Try our new portal www.taxtmi.com for a better experience!

Home

Case Laws

Home Case Index All Cases Income Tax Section Wise 2011 2011 (2) This

Law
Court
Citation	- -
Landmark
Order by

Advanced Search Options

Case Laws

Showing 181 to 200 of 1054 Records

2011 (2) TMI 1456

Issues Involved:
1. Disallowance u/s 40(ia) read with section 194C(2) of the Income-tax Act, 1961.
2. Deletion of addition of Rs. 1,76,643/- due to accounting system differences.

Summary:

Issue 1: Disallowance u/s 40(ia) read with section 194C(2) of the Income-tax Act, 1961

The Revenue appealed against the CIT(A)'s order deleting the disallowance made by the Assessing Officer (AO) u/s 40(ia) read with section 194C(2) amounting to Rs. 12,31,511/-. The AO noted discrepancies between the transport freight receipts shown by the assessee and the amounts credited by companies, leading to the disallowance. The assessee contended that it acted as an agent for vehicle owners, billing companies on their behalf and charging only commission, with TDS already deducted by the companies. The CIT(A) agreed, noting the assessee's role as an agent and the absence of claimed deductions under sections 30 to 38, thus ruling section 40(ia) inapplicable. The Tribunal upheld the CIT(A)'s decision, referencing similar cases like Mythri Transport Corporation vs. ACIT and Govind Singh, Mathura vs. ITO, Mathura, confirming that payments for hired vehicles did not constitute sub-contracts requiring TDS under section 194C(2).

Issue 2: Deletion of addition of Rs. 1,76,643/- due to accounting system differences

The CIT(A) deleted the addition of Rs. 1,76,643/- made by the AO, who noted differences due to the assessee following the Mercantile System while TDS certificates were issued on a payment basis. The CIT(A) found the difference reconciled and justified, a conclusion supported by the Tribunal, which found no contrary evidence from the Revenue.

Conclusion:

The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order on both issues, emphasizing the proper application of section 40(ia) and the reconciliation of accounting differences. The decision was pronounced in open court on 04.02.2011.
2011 (2) TMI 1455

Issues Involved:
1. Legitimacy of capital gains on the sale of shares of Bolton Properties Limited and Fast Track Limited.
2. Treatment of surplus from the sale of shares as capital gains versus business income.
3. Denial of exemption under section 54EC and section 10(38) of the Income Tax Act.
4. Levy of interest under section 234B of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Legitimacy of Capital Gains on Sale of Shares:
The primary issue revolved around whether the capital gains declared by the assessee from the sale of shares of Bolton Properties Limited and Fast Track Limited were genuine. The Assessing Officer (AO) noted an abnormal rise in the share prices of Bolton Properties Limited from Rs. 8.27 per share to Rs. 175.70 per share within a year, suspecting artificial manipulation. The AO's investigation revealed that Bolton Properties Limited had minimal business activities and its financial strength did not justify such a drastic price increase. Further, the AO linked the transactions to dubious practices involving a Kolkata-based broker, Shri Prakash Nahata, and directors of Bolton Properties Limited, who were involved in providing accommodation entries for long-term capital gains. The AO concluded that the transactions were not genuine and treated the income as unexplained cash credit under section 68 of the Act, adding back Rs. 41,85,500/- and denying the exemption under section 54EC.

2. Treatment of Surplus from Sale of Shares:
The AO alternatively argued that even if the transactions were genuine, the profits should be assessed as business income rather than long-term capital gains, considering the frequency and nature of the transactions. The CIT(A) upheld this view, noting that the assessee engaged in frequent trading of shares, indicating a business motive rather than an investment intent. The Tribunal confirmed this assessment, emphasizing that the assessee's activities resembled those of a trader in shares, given the volume and frequency of transactions.

3. Denial of Exemption under Section 54EC and Section 10(38):
The denial of exemption under section 54EC was consequential to the finding that the capital gains were not genuine. Similarly, for the assessment year 2005-06, the exemption under section 10(38) was denied on the grounds that the surplus from the sale of shares was assessed as business income, not capital gains. The Tribunal upheld these decisions, reiterating that the exemptions were not applicable as the transactions did not qualify as genuine capital gains.

4. Levy of Interest under Section 234B:
The levy of interest under section 234B was contested by the assessee. The Tribunal noted that any consequential relief would be granted based on the final assessment of the income. As the primary issues were decided against the assessee, the interest levied under section 234B was upheld, subject to any adjustments arising from the final computation of income.

