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2012 (5) TMI 636
Issues involved:
1. Deduction allowed u/s 115JB(2)(ii)
2. Allowance of deduction u/s 115JB(2)(iii)
Deduction allowed u/s 115JB(2)(ii):
The appeal by the Revenue challenged the deduction allowed under section 115JB(2)(ii) of an amount of Rs. 90.89 crores for the assessment year 2005-06. The AO did not dispute that banks and financial institutions waived interest amounting to Rs. 115,07,00,000/- as a one-time settlement, with the assessee crediting the waived amount in its P & L account. However, the AO allowed a differential amount of Rs. 5,29,41,000/- as deduction u/s 115JB(i)(ix) as it was paid in earlier years. The CIT (A) found the AO's conclusion factually incorrect, determining that the interest disallowed under section 43B assumes the character of provision and cannot be treated as "paid." The CIT (A) quantified the deduction under section 115JB(2)(i) at Rs. 90,89,79,596/-, following a precedent set by the ITAT, Bombay Bench. The Tribunal upheld the CIT (A)'s decision, rejecting the Revenue's ground.
Allowance of deduction u/s 115JB(2)(iii):
The second ground related to the allowance of deduction u/s 115JB(2)(iii) of an amount of Rs. 42.48 crores. Initially, the AO allowed Rs. 7,24,93,410/- as deduction under Explanation-III to section 115JB(2) based on unabsorbed depreciation and business loss. However, in appeal proceedings, the AO re-worked the brought forward loss and unabsorbed depreciation, resulting in unabsorbed depreciation of Rs. 28.67 crores being the lesser amount. As per section 115JB(2), the lesser amount between brought forward loss and unabsorbed depreciation should be allowed as deduction, thus the Tribunal modified the CIT (A)'s order accordingly. Consequently, this ground was allowed in favor of the Revenue, and the appeal was partly allowed.
*Order pronounced on 04-5-2012.*
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2012 (5) TMI 635
Disallowance of remuneration to working partner - Held that:- We are in agreement with the decision of the CIT (A) that once the additional income offered for taxation during the survey is accepted and it has been explained business as the source of additional income then there is no bar in the Act from claiming partner’s remuneration from such additional business income. Accordingly, we find no infirmity in the order of CIT (A). Hence this ground of the Revenue is dismissed.
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2012 (5) TMI 634
Reopening of assessment - Held that:- In view of the judgment of the Supreme Court in Assistant Commissioner of Income Tax versus Dhariya Construction Company, (2010 (2) TMI 612 - Supreme Court of India) reopening cannot be sustained.
Further, in Commissioner of Income Tax versus Puneet Sabharwal, (2010 (12) TMI 846 - Delhi High Court) it has been held that addition cannot be solely made on the basis of the valuation report.
We also notice that before the CIT(Appeals), the assessee had pointed out that the Assistant Valuation Officer had relied upon one transaction relating to sale in DDA auction of a property located in a different location. It was also stated that the property in question is located in category B and the circle rates notified by the Government of NCT of Delhi on 18th July, 2007 for category B colony was ₹ 34,100/- per square meter. The Assistant Valuation Officer has taken the land rate for the sale transaction in question, which relates to September, 2005, at ₹ 92,975/- per square meter.
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2012 (5) TMI 633
Issues involved: Appeal by Revenue against CIT(A) order u/s 69 for assessment year 2007-08.
Summary:
The Revenue appealed against the CIT(A) order which deleted an addition made by the AO u/s 69 of the Income-tax Act, 1961. The dispute arose from the mis-statement of stock figures by the assessee to its bankers for credit facility. The AO added Rs. 10,07,595 as unexplained investment due to the vast variation in stock quantity. However, the CIT(A) observed that the mis-statement was for securing overdraft limits and not for undervaluing closing stock. Citing various court decisions, the CIT(A) concluded that no addition under section 69 was justified. The ITAT upheld the CIT(A) decision, dismissing all grounds of appeal raised by the Revenue.
