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Showing 121 to 140 of 858 Records
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2010 (3) TMI 1171
Issues Involved:
1. Disallowance of VRS expenditure for Jamshedpur and Jammu Units.
2. Classification of VRS expenditure as revenue or capital expenditure.
Summary:
Issue 1: Disallowance of VRS expenditure for Jamshedpur and Jammu Units
The assessee claimed VRS expenditure of Rs. 5,66,33,237/- as revenue expenditure, which included amounts for Jamshedpur Unit (Rs. 4,10,90,573/-) and Jammu Unit (Rs. 1,07,23,833/-). The A.O. disallowed the expenditure, treating it as capital expenditure, and the CIT(A) confirmed this disallowance for the Jamshedpur and Jammu Units while allowing the amount for the Head Office. The CIT(A) held that the closure of these units amounted to the closure of business activities and thus, the expenditure could not be allowed u/s 37(1) of the Act. The CIT(A) emphasized that the units were independent, had separate accounts, and their closure did not affect the functioning of other units.
Issue 2: Classification of VRS expenditure as revenue or capital expenditure
The assessee argued that the VRS expenditure was part of a business restructuring project named 'New Dawn' and should be considered as revenue expenditure. The restructuring involved closing some units and relocating employees, but the overall business continued. The assessee relied on various judicial principles, including the Supreme Court's decision in K. Ravindranathan Nair 247 ITR 178, which supported the claim that such expenditure is revenue in nature. The CIT(A) did not accept this contention, stating that the units were independent and their closure reduced the business size rather than just the workforce.
Judgment:
The Tribunal considered the issue and found that the assessee's business was a single business despite the independent functioning of the units. The Tribunal noted that the restructuring helped modernize and increase the business turnover and profits. The principles applied by the CIT(A) to allow the Head Office expenditure were equally applicable to the Jamshedpur and Jammu units. The Tribunal concluded that the VRS expenditure was incurred in the course of business restructuring and should be allowed as revenue expenditure u/s 37(1). The appeal was decided in favor of the assessee, allowing the VRS expenditure for Jamshedpur and Jammu Units as revenue expenditure.
Order:
The appeal was decided accordingly, and the order was pronounced in the open court on 26th March 2010.
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2010 (3) TMI 1170
Issues Involved:
1. Addition towards suppression of sales.
2. Disallowance of expenses under business promotion and general expenses.
3. Addition u/s 40A(3) of the Income Tax Act.
Summary:
1. Addition towards suppression of sales:
For AY 2004-05, the AO added Rs. 98,524 towards suppression of sales based on unaccounted delivery challans. Similarly, for AY 2005-06, an addition of Rs. 31,372 was made. The CIT(A) confirmed these additions, noting that the assessee failed to maintain proper sale bills and stock inventory. The Tribunal upheld the CIT(A)'s decision, stating that the assessee did not provide sufficient evidence to prove that the goods were not sold outside the books of accounts.
2. Disallowance of expenses under business promotion and general expenses:
For AY 2004-05, the AO disallowed Rs. 20,000 claimed as business promotion expenses due to lack of supporting evidence. The CIT(A) confirmed this disallowance. However, the Tribunal deleted the addition, recognizing the common practice in the business to pay commissions to carpenters. For AY 2005-06, the AO disallowed Rs. 15,000 out of general expenses, traveling, and conveyance due to lack of documentation. The CIT(A) upheld this disallowance, and the Tribunal agreed, finding the disallowance reasonable given the circumstances.
3. Addition u/s 40A(3) of the Income Tax Act:
For both AYs, the AO disallowed 20% of cash payments exceeding Rs. 20,000 made towards freight charges. The CIT(A) confirmed these disallowances. The Tribunal partially allowed the assessee's appeal, granting relief of Rs. 14,982 for payments made to out-of-state transporters under unavoidable circumstances but sustained the disallowance of Rs. 15,618 for payments made to local transporters, as the assessee could have used account payee cheques.
Conclusion:
The Tribunal partly allowed the assessee's appeals for both assessment years, providing relief in specific instances while upholding other disallowances.
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2010 (3) TMI 1169
Issues involved: Appeal by Revenue against order relating to treatment of interest income on fixed deposits as business income or income from other sources for A.Y. 2003-04.
Summary:
1. The assessee, a company engaged in oil and gas exploration, earned interest on fixed deposits with Barclays Bank. The Assessing Officer treated the interest income as income from other sources, while the assessee claimed it to be business income related to securing a loan for business purposes.
2. On appeal, the learned CIT(A) directed the interest income to be assessed as business income, citing previous orders and the nexus between the deposit and the business activities of the assessee.
3. The Revenue appealed to the Tribunal, arguing against the CIT(A)'s decision. The assessee pointed out that the Revenue had accepted similar orders in previous years and cited relevant court decisions supporting their claim.
4. The Tribunal upheld the CIT(A)'s order, emphasizing the principle of consistency and the direct nexus between the deposit and the business activities of the assessee as per previous court decisions.
Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order to treat the interest income on fixed deposits as business income for the assessment year in question.
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2010 (3) TMI 1168
Issues Involved:
1. Eligibility for deduction u/s 10A/10B for AY 2002-03 to 2004-05.
Summary:
Issue 1: Eligibility for deduction u/s 10A/10B for AY 2002-03 to 2004-05
Facts and AO's Findings:
- The assessee company claimed deduction u/s 10A/10B for AY 2003-04, which was denied by the AO amounting to Rs. 82.20 lacs.