Conclusion:
The Tribunal dismissed all three appeals filed by the assessee, confirming the additions made by the AO under section 68, the treatment of surplus as business income, and the denial of exemptions under sections 54EC and 10(38). The levy of interest under section 234B was also upheld, with a provision for consequential relief if applicable. The Tribunal emphasized the importance of the surrounding circumstances and the application of human probabilities in assessing the genuineness of the transactions.
2011 (2) TMI 1454

Issues involved: Appeal against judgment of Gauhati High Court's Single Judge dismissing second appeal for declaration and recovery of possession of land.

Judgment details:

1. The suit was dismissed by the trial Court due to lack of document to prove title. Lower appellate Court found plaintiff-respondents proved their title based on mutation entries and documents. High Court framed question of law on sustainability of lower court's findings on title. Single Judge held question not substantial and upheld lower court's reliance on mutation entries for joint ownership.

2. Appellants argued lower appellate Court erred in declaring respondents rightful owner based on revenue records, ignoring lack of evidence of title from respondents. Appellants' predecessor had produced sale deed, while respondents' predecessor did not. Single Judge upheld lower court's decision, stating it was based on correct appreciation of evidence and refused to interfere as no perversity found.

3. Lower appellate Court's finding on title of suit land deemed correct based on evidence including Jamabandi Exhibit 1 showing joint ownership. Single Judge upheld decision as no flaws found in lower court's approach. Appeal dismissed.
2011 (2) TMI 1453

Issues Involved: Application to dispense with pre-deposit of duty and penalty confirmed against M/s. Explosion Proof Electrical Control and other appellants, based on allegations of clandestine activities and evasion of duty.

Details of the Judgment:

1. The investigation conducted against M/s. Explosion Proof Electrical Control revealed incriminating documents seized from their factory premises in Silvasa and another factory in Vapi, indicating clandestine manufacture and clearance of electrical equipment under false invoices of dummy units.

2. Statements of various individuals, including buyers, supported the view that the appellants were involved in clandestine activities, clearing goods through dummy units without actual manufacturing facilities.

3. Show cause notice dated 17.10.2008 proposed duty confirmation of &8377; 1,60,43,273/- and identical penalties, leading to the impugned order by the Commissioner.

4. The confirmation of duty was based on scrutiny of recovered records, including invoice books from the manufacturing unit, showing sales through dummy units. Statements and admissions further corroborated the clandestine activities.

5. The Tribunal found that the evidence collected by the Revenue during investigations needed detailed examination at the final disposal stage. The appellants failed to demonstrate a prima facie case or financial hardship to unconditionally allow the stay petition.

6. Despite submitting a balance sheet, the Tribunal concluded that the financial condition of the appellants could not be accurately assessed due to clandestine activities not reflected in statutory records.

7. As a result, the Tribunal directed M/s. Explosion Proof Electrical Control to deposit 50% of the duty amounting to &8377; 80 Lakhs within 12 weeks, in addition to the already deposited &8377; 14.50 Lakhs. Upon compliance, the pre-deposit of the remaining duty and penalties for all appellants was dispensed with, and recovery stayed during the appeal's pendency.

(Separate Judgment by Judges: None)
2011 (2) TMI 1452

Issues Involved: Determination of the nature and source of share application money received by the assessee-company, addition of unaccounted commission, validity of proceedings u/s 147.

Nature and Source of Share Application Money: The assessee filed its return declaring a loss, but specific information revealed that share application money received by the company was bogus and represented income from undisclosed sources. The AO initiated action u/s 147 and issued a notice. Despite producing various documents, the assessee failed to produce directors of the subscribing companies or their books of account. The AO concluded that the subscribers were name lenders, adding the amount to income u/s 68 of the Act. Additionally, unaccounted commission was also added.

CIT(Appeals) Decision: The CIT(Appeals) held that the assessee had discharged the initial onus u/s 68 by providing evidence of share subscription. Citing the decision in CIT Vs. Lovely Exports Ltd., it was concluded that the revenue could proceed against bogus shareholders but not against the company receiving share application money with proper documentation. Consequently, the addition made by the AO was deleted.

Revenue's Appeal: The revenue appealed against the deletion of the addition of share application money and commission. The assessee also filed a cross objection challenging the validity of proceedings u/s 147.

Tribunal's Decision: The Tribunal noted a confusion in the CIT(Appeals) order regarding the nature of the amounts received, clarifying that both were share application money. Referring to a similar case, it was observed that the AO had not provided substantial evidence to support the presumption made. Consequently, the addition of share application money was deemed unjustified, with a directive for the revenue to take appropriate action against the contributors. As the amount was deleted, the addition of unaccounted commission was deemed unnecessary.

Conclusion: The appeal of the revenue and the cross objection of the assessee were dismissed, upholding the deletion of the addition of share application money and unaccounted commission. The order was pronounced on 18 February, 2011.
2011 (2) TMI 1451

Issues involved: The issue involves whether M/s. Rithwik Swathi Joint Venture is obligated to effect TDS on interest payment made to M/s. PCL as per provisions u/s 194A of the Income-tax Act, 1961.