In detail, the assessee showed business income from dealing in Gujarat Ambuja Cement and truck plying. The assessee pledged bags of cement to a bank for a cash credit facility. Discrepancies in stock valuation led to the addition by the AO u/s 69. The CIT(A) noted the mis-statement to bankers for credit purposes but found no evidence of undervaluation in the books. Relying on court decisions, the CIT(A) deleted the addition.
The ITAT considered the facts and contentions, emphasizing the mis-statement to bankers for credit, not for undervaluing stock. No defects in purchases or sales were found. Referring to court decisions, the ITAT upheld the CIT(A) decision to delete the addition under section 69. The appeal by the Revenue was dismissed.
The order was pronounced on 8th May, 2012, by the Appellate Tribunal ITAT Amritsar, with Sh. H.S. Sidhu and Sh. B.P. Jain as members, Sh. Amrik Chand representing the Petitioner, and Sh. Padam Bahl representing the Respondent.
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2012 (5) TMI 632
Addition u/s 92CA(i) - Held that:- We find that learned TPO while working out the alleged excess amount of interest paid by the assessee has considered the average LIBOR (London Inter-Bank Offered Rate) between the period of April 2001 to March 2002 plus arithmetic mean of the interest rate paid by the comparables in addition to LIBOR. Learned TPO has committed two errors. He considered the arithmetic mean of LIBOR between April 2001 to March 2002. The assessee entered into an agreement for the loan on 25.12.2000. What was the rate of LIBOR at that particular time has not been considered. Similarly, we concur with the finding of the Learned CIT(Appeals) that the comparables selected by the learned TPO are not comparables with the assessee in terms of their size quantitatively. Learned TPO also not compared the terms and conditions enumerated in the assessee’s agreement for the loan vis-à-vis the terms and conditions of the five comparables. Thus, to some extent, learned TPO has compared the incomparable with the assessee. In view of the above discussion, we do not find any merit in this ground of appeal. It is rejected.
Cessation of liability - Held that:- Once it is factually established by the assessee that liability has not ceased, no addition can be made. Learned CIT(Appeals) has considered this aspect and we do not see any reason to interfere in his order. With regard to the two other creditors, we find that the Learned CIT(Appeals) has deleted the addition on the ground that these amounts have been written off by the assessee in the subsequent years and offered for tax. Assessing Officer has made the addition of these amounts in the present years on the ground that assessee failed to file the confirmation from these two entities. The case of the assessee was that a dispute was pending between the assessee and these parties and it was not possible for it to ask for a confirmation. The assessee has not written off these amounts in its books of account. Assessing Officer has not brought any positive evidence on the record indicating the liability to pay these amounts has ceased. On due consideration of the order of the Learned CIT(Appeals), we do not find any merit in the ground of appeal raised by the revenue. Hence, it is rejected.
Addition on employees contribution towards EPF - amount paid after the expiry of the due date provided in the EPF Act - Held that:- As the amount was paid before the due date of the filing of the return and the issue is squarely covered in favour of the assessee
Disallowance of expenditure - Low GP - Held that:- Since the assessee failed to submit the requisite details at the time of assessment proceedings, therefore, learned Assessing Officer has rightly made ad hoc disallowance out of expenses on the ground that genuineness of such expenses could not be verified. But we agree with the submissions made by the learned counsel for the assessee that out of certain expenses, there cannot be any disallowance. The nature of the expenses is such that no doubt on their quantification can be raised. Now, as far as difference in foreign exchange is concerned, it is to be computed based on straight formula. Similarly, depreciation could also be verified from details available on the record. Considering all these aspects, we set aside this issue to the file of the Assessing Officer for readjudication.
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2012 (5) TMI 631
Penalty u/s 271(1)(c) - Held that:- In order to expose the assessee to penalty, unless the case is strictly covered by the provisio, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. The Explanation given by the assessee in our opinion is bonafide and can not be held to be false. Thus, we uphold the order of the first appellate authority and dismiss this appeal of the revenue.
