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Showing 41 to 60 of 1054 Records

• 2011 (2) TMI 1598
  
  Issues Involved:
  1. Validity of the conviction u/s 138 of the Negotiable Instruments Act.
  2. Consideration of evidence and statutory presumption.
  3. Legally enforceable debt and limitation period.
  4. Partial payment and its effect on the liability.
  
  Summary:
  
  1. Validity of the conviction u/s 138 of the Negotiable Instruments Act:
  The criminal revision petition challenges the conviction of the Petitioner for the offence u/s 138 of the Negotiable Instruments Act, as upheld by the Additional District-cum-Fast Track Court No. I, Erode.
  
  2. Consideration of evidence and statutory presumption:
  The complainant alleged that the accused borrowed Rs. 12,00,000/- and issued a cheque which was dishonored due to insufficient funds. The trial court convicted the accused based on the evidence presented by the complainant, including the cheque, return memo, lawyer notice, and acknowledgment. The accused did not present any evidence. The defense argued that the lower court failed to consider the inconsistencies in the complainant's testimony and the contradictory nature of the evidence regarding the loan transaction.
  
  3. Legally enforceable debt and limitation period:
  The defense contended that the debt was time-barred and not legally enforceable. The court noted that the complainant failed to provide specific details about the loan transaction, including the dates and amounts involved. The complainant introduced different theories during cross-examination, which raised doubts about the existence of a legally enforceable debt. The court referenced the Supreme Court's judgment in Rangappa v. Sri Mohan, which states that the presumption u/s 139 includes the existence of a legally enforceable debt, but it is rebuttable.
  
  4. Partial payment and its effect on the liability:
  The defense argued that partial payments made by the accused were not accounted for in the complainant's claim. The court noted that the complainant admitted to receiving partial payments but failed to provide details about the liability between the accused and the complainant's mother. The court held that the complainant should have issued a notice for the lesser amount after accounting for the partial payments.
  
  Conclusion:
  The court concluded that the complainant failed to prove the existence of a legally enforceable debt of Rs. 12,00,000/-. The defense successfully raised doubts about the complainant's claims and established that the cheque was issued under different circumstances and for a time-barred debt. The court set aside the conviction and sentence, acquitting the accused of charges u/s 138 of the Negotiable Instruments Act, and ordered the refund of the fine amount and cancellation of bail bonds.

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• 2011 (2) TMI 1597
  
  Issues involved: The judgment involves issues related to the deletion of addition by the CIT(A) and the deduction u/s 80P(2)(e) of the Income-tax Act in the Department's appeal, as well as the deduction claimed u/s 80P(2)(d) on dividend and interest income in the Assessee's appeal.
  
  Department's Appeal - ITA No. 1081/Chandi/2010:
  The Department appealed against the CIT(A)'s deletion of an addition of Rs. 14,80,41,864 and the allowance of deduction u/s 80P(2)(e). The appellant, an apex cooperative society, procured agricultural commodities for the Government and received income for storage charges. The CIT(A) allowed the deduction u/s 80P(2)(e) based on previous Tribunal orders, but the High Court ruled in favor of the Revenue, stating that storing was part of the business activity. Consequently, the Department's appeal was allowed, as the issue was decided in favor of the Department by the High Court.
  
  Assessee's Appeal - ITA No. 1095/Chandi/2010:
  The Assessee appealed regarding the deduction claimed u/s 80P(2)(d) on dividend and interest income. Both parties acknowledged that a similar issue had been addressed by the Tribunal in earlier years. The Tribunal remitted the issue back to the AO for fresh adjudication in accordance with the law. As the issue was identical to previous years and for consistency, the matter was restored to the AO for a fresh decision. The order passed by the CIT(A)/Assessing Officer was set aside, and the appeal filed by the Assessee was treated as allowed for statistical purposes.
  
  In conclusion, the Department's appeal was allowed based on the High Court's ruling, while the Assessee's appeal was remitted back to the AO for fresh adjudication in line with previous Tribunal orders for consistency.

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• 2011 (2) TMI 1596
  
  Issues Involved:
  1. Validity of business loss claim for AY 2006-07.
  2. Allowability of expenses under 'repairs and maintenance', 'professional charges', and 'freight' for AY 2006-07.
  3. Validity of business loss claim for AY 2003-04.
  4. Inclusion of factory land and building as taxable wealth for AY 1998-99.
  
  Issue-wise Detailed Analysis:
  
  1. Validity of Business Loss Claim for AY 2006-07:
  The Revenue challenged the CIT(A)'s decision to allow the assessee's claim of business loss, which the AO had rejected. The assessee claimed a business loss of Rs. 8,64,486 by setting it off against house property income. The AO found discrepancies in the assessee's claim of selling a sewage water treatment plant (SWTP) to Modista Resortwear, Goa. Modista denied any transaction, and another supplier, M/s A.G. Best Electrical Works, also denied selling pumps and motors to the assessee. The CIT(A) accepted the assessee's documents without thorough verification. The Tribunal concluded that the AO's rejection was justified due to stronger evidence against the assessee's claims, thus allowing the Revenue's appeal on this ground.
  