- The AO, guided by the ACIT's opinion, concluded that the assessee was not eligible for deduction u/s 10A/10B as the company did not have a regular running office in the Software Technology Park (STP) and was merely supplying manpower, not developing software.
- The AO observed that the agreement with M/s Alpharma was for manpower supply, not software development, and the company was referred to as 'the supplier' in the agreement.
- The AO also noted that the negotiations were not recorded, and the consultant was the son of the directors, leading to the denial of the deduction claim.
Assessee's Arguments:
- The assessee argued that it satisfied all conditions for exemption u/s 10A/10B, including being a 100% export-oriented unit (EOU) and exporting computer software onsite.
- The assessee provided bank advices and a report in the prescribed form F-56G signed by a Chartered Accountant to support its claim.
- The assessee relied on Explanation 3 to sec. 10A/10B, which allows onsite software development carried out outside India, and notification no. 11521 dated 26.9.2000, which includes IT-enabled services for deduction u/s 10A/10B.
- The assessee contended that having only one employee does not negate the company's existence or its eligibility for deduction.
CIT(A)'s Findings:
- The CIT(A) found that the assessee complied with all prerequisites stipulated in section 10A/10B and that the main contention of the AO regarding the nature of services was unfounded.
- The CIT(A) noted that the agreement was for IT consulting services, and procuring manpower was incidental to rendering these services.
- The CIT(A) highlighted that the company had possession of the premises approved by the Customs Department and that the projections given to STPI were not relevant for determining eligibility.
- The CIT(A) concluded that the contract was not for manpower supply but for software services, and the assessee was entitled to the benefit of exemption u/s 10A/10B.
Tribunal's Decision:
- The Tribunal upheld the CIT(A)'s order, finding no infirmity in the CIT(A)'s conclusions.
- The Tribunal noted that the CIT(A) had considered each objection raised by the AO and provided detailed reasoning for allowing the deduction.
- The Tribunal referenced a similar case (Information Architects) where the assessee was allowed deduction u/s 80HHE, which is similar to u/s 10A/10B.
- The Tribunal confirmed the CIT(A)'s order for AY 2002-03 and 2004-05 based on the same reasoning.
Conclusion:
- The appeals filed by the department were dismissed, and the assessee was allowed the deduction u/s 10A/10B for the assessment years in question.
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2010 (3) TMI 1167
Issues Involved:
1. Applicability of Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of assessment on the Association of Persons (AOP) under Section 167B(2).
3. Bona fide belief and reliance on Supreme Court decisions and CBDT Circulars.
4. Justification for concealment penalty.
Issue-Wise Detailed Analysis:
1. Applicability of Section 271(1)(c) of the Income Tax Act, 1961:
The assessee, an AOP constituted by a joint venture agreement, faced penalties under Section 271(1)(c) for the assessment years 2003-04 and 2004-05. The penalties were imposed for allegedly concealing income or furnishing inaccurate particulars. The assessee contended that the income was distributed among its members and declared in their respective returns. The Tribunal examined whether the explanation offered by the assessee was bona fide and substantiated. It was noted that the explanation was not found to be false, and the assessee disclosed all material facts related to the computation of income. The Tribunal concluded that the provisions of Section 271(1)(c) were not attracted as the explanation was bona fide and substantiated.
2. Validity of assessment on the Association of Persons (AOP) under Section 167B(2):
The AOP earned a commission and distributed the net profit among its members according to their profit-sharing ratio. The Assessing Officer (AO) applied Section 167B(2) and assessed the entire income in the hands of the AOP, as the share of each member exceeded the maximum amount not chargeable to tax. The CIT(A) confirmed this action. The Tribunal referred to a Special Bench decision, which held that the assessment on the AOP was valid, and reliance on a CBDT circular was not applicable in light of the Supreme Court decision in ITO vs. Ch. Atchaiah. The Tribunal upheld the assessment on the AOP under Section 167B(2).
3. Bona fide belief and reliance on Supreme Court decisions and CBDT Circulars:
The assessee relied on the Supreme Court decision in Murlidhar Jhawar & Purna Ginning & Pressing Factory and a CBDT circular, which stated that once members of an AOP are assessed on their share income, the AOP cannot be assessed again. The Tribunal noted that the assessee had a bona fide belief based on this decision and circular. Although the legal position changed with the Supreme Court decision in ITO vs. Ch. Atchaiah, the circular was not withdrawn, leading to the assessee's bona fide belief. The Tribunal acknowledged that two views were possible and the assessee's claim was supported by material, indicating a bona fide belief.
4. Justification for concealment penalty:
The Tribunal emphasized that penalty proceedings are distinct from assessment proceedings. The confirmation of an assessment order does not automatically justify the imposition of a penalty. The assessee's explanation was based on a Supreme Court decision and a CBDT circular, and all material facts were disclosed. The Tribunal referred to various High Court decisions, including CIT vs. Lotus Trans Travels (P) Ltd., which held that penalty is not justified when the issue is debatable and the assessee's claim is bona fide. The Tribunal concluded that the assessee's claim was bona fide and supported by material, and there was no attempt to mislead the AO. Therefore, the levy of penalty was unjustified, and the penalties for both years were deleted.
