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Income Tax - Case Laws
Showing 301 to 320 of 421 Records
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2012 (4) TMI 280 - ITAT DELHI
Exploration, extraction and production of mineral oil - AO has brought to tax income of the assessee u/s 9(1)(vii) instead of u/s 44BB(1) - Held that:- the assessee suffers no risks even if project of prospecting for or exploration for mineral oil does not succeed. The assessee could not demonstrate that the project is owned by it. The job of the assessee is well defined by the contract. Obviously, it cannot be said that the project is undertaken by the assessee even if it is assumed that services provided by the assessee amount to 'mining or like project'. Hence, first exception to definition of FTS as contained in Explanation 2 to section 9(l)(vii) is not available to the assessee. The second exception is also not available as receipts are not taxable under the head salary. Therefore, receipts are in nature of FTS and hence because of proviso to section 44BB(l), provisions of section 44BB(1) are not applicable.
On combined reading of proviso to section 44BB (1) and second proviso to section 44DA it is clear that the fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil though effectively connected with PE or fixed place of profession will fall not under section 44BB(1) and will be assessable under section 44DA of the Act -admittedly the receipts are not connected with PE in India and hence the fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil will be assessable u/s 115A of the Act.
Holding 25 per cent of the gross receipts from Eni as profits earned on the project and in failing to provide credit to the appellant in respect of taxes deducted at source by ONGC and Eni as per the provisions of section 195 of the Act assessee contested that entire project has to be executed by the assessee by employing vessels, whether owned or chartered equipped with specialized instruments all the terms of contract are similar to that of ONGC with only difference that Eni is a non-resident company Held that:- the amount received by the assessee will be assessable in the nature of fee for technical service and will be assessable u/s 115A (1)(b) of the Act - income from fee for technical services has been assessed in the hands assessee, the assessing officer is directed to allow credit of TDS against the tax payable by the assessee - the AO has charged interest treating the same as mandatory without examining the case in the light of judicial pronouncements - direct the assessing officer to examine accordingly as stated.
Levy of interest u/s 234B - Held that:- assessing officer has charged interest treating the same as mandatory without examining the case in the light of judicial pronouncements to the effect that if amount was subject to TDS, whether any interest was still chargeable under these sections - assessing officer is directed accordingly.
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2012 (4) TMI 279 - ITAT CHANDIGARH
Arm's length price - Section 92CA - Order u/s 144C - Determination of international transaction u/s 92B - addition made on account of alleged difference in arm's length price of reimbursement of advertisement, marketing and brand promotion expenses (AMP expenses) - whether inference by TPO was permissible without reference from the AO? - held that:- In the absence of the reference being made by the Assessing Officer to the TPO, the suo moto action taken by the TPO in working out the arm's length price of a particular international transaction, not referred to him by the Assessing Officer, is not warranted under the provisions of section 92CA of the Act. - in respect of the AMP expenditure, the assumption of jurisdiction by the TPO in working out arm's length price in respect of the aforesaid AMP expenditure, is not justified and the order of the TPO in this regard is non-est.
Capital or revenue expenditure - expenditure under the head "Promotional and Trade Marketing Expenses" - held that:- the test of enduring benefit is not conclusive to judge true nature of expenditure. One has to go further and ascertain as to whether particular expenditure results into an advantage of enduring nature in the capital field or revenue filed. In the instant case having regard to the nature and details of expenditure it is clear that the expenditure under the head "Promotional and Trade Marketing Expenses" is an expenditure which is incurred wholly and exclusively for the purposes of business and is in the revenue field. The same is allowable as a revenue expenditure.
Capital or revenue expenditure - expenditure under the head "Product Development Expenses" - held that:- it is erroneous to conclude that the assessee acquired a new line of business by merely developing and introducing new products in the existing line of business. The new products clearly relate to the same line of business that the assessee has been hitherto carrying on. Therefore, on above consideration also the plea of the assessee that the expenditure in question is a revenue expenditure deserves to be upheld.