  2. Allowability of Expenses under 'Repairs and Maintenance', 'Professional Charges', and 'Freight' for AY 2006-07:
  The Revenue contended that the CIT(A) erred in allowing these expenses. The AO had capitalized these expenses, considering them pre-operative since the business had not commenced. The CIT(A) allowed the expenses, stating the AO did not make a clear case. The Tribunal found that the assessee's business activities were inconsistent, and no business had commenced in the relevant year. Therefore, the AO's decision to capitalize the expenses was upheld, and the Revenue's appeal on this ground was allowed.
  
  3. Validity of Business Loss Claim for AY 2003-04:
  The Revenue contested the CIT(A)'s decision to allow the assessee's claim of business loss from car hiring. The AO found insufficient evidence of a car hire business, as the assessee had only one car and no substantial records. The CIT(A) accepted the assessee's cash receipts without proper verification. The Tribunal noted that a four-year lull in business could not be considered temporary suspension and upheld the AO's rejection of the business loss claim. Consequently, the Revenue's appeal on this ground was allowed.
  
  4. Inclusion of Factory Land and Building as Taxable Wealth for AY 1998-99:
  The Revenue appealed against the CIT(A)'s decision to exclude the factory land and building from taxable wealth, citing a retrospective application of the Finance Act, 1998 amendment to Section 2(ea) of the Wealth-tax Act. The Tribunal found that the amendment, effective from 01-04-1999, was not retrospective and that factory land and building were commercial properties included in taxable wealth for AY 1998-99. Therefore, the Revenue's appeal on this ground was allowed.
  
  Summary:
  The Tribunal allowed all the appeals of the Revenue, rejecting the assessee's claims of business loss and expenses for AY 2006-07 and AY 2003-04 and including the factory land and building in taxable wealth for AY 1998-99.

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• 2011 (2) TMI 1595
  
  Issues Involved:
  1. Validity of reassessment proceedings u/s 147.
  2. Treatment of Lease Equalization Reserve (LER) in computation of taxable income.
  
  Summary:
  
  Issue 1: Validity of reassessment proceedings u/s 147

  Ground No.1 raised by the assessee in ITA No.3633/M/08 and ITA No.3634/M/08 contends that the CIT(A) erred in confirming the reassessment proceedings without appreciating that reopening of assessment based on change of opinion and unintelligible reasons are void and invalid. The assessee argued that the AO failed to establish a 'nexus' between the capitalization of LER and the addition of LER to the Assessee's income, and that the AO's reasons were not intelligible. The Tribunal noted that the AO had already dropped proceedings u/s 154 on the same issue, indicating awareness that LER was not considered for determining income under the Act. The Tribunal held that there was no "reason to believe" that income chargeable to tax had escaped assessment, making the initiation of reassessment proceedings invalid. Consequently, the order u/s 147 was annulled.

  Issue 2: Treatment of Lease Equalization Reserve (LER)

  The assessee, engaged in acting as advertising agents and providing equipment on lease, created a LER in compliance with the Guidance Note on Accounting for Leases issued by the ICAI. The Tribunal observed that LER was an item of debit or credit in the P&L Account prepared under the Companies Act, 1956, and was not considered by the assessee for determining its income under the Income Tax Act. The Tribunal emphasized that the LER was purely an accounting entry and did not represent real income. The Tribunal concluded that the AO's belief that LER should have been capitalized was based on a misunderstanding of the concept of LER, and thus, there was no rational and intelligible nexus between the reasons recorded by the AO and the belief that income had escaped assessment.

  Conclusion:

  The Tribunal allowed the appeals by the assessee and dismissed the appeals by the revenue, annulling the reassessment orders for both assessment years 2000-01 and 2001-02 on the grounds of invalid initiation of reassessment proceedings.

  Order pronounced in the open court on the 9th day of February 2011.

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• 2011 (2) TMI 1594
  
  Issues Involved:
  1. Treatment of repair expenses as capital or revenue in nature.
  2. Disallowance of provision for sludge disposal charges.
  3. Adjustment to book profit by treating provision for doubtful debts as unascertained liability.
  4. Adjustment to the cost of opening WDV and additions to fixed assets on account of capital subsidy.
  5. Disallowance of repairs and maintenance expenses.
  6. Penalty under Section 271(1)(c) for not reducing capital subsidy from the cost of assets.
  
  Issue-Wise Detailed Analysis:
  
  1. Treatment of Repair Expenses as Capital or Revenue in Nature:
  The Revenue challenged the CIT(A)'s decision to delete the addition made by the Assessing Officer (AO) by treating repair expenses as capital in nature. The AO had identified specific expenses related to the purchase of steel, cement, and RCC rod for road construction and pump purchase, totaling Rs. 7,14,272/-, and treated them as capital expenses. The CIT(A) found these expenses to be essential for running the business and not for enhancing the income-earning apparatus, thus allowable as business expenditure. The Tribunal agreed with the CIT(A), emphasizing that the effluent treatment plant's nature necessitated frequent repairs due to corrosive chemicals, thus confirming the deletion of the addition.
  
  2. Disallowance of Provision for Sludge Disposal Charges:
  The AO disallowed the provision for sludge disposal charges, treating it as a contingent liability. The CIT(A) upheld this disallowance, noting the provision was not a bona fide liability as it was not certain. The Tribunal, however, found that the liability for sludge disposal charges accrued as soon as the sludge was generated, as per the norms of GPCB. Following the mercantile system of accounting and the decision in Udaipur Mineral Development Syndicate Pvt. Ltd. vs. DCIT, the Tribunal allowed the provision for sludge disposal charges as a deductible expense under Section 37 of the Act.
  
