns and paid the tax - once that is so, there was absolutely no basis for the AO to levy tax for the same period on the testator also - The Commissioner did not address this issue and the Tribunal refused to take that into account, on the ground that it was not raised earlier - being a last authority on facts, the Tribunal was supposed to deal with every aspect, that arises for consideration, uninhibited by any such restrictions – thus, the matter is remitted back to the AO for the limited purpose of verification of the Will Deed and the factum of the bequest of the property on the Trust – Decided in favour of assessee.
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2014 (12) TMI 1110 - BOMBAY HIGH COURT
Invocation of power of CIT for revision u/s 263 - Erroneous or prejudicial to the interest of the Revenue – Held that:- The Tribunal rightly was of the view that the Commissioner's power u/s 263 could not have been exercised - The exercise of powers was based merely on change of opinion - If the Commissioner held the particular opinion, but on the same transaction and same dealing, then that was not enough to enable him to exercise this power, is the conclusion reached - firstly the Commissioner rendered a particular finding - an agreement for sale confers no title in the immoveable property - The Commissioner possibly is not aware of the nature of the transaction and in immoveable property in the city of Mumbai - This agreement for sale definitely confers rights and which are capable of being enforced - it is not clear as to why the Commissioner held another opinion - apart therefrom only his view and opinion will not enable him to exercise the power u/s 263, that is not found to be permissible in law by the Tribunal - if his view on the same set of facts pertaining to the transaction alone have gone into in the exercise undertaken by him and for invoking the power u/s 263 of the Act, then, there was no error in reversing his order and not upholding his view – thus, the AO’s order is not erroneous and in so far as it is prejudicial to the interest of the Revenue, but the Commissioner proceeded to exercise his power on mere change of opinion – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 1109 - ITAT DELHI
Disallowance on expenses on adhoc basis under manufacturing, trading and other expenses – Held that:- The A.O. disallowed on ad-hoc basis 10% of the total expenditure for the reason that the assessee could not furnish item-wise details of purchase and sale of goods - the books of account were accepted by the AO and no adverse inference in maintenance thereof was pointed out - the entire expenses incurred during the year was duly vouched and supported by necessary documents - The AO could not have made any ad-hoc disallowances without pointing out even a single instance of inflation of expenditure - the gross margin was worked out on the basis of books of account which were duly audited and accepted as correct and complete - The gross profit with regard to sale and purchase of goods in the trading division was at rate of 31.57% and there were various in direct expenses in the nature of high rental for retail outlets in prominent location - This had pushed down the net profit rate - CIT (A) has categorically found gross profit earned from the trading division of the assessee is reasonable and has also examined the vouchers of purchase and sale of goods made by the assessee on a sample basis and has found same is to be correct – the order of the CIT(A) is upheld – Decided against revenue.
Restriction of addition u/s 14A r.w. Rule 8D – Held that:- The dividend which is exempt from taxation is earned on account of investment made in share in the earlier years - The additional shares allotted to the assessee's company in the current AYs were on account of amalgamation of subsidiary companies - Therefore, no portion of the interest expenses incurred was in relation to investments in shares - the AO has not established any nexus between the investment and the borrowed funds - the assessee had enough interest free funds in the form of reserves and surplus and there was no relation between the interest expenditure and the dividend income - therefore, disallowance of interest expenditure, by invoking the provision of Section 14A, was uncalled for and the order of the CIT(A) I s upheld – Decided against revenue.
Disallowance of repair and maintenance expenses related to building and office equipment – Capital expenses or not – Held that:- The assessee had acquired the land at Ballabgarh in the year 1979 on which factory building was constructed and, accordingly, capitalized in the books on the year ending 31.3.1981 for an aggregate amount of ₹ 85,99,124/- since then the building was put to use in the course of business carried on by the assessee and for the continuous use of the building for a long period of over 20 years, the factory building had naturally required certain repairs and alterations for uninterrupted and smooth operations of the business in the building - Considering the life of the building and the total amount of expenditure of ₹ 6,84,504/- incurred on repair of the factory during the year was nominal compared to the total construction cost of building of ₹ 85,99,124/- in the year 1981 – the expenditure cannot be said to be capital in nature - an expenditure incurred on repair of building for the purposes of business, which is not capital in nature is allowable deduction u/s 30 or 37(1) – in Ramaraju Surgical Cotton Mills [2007 (8) TMI 39 - SUPREME COURT OF INDIA] it has been held that if a repair expenditure does not fall within the meaning of 'current repair' under section 30, but does not result in acquisition of any new capital asset, can be allowed as revenue expenditure under the residuary provision of section 37(1).