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2012 (4) TMI 278 - JHARKHAND HIGH COURT
Power of attachment u/s 281B - abuse of power - attachment of various deposits lying in the bank as well as the immovable property - petitioner contended that Department did not proceed to determine the liability of the petitioner, which should have been done only within 21 months from the date of getting the incriminating documents under the search and seizure operation in the financial year when the search was conducted under Section 132 of the Income Tax Act. - held that:- It is true that there may be complex and voluminous documentary evidence, which may have been obtained by the Revenue Department and though documents may be in haphazard manner, which may require skilled expert opinion, for which the special audit can be ordered and if the Department could have proceeded, it could have done so. Be that as it may, the delay in the proceeding cannot be said to be fatal in all cases because of the reason that any time the Revenue may form opinion that there is possibility of shifting of money by the assessee.
Though the powers are wide but should be exercised by the Assessing Officer only if there is reasonable apprehension that the assessee may thwart the ultimate collection of the demand, i.e., likely to be raised on completion of the assessment. The power of attachment under this section is in the nature of attachment before judgment under the C.P.C. It is a drastic power. It should therefore, be exercised with extreme care and caution.
The attachment of the property should be made to the extent it is required to achieve the object. Obviously it must have some co-relation, which cannot be exact amount of future liability, but this does not mean that power under section 281B is absolutely arbitrary power and therefore,it is not necessary to form opinion about liability to maximum of possible liability and also this power cannot be such arbitrary that the Assessing Officer need not to indicate or know that properties of asessese which is being attached is of what value?
The order does not disclose any reason for attachment - attaching the property of the writ petitioner lying with the J.S.E.B cannot be sustained and liable to be set aside.
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2012 (4) TMI 273 - BOMBAY HIGH COURT
Validity of re-opening of assessment beyond a period of four year from the end of relevant AY Trust AY 2004-05 - assessment reopened on ground of information received by A.O. of alleged misappropriation of funds assessment of AY 2005-05 pending when FIR of misappropriation of funds was lodged Held that:- A.O. formed belief on the basis of the material revealed in the investigation which was carried out by CID, Mumbai. The chargesheet which has been filed by the EOW would in our view constitute tangible material on the basis of which the A.O. could have reopened the assessment. Conclusion drawn by A.O. that there was a failure on the part of the assessee to fully and truly disclose material facts necessary for the assessment for the Assessment Year 2004-2005 is upheld Decided against the petitioner.
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2012 (4) TMI 272 - ITAT MUMBAI
Unexplained cash credits CIT(A) deleted major additions made by A.O. - addition related to amount advanced by non-resident retained in absence of evidences - Held that:- Order of CIT(A) is upheld since assessee discharged his onus by establishing the identity, credit worthiness of parties and genuineness of the transactions and onus shifts to revenue, which is not discharged by it. AO cannot brush aside the evidences submitted during assessment proceedings and make additions. Further, CIT(A) have rightly excluded opening balance pertaining to the earlier years from the total addition - Decided against the Revenue With respect to amount advanced by non-resident Assessee submitted that since creditor is not assessed to tax in India, details of the tax returned could not be filed held that:- Since there is no finding in the assessment order about the claim made by the assessee, so it will be proper to remit the matter back to the AO for making verification in this regard and pass a speaking order Decided in favor of assessee for statistical purposes.
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2012 (4) TMI 271 - ITAT DELHI
Receipts in the nature of reinsurance brokerage/commission of the appellant treated by AO as fees for technical services as per Article 13 of the UK DTAA - Tribunal's order in assessee's own case for AY 2006-07 in his favour - DR relied on a recent ruling of AAR in the case of Verizon Data Services India limited (2011 - TMI - 205159 - AAR - Income Tax) after elaborately interpreting the provisions of Article 12 of the Indo-US DTAA and guiding protocol to the Treaty has concluded that it is not necessary to make available consultancy know how to the recipient in order to hold the same taxable under FIS Ld - Held that:- decision of AAR on the issue of applicability of Art. 12(4)(b) of the Indo-US DTAA has been set aside by the Hon'ble Madras High Court vide their order dated 9th August, 2011 in WP 14921 of 2011, we set aside the order of the ARA and remit the matter back giving an opportunity to the assessee to state its case as to the nature of services given by the seconded employees - the services do not fit into either of the categories defined in Article 13, since the services rendered by the assessee do not involved technical expertise, nor did the assessee made available any technical knowhow, experience, skill etc. - assessee was basically acting as an intermediary in the process of finalization of reinsurer suggesting various options to the Indian Insurance Co. for their consideration and acceptance - cannot be qualified to be in the nature of fees for technical services as contemplated under Article 13(4)(c) of the DTAA between India & UK - in favour of assessee.