  3. Adjustment to Book Profit by Treating Provision for Doubtful Debts as Unascertained Liability:
  The AO added the provision for doubtful debts amounting to Rs. 6,01,265/- to the book profit under Section 115JB, treating it as an unascertained liability. The CIT(A) upheld this adjustment, stating that the debts were not shown to be bad or doubtful. The Tribunal agreed with the CIT(A), citing the amendment to Section 115JB, which requires adding back any provision for diminution in the value of assets to the book profit. Thus, the adjustment was confirmed.
  
  4. Adjustment to the Cost of Opening WDV and Additions to Fixed Assets on Account of Capital Subsidy:
  The AO reduced the capital subsidy from the cost of capital assets for computing depreciation, as per Explanation 10 to Section 43(1). The CIT(A) upheld this adjustment. However, the Tribunal found that the capital subsidy was received for assets acquired before 01-04-1998, and the proviso to Explanation 10, effective from 01-04-1999, was not applicable. Therefore, the Tribunal ruled in favor of the assessee, allowing the depreciation without reducing the capital subsidy.
  
  5. Disallowance of Repairs and Maintenance Expenses:
  The AO disallowed Rs. 5,27,839/- out of the total repair and maintenance expenses, treating them as capital in nature. The CIT(A) confirmed this disallowance. The Tribunal, however, found that the expenses were necessary for maintaining the effluent treatment plant, which frequently required repairs due to corrosive chemicals. The Tribunal allowed the repair and maintenance expenses as revenue expenditure, emphasizing they did not enhance the capacity of the plant but were essential for its functioning.
  
  6. Penalty under Section 271(1)(c) for Not Reducing Capital Subsidy from the Cost of Assets:
  The AO levied a penalty of Rs. 15,64,180/- under Section 271(1)(c) for not reducing the capital subsidy from the cost of assets. The CIT(A) canceled the penalty. The Tribunal, having decided the issue of capital subsidy in favor of the assessee in the quantum appeal, confirmed the deletion of the penalty, stating it would not survive.
  
  Conclusion:
  The Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals and cross-objections, except for ITA No.734/Ahd/2007, which was partly allowed. The Tribunal's decision emphasized the necessity of repairs and maintenance for the effluent treatment plant, the correct treatment of provisions under the mercantile system of accounting, and the non-applicability of certain provisions to assets acquired before specific dates. The penalty under Section 271(1)(c) was also deleted following the favorable ruling on the capital subsidy issue.

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• 2011 (2) TMI 1593
  
  Issues Involved:
  1. Legality of the complaint filed by the Power of Attorney Holder.
  2. Validity of notice service u/s 138 of the N.I. Act.
  3. Jurisdiction of the Court to entertain the writ petition.
  
  Summary:
  
  Issue 1: Legality of the Complaint by Power of Attorney Holder
  The first point addressed whether the opposite party No. 1, based on a Power of Attorney dated 2.6.2003, could file a criminal complaint u/s 138 of the N.I. Act, 1881. The petitioner argued that the Managing Director of the company, who is the Principal Officer, cannot re-delegate his power to file such complaints. The court noted that the Principal Officer cannot re-delegate his power to a subordinate, making the complaint filed by the Power of Attorney Holder invalid.
  
  Issue 2: Validity of Notice Service u/s 138 of the N.I. Act
  The second issue was whether the notice, which was returned unserved, could constitute an offence u/s 138 of the N.I. Act. The petitioner contended that the notice was not served as required by law. The court emphasized that for an offence u/s 138 to be constituted, the notice must be served upon the addressee. The court found that the notice was sent to an incorrect address and returned unserved, thus failing to meet the mandatory requirement of service of notice u/s 138(b) of the N.I. Act. Consequently, the cognizance taken by the Chief Judicial Magistrate, Daman, was deemed illegal.
  
  Issue 3: Jurisdiction of the Court
  The third issue was whether the High Court of Orissa had jurisdiction to interfere with the complaint lodged at Daman. The court noted that since the cheque was issued at Balasore and dishonoured at Bhubaneswar, the cause of action arose in the State of Orissa. Therefore, the institution of the complaint at Daman was not maintainable. The court held that the writ petition filed in the High Court of Orissa was maintainable under Article 226 of the Constitution of India.
  
  Conclusion:
  The writ petition was allowed, and the proceedings initiated by opposite party No. 1 at Daman were quashed.

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• 2011 (2) TMI 1592
  
  Issues involved: Appeal against order dated 22.12.2009 of learned CIT(A)-XXVII, Mumbai for Assessment Year 2005-2006.
  
  Issue 1 - Non-occupancy charges:
  The Revenue challenged the deletion of addition of &8377; 8,36,400/- for non-occupancy charges collected from members who sub-let their flats, claiming exemption under the principle of mutuality. The CIT(A) deleted the addition following the decision of the Hon'ble Jurisdictional High Court in the case of M/s. Sind CHS. The High Court held that non-occupancy charges are not taxable as they are governed by the principle of mutuality, with no element of profiteering. The Tribunal's remand directed the Assessing Officer to treat non-occupancy charges received by the society as non-taxable, as they increase the society's funds for providing services to members. The 10% limit on maintenance charges does not apply to commercial societies. The Tribunal's decision was accepted by the Revenue. The appeal upheld the CIT(A)'s decision based on the High Court's ruling.
  