Summary:
The case involved an appeal by the Revenue against the order of the CIT(A), Tirupati. The assessee, a subcontractor, had entered into agreements with different companies for the execution of civil works. The main issue was regarding the deduction of TDS on interest payment made by the assessee. The Assessing Officer disallowed the interest payment under section 40(a)(ia) as TDS was not deducted. The assessee argued that as THDC, a joint venture of the Government, had already deducted the interest, TDS was not applicable. The CIT(A) upheld the assessee's contention, stating that since THDC deducted the interest, TDS was not required. The ITAT Hyderabad confirmed the CIT(A)'s decision, noting that THDC, being a joint venture of the Government, was not liable to deduct TDS on the interest amount.

In conclusion, the appeal of the Revenue was dismissed, and the decision of the CIT(A) was upheld by the ITAT Hyderabad.
2011 (2) TMI 1450

Nature of services - Providing composite services Constitute managerial services? - Obligation of the assessee to deduct withholding tax u/s 195 - Disallowance of travelling expenses - HELD THAT:- In the present case, the ‘overseas agent did not render any services in India. It had no place or permanent establishment in India. It worked abroad and procured orders. The orders were sent directly by the foreign purchasers remitted to the assessee in India and even the payment for export was received by the assessee in foreign currency directly from foreign purchasers and the commission was paid to foreign agent thereafter as a percentage of sales in terms of the agency agreement.

The payment made to overseas commission agent by the assessee was not for technical/managerial services. ‘Therefore in the absence of any service having been rendered in India, no part of the commission paid to the overseas agency could be said to be chargeable in India under the Income-tax Act, 1961 and in the absence of any income chargeable to tax in India, question of applying section 195 of Income-tax Act, 1961 does not arise. Hence we allow asscssee’s appeal on this issue.’

Disallowance of travelling expenses amounting to ₹ 23,64,006 being 25 per cent of the travelling expenses confirmed by the ld. CIT(A) on the ground that no supporting evidence was furnished by the assessee and the expenses were not incurred wholly and exclusively for the purpose of business.

We are of the opinion that the ld. CIT(A) had wrongly disallowed 25 per cent of the expenses on adhoc basis when the assessee had furnished all the details such as (a) details of travelling expenses (b) list of the foreign parties visited (c) copies of the passport (d) relevant correspondence with the foreign parties (e) statement of sales made to the foreign parties and (f) visa application. Therefore, as the assessee has given enough supporting evidences while claiming the expenses, we allow assessee’s apeal on this issue. In the result, the appeal filed by the assessee is allowed.
2011 (2) TMI 1449

Issues involved: Appeal against order of Commissioner of Income-tax(Appeals) regarding reduction of investment subsidy from opening WDV of assets and disallowance of depreciation on electrical fittings.

Reduction of investment subsidy:
The assessee, engaged in manufacturing and trading, received an investment subsidy of Rs. 20,00,000 from the government. The Assessing Officer reduced this subsidy from the written down value of assets, leading to disallowance of depreciation. The assessee argued that the subsidy was not linked to the purchase of any asset but was a pecuniary assistance to encourage industry establishment. Citing precedent cases, the assessee contended that the subsidy should not reduce the asset's cost for depreciation calculation. The Tribunal agreed, stating that the subsidy did not meet the criteria under Explanation 10 to S.43(1) for reducing asset cost, thus allowing depreciation without subtracting the subsidy amount.

Disallowance of depreciation on electrical fittings:
The Assessing Officer disallowed depreciation on electrical fittings at 25% claimed by the assessee, restricting it to 15%. The assessee argued that the fittings were part of plant and machinery and were previously depreciated at 25%. However, the Officer maintained that electrical fittings were not classified as part of plant and machinery for depreciation purposes. The Tribunal upheld the Officer's decision, noting that the assessee had previously claimed depreciation on fittings at 15% in audit reports. The Tribunal ruled that the claim for higher depreciation did not justify perpetuating the error, affirming the disallowance at 15% depreciation rate.

Conclusion:
The Tribunal partly allowed the assessee's appeal, overturning the reduction of investment subsidy from asset value but upholding the disallowance of depreciation on electrical fittings.
2011 (2) TMI 1448

The High Court of Bombay dismissed the appeal stating that the question raised was covered against the Revenue by a previous decision in the case of CIT Vs. Reliance Industries Ltd. in Income Tax Appeal No.1299 of 2008.
2011 (2) TMI 1447

Issues Involved:
Appeal against rejection of registration u/s 12AA and exemption u/s 80G of the Income-tax Act, 1961.