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2012 (4) TMI 270 - ITAT DELHI
Determination of the appropriate head of income for taxing the surplus realized on sale of shares - business income or capital gain Held that:- AY 2006-07 - an investor would not enter into purchase and sale transactions of shares of 52 companies and units of 10 mutual funds in a single year. The transactions are numerous and period of holding is small - undertakes such large number of transactions keeping the market conditions in view would obviously assume the character of a dealer and not investor - surplus arising from the transactions fall in head profits and gains of business - against assessee.
AY 2007-08 and 2008-09 Assessee stated that the LTCG was claimed to be not includible in the total income by dint of provision contained in section 10(36), lower rate of tax was claimed to be applicable in respect of STCG - assessee has also shown STCG in respect of 74,000 bonus and the assessee also sold sub-divided shares and earned profit on it Held that:- bonus shares would normally be deemed to be distributed by the company as capital and the shareholders receive the shares as capital - profit on sale of bonus shares would be in the nature of capital gain to profit which has to be classified as STCG - bonus shares of Kotak Bank Ltd. and Unitech Ltd. are held to be on capital account and all other transactions are held to be on business account.
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2012 (4) TMI 269 - ITAT MUMBAI
Disallowance u/s. 40(a)(ia) - TDS u/s 194C or u/s 194J deleted by CIT(A) production of cinematographic films - held that:- Fundamentally, there is no difference between production of film for broadcasting and telecasting except that cinemotograph films are exhibited in theatres for viewing by the public. - The payment made by the assessee would fall for consideration only under the provisions of Sec. 194-C of the Act. Since the provisions of Sec.194-C of the Act were not applicable to individuals prior to 1.4.2007, the assessee was under no obligation to deduct tax at source for the period under consideration and therefore no disallowance could be made u/s. 40(a)(ia) of the Act.
Addition u/s 41(1) - remission of liability - held that:- there is no material on record to show that there was cessation of liability or remission of liabilities and that the assessee derived benefit by such remission or cessation of liabilities. In fact, the facts and record go to show that the liabilities were only one year old. In these circumstances, we are of the view that the addition sustained by the CIT(A) deserves to be deleted.
Additional grounds - new claim - CIT(A) rejected the Additional Ground raised by the Appellant - held that:- he Hon'ble Delhi High court in the case of Jai Parabolic Springs Ltd. (2008 (4) TMI 3 - DELHI HIGH COURT) has taken the view that there is no prohibition on the powers of the Tribunal to entertain any additional ground for a just decision of the case. The Hon'ble Delhi High Court distinguished the decision of the Supreme Court in the case of Goetz (India) Ltd. (5171). We, therefore, hold that the CIT(A) ought to have admitted the additional ground for adjudication.
Expenditure on production of feature films - Rule 9A - held that:- the claim made by the assessee was rightly accepted by the CIT(A). Even if Rule 9A is applied, the assessee was entitled to claim the un-recouped cost of production in terms of Rule 9A(3) of the Rules. This un-recouped cost has been determined at a sum of ₹ 2,93,73,793/- by the AO in the assessment of the firm for asst. year 2004-05 and the same has become final. It is not open to the AO of the assessee to re-determine the cost of production in the assessment of the assessee.