Conclusion:
The Tribunal allowed the appeals, deleting the penalties for both assessment years. The key factors were the bona fide belief of the assessee based on Supreme Court decisions and a CBDT circular, the disclosure of all material facts, and the distinct nature of penalty proceedings from assessment proceedings.
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2010 (3) TMI 1166
Issues Involved:
1. Validity of service of notice under Section 158BD of the Income Tax Act, 1961.
2. Compliance with procedural requirements for service by affixture under the CPC, 1908.
3. Jurisdiction to complete assessment under Section 158BC read with Section 158BD.
Issue-wise Detailed Analysis:
1. Validity of Service of Notice under Section 158BD:
The core issue in this case revolves around whether the notice issued under Section 158BD was validly served on the assessee. The facts reveal that a search and seizure action under Section 132 was conducted on M/s S.S. Property Dealer, and during this search, an agreement involving the assessee was seized. The Assistant Commissioner of Income Tax (ACIT) proposed action under Section 158BD, and a notice was issued on 29th April 2002, which was claimed to be served by affixture.
The CIT(A) noted that the notice under Section 158BD was not served by post and that the service by affixture did not comply with the procedural requirements. The AO did not provide reasons for satisfaction that the notice could not be served in the ordinary way. Furthermore, no efforts were made to trace the assessee's whereabouts, and there were no independent witnesses to the affixture. Consequently, the CIT(A) held that the service of notice under Section 158BD was invalid, leading to the conclusion that the assessment framed under Section 158BC read with Section 158BD was bad in law.
2. Compliance with Procedural Requirements for Service by Affixture under the CPC, 1908:
The CIT(A) emphasized that the service by affixture must comply with Order 5 of the CPC, 1908. The AO's direction for substituted service lacked reasons for satisfaction that the notice could not be served in the ordinary way. The CIT(A) observed that the AO knew as early as May 2000 that the assessee had moved from the last known address. The process server's reports did not indicate any efforts to locate the assessee, and there were no independent witnesses to the affixture on 5th August 2003.
The Tribunal reiterated that service of notice under Section 158BD must comply with Section 282 of the IT Act, which allows service by post or as if it were a summons issued by a court under the CPC. The Tribunal highlighted that service by affixture must follow the procedure laid down in Order 5, Rule 17 of the CPC, which requires due diligence and verification by independent witnesses. The Tribunal found that the AO did not exercise due diligence and that the service by affixture was not valid as per the CPC requirements.
3. Jurisdiction to Complete Assessment under Section 158BC read with Section 158BD:
The Tribunal noted that the service of notice under Section 158BD is a jurisdictional requirement. The absence of valid service of notice invalidates the jurisdiction to complete the assessment. The Tribunal cited precedents, including the Hon'ble Supreme Court's decision in CIT vs. Thayaballi Mulla Jeevaji Kapasi, which held that service of notice is a condition precedent to the initiation of reassessment proceedings. The Tribunal concluded that the lack of valid service of notice under Section 158BD rendered the assessment proceedings illegal and void.
Conclusion:
The Tribunal upheld the CIT(A)'s order, confirming that the service of notice under Section 158BD was invalid due to non-compliance with procedural requirements and lack of due diligence. The Tribunal dismissed the Revenue's appeal, affirming that the assessment framed under Section 158BC read with Section 158BD was bad in law. The Tribunal emphasized the importance of valid service of notice to confer jurisdiction for assessment proceedings.
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2010 (3) TMI 1165
Issues involved: The judgment involves issues related to disallowance of deduction under section 80HHC, disallowance of payment on account of Provident Fund, disallowance of interest on late payment of TDS, consideration of revised computation of income, reduction of income of GE Capital Debentures, charging of interest, deletion of addition on account of revising the value of closing stock, deletion of disallowance of foreign travel expenses, and disallowance of loss on account of re-statement of foreign exchange assets.
Issue 1: Disallowance of deduction under section 80HHC
The assessee appealed against the disallowance of deduction under section 80HHC in respect of DEPB credit. The ground was not pressed during the hearing, leading to its dismissal for want of prosecution.
Issue 2: Disallowance of payment on account of Provident Fund
The dispute arose regarding the disallowance of a payment on account of Provident Fund contributions. The Assessing Officer contended that the employer's contribution to the Provident Fund Trust was not allowable as the trust was not recognized. The CIT(A) upheld the disallowance, stating that the trust was not recognized by the department. However, the assessee provided evidence to show that the trust was recognized, leading to the deletion of the disallowance.
Issue 3: Consideration of revised computation of income
The issue involved the exclusion of interest on refund in the revised computation of income. The CIT(A) justified the Assessing Officer's decision based on a Supreme Court ruling. However, the Tribunal directed the Assessing Officer to consider the revised computation and compute the income as per law, considering the pending issue before the High Court.
Issue 4: Deletion of addition on account of revising the value of closing stock
The Assessing Officer added an amount due to the revision of the closing stock valuation method. The CIT(A) deleted the addition based on the Tribunal's decision in the assessee's favor in previous years. The Tribunal upheld the deletion, stating that the method of valuation was recognized, and the addition was not sustainable.