Issue 1: Registration under Section 12AA

The assessee, a society registered under the Tamil Nadu Registration Act, applied for registration under section 12AA and exemption under section 80G of the Act. The Director of Income Tax (Exemptions) rejected the applications citing reasons such as deletion of object clause 3(b) and non-charitable nature of certain activities. The assessee appealed, arguing that the objects of the Trust are charitable, and the rejection was based on frivolous issues. The ITAT Chennai found that the Trust's activities were indeed charitable, and the CIT erred in rejecting the registration without proper examination. Referring to the scope of enquiry under section 12AA, the ITAT directed the DIT (Exemptions) to grant registration under section 12AA and approval under section 80G to the assessee-Trust.

Key Points:
- The CIT's duty was to ensure the genuineness of the Trust's activities.
- The Trust's objects were found to be charitable.
- CIT erred in rejecting registration without proper examination.
- Scope of enquiry under section 12AA is limited.
- DIT (Exemptions) directed to grant registration and approval.

Issue 2: Grounds of Appeal

The assessee raised several grounds of appeal against the rejection of registration under section 12AA by the Commissioner of Income Tax. These grounds included errors in facts and law, failure to dispose of the application within the prescribed period, hasty disposal without proper consideration, and overlooking documentary evidence about the Trust's activities. The ITAT Chennai considered these grounds, noting that the Commissioner had not adequately examined the genuineness of the Trust's activities and had made observations without proper evaluation. The ITAT held that the Commissioner's conclusion was hyper-technical and directed the grant of registration under section 12AA.

Key Points:
- Grounds of appeal included errors in facts and law.
- Commissioner failed to dispose of the application within the prescribed period.
- Commissioner's disposal was hasty and lacked proper consideration.
- Observations made without proper evaluation.
- Conclusion deemed hyper-technical.

Separate Judgement:
No separate judgement was delivered by the judges.
2011 (2) TMI 1446

Issues involved: Disallowance of unvouched expenses described as speed money u/s 37(1) and applicability of Explanation to sec. 37(1) for assessment years 1997-98 and 1999-99.

Summary:
The appeals were filed by the assessee against the orders of the CIT(A), Central VIII, Mumbai for assessment years 1997-98 and 1999-99, primarily disputing the disallowance of certain unvouched expenses, termed as speed money, despite Tribunal directions. The Tribunal remanded the issue back to the AO for verification of documents regarding the nature of payments made by the clients of the assessee. In the subsequent proceedings, the assessee contended that the expenses were incurred on behalf of clients who were aware of reimbursing such payments. However, the AO and CIT(A) did not find merit in the submissions, leading to the confirmation of disallowance.

The learned senior advocate for the assessee argued that non-compliance with the Tribunal's earlier order regarding client awareness justified deletion of the addition. The Revenue authorities contended that detailed investigations were conducted, and the expenses were labeled as service charges, warranting disallowance. After considering the submissions, the Tribunal concluded that no useful purpose would be served by restoring the matter to the AO after 12 years. It was noted that neither the assessee nor the AO made efforts to prove the illegality of the expenditure or client reimbursement awareness.

Referring to the case of A.P.L. (India) P. Ltd. v.s. DICT 96 ITD 227 (Mum), the Tribunal held that 25% of the expenditure should be disallowed under Explanation to sec. 37(1) due to lack of details on payments to government employees. Accordingly, the Tribunal partly allowed the appeals, directing the AO to disallow 25% of the alleged illegal expenses for the respective assessment years.

In conclusion, the Tribunal partially allowed the appeals, emphasizing the need for substantiating expenses and client awareness to avoid disallowances u/s 37(1) and Explanation to sec. 37(1).
2011 (2) TMI 1445

Issues Involved:
1. Rejection of books of accounts and book results under Section 145 of the Income Tax Act.
2. Addition on account of alleged undervaluation of closing stock.

Issue-wise Detailed Analysis:

1. Rejection of Books of Accounts and Book Results under Section 145 of the Income Tax Act:
The assessee contested the rejection of their books of accounts and book results by the Assessing Officer (AO) under Section 145 of the Income Tax Act. The assessee argued that they have consistently followed the method of valuing closing stock at "cost or market value whichever is less." This method involves taking a detailed physical quality-wise stock of diamonds at the end of each year and valuing them accordingly. The assessee provided documentary evidence, including sale bills of the diamonds in the subsequent year, to support their valuation method. The AO, however, rejected the assessee's books of accounts, determining the value of the closing stock at cost rather than the method followed by the assessee. The AO's rejection was based on the grounds that the assessee failed to establish that the market value of the closing stock was lower than the cost. The tribunal upheld the AO's decision, stating that the assessee did not provide sufficient evidence to prove that the market value was lower than the cost.