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2012 (4) TMI 268 - RAJASTHAN HIGH COURT
Application of stay of demand - Asst. Commissioner passed an Order stating that merely filing an appeal against the assessment order before the appellate authority is not sufficient reason to stay the recovery of demand Assessee file a Writ stating that Commissioner while passing the order has not taken into consideration the law laid down by the Hon'ble Supreme Court, this Court and also the mandatory circulars issued by the department of Income Tax itself - the view of the assessee is supported by the judgment of the honable Delhi High Court in the case of Soul v. Deputy Commissioner of Income - 2008 - TMI - 76546 - DELHI HIGH COURT - Income Tax Held that:- when the assessed income is more then double of the returned income then the demand should be stayed till the decision of appeal - it is apparent that while deciding the stay application, the Assistant Collector has not taken into consideration the judgment and circulars cited by the petitioner - quash the order remanding to the Assistant Collector of Income Tax to consider the stay application afresh by providing an opportunity of hearing to the petitioner and also by taking into consideration judgments and circulars cited by the petitioner in favour of assessee.
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2012 (4) TMI 267 - BOMBAY HIGH COURT
Return of income claiming deduction u/s 80I, 80IA and 80HH AO accepted the claim with little variation - CIT issued a notice under Section 263 mentioning that research expenditure incurred by the assessee is inextricably linked with the business of the assessee and business in those products which are manufactured in the units entitled to a deduction under Sections 80I, 80IA and 80HH - Tribunal set aside the order passed by the CIT holding that the jurisdiction under Section 263 has not been invoked properly - Held that:- As a result of an erroneous order passed by an Assessing Officer, where the Revenue is losing tax lawfully payable by an assessee, the order is prejudicial to the interests of the Revenue -there was a complete failure on the part of the AO to apply his mind to the issue of whether the expenditure which was claimed should be allocated as between the units in respect of which the deduction had been claimed and on whether there was a direct or proximate nexus - jurisdiction under Section 263 was in order and that the Tribunal was not justified in interfering with the order passed by the Commissioner.
Tribunal is right in holding that the entire cess can be claimed against taxable income? - the composite income derived from sale of tea grown and manufactured by the assessee cess payable on green tea leaves is allowable as a business expenditure in computing the composite income under Rule 8 of the Income Tax Rules,1962.
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2012 (4) TMI 266 - ITAT DELHI
Profit from purchase and sale of shares - Capital gain or business income - Held that:- assessee did not place any material, other than Board resolution, while the auditor reports and facts for the years under consideration, reflecting intention of the assessee, lead to the conclusion that the assessee is continuing its activities as in earlier years of a trader in shares - the voluminous share transactions were in the ordinary line of the assessee's business; purchase of shares by them was not for the purpose of earning dividend, but with the dominant intention of resale in order to earn profits - the repetition and continuity of the transactions, give them a flavour of "trade" - ld. CIT(A) was not justified in accepting the claim of the assessee as investor in shares - restore the order of the AO.
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2012 (4) TMI 265 - ITAT PUNE
Addition of income for suppression of the cable connections - the AO rejected the books of accounts silently and resort of estimations adopting basis of 40% of the electricity connections of an area in making the best judgment assessments u/s 144 - Held that:- In the absence of any material pointing towards falsehood of the books of accounts and no particular defect, or discrepancy being pointed in the books of accounts, resort could not be made to rejecting the books of accounts by invoking Sec.145(3) - AO shall not reject the books unless the accounts of the assessee suffer from either of the twin reasons specified in the Act ie correctness or completeness - Shri Ezaz Inamdar, Directors response is picked in isolation. A reading of the question and answer makes it clear that a part of the sentence is extracted to mislead. The full sentence is "Further for planning purpose, we take 40% as the possible connectivity - the said allegation of Service Tax Department and informed that the said allegation were finally dropped by the said Department as they could not support the allegation - the AO never could enlist or provide single conclusive instance of either incompleteness or inaccuracy in the accounts in favour of assessee.
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2012 (4) TMI 264 - ITAT DELHI
Disallowance of claim u/s 80IC - assessee filed return of income after due date claiming deduction u/s 80-IC - AO disallowed the claim as per Section 80AC stating unless the return is filed within the prescribed date, the claim u/s 80IC shall not be allowed - Held that:- The assessee in the present case, had filed all the necessary documents which were supporting the claim of the assessee for deductions u/s 80IC before due date of filing the return. The default of the assessee for not filing the return was only a technical default as the return was not filed, but supporting documents were filed - claim of the assessee should be considered on merits and it should not be rejected - AO has not examined the claim of the assessee on merits that whether or not the assessee is fulfilling the conditions laid down in Section 80IC, we restore the matter back to the file of AO to examine that whether these conditions are satisfied by the assessee - Appeal in favour of assessee in the mentioned manner.