  Issue 2 - Transfer charges:
  The Revenue also contested the deletion of addition of &8377; 95,000/- for transfer charges, citing a High Court decision that amounts received on account of transfer charges are exempt under the principle of mutuality up to &8377; 25,000/- per case as per government notification. The AR argued that the transfer charges in this case were below the permissible limit. Consequently, the Tribunal directed the Assessing Officer to allow the claim if the transfer charges were up to &8377; 25,000/- per case. The appeal was disposed of accordingly.
  
  The judgment pronounced on 11th February 2011 by Appellate Tribunal ITAT Mumbai, involved the resolution of issues related to non-occupancy charges and transfer charges, with decisions based on the principle of mutuality and relevant High Court rulings.

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• 2011 (2) TMI 1591
  
  Issues involved: Recall of Tribunal order for fresh consideration u/s 254(2) of the Income-tax Act, 1961.
  
  The Appellate Tribunal ITAT CHENNAI considered the miscellaneous petitions filed by the Revenue regarding the Tribunal order dated 31.5.2010 in S.P.No.20/Mds/2010 & I.T.A.No. 327 & 328/Mds/2010 for assessment years 2003-04 and 2004-05. The Revenue sought the recall of the entire order for fresh consideration u/s 254(2) of the Act. The reasons cited by the Revenue included issues related to the taxability of capital gains and the adoption of guideline value as Fair Market Value of the property. The Revenue contended that the Tribunal erred in admitting certain issues instead of remanding them back to the CIT(A). However, after hearing the rival submissions, the Tribunal held that allowing the recall would amount to a review of the order, which is not permissible under the law. Therefore, the Tribunal dismissed the miscellaneous petitions, stating that rewriting the order through review is not permissible u/s 254(2) of the Act. Consequently, the petitions filed by the Revenue were dismissed on 18.2.2011.
  

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• 2011 (2) TMI 1590
  
  Issues involved:
  The issues involved in this case are (1) deletion of addition of cash deposits u/s 68 of the Income Tax Act, 1961, (2) sufficiency of evidence provided by the assessee to explain the source of cash deposits, (3) burden of proof on the assessee to explain the source of cash deposits, and (4) consideration of additional evidence by the CIT(A) in deleting the addition.
  
  Deletion of addition of cash deposits u/s 68:
  The appeal was filed by the revenue against the order of the ld. CIT(A) deleting the addition of Rs. 8,64,000 made by the AO u/s 68 of the Income Tax Act, 1961. The assessee explained that the amount was withdrawn for renovation work and subsequently deposited back into the bank account. The CIT(A) found that the AO lacked specific evidence to challenge the cash flow statement and held that the unsubstantiated observation by the AO could not change the nature of the cash deposit. Therefore, the CIT(A) deleted the addition, which the revenue challenged in appeal.
  
  Sufficiency of evidence provided by the assessee:
  The assessee submitted that a portion of the withdrawn amount was advanced to a contractor for renovation work, and the contractor refunded the amount back to the assessee, which was then deposited in the bank account. An affidavit from the contractor supported this claim. The CIT(A) observed that the source of the deposit was explained by the assessee and that the AO did not provide any alternative explanation or evidence to contradict this. The Tribunal found no infirmity in the CIT(A)'s decision to delete the addition based on the explanation provided by the assessee.
  
  Burden of proof on the assessee:
  The revenue argued that the assessee failed to satisfactorily explain the source of the cash deposits, as required by judgments of the Hon'ble Supreme Court. However, the CIT(A) considered the evidence provided by the assessee, including the affidavit from the contractor, and concluded that the source of the deposit was adequately explained. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had successfully clarified the origin of the deposited amount.
  
  Consideration of additional evidence by CIT(A):
  The Tribunal noted a contradiction between the assessment order and the CIT(A)'s decision regarding the contractor's involvement in the renovation work. Despite this, the Tribunal found that the CIT(A) had not relied on any additional evidence in deleting the addition. The Tribunal concluded that the CIT(A) correctly assessed the case based on the facts presented during the assessment proceedings. Consequently, the Tribunal dismissed the revenue's appeal, affirming the deletion of the addition by the CIT(A).

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• 2011 (2) TMI 1589
  
  Issues Involved:
  1. Readiness and willingness of the Plaintiff to perform the contract.
  2. Entitlement of the Plaintiff to damages.
  
  Summary:
  
  Issue 1: Readiness and Willingness to Perform the Contract
  The Respondent entered into an agreement of sale dated 26.10.1988 with the Appellant, agreeing to sell her property for Rs. 43,50,000/- and received Rs. 9,50,000/- as advance. The agreement required the sale to be completed by paying the balance consideration of Rs. 34 lakhs within 30 days from the date of issue of a letter/telegram by the vendor informing the vendee that necessary NOC u/s 269(UL) of the Income Tax Act, 1961 and Income Tax Clearance Certificate had been received. The Respondent canceled the agreement on 27.2.1989 but subsequently entered into a fresh agreement on 2.5.1989, treating the cancellation as withdrawn. The sale had to be completed by 19.6.1989. The Respondent alleged that the Appellant was in breach for not completing the sale and terminated the agreement on 22.6.1989, leading to a suit for specific performance by the Appellant.
  
  The High Court dismissed the suit, holding that the Plaintiff-Appellant was not ready and willing to perform the contract and had failed to tender Rs. 34,00,000/- within the stipulated date. The court granted a decree for refund of Rs. 9,50,000/- with interest at 10% per annum. The Division Bench affirmed this decision, dismissing the appeal with costs of Rs. 10,000/-. The Supreme Court noted that the suit was dismissed based on concurrent findings of fact that the Appellant was in breach.
  