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2012 (5) TMI 630
Order u/s. 201 passed beyond the period of 4 years from the end of the relevant financial year - obligation to deduct tax in respect of payment made by one non-resident to another non-resident - liability to deduct tax from payments made to Advanced Satellite International Ltd. - deduction of tax in respect of payments made to LMB Holdings (Mauritius).
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2012 (5) TMI 629
TDS u/s 194H - Held that:- The factual finding as recorded by the first appellate authority and the tribunal is that the payments were made by the purchasers who had booked plots/flats. While making payment, discounted price was paid by the buyers. In these circumstances, we do not think that Section 194H of the Act can be invoked. Therefore, no substantial question of law arises on the first aspect.
Disallowance of commission payment under Section 40A(2)(b) - Held that:- They were carrying on business in the name of Ethical Infrastructures Private Limited. Similarly, Ravinder Saund and Noorjahan Saund, husband and wife, were in the business of real estate. Ravinder Saund, was earlier the General Manager of Ansal Infrastructures Private Limited and had subsequently joined another developer. The bills issued by them were placed on record. Gaurav Mukhija, Praveen Mukhija and Anil Mukhija were relatives of the assessee but they too were in the real estate business for last several years. Their offices were located at Kundli and Sohna Road, etc. S.M.Mukhija (HUF) was similarly in business of real estate for the last several years. Advertisements, which were published by them to secure business was relied upon and highlighted. The CIT(Appeals) has recorded that the turnover of the assessee had increased from ₹ 1,65,28,203/- to ₹ 3,36,78,330/- and the net profit had also increased from ₹ 42,53,421/- to ₹ 79,18,404/-. Increase in turnover as well, as the net profit, required increase in manpower to co-ordinate with the clients. The aforesaid findings have been upheld by the tribunal. These are again findings of fact and are not perverse.
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2012 (5) TMI 628
Issues involved: The judgment involves appeals filed by the Revenue against orders of the CIT(A) VI, Chennai for different assessment years, challenging the deletion of penalties levied u/s 271(1)(c) of the Income Tax Act.
Assessment Years 1999-2004:
The Revenue contended that the assessee's revised returns filed in response to notices u/s 148 were not voluntary, leading to penalty imposition. However, the assessee argued that the revised returns were based on available data and not concealment. The ITAT held that penalty u/s 271(1)(c) was not applicable, citing relevant case law.
Assessment Year 2005-06:
The Revenue disputed the Commissioner's decision to allow telescoping of certain amounts, arguing against the need for such adjustments. The ITAT upheld the Commissioner's order, noting consistency with a previous decision for the assessment year 2001-02.
The judgment dismissed the Revenue's appeals for all assessment years, affirming the decisions of the Commissioner of Income Tax (Appeals) in both issues.
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2012 (5) TMI 627
Transfer pricing adjustment - A.E. -comparability - MAM - TNMM - Pre-operative expenses - eligible for deduction u/s 10-A - deduction u/s 10-B on interest earned from I.T. refund and housing loan given to employee being Non- business income - depreciation at the rate of 60% on computer peripherals and accessories - compensation received from landlord for delay in actual delivery of leased premises and related work facilities - rent expenses - pertaining to pre-operative period or post-operative period
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2012 (5) TMI 626
The Bombay High Court quashed and set aside the impugned orders in a writ petition, restoring the matter to the Policy Interpretation Committee for fresh consideration. The judgment was made on May 3, 2012, with no order as to costs.
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2012 (5) TMI 625
Accrued interest in respect of the borrowal account - Held that:- We would like to reiterate that though the AR had vouched that in case the accrued interest in respect of the borrowal account was not actually realized and the amount has become NPA as at the close of subsequent year, interest accrued and credited to income account in the corresponding previous year has been reversed and so on and so forth. However, no documentary proof was forth-coming for such an exercise made by the assessee.
In view of the above, this issue is remitted back to the file of the AO with a specific direction to look into the veracity of the assessee’s assertion and to take appropriate corrective step, if so warrants. The AO shall, however, keep in view the case laws relied on by the learned AR while implementing the above direction. It is ordered accordingly.