The assessee is engaged in the business of manufacturing/ publishing and sale of city maps, manufacturing and trading of furnishing items, etc. - the assessee is not engaged in the business of manufacturing software or rendering services, through use of softwares - The softwares, if any, acquired by the assessee during the relevant year or up-gradation of existing software acquired in the earlier year, were merely application of softwares which enabled the assessee to execute tasks in the field of accounting, purchases, inventory maintenance, etc. and, thus, facilitating smooth carrying on of the business operations - such application of software did not result in creation of any new profit-earning apparatus or source of income for the assessee - the assessee only acquired license to use the softwares, it did not amount to have any ownership right in such software, and that the assessee cannot even be said to have acquired any capital asset to consider such licence fee paid as capital expenditure - the expenditure incurred on up-gradation of existing softwares or payment of license fee for new softwares for additional users cannot be said to be capital in nature – Decided in favour of assessee.
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2014 (12) TMI 1108 - ITAT COCHIN
Determination of agricultural income – Held that:- The assessee is cultivating coffee plantation in 150 acres - AO estimated the agricultural income at ₹ 4000/- per acre which worked out ₹ 6 lakhs as against the estimation of income by the assessee at ₹ 23,07,737/- CIT(A) considered the agricultural income at ₹ 8252/- per acre working out at ₹ 12,37,850/- when the assessee has not maintained proper books of accounts regarding actual income generated from the coffee plantation, it is inevitable that the estimation of income is to be done - CIT(A) after considering the report of the Coffee Board observed that the actual production of coffee in the Annamalai area was 0.64 MT/hectare. Since the assessee’s area is rocky and barren area in the estate, the CIT(A) considered 70% of 150 acres, i.e. 105 acres of area wherein coffee plantation was carried on by the assessee and since the yield in this area is less, he considered the yield from this area as only 0.38 MT/hectare - the estimation made by the CIT(A) is very reasonable based on the report from Coffee Board - assessee has not produced contrary material to controvert his findings - in the absence of positive evidence by the assessee to support the assessee’s argument, the order of the CIT(A) cannot be reversed - the estimation of agricultural income made by the CIT(A) is confirmed – Decided against assessee.
Disallowance of expenses and telescoping the same against the agricultural income of the assessee under the head “Other Sources” – Held that:- The disallowance was made by the Revenue authorities on account of lack of proper evidence like vouchers/bills produced by the assessee in support of the expenditure - when the assessee claims any expenses, it is the duty of the assessee to prove that the expenses were actually incurred for the purpose of earning income. - there is every chance of inflating expenses incurred for agricultural purposes to business purposes - If the assessee has placed necessary evidence to show that it was incurred for the purpose of business, then the Revenue would be in a position to pinpoint the discrepancies if any - most of the expenses are unvouched for and are supported by self-vouchers - when the assessee makes self-vouchers, there is every chance of inflating the same - being so, in the absence of necessary evidence to show that it was actually incurred for business purposes, the order of the CIT(A) cannot be reversed – Decided against assessee.
Disallowance of 50% of the increase in traveling expenses – Held that:- The CIT(A) has very reasonably considered that no disallowance of salary, rent, electricity charges, rates and taxes, repairs and maintenance, bank charges and commission, legal expenses, labour welfare fund internal audit fee, tax audit fee, telephone charges, cash transfer tax, printing and stationery etc can be made for the reason that they are duly vouched - CIT(A) found that self-made vouchers were made only for traveling expenses of staff and Directors and hence she disallowed 50% increase in traveling expenses at ₹ 1,54,464/- CIT(A) has taken a reasonable view and the same is confirmed – Decided against assessee.