  The Appellant, a builder, argued that the Respondent failed to furnish the mutation certificate and up-to-date tax paid receipts, demanding an affidavit and bank guarantee confirming that all municipal taxes had been paid. The Respondent contended that there was an arbitrary assessment of tax by the Municipal authorities, and she had filed a suit which was decreed, directing a fresh assessment. She informed the Appellant that she would bear and pay the taxes up to the date of sale once the final assessment was made. The Appellant insisted on additional security, which the Respondent refused, leading to the termination of the contract.
  
  The Supreme Court found that the Appellant admitted in its notice dated 24.6.1989 that the Respondent attended the Sub-Registrar's Office on 14.6.1989 and 19.6.1989. The evidence showed that the Respondent was ready to execute the sale deed, but the Appellant insisted on additional security. The High Court's findings that the Appellant was in breach were based on appreciation of evidence and did not call for interference.
  
  Issue 2: Entitlement to Damages
  The Appellant sought damages for loss of profits and interest on the advance amount. The High Court dismissed the claim for specific performance and damages, granting only the refund of the advance amount with interest. The Supreme Court upheld this decision, noting that the Appellant was not ready and willing to perform the contract and could not claim damages.
  
  Conclusion:
  The Supreme Court dismissed the appeal, affirming the High Court's decision that the Appellant was in breach and not entitled to specific performance or damages. The Appellant's insistence on additional security for municipal taxes was not justified, and the Respondent was ready and willing to perform her part of the contract.

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• 2011 (2) TMI 1588
  
  Issues Involved:
  1. Product development expenses in foreign currency.
  2. Reopening of assessment u/s 147 r.w.s 148.
  3. Exclusion of expenses from export turnover.
  4. Foreign travel expenses.
  5. Disallowance of exchange fluctuation loss.
  6. Amortization expenses.
  
  Summary:
  
  Issue 1: Product Development Expenses in Foreign Currency (Assessment Year 2001-02)
  The Revenue's appeal concerning product development expenses incurred in foreign currency amounting to Rs. 8,64,51,871/- was dismissed. The CIT(A) ruled that these expenses should not be excluded from export turnover, a decision upheld by the ITAT, referencing the Special Bench decision in the assessee's own case for AY 2003-04.
  
  Issue 2: Reopening of Assessment u/s 147 r.w.s 148 (Assessment Years 2001-02 and 2002-03)
  For AY 2001-02, the reopening of assessment was upheld as the Assessing Officer had valid reasons to believe income had escaped assessment. Similarly, for AY 2002-03, the reopening was deemed valid based on objective material available to the Assessing Officer.
  
  Issue 3: Exclusion of Expenses from Export Turnover (Assessment Years 2001-02, 2002-03, 2004-05, and 2005-06)
  For AY 2001-02, the exclusion of Rs. 4,43,19,916/- from export turnover was upheld. However, for AY 2002-03, the exclusion of Rs. 32,34,01,504/- was dismissed as the Assessing Officer had already verified and allowed the claim. For AY 2004-05 and 2005-06, the exclusion of expenses incurred in foreign currency on onsite development was decided in favor of the assessee, following the Special Bench decision.
  
  Issue 4: Foreign Travel Expenses (Assessment Years 2001-02 and 2002-03)
  For AY 2001-02, the issue was remanded back to the Assessing Officer for fresh consideration. For AY 2002-03, the exclusion of Rs. 44,26,416/- was upheld as no evidence was produced to support the claim.
  
  Issue 5: Disallowance of Exchange Fluctuation Loss (Assessment Year 2004-05)
  The disallowance of exchange fluctuation loss was dismissed, with the ITAT following the Supreme Court decision in Sutlej Cotton Mills Ltd vs CIT and other Tribunal decisions favoring the assessee.
  
  Issue 6: Amortization Expenses (Assessment Years 2004-05 and 2005-06)
  For AY 2004-05, the issue of amortization expenses was remanded back to the Assessing Officer for further investigation. Similarly, for AY 2005-06, the issue was set aside to the Assessing Officer with similar directions.
  
  Conclusion:
  - AY 2001-02: Assessee's appeal partly allowed for statistical purposes; Revenue's appeal dismissed.
  - AY 2002-03: Assessee's appeal dismissed.
  - AY 2004-05: Assessee's appeal partly allowed; Revenue's appeal partly allowed for statistical purposes.
  - AY 2005-06: Assessee's appeal allowed; Revenue's appeal allowed for statistical purposes.
  
  Order pronounced in the open court on 28.2.2011.

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• 2011 (2) TMI 1587
  
  Issues involved: Appeal against deletion of depreciation on assets purchased out of exempted income u/s 11 of IT Act for AY 2006-07.
  
  Summary:
  1. The Revenue disallowed depreciation claimed by the assessee on assets purchased out of exempted income u/s 11 of the IT Act, as it amounted to double deduction. The AO concluded that depreciation is not admissible on assets where 100% deduction has already been taken. The claim for deduction was disallowed.
  
  2. On appeal, the CIT(A) allowed the claim of the assessee for depreciation, stating that the assets acquired by the appellant have value and the application of income for acquiring capital goods is eligible for deduction u/s 11. The CIT(A) referred to a Bombay High Court decision supporting the allowance of depreciation on such assets.
  