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2012 (5) TMI 624
Issues involved: Challenge to the order of Customs, Excise and Service Tax Appellate Tribunal regarding penalty for shortage of Tread Rubber under Sections 11AC and 11AB of the Central Excise Act.
Summary:
1. The appellant contested the legality of the order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, dated 18-7-2008, related to a penalty imposed for a shortage of Tread Rubber.
2. Central Excise officials found a shortage of 2247.78 kgs of Tread Rubber at the respondent's premises on 10-11-1995. A penalty of &8377; 81,781 was demanded by the Joint Commissioner of Central Excise under Sections 11AC and 11AB of the Act. The assessee's appeal to the Commissioner (Appeals) and subsequently to the CESTAT was successful, leading to the current appeal.
3. The appeal raised two substantial questions of law regarding the interpretation of Section 11A of the Central Excise Act and the applicability of a previous judgment. The Tribunal's decision was challenged based on errors in applying legal precedents.
4. The appellant's counsel argued that the Tribunal erred in overturning the concurrent findings of facts without proper consideration of the case's specifics. The Tribunal's decision was deemed to lack proper analysis and was set aside for reconsideration.
5. The appeal was allowed without answering the questions of law, and the matter was remanded to the CESTAT for fresh consideration in accordance with the law.
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2012 (5) TMI 623
Penalty levied u/s 271AAA - Held that:- As far as first condition is concerned, we find that assessee has fulfilled this condition as in the statement recorded at the time of search assessee, in reply to question No.5, stated that he was disclosing ₹ 50,00,000/- representing net on money receipts on land dealings as income. Thus assessee clearly specified that income is earned by way of getting on money in land dealings.
Coming to the second condition, we have already observed that there is no dispute about the fact that neither at the stage of recording of statement of the assessee nor at the stage of assessment proceeding assess was asked, either by the authorized officer or by the A.O., to substantiate the manner in which this undisclosed income was derived. Under these circumstances, the assessee be deemed to have discharged his onus of substantiating the manner in which this undisclosed income was derived by him and therefore it cannot be said during penalty proceeding that assessee did not fulfill this condition. No infirmity in the order of ld. CIT(A) deleting this penalty - Decided in favour of assessee.
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2012 (5) TMI 622
Addition u/s 43B - Held that:- Remit the matter back to Assessing Officer to verify dates whether payment is made within due dates of filing of return of income u/s. 139(1) of the Act or not. If payments are made within due date of filing of return of income u/s. 139(1) of the Act, then addition should be deleted in full. We order accordingly. This ground of appeal of the assessee is allowed for statistical purposes.
Disallowance of prior period expenses on account of interest - Held that:- This expenditure is related to the receipts for accounting year 2003-04 and 2004-05 and not to the relevant assessment year 2007-08. Hence, these are not allowable in this year.
Disallowance of depreciation on hotel building - Held that:- No infirmity in the order of CIT(A) and even in earlier years the assessee's claim has been allowed @ 10% as per depreciation rules. Accordingly, this issue of assessee's appeal is dismissed.
Estimated proportionate disallowance of interest paid on borrowed funds having advanced interest free to its subsidiary company and sister concern - Held that:- The amount advanced by assessee-company to its subsidiaries is for advancement of its objects and falls under the commercial expediency thus we allow the claim of assessee
Addition u/s 14A - Held that:- We direct the AO to restrict disallowance at 1% of expenses. This ground of appeal of assessee is partly allowed.
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2012 (5) TMI 621
Issues Involved:
1. Entitlement to exemption from excise duty under various notifications and policies.
2. Withdrawal of Cenvat credit benefits.
3. Applicability of National Calamity Contingent Duty (NCCD), Education Cess, and Secondary and Higher Education Cess.
4. Interpretation of exemption notifications in light of subsequent Finance Acts.
Summary of Judgment:
1. Entitlement to Exemption from Excise Duty:
The petitioners, M/s. Unicorn Industries and M/s. Akshay Ispat and Ferro Alloys Pvt. Ltd., established their units based on the Industrial Policy Resolution (IPR) of the Government of India and subsequent notifications, which granted a 10-year exemption from income tax and excise duty. The goods manufactured by the petitioners were not listed in Annexure-I of the exemption notification, thus qualifying for the exemption. The exemption was also applicable to the duty paid by utilizing Cenvat credit under the Cenvat Credit Rules, 2002. However, the exemption for Pan Masala was withdrawn by Notification No. 21/2007-C.E., dated 25-4-2007, which included it in the Negative List.