2. Addition on Account of Alleged Undervaluation of Closing Stock:
The AO determined the cost of the closing stock of polished diamonds at Rs. 13,27,06,527, while the value disclosed by the assessee was Rs. 10,30,98,508, leading to a difference of Rs. 2,96,08,019. The assessee claimed that the market value of a part of the stock was lower than the cost, and thus, they valued it accordingly. However, the tribunal noted that the assessee's method of valuation lacked consistency and proper documentation. The assessee did not provide cost or market value details for each lot of diamonds, making it difficult to verify their claims. The tribunal observed that the sale bills provided by the assessee did not correlate with the closing stock details, and the AO's valuation method was found to be accurate. The tribunal concluded that the assessee failed to prove that the market value was lower than the cost, and thus, the AO's valuation at cost was justified.

Conclusion:
The tribunal dismissed the appeal of the assessee, upholding the AO's rejection of the books of accounts and the addition on account of undervaluation of closing stock. The tribunal agreed with the AO's method of valuing the closing stock at cost, as the assessee did not provide sufficient evidence to support their claim that the market value was lower than the cost. The tribunal also noted that the AO did not disturb the assessee's method of accounting but corrected the valuation based on the available evidence. The appeal was dismissed, and the order of the learned CIT(A) was upheld.
2011 (2) TMI 1444

Issues Involved:
1. Treatment of income from mini buses.
2. Consideration of income below taxable limit as undisclosed income.
3. Assessment of income for the period falling within the block period.
4. Assessment of income from mini buses in the hands of the assessee's husband.

Summary:

Issue 1: Treatment of income from mini buses
The Revenue contended that the CIT(A) erred in holding that the income from mini buses owned by the assessee, Smt. R.K. Prema, should be assessed in the hands of her husband, Shri S.M.R. Kumaresan. The Tribunal noted that the mini buses were purchased and registered in the name of the assessee, and the hire purchase loans were also obtained in her name. Despite Shri Kumaresan admitting the income from the buses in his return, the Tribunal held that the legal ownership and income from the buses should be assessed in the hands of the assessee. The CIT(A)'s order was set aside, and the addition made by the AO was reinstated. (Para 8)
Issue 2: Consideration of income below taxable limit as undisclosed income
The Revenue challenged the CIT(A)'s decision to exclude income below the taxable limit for A.Ys. 1998-99 to 2001-02 from the undisclosed income. The Tribunal agreed with the CIT(A) that income below the taxable limit cannot be considered as undisclosed income. However, upon including the income from mini buses, it was found that the income for A.Y. 1998-99 alone was below the taxable limit, while for other years, it was above the basic exemption limit. Therefore, the Tribunal held that the income for A.Ys. 1999-2000 to 2001-02 and the broken period 01-04-2001 to 26-12-2001 should be considered as undisclosed income. (Para 12)
Issue 3: Assessment of income for the period falling within the block period
The Revenue contended that the CIT(A) erred in holding that the income for the period 01-04-2001 to 26-12-2001 should be considered only in regular assessment and not in the block assessment. The Tribunal noted that the income for the broken period of 01-04-2001 to 26-12-2001 was part of the block period and should be included in the block assessment. The AO was directed not to consider the income for this period in the regular assessment for the impugned assessment year. (Para 21)
Issue 4: Assessment of income from mini buses in the hands of the assessee's husband
The Revenue appealed against the CIT(A)'s decision to assess the income from mini buses in the hands of Shri S.M.R. Kumaresan on a substantive basis. The Tribunal reiterated its earlier decision that the income from mini buses should be assessed in the hands of the assessee, Smt. R.K. Prema, and not her husband. The CIT(A)'s direction was set aside. (Para 27)
Conclusion:
The appeals of the Revenue were partly allowed, with the Tribunal directing that the income from mini buses be assessed in the hands of Smt. R.K. Prema, and the income for the period 01-04-2001 to 26-12-2001 be included in the block assessment. The Tribunal also held that income below the taxable limit for A.Y. 1998-99 should not be considered as undisclosed income, while for other years, it should be. (Para 29)
2011 (2) TMI 1443

Issues involved: Appeal against disallowance of provision for warranty expenses by CIT(A) for the assessment year 2005-06.

Facts: The assessee, a subsidiary of a foreign company, filed its return for A.Y. 2005-06, which was selected for scrutiny. The Assessing Officer disallowed provision for warranty expenses of Rs. 95,33,312, leading to an appeal before CIT(A), who upheld the disallowance.

Observations: The AO disallowed the provision stating that any provision is not an allowable expenditure under the Income-Tax Act. The CIT(A) upheld the disallowance based on a mismatch between actual expenditure and provision made for warranty.