Issue 5: Deletion of disallowance of foreign travel expenses
The disallowance of foreign travel expenses was challenged by the revenue. The CIT(A) deleted the disallowance based on previous appellate orders in favor of the assessee. The Tribunal sustained the deletion, as the relief granted to the assessee had been accepted by the department.
Issue 6: Disallowance of loss on account of re-statement of foreign exchange assets
The dispute involved the disallowance of a loss on the re-statement of foreign exchange assets. The CIT(A) allowed the loss as it was on revenue account, following the principles of AS-2. The Tribunal upheld the decision, stating that the loss was allowable and not notional.
In conclusion, the Tribunal partly allowed the appeal of the assessee and dismissed that of the revenue, addressing various issues related to deductions, disallowances, valuations, and losses in the judgment pronounced on 19th March 2010.
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2010 (3) TMI 1164
Issues involved: Determination of long-term capital gain u/s 50C of the Income Tax Act and consideration of fair market value of property for capital gain calculation.
Issue 1: Determination of long-term capital gain u/s 50C of the Income Tax Act
The assessee sold an immovable property and claimed the cost of acquisition at a higher value than the one originally bought for. The AO rejected this claim, citing section 50C of the Act, which deals with stamp duty valuation. The AO concluded that the stamp duty valuation adopted by the assessee was not acceptable. The ld. CIT(A) upheld the AO's decision. The ITAT found that the cost of acquisition should be the actual amount paid by the assessee, not the higher value claimed. The ITAT clarified that section 50C is only applicable when the sale consideration is lower than the value adopted by the Stamp Valuation Authority. Therefore, the assessee's request to apply section 50C to substitute the cost of acquisition was rejected.
Issue 2: Consideration of fair market value of property for capital gain calculation
The assessee claimed that the actual consideration received for the property was lower than the value adopted by the Stamp Duty Authority. The assessee argued that the property's fair market value was less than the value assessed by the Authority. The ld. CIT(A) did not find it necessary to refer the property for valuation by the Valuation Officer since the assessee had already accepted the sale consideration assessed by the Stamp Duty Authority. The ITAT noted that section 50C(2) allows for valuation by a Valuation Officer if the assessee contests the value assessed by the Stamp Valuation Authority. Even though the assessee did not raise this issue before the AO, the ITAT decided to remit the matter back to the AO for further consideration. The AO was directed to evaluate the fair market value of the property based on the assessee's claim and supporting documents.
In conclusion, the ITAT partially allowed the appeal for statistical purposes, remitting the fair market value issue back to the AO for reevaluation.
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2010 (3) TMI 1163
Issues involved: Appeal against order of CIT(A) regarding deduction under sec. 35D(2)(c)(iv) for expenditure on brokerage for raising capital.
Summary:
1. Facts of the case: The assessee, a limited company in the business of batteries and power systems, filed return for AY 2006-07. AO completed assessment with various disallowances. Assessee appealed to CIT(A) for relief, which was partially granted leading to the current appeal.
2. Assessee's contentions: Assessee claimed deduction u/s 35D for expenditure of &8377; 54.22 lakhs incurred for issuing share capital to comply with SEBI guidelines. Assessee argued the expenditure was for expansion and thus eligible for deduction under S.35D. Alternatively, claimed the expenditure as revenue expenditure.
3. Revenue's arguments: Revenue contended that the expenditure was for private placement of shares, not public subscription as required by S.35D. Also, argued that the expenditure was in the nature of capital, not revenue.
4. Tribunal's decision: Tribunal analyzed the provisions of S.35D and SEBI guidelines, concluding that the issue of share capital was not for public subscription but preferential basis. Found no evidence of expansion of business due to share issue. Rejected assessee's claim for deduction u/s 35D and as revenue expenditure. Case law cited by assessee deemed inapplicable.
5. Conclusion: Assessee's appeal was dismissed, and the order was pronounced on 03-03-2010.
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2010 (3) TMI 1162
Issues involved: Dispute over deduction claimed on compensation paid to tenant while computing capital gain from property sale; Dispute over allowability of deduction u/s 54 of the Income-tax Act.
Issue 1: Deduction claimed on compensation paid to tenant
The appellant, a financing business, declared capital gain from the sale of property and claimed a deduction of &8377; 25 lakhs for payment to the tenant, Shri Ramesh Nichlani. The Assessing Officer disallowed the claim due to lack of evidence. In appeal, the appellant presented an old agreement showing tenancy, along with evidence of subletting. The CIT (A) allowed the claim based on this new evidence. The Tribunal noted the fresh evidence and decided to send the issue back to the Assessing Officer for reevaluation after considering the additional evidence.
Issue 2: Allowability of deduction u/s 54 of the Income-tax Act
The appellant purchased a residential house using capital gain, seeking exemption u/s 54. The Assessing Officer disallowed the claim, stating the appellant was not the owner of the property sold, only the land. In appeal, the appellant provided an agreement showing joint ownership of the residential house. The CIT (A) accepted the evidence and allowed the deduction. The Tribunal found that the agreement was not submitted to the Assessing Officer and decided to remand the issue for a fresh assessment after considering all additional evidence.
Separate Judgment:
The dispute over deduction on compensation paid to the tenant, Shri Ramesh Nichlani, in the case of Shri Bhagwandas A Nichlani is similar to the issue raised in the case of Mrs. Sheela B Nichlani. Following the decision on Mrs. Sheela B Nichlani's case, the Tribunal remanded this issue to the Assessing Officer for reevaluation after considering additional evidence and providing an opportunity for the assessee to be heard.