2. Withdrawal of Cenvat Credit Benefits:
The petitioners were availing Cenvat credit benefits, which were withdrawn by Notification No. 23/2008-C.E., dated 27-3-2008, and Notification No. 37/2008-C.E., dated 10-6-2008. The petitioners challenged these withdrawals, and the court quashed the impugned notifications with some directions.
3. Applicability of NCCD, Education Cess, and Secondary and Higher Education Cess:
The petitioners claimed re-credit/refund of NCCD, Education Cess, and Secondary and Higher Education Cess, believing these to be components of excise duty and thus within the purview of the exemption policy. However, the court found that these duties, though collected as excise duties, were not in essence excise duties but surcharges for specific purposes (e.g., disaster relief, education funding). The court held that these duties were not covered by the exemption notifications, which only applied to basic excise duty and additional duties specified under certain acts.
4. Interpretation of Exemption Notifications:
The court examined the nature of levies under the Finance Acts and concluded that the exemption notifications did not intend to grant exemption from duties imposed by future statutes. The exemption was limited to duties existing at the time of the notification. The court referenced the Supreme Court's decision in Union of India v. Modi Rubber Ltd., which held that exemptions are confined to duties in existence at the time of the notification and do not extend to future levies.
Conclusion:
The court dismissed the writ petitions, ruling that the petitioners were not entitled to exemptions from NCCD, Education Cess, and Secondary and Higher Education Cess, as these were not covered by the exemption notifications. The demands raised by the respondents for these duties were upheld.
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2012 (5) TMI 620
TDS u/s 194C - non deduction of tds - Held that:- For applying the provisions of section 194C(1) the contract should be between the contractor and the parties as per the list given from (a) to (j) of section 194C (1) of the IT Act as per the provisions applicable to the assessment year under appeal in which sub-clause(k) being the individual do not find mention. Thus, in the assessment year under appeal, the contract between the contractor and individual would not cast any obligation on the individual to deduct TDS on the payment made to the contractor. Since in this case, payment is made by the assessee to M/s. Devshree Network Pvt. Ltd., for providing cable transmission, therefore, no other person is involved in the transaction/oral contract. Thus, the assessee did not act as a sub-contractor in this case. Since the assessee has not acted as a contractor and no payment is made to the sub-contractor, therefore, the findings of the authorities below are based on wrong premise and assumption of certain facts which are not relevant to the matter in issue.
Provisions of section 194C(1) and (2) of the IT Act would not apply to the case of the assessee.
Since the expenditure has been actually paid and nothing remained payable as at the end of the A.Y. in the form of liability, therefore, provisions of section 40(a)(ia) are not applicable.
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2012 (5) TMI 619
Issues involved: Delay in writ petition, pre-deposit under Section 35F of Central Excise Act, 1944, recalling of order requiring deposit
The High Court of Calcutta addressed the issue of unnecessary delay in a writ petition filed in 2004, noting that it did not involve any substantial legal questions. The petitioners had applied for dispensation of pre-deposit u/s 35F of the Central Excise Act, 1944 during an appeal, but were directed by the Tribunal to make a pre-deposit of Rs. 7 lakh for the appeal to proceed. The petitioners argued that the total dispute amount was Rs. 8 lakh and highlighted a legal question regarding the inclusion of profit factor in assessing excise duty for a component. They contended that a prima facie assessment of the legal issue should have been made to determine the undue hardship caused by the pre-deposit requirement.
The petitioners further applied for recalling the order mandating the deposit, stating that their officer was indisposed, leading to a lack of awareness about the hearing date. Despite submitting a medical certificate, the Tribunal did not consider their reasons for non-representation. The Court emphasized the importance of giving a party an opportunity to present their side before making a decision, especially when an order is issued without proper representation. The Tribunal was urged to reconsider the recalling application with leniency and openness towards adjusting the quantum of pre-deposit if necessary.