Assessee's submissions: The assessee argued that warranty expenses are incurred for repair/replacement of hardware and are covered in product pricing. The provision was made based on scientific evaluation and commercial prudence, supported by case laws and past experience data.

Decision: The ITAT allowed the appeal, noting that the provision for warranty was justified. The ITAT referred to a previous case for A.Y. 2003-04 where a similar provision was allowed. The ITAT found no material to establish a mismatch and directed the AO to delete the addition of Rs. 95,33,313 for provision of warranty expenses.

Conclusion: The appeal was allowed in favor of the assessee, emphasizing compliance with accounting standards and past precedents. The ITAT directed the AO to delete the disallowed amount for provision of warranty expenses.
2011 (2) TMI 1442

Issues involved: Appeal against order of CIT(Appeals) regarding addition in closing stock u/s 145A, impact of MODVAT on profitability, and disallowance u/s 14A of the I.T. Act.

Addition in closing stock u/s 145A:
The appeal was filed by the Revenue challenging the deletion of addition in closing stock u/s 145A by CIT(A). The Revenue contended that the decision in CIT Vs. Indonippon Chemical Co. is not applicable to the assessee's case. However, CIT(A) relied on the audited statement showing no impact on profitability due to MODVAT and directed the AO to delete the addition, which was allowed. The ITAT found no infirmity in CIT(A)'s findings on this issue.

Impact of MODVAT on profitability:
The assessee, a private limited company manufacturing Audio Magnetic Tapes, faced additions u/s 145A and u/s 14A of the I.T. Act. CIT(A) deleted these additions. Regarding the addition u/s 145A, CIT(A) considered the consistent valuation method of opening and closing stock by the appellant and directed the AO to delete the addition based on audited statements. The ITAT upheld CIT(A)'s decision on this issue.

Disallowance u/s 14A:
CIT(A) restricted the disallowance made by the AO u/s 14A to &8377; 4,67,936 based on Rule 8D, as against the initial disallowance of &8377; 8,80,470. The ITAT noted that Rule 8D cannot be applied for the assessment year 2005-06, but as the assessee did not dispute the disallowance, the ITAT found no fault in CIT(A)'s order. The appeal of the Revenue was dismissed, and the order was pronounced on 25th February, 2011.
2011 (2) TMI 1441

Issues Involved:

1. Eligibility for deduction u/s 80IB(10) concerning the commercial area exceeding permissible limits.
2. Applicability of clause (d) of sec. 80IB(10) inserted by Finance Act 2004 w.e.f. 1.4.2005 to projects approved before 31.3.2005.

Summary:

Issue 1: Eligibility for deduction u/s 80IB(10) concerning the commercial area exceeding permissible limits
The assessee, an AOP, claimed deduction u/s 80IB(10) for a housing project. The Assessing Officer disallowed the claim, noting that the commercial area of shops in the project exceeded the permissible limit of 2000 sq.ft as per clause (d) of sec. 80IB(10). The assessee argued that this clause was not applicable as their project was approved before 31.3.2005. The CIT(A) allowed the claim, following the Tribunal's decision in Saroj Sales Organization vs ITO and other cases, stating that the amendment should be applied based on the date of project approval.
Issue 2: Applicability of clause (d) of sec. 80IB(10) inserted by Finance Act 2004 w.e.f. 1.4.2005 to projects approved before 31.3.2005
The revenue appealed, arguing that the CIT(A) erred in holding the assessee entitled to deduction u/s 80IB(10), ignoring the applicability of sec. 80IB(10)(d). The Tribunal, considering the arguments and previous decisions, upheld the CIT(A)'s order. It was held that the law as it existed when the project was approved should apply, not the amended law. The Tribunal cited the decision in Hiranandani Akruti JV vs DCIT, emphasizing that amendments should not retroactively affect projects approved before the amendment date.
Conclusion:
The Tribunal dismissed the revenue's appeals, affirming that the assessee's claim for deduction u/s 80IB(10) was valid as the project was approved before the amendment date. The decision followed the precedent set by Saroj Sales Organization and Hiranandani Akruti JV cases, ensuring that the law applicable at the time of project approval governs the eligibility for deductions.
Order pronounced on the 11th day of Feb 2011.
2011 (2) TMI 1440

Issues Involved: Disallowance of long term capital gains claimed on sale of shares due to alleged non-genuineness of share transactions.

The High Court of Allahabad heard two appeals arising from the Income Tax Appellate Tribunal's order dated 31.3.2009 concerning the assessment year 2001-02. The assessees had sold shares in the relevant assessment year and claimed long term capital gains, which were disallowed by the Assessing Officer citing non-genuineness of the share transactions. The assessees' appeals were initially dismissed by the Commissioner (Appeals), leading them to file appeals before the Tribunal, which ruled in their favor, prompting the present appeals.