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2012 (4) TMI 263 - ITAT HYDERABAD
Determining the average profit margin under the TNMM method - comparable - assessee stated that the companies which are showing loss are to be considered as comparable for determining ALP - CIT(A) observed that the financial results of the company used for comparable by TPO are shown for 15 months period and direct report of this company clearly stated that due to abnormal circumstances during the year, profits were adversely affected - due to the extra expenses, the probability of the company has been adversely affected - CIT(A excluded the results of loss making companies for the purpose of determining profit margin - Held that:- The determination of the ALP is depended upon the facts of a particular case - selection of comparables should be based on functional, asset and risk analysis of both the parties and the transactions - The underlying principle being that only likes can be compared with the like -the result of mentioned companies is not considered as comparables with the assessee's company transactions on the reason that the datas of these companies are not comparable with the assessee's company - If a reasonable accurate adjustment for the difference to eliminate material effect of the differences cannot possibly be made, then such comparables (uncontrolled) are to be rejected
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2012 (4) TMI 262 - ITAT MUMBAI
Profit on 'sale of ships' - CIT(A) stated profit from sale not attributable to the core activities defined for a tonnage tax company and as such is not to be include in the "Book Profit" of a tonnage tax company u/s 115 V-0 which is to be excluded in determining the Book Profits u/s 115JB of Income Tax Act - Assessee contented that it is carrying on only one activity of operation of ships and the entire income relating to ships as recorded in the profit & loss account was to be taken as profit derived from the activities of tonnage tax company and the same was to be reduced from the book profit for the purpose of sec.115JB Held that:- As per the provisions section 115VI(i)(2), core activities of a tonnage tax company mean, inter alia, its activities from operating qualifying ships - the activity of sale of old ships cannot be regarded as an activity from operating qualifying ships favour of revenue.
Income from sale of ship - Held that:- this issue is squarely covered against the assessee by the decision of Special Bench of ITAT at Hyderabad in the case of Rain Commodities Ltd. (2010 - TMI - 203366 - ITAT HYDERABAD) - provisions of section 115JB have an overriding effect upon other provisions of the Act and, therefore, the method of computation of book profit provided in the Explanation to section 115JB should be followed while computing the book profit and the normal provisions of computation of profit under any head of the Act shall not be applicable in favour of revenue.
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2012 (4) TMI 261 - ITAT MUMBAI
Penalty u/s 271(1)(c) - compensation received from the landlord on failure to provide an alternate accommodation on vacating one of its premises - AO considered it as income received on termination of warehousing agreement - Held that:- the assessee claimed the amount as not chargeable to tax which view as not accepted by the taxation authorities. Obviously it cannot be a case of concealment of income. - section 271(1)(c) reveals that the concealment of particulars of income or furnishing of inaccurate particulars of such income by the assessee is sine qua non for the imposition of penalty under this section - the assessee succeeds in proving that none of these conditions are satisfied in his case, then obviously the addition made by the Assessing Officer shall not constitute income in respect of which particulars have been concealed for the purposes of section 271(1)(c) - all the material facts relating to the case were disclosed by him the penalty would not be attracted - appeal in favour of assessee
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2012 (4) TMI 260 - ITAT MUMBAI
Deletion of addition made by the A.O. on account of adjustments made to the ALP u/s 92CA(3) in respect of international transactions entered into with AE by Ld. CIT(A) - determination of comparable - Held that:- geographical difference is not material so far as it applies to the logistics industry - there is splitting of gross profit equally at 50:50 even in Pakistan, Bangladesh and Sri Lanka which fall under the same geographical region. - the detailed reasoning given by the ld. CIT(A) we do not find any infirmity in the CUP method (50:50 module) adopted by the assessee - the order of the ld. CIT(A) is upheld and the ground raised by the Revenue is dismissed.