In conclusion, the Tribunal allowed both appeals of the revenue for statistical purposes, with orders pronounced on 12th March 2010.
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2010 (3) TMI 1161
CENVAT Credit - duty paying invoices - Whether private challans other than the prescribed documents are valid for taking modvat credit under the Central Excise Rules, 1944? - Held that:- The respondent-manufacturer would be entitled to claim Modvat credit on the strength of private challans, as the same were not found to be fake and there was a proper certification that duty had been paid - appeal dismissed - decided against Revenue.
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2010 (3) TMI 1160
Issues involved: Appeal against assessment of expenses relating to research and development u/s 35(2AB) for assessment year 2005-06.
Summary:
1. The assessee, engaged in manufacturing automotive air-conditioning systems, claimed deduction u/s 35(2AB) and revenue expenses for research and development. The AO disallowed the claim of Rs. 3,83,62,003 for absence of Form No. 3 CL, denying the weighted deduction of 150%.
2. The CIT(A) upheld the disallowance, citing the late application for recognition of in-house R&D facility and absence of Form 3 CL issued by the Department of Science.
3. The assessee contended that the delay in receiving the certificate was beyond their control and argued that the decision of the Gujarat High Court in "CIT v. Claris Lifesciences Ltd." should apply to their case.
4. The Tribunal noted that the application for R&D facility approval was made within the relevant financial year, even though the Form 3 CL was received in a subsequent year.
5. Relying on the Gujarat High Court decision, the Tribunal held that the assessee was entitled to the weighted deduction claimed u/s 35(2AB), as the delay in receiving the certificate did not prejudice the assessee's claim.
6. Consequently, the appeal of the assessee was allowed, and the decision was pronounced on 22.03.2010.
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2010 (3) TMI 1159
Petition challenges the Notices issued by the Competition Commission under the Competition Act, 2002 in respect of an alliance between the petitioners and Jet Airways (India) Ltd - retrospective effect on alliance between the parties - objective to rationalise the rates and provide improved standard of service of wider choice to the customers - M.R.T.P. Commission had taken cognizance of the agreement - Competition Act, 2002 repealing the M.R.T.P. Act came into effect on 20th May, 2009 - However, the operation of Section 66 was kept in abeyance for two years, as a result of which, M.R.T.P. Commission could continue to exercise the jurisdiction till the expiry of two years from 20th May, 2009 - According to the petitioners, the M.R.T.P. Commission is already seized of the matter in enquiry and therefore, the cognizance taken by the Competitive Commission was one without jurisdiction - establishment of relevant market is an essential condition before any exercise can be undertaken by the Commission.
HELD THAT:- It is clear that though the transaction and agreement may be prior to coming into force of the Act, it stands covered by the Act on the date the Act came into operation. The decision in Rajgopal's 1995 (1) TMI 67 - SUPREME COURT] case applies on all fours to the instant case. We are, therefore, of considered opinion that though the Competition Act is not retrospective, it would cover all the agreements covered by the Act though entered into prior to the commencement of the Act and sought to be acted upon.
Whether the Competition Act could be said to be penal in nature - It was submitted on behalf of the petitioner that Section 43 of the Act prescribes punishment and therefore, it should be treated as a penal Act. We do not think that the Act, strictly speaking, is a penal Act. This is because the Act does not make punishable by itself an act of entering into an agreement, contrary to the provisions of the Act. Therefore, even if parties enter into an agreement covered by the Act, that by itself, does not amount to an offence. What is made punishable is disobedience of the order passed by the Commission and noncompliance.
Strictly speaking, no criminal liability ensues for breach of Section 3 or 4 of the Competition Act. It seems to us that the penalty is provided only with a view to ensure or enforce compliance of the directions of the Commission, as can be seen from Section 27(1) of the Competition Act. Such a direction can be issued by the Commission only after enquiry. Necessarily, therefore, unless and until any enquiry is held and pursuant to that certain directions as envisaged by Section 2(a) to (g) are issued, there would be no question of anybody committing any offence. At the cost of repetition, it may be said that breach of Sections 3 and 4 by itself is not an offence.
The agreement was valid when entered into. It was not an offence at that time nor is it an offence even today or even on the date of the coming into force of the Act. As pointed out earlier, entering into agreement contrary to the Act by itself is not an offence. The petitioners are not sought to be convicted or even tried for an act of entering into an alliance. The proceedings or the action of the Commission is at the preliminary stage only. It only seeks to look into and enquire into/investigate into the terms of the alliance. If Article 20 is to be applied, there has to be trial or prosecution for the act done prior to the coming into force of the Act. There is nothing like that.
There is no doubt that the M.R.T.P. Commission had received a complaint under that Act. The said complaint No.172 of 2008 was looked into by the M.R.T.P. Commission. It is clear that the M.R.T.P. Commission had found that since the alliance had not come into effect, the mere apprehension cannot be taken into consideration and had, therefore, left the matter open for the Director General to take up the investigation if any development occurs. It is apparent that the Commission has not decided any issue at all nor has it ordered any investigation.