  3. The Revenue appealed against the CIT(A)'s decision. The DR relied on the AO's order, while the AR for the assessee cited relevant case laws to support the CIT(A)'s findings.
  
  4. The ITAT considered the arguments and cited decisions from the Bombay, Karnataka, Madhya Pradesh, Madras, Punjab, and Haryana High Courts, all supporting the allowance of depreciation on assets of charitable trusts. The ITAT upheld the CIT(A)'s decision to allow depreciation on the assets in question.
  
  5. The ITAT dismissed the appeal, stating that the Revenue did not provide any contrary decisions or material to warrant a different view. Both grounds of appeal were dismissed, and the appeal was rejected.
  
  Judgment: The ITAT upheld the CIT(A)'s decision to allow depreciation on assets purchased out of exempted income u/s 11 of the IT Act for AY 2006-07, citing various High Court decisions supporting the allowance of depreciation for charitable trusts.

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• 2011 (2) TMI 1586
  
  Issues involved: Appeal against order of CIT(A)-IV, Ahmedabad for assessment year 1998-99 regarding non-grant of deduction u/s 80IA on export incentives, including sale of import licence, duty draw back, and DEPB licence sale.
  
  Grounds raised in the appeal: Four grounds raised in the appeal relate to denial of deduction u/s 80IA on export incentives like sale of import licence, duty draw back, and DEPB licence sale in the original assessment order u/s 143(3).
  
  Background: ITAT previously directed the assessing officer to decide afresh on the treatment of export incentives for deduction u/s 80IA based on a co-ordinate Bench judgment. Assessing officer repeated denial of deduction in a subsequent assessment, with CIT(A) allowing deduction only on duty draw back.
  
  Arguments: Assessee's representative argued that incentives are covered as business income and entitled to deduction u/s 80IA. Contended that assessing officer's jurisdiction in set aside proceedings is limited to ITAT's directions, citing relevant case laws. However, Revenue's representative relied on a recent Apex Court judgment in Liberty India Ltd case to support denial of deduction.
  
  Decision: ITAT dismissed the appeal, holding that DEPB and duty draw back are incentives not derived from eligible business under section 80IA, as per the law laid down by the Supreme Court. The judgment of the Apex Court prevails over previous directions of the ITAT, and the appeal was decided against the assessee.
  
  Conclusion: The appeal was dismissed by ITAT, upholding the denial of deduction u/s 80IA on export incentives like sale of import licence, duty draw back, and DEPB licence sale, based on the recent judgment of the Apex Court.

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• 2011 (2) TMI 1585
  
  Issues Involved:
  1. Validity of contract termination by the Respondent.
  2. Applicability of public law principles versus private law principles.
  3. Entitlement to specific performance or damages.
  4. Grant of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.
  
  Issue-wise Detailed Analysis:
  
  1. Validity of Contract Termination by the Respondent:
  The Appellant entered into a contract with the Respondent for displaying advertisements through 50 LED screens. The contract included specific terms and conditions, such as payment schedules and site inspections. The Appellant claimed that 25 of the 50 sites were either not under the Respondent's control or faced objections from various authorities. Despite these issues, the Appellant paid the license fee for the first seven months but defaulted on subsequent payments, leading to the issuance of a show cause notice by the Respondent. The contract was eventually canceled by the Respondent due to non-payment, and the security amount was forfeited. The court observed that the legality of the termination would be determined in arbitration, noting that the contract was inherently terminable as per its terms.
  
  2. Applicability of Public Law Principles versus Private Law Principles:
  The Appellant argued that the Respondent, being a public authority, should be governed by public law principles under Article 14 of the Constitution, which mandates fairness, justice, and reasonableness. The court referred to the Supreme Court's decision in ABL International Ltd., which held that Article 14 applies even in contractual matters involving the State. However, the court also cited Issac Peter, reaffirming that mutual rights and liabilities in contracts freely entered into with the State are governed by the terms of the contract and contract law, not exclusively by public law principles. Thus, the court concluded that the contract in question, entered through a tender process, was subject to private law principles.
  
  3. Entitlement to Specific Performance or Damages:
  The Respondent contended that the contract was determinable and could not be specifically enforced under Section 14(1)(c) of the Specific Relief Act. The court agreed, citing precedents like Rajasthan Breweries Ltd., which held that in cases of wrongful termination, the remedy lies in seeking damages rather than specific performance. The court noted that the Appellant's remedy, if the termination was found wrongful, would be to claim damages in arbitration. The court emphasized that the contract's determinable nature precluded the grant of specific performance.
  
  4. Grant of Interim Relief under Section 9 of the Arbitration and Conciliation Act, 1996:
  The Appellant sought interim relief under Section 9 of the Arbitration and Conciliation Act to stay the contract's termination and maintain the status quo. The Single Judge dismissed the application, concluding that the Appellant failed to establish a prima facie case for interim relief. The court upheld this decision, noting that the contract was determinable and that the Appellant's primary remedy lay in seeking damages. The court also referenced Section 41(e) of the Specific Relief Act, which prohibits injunctions to prevent the breach of a contract that cannot be specifically enforced.
  
  Conclusion:
  The court dismissed the appeal, affirming that the contract was terminable and that the Appellant's remedy for any wrongful termination would be to seek damages through arbitration. The court upheld the rejection of interim relief, emphasizing that the contract's determinable nature precluded specific performance or an injunction to maintain the status quo. The appeal was dismissed with no order as to costs.