Ultimately, the Court set aside the order from August 3, 2004, and instructed the Tribunal to reexamine the recalling application in line with the provided observations, emphasizing the need to act conscientiously. The writ petition was allowed without any cost implications, and parties were granted access to urgent certified copies of the order upon compliance with formalities.
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2012 (5) TMI 618
Issues Involved:
The judgment involves the refusal of registration u/s 12AA of the IT Act to the assessee by the ld. CIT, Gwalior, based on the contention that the objects of the trust were not solely religious in nature as claimed by the assessee.
Issue 1: Refusal of Registration u/s 12AA:
The assessee trust applied for registration u/s 12AA of the IT Act, asserting that its objects were for the advancement of lives of persons of a particular community with faith in a specific religion, qualifying it as a public religious trust. The ld. CIT rejected the application, citing the decision in the case of CIT vs. Palghat Shadi Mahal Trust, 254 ITR 212(SC), and deeming the trust ineligible for registration.
Details:
The assessee contended that its case was similar to the Dawoodi Bohra Jamat case, where registration was granted u/s 12AA by the ITAT, Indore Bench, and upheld by the Hon'ble M.P. High Court. The assessee argued that since the issue was identical and the departmental SLP was pending before the Supreme Court, registration should be granted. The ld. DR supported the CIT's decision.
Issue 2: Consideration of Previous Judgments:
The ITAT, Indore Bench had previously considered a similar case involving Dawoodi Bohra Jamat, where registration u/s 12AA was granted. The High Court upheld the ITAT's decision, emphasizing that the trust was solely religious in nature, and the provisions of section 13(1)(b) were not applicable as the trust was not established for charitable purposes.
Details:
The High Court dismissed the departmental appeal, affirming the ITAT's decision to grant registration to Dawoodi Bohra Jamat u/s 12AA. The High Court noted that the trust's objects were religious and not charitable, thus section 13(1)(b) did not apply. The issue being identical, the ITAT directed the ld. Commissioner to grant registration to the assessee based on the previous decisions.
In conclusion, the judgment highlights the importance of the nature of trust objects in determining eligibility for registration u/s 12AA of the IT Act, drawing on precedents to support the decision to grant registration to the assessee in this case.
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2012 (5) TMI 617
Issues involved: Appeal against levy of penalty u/s 271(1)(c) on gifts received, genuineness of gifts, confirmation of gifts, addition of unexplained expenditure, justification of penalty, non-substantiation of gifts.
Summary:
Issue 1: Confirmation of levy of penalty on gifts received
The Assessing Officer added gifts received as income due to lack of proof of genuineness. Tribunal confirmed addition of gift from one donor but remanded another gift for re-examination. Penalty proceedings were initiated u/s 271(1)(c) for total gifts received, including an addition for unexplained expenditure. Penalty was levied on the total amount, leading to an appeal.
Issue 2: CIT(A)'s decision on penalty levy
CIT(A) sustained the penalty on the gift confirmed by the Tribunal, directing recalculation of penalty amount. Despite submissions and proofs provided by the assessee, CIT(A) found the explanation unsatisfactory and upheld the penalty.
Issue 3: Tribunal's decision on penalty levy
Assessee appealed before the Tribunal, reiterating submissions made before CIT(A) and providing additional evidence. Assessee argued that penalty cannot be levied as it was a case of non-substantiation, not inaccurate particulars. Various case laws were cited to support the argument.
Issue 4: Tribunal's decision on penalty levy
After considering submissions and evidence, the Tribunal found the levy of penalty unjustified. The Tribunal noted the age and demise of the assessee and donor, along with the provided documents. Despite the lack of conclusive proof of gift genuineness, the Tribunal concluded that penalty was not warranted. Citing relevant case laws, the Tribunal canceled the levy of penalty.
In conclusion, the Tribunal allowed the appeal, canceling the levy of penalty on the gifts received.
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