Disallowance of foreign travel expenses – Held that:- Assessee has not produced any evidence to prove that the above expenses were incurred for the purpose of business - the assessee’s business is confined to Kerala - the Directors went abroad to mobilize deposits for the purpose of assessee’s business - what are the activities done by the assessee’s Directors with regard to the business of the assessee are not brought on record - in the absence of the details of the activities carried out by the assessee’s Directors with regard to the business at abroad, the order of the CIT(A) is upheld – Decided against assesse.
Disallowance of depreciation on vehicles – Held that:- The assessee is a limited company - the lower authorities have disallowed 1/4th of the total expenses on vehicles - assessee is a limited company and the vehicles are used by the Company for frequent visits to its 78 branches in Kerala for business purpose - Being so, disallowance is not warranted towards depreciation on vehicles for personal use - the running expense of vehicle was allowed by the Assessing officer and it was held that the expenses were incurred solely for the purpose of business –Decided in favour of assessee.
Addition of payment made for consultation charges without deduction of TDS deleted – Held that:- The reason for deleting the disallowance was that the payment was made to the person who has retired from PF Department who has no professional qualification and it was not paid for rendering professional services and hence, provisions of sec. 194J was not attracted so as to apply the provisions of sec. 40(a)(ia) - if the payment has been made to the person in excess of the prescribed limit for which sec. 194J is applicable, relief cannot be given on the reason that the person who has rendered services is not a professional person - there is no necessity of professional qualification for rendering services and receiving payment - provisions of sec. 194J is directly applicable and the assessee is duty bound to deduct tax - assessee failed to deduct tax and hence the payment would attract the provisions of sec. 194J and non-deduction of tax under the section would attract the provisions of section 40(a)(ia) – the order of the CIT(A) is upheld – Decided partly in favour of revenue.
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2014 (12) TMI 1107 - ITAT DELHI
Disallowance on trade mark fee deleted – Revenue expenses or not - Right to use the trade mark acquired by the assessee was an intangible asset as defined u/s 32 or not - Held that:- CIT(A) rightly deleted the disallowance of ₹ 55,70,045/- on account of trade mark fee by holding that it was a revenue expenditure and without considering that “right to use the trade mark” acquired by the assessee was an intangible asset as defined u/s. 32 - following the decision in THE COMMISSIONER OF INCOME TAX-IV NEW DELHI Versus G4S SECURITIES SYSTEM (INDIA) PVT. LTD. [2011 (7) TMI 65 - DELHI HIGH COURT] - under the terms of the agreement, the ownership rights of the trade mark and knowhow throughout vested with G4F and on the expiration or termination of the agreement the assessee was to return all G4F knowhow obtained by it under the agreement - The payment of royalty was also to be on year to year basis on the net sales of the assessee and at no point of time the assessee was entitled to become the exclusive owner of the technical knowhow and the trade mark - hence, the expenditure incurred by the assessee as royalty is revenue expenditure and is therefore, relatable u/s 37(1) – Decided against revenue.
Disallowance of license fee deleted – Revenue expenses or not - assessee had acquired proportionate rights to use the software, which was an intangible asset as defined u/s. 32 or not – Held that:- CIT(A) rightly deleted the disallowance of license fee by holding it as revenue expenditure and without considering that the assessee had acquired proportionate rights to use the software, which was an intangible asset as defined u/s. 32 – Following the decision in COMMISSIONER OF INCOME TAX Versus M/s ASAHI INDIA SAFETY GLASS LTD. [2011 (11) TMI 2 - DELHI HIGH COURT] - it cannot be said that the expenses brought about in an enduring benefit to the assessee - the mere fact that the assessing officer records that the expenditure, in financial year 1997-98 (assessment year 1998-99), was incurred towards what he terms as an “on-going project” would not ipso facto give it a colour of capital expenditure - after noticing the submission of the assessee that the expenditure incurred in the AY was for removing deficiencies which were found in the software installed in the earlier assessment year, and that, out of a sum of ₹ 1.71 crores a sum of ₹ 49 lacs was incurred to modify, customize and upgrade the software installed, while the balance expenditure was used for development and implementation – it returned a finding that the expenses were incurred to upgrade and run the system – thus, the order of the CIT(A) is upheld – Decided against revenue.
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