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• 2011 (2) TMI 1584
  
  The Appellate Tribunal ITAT AGRA ruled in favor of the assessee in a case involving a disputed cash credit of Rs. 1,50,000. The matter was referred to the ld. Third Member due to a difference of opinion between the Members of the Division Bench. The ld. Third Member agreed with the view of the ld. Judicial Member, leading to the allowance of the assessee's appeal. (Citation: 2011 (2) TMI 1584 - ITAT AGRA)

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• 2011 (2) TMI 1583
  
  Issues involved: Appeal against disallowance of expenses u/s 14A and applicability of section 14A to partner's share income from a firm.
  
  Disallowance of Expenses u/s 14A:
  The assessee claimed expenses against interest and remuneration income from a partnership firm. The AO disallowed a portion of the expenses u/s 14A, treating interest income separately. The CIT(A) upheld the disallowance based on a special bench Tribunal decision. The assessee contended that the issue was covered by ITAT decisions, citing the case of Shri Sudhir Kapadia. The ITAT, following the Sudhir Kapadia case, held that the share income of the partner retains the character of business income, exempt from double taxation, and thus, section 14A does not apply. Consequently, the disallowance of expenses was deleted, and the appeal was allowed.
  
  Applicability of Section 14A to Partner's Share Income:
  The ITAT relied on the Sudhir Kapadia case, where it was established that the share income of the partner from the firm retains the character of the firm's income, exempt from double taxation. As a result, section 14A was deemed not applicable to the partner, and the disallowance of expenses was overturned. The decision emphasized that the share income in the hands of the partner is not entirely tax-free, as it is already taxed in the hands of the firm, thereby avoiding double taxation. The ITAT directed the AO to allow the expenses claimed by the assessee, aligning with the Sudhir Kapadia precedent.
  
  Judgment Summary:
  The ITAT Mumbai heard an appeal challenging the disallowance of expenses u/s 14A and the applicability of section 14A to a partner's share income from a firm. The ITAT, referencing the Sudhir Kapadia case, ruled in favor of the assessee, stating that the share income retains the character of business income and is exempt from double taxation. Consequently, section 14A was deemed inapplicable, leading to the deletion of the disallowed expenses. The appeal was allowed, emphasizing the tax treatment of partner's share income in partnership firms.

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• 2011 (2) TMI 1582
  
  Issues involved: Appeal against order u/s 263 of the Income-tax Act, 1961 regarding treatment of lease rent income as business income.
  
  Summary:
  1. The appellant challenged the order of the Commissioner of Income Tax, Chennai-I u/s 263 of the Act, contending that the twin conditions stipulated in section 263 were not met.
  2. The assessment for the relevant year was completed after scrutiny u/s 143(3) of the Act, accepting the loss claimed by the assessee. The CIT issued a notice u/s 263 as the Assessing Officer had not considered whether income from leased buildings should be treated as business income. The assessee argued that the rental income was rightfully claimed as business income due to the temporary nature of the arrangement.
  3. The appellant submitted detailed information to the Assessing Officer supporting the claim that the lease income should be considered as business income. The A.O. had considered the replies and concluded that the rental income was indeed business income. The CIT, however, directed a fresh order, alleging lack of proper assessment by the A.O.
  4. The Departmental Representative supported the CIT's order, claiming that the A.O. did not apply his mind while assessing the lease rent receipts.
  5. The Tribunal observed that while the A.O.'s order lacked discussion on the treatment of lease rent income, the assessee had provided detailed explanations supporting the claim of business income. The Tribunal held that the A.O. had conducted a proper investigation and had applied his mind, thus rejecting the CIT's view.
  6. The Tribunal emphasized that the A.O. had called for and received necessary information from the assessee, indicating a proper application of mind. As the A.O. had taken a lawful view after considering all relevant details, the Tribunal found no error in the A.O.'s order. The Tribunal cited legal precedents to support its decision.
  7. Consequently, the Tribunal quashed the CIT's order u/s 263, allowing the appeal filed by the assessee.
  
  Judges' Names: Shri Abraham P. George, Accountant Member and Shri George Mathan, Judicial Member.

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• 2011 (2) TMI 1581
  
  Issues Involved:
  1. Powers of the revisional court under Section 115 of the Code of Civil Procedure (CPC).
  2. Maintainability of a revision under Section 115 CPC when no appeal lies under Section 102 CPC.
  3. Examination of the appellate court's judgment regarding the plaintiff's title to the property and the alleged entrustment of the crop to the first defendant.
  4. Determination of whether the appellate court's findings were perverse and warranted interference by the revisional court.
  
  Detailed Analysis:
  
  1. Powers of the Revisional Court under Section 115 CPC:
  The primary consideration in this case is the power of the revisional court under Section 115 CPC. The revisional jurisdiction has a long legislative history, starting from the Code of Civil Procedure, 1859, which did not contain any provision for revisional jurisdiction. The High Courts were later given superintendence over subordinate courts under the Charter Act, 1861. Section 115 CPC, as it stands today, was incorporated from Section 622 of the Code of Civil Procedure, 1882. The amendments in 1976, 1999, and 2002 have further refined the revisional jurisdiction, adding explanations and provisos to clarify its scope.
  