We, therefore, find that no action whatsoever has been taken by the M.R.T.P. Commission. There could therefore be no impediment in taking any action under the new Act. Even otherwise, the provisions of the M.R.T.P. Act and the Competition Act are not identical. Since no action whatsoever is taken or proposed to be taken by the M.R.T.P. Commission, there could be no question of the petitioners being subjected to double jeopardy. Further, the M.R.T.P. Commission now stands abolished w.e.f. 14th October, 2009. There is, therefore, no question of M.R.T.P. Commission now taking any action against the petitioners. This ground of challenge has no substance at all.
The submission that unless and until the Commission first determines the relevant market, the relevant geographic market, it cannot take any action u/s 4 of the Competition Act. There is no doubt that for coming at a conclusion as to whether a particular group has abused the dominant position or not, three things, namely; relevant market, relevant geographic market and relevant products are to be considered. However, for considering the effect of Section 4, it would also be necessary to look into the various other provisions of the Act.
It is clear from Section 19 that the Commission can act upon receipt of information and on a reference made to it by the Central or State Government or on its own motion. It is, therefore, clear that there has to be some information before the Commission about the alleged breaches of Sections 3 and 4. If the Commission receives an information, it is supposed under Section 19 to enquire into the complaint received. Under the Code of Criminal Procedure, a Police Officer is supposed to look into the complaint and decide whether the information discloses a cognizable offence or not. If, upon reading the complaint, he finds that it does disclose a cognizable offence, he is bound to register the First Information Report and investigate into it.
The law is well settled that the court should not stifle the investigation at all, except for compelling reason or when F.I.R. does not disclose any offence at all. If the analogy is to be applied here it cannot be said that the information given by respondent no.3 does not disclose any beach nor can it be said that it is a case of lack of inherent jurisdiction to the Commission to investigate. It has a power to enquire and investigate into every complaint received under the Act, as is clear from the above provision.
We find that it was not necessary for the Commission to first find out the relevant geographic market, relevant products market or relevant market. Such things can be found or concluded upon investigation and not necessarily before that.
Therefore, we find that no writ as sought can be issued and petition should be dismissed. We, therefore, dismiss the petition.
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2010 (3) TMI 1158
Issues Involved:
1. Allowability of Foreign Buyer Agency Commission.
2. Disallowance of Deduction under Section 80HHC of the Income Tax Act.
Detailed Analysis:
1. Allowability of Foreign Buyer Agency Commission:
Observations by the Assessing Officer (AO):
- The AO noted that the assessee paid commission to Foreign Buyer's Agents (FBA) on export sales.
- The AO required the assessee to provide details such as the names and addresses of foreign buyers, mode of payment, copies of agreements with agents, and confirmation letters regarding the commission payment.
- The assessee explained that the commission was deducted from the gross value of export invoices, and only the net value was received from foreign buyers, as evidenced by the Bank Realization Certificate.
- The AO did not accept the assessee's contention, citing a lack of proper evidence and non-compliance with commercial agency laws of UAE and Indonesia. The AO disallowed the foreign agent commission expenses of Rs. 59,27,941/-.
Decision by the Commissioner of Income Tax (Appeals) [CIT(A)]:
- The CIT(A) allowed the claim, stating that the appellant had provided sufficient evidence, including sales contracts and confirmation of receiving commissions from the agents.
- The CIT(A) noted that the procedural non-compliance with UAE law by the agent could not form a ground for rejection of the commission payment.
- The CIT(A) emphasized that the identity of the recipient of the commission was established, and the recipient confirmed receiving the commission.
- The CIT(A) rejected the AO's view that tax should have been deducted on payments made to the foreign buyers' agent, referencing CBDT Circular No.786.
Arguments by the Department Representative (DR):
- The DR argued that the assessee failed to establish the genuineness and business nexus of the claimed agency expenditure under Section 37 of the Act.
- The DR emphasized that the commission was not reflected in the books of the assessee and thus should be disallowed.
Arguments by the Assessee's Representative (AR):
- The AR submitted that the issue was covered by previous decisions of the Ahmedabad Bench, which allowed the deduction of Foreign Buyers' Agent Commission.
- The AR provided evidence that the commission was deducted from the invoice value and that the net sales proceeds were brought into India in convertible foreign exchange.
Tribunal's Decision:
- The Tribunal referred to previous decisions, including those in the cases of Shri Sanjay Jain vs. DCIT and Shri Samir Batra vs. ITO, where similar claims were allowed.
- The Tribunal concluded that the Foreign Buyer's Agent Commission should be allowed as a deduction from the invoice value.
- The Tribunal dismissed the department's appeal, upholding the CIT(A)'s decision.
2. Disallowance of Deduction under Section 80HHC of the Income Tax Act:
Facts of the Case:
- The assessee, a partnership firm engaged in the export of fabrics, claimed a deduction under Section 80HHC.
- The AO disallowed the entire deduction, which was upheld by the CIT(A).
Arguments by the Assessee's Representative (AR):
- The AR argued that the issue was covered by the decision of the Special Bench in the case of Topman Exports vs. ITO, which held that only the profit element on the sale of DEPB should be considered under Section 28(iiid).
Tribunal's Decision:
- The Tribunal referred to the decision of the Special Bench in Topman Exports vs. ITO, which clarified that the face value of DEPB should be considered under Section 28(iiib) and the profit element on its sale under Section 28(iiid).