During the proceedings, arguments were presented by Sri Shambhu Chopra for the Income Tax Department and Sri Rahul Agarwal for the Assessees. The Tribunal had found that the sales of shares were genuine and not sham transactions based on several factors. Firstly, the Assessees had acquired shares through preferential allotment directly from the Companies. Additionally, the purchases were reflected in the balance sheets of previous years, which had been accepted by the Department. Furthermore, the shares were sold to registered stock brokers and the stock exchange, with the brokers confirming the transactions and payments being made through drafts.

The Court considered the aforementioned factors as crucial in determining the genuineness of the transactions. It emphasized that the finding that the sales were not sham transactions was a factual determination by the Tribunal and not illegal. The Court concluded that there was no merit in the appeals and subsequently dismissed them.
2011 (2) TMI 1439

Issues Involved:
1. Inclusion of current year's profits in accumulated profits for the purpose of application of section 2(22)(e).
2. Exclusion of share premium from accumulated profits for computing deemed dividend u/s 2(22)(e).
3. Treatment of debit balances in trading transactions as loans and advances within the meaning of section 2(22)(e).

Summary:

Issue 1: Inclusion of current year's profits in accumulated profits for the purpose of application of section 2(22)(e)
The assessee contended that current year's profits should not be included in accumulated profits for the application of section 2(22)(e). However, the Tribunal upheld the CIT(A)'s decision, stating that the definition of "accumulated profits" in Explanation 2 to section 2(22)(e) includes current year's profits up to the date of payment of deemed dividend. The Tribunal relied on the decision in NCK Sons Exports (P) Ltd., which clarified that the legislature's definition must be followed, and dismissed the assessee's appeal.
Issue 2: Exclusion of share premium from accumulated profits for computing deemed dividend u/s 2(22)(e)
The revenue challenged the CIT(A)'s decision to exclude share premium from accumulated profits. The Tribunal upheld the CIT(A)'s decision, relying on the Delhi Bench's ruling in DCIT v. Maipo India Ltd., which stated that share premium, being capital reserve and not distributable as dividend, cannot be included in accumulated profits for section 2(22)(e). The Tribunal rejected the revenue's arguments, including the applicability of section 2(17) and clause (b) of section 2(22), and dismissed the revenue's appeal on this ground.
Issue 3: Treatment of debit balances in trading transactions as loans and advances within the meaning of section 2(22)(e)
The revenue argued that debit balances in the assessee's account with M/s. Ruchiraj Shares & Stock Brokers Pvt. Ltd. should be treated as loans and advances. The Tribunal upheld the CIT(A)'s decision that these were regular business transactions of purchase and sale of shares, not loans or advances. The CIT(A) verified the ledger accounts and found no cash or cheque receipts, and noted a consistent reduction in the balance payable by the assessee. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's appeals on this issue.
Conclusion:
All appeals by the revenue and the assessee were dismissed. The Tribunal upheld the CIT(A)'s decisions on all issues, confirming the inclusion of current year's profits in accumulated profits, exclusion of share premium from accumulated profits, and the treatment of trading transactions as not constituting loans or advances u/s 2(22)(e).
2011 (2) TMI 1438

Issues involved: Whether the assessee is the owner of the road bridge constructed for National Highways Authority of India, eligibility for depreciation on the road bridge, classification of the road bridge as 'building' or 'plant', and treatment of a sum as revenue expenditure.

Ownership of Road Bridge:
The appeal by the Revenue for the assessment year 2007-08 was directed against the order of the Commissioner of Income-tax(Appeals) regarding the ownership of the road bridge constructed by the assessee for National Highways Authority of India. The issue was whether the assessee is entitled to depreciation on the road bridge. The Tribunal found that the issue was covered in favor of the assessee based on previous decisions. The Tribunal held that the assessee is indeed the owner of the road bridge and is entitled to depreciation on it. The order of the CIT(A) was confirmed, and the grounds of appeal of the Revenue were rejected.

Eligibility for Depreciation:
The key issue was whether the assessee is eligible for depreciation on the road bridge constructed by treating it as the owner. The Departmental Representative relied on the Assessing Officer's order, while the counsel for the assessee argued that the issue was already decided in favor of the assessee in a previous case. The Tribunal agreed with the assessee, stating that the issue was identical to a previous assessment year. The Tribunal decided in favor of the assessee, confirming that depreciation on the road bridge is allowable.

Classification of Road Bridge:
Another issue was whether the road bridge can be considered as 'building' or 'plant' for the purpose of allowing depreciation. The Tribunal referred to previous decisions and found that the assessee is entitled to depreciation on the road bridge constructed for the National Highways Authority of India. The Tribunal confirmed the order of the CIT(A) and rejected the grounds of appeal of the Revenue.