  2. Maintainability of a Revision under Section 115 CPC:
  The revision arises from the judgment in A.S. No. 59 of 2004, which is an appeal from the judgment and decree in O.S. No. 607 of 1999. Section 102 CPC proscribes a second appeal for suits involving recovery of money not exceeding Rs. 25,000. The value of the suit was Rs. 11,500, thus barring a second appeal. The plaintiff argued that a revision is maintainable under Section 115 CPC when no appeal lies. The court examined whether the impugned order finally disposed of the suit or proceeding, as required by the proviso to Section 115(1) CPC. The court concluded that the revision is maintainable because the appellate court's judgment finally disposed of the suit, satisfying the conditions under Section 115(1) CPC.
  
  3. Examination of the Appellate Court's Judgment:
  The plaintiff claimed ownership of the land and alleged that the first defendant, under the instigation of the second defendant, appropriated 25 bags of paddy. The trial court granted a decree for Rs. 8,500, but the appellate court reversed this, questioning the plaintiff's title and the alleged entrustment. The revisional court scrutinized the evidence, including the pattadar passbook (Ex. A.4) and receipts from the Primary Agricultural Cooperative Credit Society (Ex. A.5). The court found that the appellate court erred in rejecting these documents and concluded that the plaintiff had sufficiently established his title and the entrustment of the crop to the first defendant.
  
  4. Determination of Perverse Findings:
  The revisional court noted that the appellate court's findings were not just erroneous but perverse, as they ignored substantial evidence. The court referred to precedents where revisional jurisdiction was exercised to correct perverse findings. The court emphasized the maxim "Ubi jus ibi remedium," which means "where there is a right, there is a remedy," to justify its interference. The court concluded that the appellate court's judgment was perverse and deserved to be rectified.
  
  Conclusion:
  The revision was found to be meritorious and was allowed. The judgment of the appellate court was set aside, and the trial court's judgment was restored. The plaintiff was granted a decree against the first defendant for Rs. 8,500 with interest at 6% per annum from the date of the suit till realization. No order as to costs was made.

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• 2011 (2) TMI 1580
  
  Issues Involved:
  1. The reopening of assessment.
  2. The confirmation of disallowance made u/s.36[1][iii] by the AO, but confirmed by the CIT(A) u/s.14A.
  
  Summary:
  
  1. The Reopening of Assessment:
  The original return was processed u/s.143[1] on 30-12-04, and later the assessment was reopened u/s.147. The reasons for reopening included the finding that the assessee was paying interest expenses against unsecured loans, which were invested in acquiring unquoted shares of a subsidiary company. The AO disallowed the interest claimed u/s.14A, asserting that the borrowed funds were not used for business activities but for investment in shares, which generated tax-free dividend income u/s.10(33). The CIT(A) confirmed this action, noting that the original return was processed only u/s.143[1].
  
  The assessee argued that the tangible material for reopening was available before the deadline for issuing a notice u/s.143[2], and thus the AO should have issued the notice within the stipulated time. The assessee cited the case of Balkrishna Hiralal Wani, where it was held that assessment could not be reopened without tangible material. However, the Tribunal found that the AO had valid reasons to believe that income had escaped assessment, based on the assessment order for A.Y 2002-2003. The Tribunal referred to the Supreme Court's decision in ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd., which stated that failure to issue a notice u/s.143[2] does not render the AO powerless to initiate reassessment proceedings if conditions of section 147 are satisfied. Therefore, the Tribunal confirmed the reopening of the assessment.
  
  2. The Confirmation of Disallowance u/s.36[1][iii] and u/s.14A:
  On merits, the assessee contended that in their own case for A.Y 2002-03, an addition u/s.14A was deleted because there was no exempt income. However, the Tribunal noted that this decision was rendered before the Special Bench's decision in Daga Capital Management Pvt. Ltd., which held that provisions of sec.14A are applicable even in the absence of exempt income. The Tribunal also referred to the case of Cheminvest Ltd. vs. ITO, where it was held that disallowance under sec.14A applies irrespective of whether any income is earned.
  
  The Tribunal acknowledged that Rule 8D is not retrospective, as held by the Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT. Therefore, the Tribunal set aside the issue for reconsideration in light of this decision.
  
  Conclusion:
  The appeal was partly allowed for statistical purposes, with the Tribunal confirming the reopening of the assessment and setting aside the issue of disallowance for reconsideration. The order was pronounced in the open Court on 4th February 2011.

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• 2011 (2) TMI 1579
  
  Issues involved: Disallowance of claim u/s 54 of the Income-tax Act 1961.
  
  Summary:
  The assessee had sold three residential flats and invested the capital gain in purchase of three residential flats in the same building. The AO allowed exemption only in respect of sale of one flat and the corresponding investment in one flat. The CIT(A) upheld the view taken by the AO. The assessee argued that exemption under section 54 can be allowed if capital gain arising from more than two residential houses is invested in one residential house. The dispute was regarding exemption of capital gain under section 54 arising from sale of more than one residential house.
  
  The Appellate Tribunal held that the section 54 exempts capital gain arising from sale of a long term capital asset being a residential house and therefore it will apply to sale of any residential house provided other conditions are fulfilled. The Tribunal also ruled that the capital gains arising from sale of more than one residential house will be eligible for exemption under section 54 if gains from both the houses are invested in the same residential house. The decision was pronounced in favor of the assessee, setting aside the order of CIT(A) and allowing the appeal of the assessee.

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