- The Tribunal directed the AO to recalculate the DEPB entitlement based on this decision.
- The appeal was allowed for statistical purposes.
Order Pronouncement:
- The order was pronounced in Open Court on 24/03/2010.
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2010 (3) TMI 1157
Issues Involved:
1. Taxability of income on accrual basis vs. cash basis.
2. Existence of business connection or Permanent Establishment (PE) in India.
3. Attribution of profit to PE in India.
Detailed Analysis:
1. Taxability of Income on Accrual Basis vs. Cash Basis:
The primary issue was whether the income of the assessee should be computed on an accrual basis or a cash basis. The AO held that the income should be taxed on an accrual basis, citing that the fees for technical services (FTS) are deemed to accrue in India when they become payable. The CIT(A) upheld this view, stating that the income of the non-resident should be computed on an accrual basis, as the assessee maintained its accounts on a mercantile basis at its head office. The Tribunal agreed with the CIT(A), noting that the assessee's annual accounts were prepared on a mercantile basis, and thus, the income in India should be computed on the same basis.
2. Existence of Business Connection or Permanent Establishment (PE) in India:
The second issue was whether the assessee had a business connection or PE in India. The AO and CIT(A) held that the assessee had a PE in India through its agent, ANR Associates, who performed significant activities for the assessee, including soliciting orders and maintaining customer relationships. The Tribunal examined the agreement between the assessee and ANR, noting that ANR acted almost wholly for the assessee and was subject to extensive control and instructions from the assessee. The Tribunal concluded that ANR was not an independent agent and that the assessee had a PE in India within the meaning of Article 5(1) and 5(8) of the DTAA between India and Singapore.
3. Attribution of Profit to PE in India:
The final issue was the attribution of profit to the PE in India. The AO attributed a significant portion of the profit from the sale of spares to the PE in India. The CIT(A) reduced the profit attributable to the PE to 10% for certain years and 25% for others. The Tribunal upheld the CIT(A)'s decision to attribute 10% of the profit to the PE for all assessment years, noting that ANR's role was limited to soliciting orders and promoting sales, and that the core activities were performed outside India. The Tribunal also considered the fixed remuneration paid to ANR and concluded that 10% of the total profit from the sale of spares could be attributed to the PE in India.
Conclusion:
The Tribunal upheld the CIT(A)'s decision to tax the income on an accrual basis, confirmed the existence of a PE in India through ANR Associates, and attributed 10% of the profit from the sale of spares to the PE in India for all assessment years. The appeals filed by the assessee were partly allowed, and those of the Revenue were dismissed.
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2010 (3) TMI 1156
Issues involved: Dismissal of Revenue's appeal due to lack of approval from Committee on Disputes (COD) u/s public sector undertaking regulations, disallowance of depreciation in securities held by bank as stock-in-trade, disallowance of unrealized interest on NPAs, and disallowance of prior period expenses.
Revenue's Appeal:
The appeal was dismissed as approval from the Committee on Disputes was not obtained, which is mandatory u/s public sector undertaking regulations. The Revenue was given the option to request a recall of the order if approval is later received.
Assessee's Appeal - Disallowance of Depreciation:
The grounds of appeal focused on disallowance of depreciation in securities held as stock-in-trade. The Tribunal decided in favor of the assessee based on a previous decision in the assessee's own case for the assessment year 2003-04.
Assessee's Appeal - Disallowance of Unrealized Interest on NPAs:
The grounds of appeal related to disallowance of unrealized interest on NPAs. The Tribunal ruled in favor of the assessee based on a previous decision in the assessee's own case for the assessment year 2003-04.
Assessee's Appeal - Disallowance of Prior Period Expenses:
The grounds focused on the disallowance of prior period expenses. The Tribunal decided in favor of the assessee based on a previous decision in the assessee's own case for the assessment year 2003-04.
Assessee's Appeal - Other Disallowed Grounds:
Some grounds related to provisions under Section 36(1)(viia) and Section 115JB of the Income Tax Act 1961 were not pressed by the assessee during the hearing and were rejected as not pressed.
In conclusion, the Revenue's appeal was dismissed due to lack of COD approval, while the assessee's appeal was partly allowed based on the Tribunal's decisions in favor of the assessee on the issues of disallowance of depreciation, unrealized interest on NPAs, and prior period expenses.
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2010 (3) TMI 1155
Issues involved: Appeal against disallowance of expenditure for procuring contract.
Summary:
1. The appellant, a Civil Contractor, claimed an expenditure of Rs. 10 lacs for business procurement and development charges. The amount was paid to a party who withdrew from a tender, allowing the appellant to secure the work order at a lower rate.
2. The Assessing Officer (A.O.) disallowed the claim, stating lack of evidence for business purposes. The Commissioner of Income Tax (CIT) upheld the disallowance, citing it as not a legal liability and against public interest.
3. The appellant argued that the expenditure was for business purposes and did not violate public policy. The work was awarded only after the other party refused to work at the lowest rate.
4. The Departmental Representative (D.R.) contended that there was no proof of the expenditure being for business purposes. The absence of a clear agreement showing the intention of the other party to withdraw from the bidding for the payment was highlighted.
5. The Tribunal referred to a decision by the Karnataka High Court, holding that the payment was a capital expenditure, not incurred for the business purpose of the appellant. The lack of evidence establishing the business purpose of the payment led to the dismissal of the appeal.