Petty cash expenses - A.O. noted that many of the petty cash expenses were not supported by invoices/bills assessee submitted that the above amount is merely 1.82% of the income from operations -CIT(A) deleted the addition as on observation that the assessee has duly produced the vouchers for A.O's verification but A.O. has not given any cogent reasons for making an adhoc disallowance Held that:- claiming any expenditure as genuine business expenditure the onus is always on the assessee to satisfy the A.O. with evidence to his satisfaction to substantiate that the expenditure has been incurred wholly and exclusively for the purpose of business disallowance of ₹ 20 lacs appears to be on higher side adhoc disallowance of an amount of ₹ 10 lacs will allowed appeal by the Revenue is partly allowed.
Employees' contribution to PF Held that:- the contributions have been paid before the grace period, therefore, in view of the consistent decisions of the co-ordinate Benches of the Tribunal that amounts paid within the grace period has to be allowed as deduction, the amount cannot be disallowed
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2012 (4) TMI 259 - ITAT MUMBAI
Disputed the validity of order of DRP as constitution of DRP is contrary to principle of natural justice as one of the member of DRP is the Jurisdictional Commissioner of assessee and assessee filed objections before DRP on Transfer Pricing Officer's order suggesting Arm Length Price (ALP) adjustment but DRP disposed off the objections stating that AO is to follow adjustment proposed by TPO and did not go into the merits of objections filed by assessee Held that:- considering the fact that CBDT issued notification which is subsequent to the order passed by Hon'ble High Court of Uttarkhand in the case of Hundai Heavy Industries Ltd. v. Union of India (2011 -TMI - 210159 - UTTARAKHAND HIGH COURT) observing that CBDT to ensure that Jurisdictional Commissioner is not nominated as a member of DRP considering Sec. 144C that DRP before giving any direction to AO under sub-section (5) to enable him to complete assessment, will give opportunity of being heard to parties on such directions which are prejudicial to the interest of assessee or the interest of Revenue - DRP has not given any reason and/or commented upon the objections of assessee in the said order while agreeing with the adjustments proposed by TPO - order passed by DRP u/s. 144C of the Act is not a speaking order and held to be set aside AO to pass fresh assessment order - in favour of assessee.
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2012 (4) TMI 250 - BOMBAY HIGH COURT
Search & seizure partnership firm engaged in providing security services dissolution of firm - legality of warrant of authorization issued in name of dissolved firm legality of search conducted at place of erstwhile partners sufficiency of reasons to issue summon by DIT - time limit for release of documents seized - Held that:- It is found that profits were deflated and money siphoned off were invested in fixed deposits taken in name of individual names of the partners and were never disclosed to the Department. Therefore, satisfaction has been arrived at by DIT (Investigation) on the basis of relevant and material circumstances which are recorded and DIT had reason to believe within meaning of Section 132. The sufficiency of these reasons cannot be questioned by this Court in exercise of the writ jurisdiction under Article 226 of the Constitution.See ITO, Special Investigation Circle "B" Meerut Versus Seth Brothers and Ors (1969 (7) TMI 1 - SUPREME Court), Pooran Mal Versus Director of Inspection (1973 (12) TMI 2 - SUPREME Court - Income Tax) Section 189 states that notwithstanding the discontinuance of firm or its business, assessment has to be made of the total income of the firm as if no such discontinuance or dissolution has taken place and every person who was at the time of such discontinuance or dissolution a partner of the firm, shall be jointly and severally liable. Also, warrants of authorization were not merely issued in the names of the firms, but also separately issued in the name of the petitioner and his spouse. Further, documents have been retained having regard to the pendency of the appeal proceedings. Thus no illegality is found. For the aforesaid reasons, no meit is found in the petition Petition dismissed.
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2012 (4) TMI 249 - DELHI HIGH COURT
Deemed Dividend interest free loan and advances made to sole proprietorship of assessee (shareholder) having 20.6% shareholding the company assessee contended that advance or loan are provided in normal course of business Held that:- It is observed that interest free loans are provided which cannot be said to be made in ordinary course of money lending business. Further, documents show that company was doing the business of import and export and it was a recognized export house. Order of Tribunal is upheld in attracting provisions of clause (ii) of section 2(22)(e) Decided against the assessee.
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