Treatment of Expenditure:
The final issue was whether the assessee is eligible to treat a sum as revenue expenditure in the absence of treating the road bridge as stock-in-trade. The Tribunal's decision in favor of the assessee on the ownership and depreciation of the road bridge implied that the sum in question could be treated as revenue expenditure. The appeal of the Revenue was dismissed, and the order was pronounced in court on 11.2.2011.
2011 (2) TMI 1437

Issues Involved:
1. Disallowance of commission payments to agents.
2. Disallowance of cash payments under Section 40A(3).
3. Inclusion of other income in total turnover for computing deduction under Section 80HHC.
4. Disallowance of employees' contribution to PF/ESI.
5. Disallowance of royalty payment.
6. Disallowance of foreign technicians' fee.
7. Disallowance of research and development expenses.
8. Disallowance of repairs and maintenance expenses.
9. Exclusion of excise duty in total turnover for computing deduction under Section 80HHC.
10. Disallowance of software expenses.
11. Withdrawal of DEPB benefit for computing deduction under Section 80HHC.

Detailed Analysis:

1. Disallowance of Commission Payments to Agents:
The assessee claimed commission payments to agents for services rendered in procuring orders and other related activities. The Assessing Officer (AO) disallowed these payments, arguing they were not exclusively for business purposes and possibly illegal. The CIT(A) upheld the AO's decision, stating that influencing government officials is illegal. However, the Tribunal reversed this, stating the payments were legitimate business expenses, supported by agreements and services provided. The Tribunal emphasized that the payments were made to business enterprises, not government officials, and were necessary for completing sales and realizing payments. The Tribunal directed the AO to allow the commission payments as deductions.

2. Disallowance of Cash Payments under Section 40A(3):
The AO disallowed 20% of cash payments exceeding Rs. 20,000, citing Section 40A(3). The assessee argued that these payments were made in locations without bank accounts. The CIT(A) and Tribunal upheld the disallowance, stating the reason provided by the assessee was not sufficient to bypass Section 40A(3).

3. Inclusion of Other Income in Total Turnover for Computing Deduction under Section 80HHC:
The assessee contested the inclusion of other income in total turnover for Section 80HHC deduction. The Tribunal directed the AO to exclude other income from total turnover, following the precedent set in the assessee's earlier cases and the Supreme Court's decision in CIT vs. Laxmi Machine Works.

4. Disallowance of Employees' Contribution to PF/ESI:
The AO disallowed contributions to PF/ESI paid after the due date but within the filing deadline. The Tribunal, referencing the Supreme Court's decision in CIT vs. Vinay Cement, allowed the deduction, stating the deletion of the second proviso to Section 43B is retrospective.

5. Disallowance of Royalty Payment:
The AO treated 25% of royalty payments as capital expenditure. The CIT(A) and Tribunal deleted this addition, citing earlier Tribunal decisions and the Delhi High Court's affirmation, which were upheld by the Supreme Court.

6. Disallowance of Foreign Technicians' Fee:
The AO disallowed the fee paid to foreign technicians. The CIT(A) and Tribunal deleted this disallowance, referencing earlier Tribunal and High Court decisions in the assessee's favor.

7. Disallowance of Research and Development Expenses:
The AO treated a significant portion of R&D expenses as capital expenditure. The CIT(A) and Tribunal deleted this addition, following earlier Tribunal decisions affirmed by the High Court.

8. Disallowance of Repairs and Maintenance Expenses:
The AO disallowed a portion of repairs and maintenance expenses. The CIT(A) and Tribunal deleted this disallowance, citing consistent Tribunal decisions and the High Court's rejection of the department's reference.

9. Exclusion of Excise Duty in Total Turnover for Computing Deduction under Section 80HHC:
The CIT(A) directed the AO to exclude excise duty from total turnover for Section 80HHC deduction, following the Supreme Court's decision in Laxmi Machine Works. The Tribunal upheld this decision.

10. Disallowance of Software Expenses:
The AO treated software expenses as capital expenditure. The Tribunal remanded the issue back to the AO for fresh examination in light of the Special Bench decision in Amway India Enterprises vs. DCIT.

11. Withdrawal of DEPB Benefit for Computing Deduction under Section 80HHC:
The AO withdrew the DEPB benefit for Section 80HHC deduction. The Tribunal remanded the issue back to the AO for reconsideration in light of the Bombay High Court's decision in Kalpataru Colours & Chemicals vs. CIT.

Conclusion:
The appeals filed by the assessee were partly allowed, and those filed by the revenue were dismissed. The Tribunal provided detailed directions on each issue, ensuring compliance with relevant legal precedents and statutory provisions.