6. The Tribunal concluded that the payment was capital in nature and not proven to be for business purposes. The lack of documentation showing the intention of the other party to withdraw from the bidding for the payment resulted in the dismissal of the appeal.
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2010 (3) TMI 1154
Issues involved: Appeal u/s 260-A of the Income-Tax Act, 1961 challenging deletion of addition based on adhoc Gross Profit rate.
Summary:
Issue 1: Rejection of books of accounts and addition of adhoc Gross Profit rate
The assessment year is 1993-94, and the Assessing Officer rejected books of accounts of the respondent assessee, adding Rs. 54,38,457 based on an adhoc Gross Profit rate of 5%. The Commissioner (Appeals) deleted this addition, stating no grounds for rejection of books existed. Revenue appealed to the Income Tax Appellate Tribunal, questioning the deletion of the addition.
Issue 2: Tribunal's decision on the addition
The Tribunal, after considering the grounds raised by Revenue, upheld the deletion of the addition. It emphasized that since the rejection of books of accounts was not challenged by Revenue, the consequential addition could not be sustained. The Tribunal's decision was based on the premise that the exercise of powers u/s 145 of the Act precedes the estimation of profits, and in this case, there was no challenge to the cancellation of the rejection of books of accounts by the Commissioner (Appeals).
Conclusion:
The High Court dismissed the appeal, stating that no error was found in the Tribunal's decision. It emphasized that the rejection of books of accounts is a prerequisite for estimating profits, and since there was no challenge to the cancellation of the rejection, the addition based on adhoc Gross Profit rate could not be sustained. The appeal was dismissed with no order as to costs.
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2010 (3) TMI 1153
Issues involved: Failure to engage authorized counsel, non-appearance of assessee, dismissal of appeals in limini.
The Appellate Tribunal ITAT MUMBAI in the case of assessment years 2000-2001 to 2006-2007, noted that the assessee failed to engage an authorized counsel in a timely manner. Despite being given multiple opportunities, the counsel did not provide proof of authorization in the form of a power of attorney. The Tribunal emphasized the necessity for proper authorization and dismissed the request for adjournment due to the lack of documentation.
Due to the non-appearance of the assessee on the scheduled hearing dates and the absence of an authorized counsel, the Tribunal inferred that the assessee was not interested in pursuing the appeals. Citing a previous case, the Tribunal highlighted that dismissal of appeals in limini due to non-appearance is within its rights. As the assessee had not authorized any counsel and failed to provide proof of authorization, the Tribunal had no choice but to dismiss the appeals in limini.
In conclusion, the Appellate Tribunal ITAT MUMBAI, on 2nd March 2010, dismissed the appeals filed by the assessee for the assessment years 2000-2001 to 2006-2007 due to the failure to engage an authorized counsel and the subsequent non-appearance of the assessee, in accordance with the inherent right of the Tribunal to dismiss appeals in limini under such circumstances.
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2010 (3) TMI 1152
Inter-se seniority between two batches - direct recruits Range Forest Officers 1979-81 batch (non-graduates) and 1980-81 batch (graduates) of the Subordinate Forest Services and their further promotion to the post of Assistant Conservator of Forests - HELD THAT:- We are of the view that the Government has committed a grave error in unsettling the inter se seniority of the graduates and non- graduates which was settled as early as in the year 1982. The State Government in its letter dated 12.10.1982 had taken the view that two years’ training was imparted to non-graduates of 1979-81 batch and one year training was imparted only to graduates of 1980-81 batch since candidates with lesser qualification required through training compared to the candidates with higher qualification.
Strict interpretation of Rule 10 of 1969 Rules and Rule 18 of 1974 Rules was unworkable and literal interpretation would have resulted in absurd results. When the educational qualification prescribed was pass in intermediate examination, the legislature wanted the candidates to undergo training for two years. But, when the higher educational qualification of graduation was prescribed the statute was silent as to the period of training the candidates have to undergo. Even the non- graduates were not sent for training in the colleges mentioned in the Rules but were sent to some other colleges where the duration of course was two years and the candidates of 1980-81 batch was sent for training to the colleges which conducted course of one year duration. Such a course was adopted, since the rules were found to be unworkable. It is a well known Rule of construction that the provisions of a statute must be construed so as to give them a sensible meaning.
The above legal principles clearly indicate that the courts have to avoid a construction of an enactment that leads to an unworkable, inconsistent or impracticable results, since such a situation is unlikely to have been envisaged by the Rule making authority. Rule making authority also expects rule framed by it to be made workable and never visualises absurd results. The decision taken by the government in deputing the non-graduates (1979-81 batch) to a two year training course and graduates (1980-81 batch) to a one year training is in due compliance with Rule 10 of 1969 Rules and Rule 18 of 1974 Rules and the seniority of the both batches has been rightly settled vide orders dated 12.10.1982 and 5.3.1987 and the government has committed an error in unsettling the seniority under its proceedings dated 29th September, 1993.
We, therefore, find no illegality in the judgment of the High court in quashing the order dated 29th September, 1993 and upholding the seniority of the candidates of 1980-81 batch over the candidates of 1979-81 batch.
Appeal therefore lacks merits, and the same is accordingly dismissed.
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