|
Advanced Search Options
Case Laws
Showing 121 to 140 of 264 Records
-
1989 (7) TMI 146
Issues Involved:
1. Entitlement to deduction under section 80-J of the Act for Barges.
2. Treatment of liabilities in determining 'capital employed' for deduction under section 80-J.
3. Classification of barges as ships under section 80-J.
Issue-wise Detailed Analysis:
1. Entitlement to Deduction under Section 80-J of the Act for Barges:
The primary point of contention is whether the assessee is entitled to a deduction under section 80-J of the Act for the barges owned by it. The assessee, a company engaged in mining operations and shipping ore with barges, claimed this deduction, which the I.T.O. initially accepted. However, the C.I.T. (A) later contested this, stating that a barge is not a ship and thus does not qualify for the deduction under section 80-J. The Tribunal, however, found that the word "ship" is not defined in the Act, necessitating reference to other statutes and dictionaries. The Tribunal noted that the General Clauses Act and various dictionaries provide a broad definition of "ship" that includes vessels used in navigation not exclusively propelled by oars. The Tribunal also referred to Part I of Appendix I to the Income-tax Rules, 1962, which describes "ship" as a class of vessels, including ocean-going ships and vessels operating on inland waters. Based on these references and previous judicial decisions, the Tribunal concluded that barges should be considered ships for the purposes of section 80-J, thereby entitling the assessee to the deduction.
2. Treatment of Liabilities in Determining 'Capital Employed' for Deduction under Section 80-J:
The dispute also involved how to treat liabilities when determining the 'capital employed' for the deduction under section 80-J. The assessee argued that liabilities should be ignored, whereas the I.T.O. deducted the amount of liabilities from the value of the barges, citing the retrospective amendment made in section 80-J by the Taxation Laws (Amendment) Act, 1980. The C.I.T. (A) upheld the I.T.O.'s action based on the Supreme Court's decision in Lohia Machines Ltd. v. Union of India, which supported considering liabilities in determining the capital employed. The Tribunal did not find fault with this approach, indicating that the retrospective amendment and the Supreme Court's decision provide a clear directive on this matter.
3. Classification of Barges as Ships under Section 80-J:
The classification of barges as ships was a significant issue. The C.I.T. (A) argued that a barge is not a ship based on dictionary definitions and the General Clauses Act. However, the Tribunal found that the definitions in various legal dictionaries and statutes, including the General Clauses Act, Carriage of Goods Act, and Marine Insurance Act, provide a wide meaning to the term "ship," encompassing various types of vessels used in navigation. The Tribunal also referred to previous judicial decisions, such as CIT v. Shri Digvijay Cement Company Ltd. and Chola Fish & Farms (P.) Ltd. v. CIT, which supported the classification of similar vessels as ships for tax purposes. Moreover, the Tribunal noted that the C.I.T. (A) had previously granted investment allowance on a barge by treating it as a ship, following instructions from the C.B.D.T. Given these considerations, the Tribunal concluded that the barges owned by the assessee should be treated as ships for the purpose of section 80-J, thus allowing the deduction.
Conclusion:
The Tribunal allowed the appeals, setting aside the C.I.T. (A)'s order to withdraw the section 80-J relief granted on the barges. The Tribunal's decision was based on a comprehensive analysis of statutory definitions, judicial precedents, and the specific facts of the case, affirming the assessee's entitlement to the deduction under section 80-J for the barges owned by it.
-
1989 (7) TMI 145
Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the IT Act, 1961.
2. Validity of the Tribunal's decision to cancel the penalty.
3. Application of the law before and after the amendment by the Finance Act No. 5 of 1964.
4. Examination of the evidence and statements regarding the source of Rs. 6 lakhs.
5. Assessment of the genuineness of loans and their inclusion in the total income.
6. Determination of whether the assessee consciously concealed income.
7. Consideration of the presumption under the Explanation to Section 271(1)(c).
Issue-wise Detailed Analysis:
1. Imposition of Penalty under Section 271(1)(c) of the IT Act, 1961:
The IAC imposed a penalty of Rs. 1,76,000 on the assessee for the assessment year 1971-72. The Tribunal initially canceled this penalty, leading to the Revenue filing a reference application. The High Court directed the Tribunal to reconsider the matter in light of the amended provisions of the law.
2. Validity of the Tribunal's Decision to Cancel the Penalty:
The Tribunal initially canceled the penalty, stating that there was no evidence to conclusively establish that the sum of Rs. 88,000 represented the assessee's income which was consciously concealed. The High Court, however, mandated the Tribunal to re-examine the matter considering the amended law.
3. Application of the Law Before and After the Amendment by the Finance Act No. 5 of 1964:
The High Court pointed out that the Tribunal had decided the appeal based on the law applicable before the amendment by the Finance Act No. 5 of 1964. The Court highlighted that the law after the amendment required certain presumptions to be raised against the assessee, which the Tribunal had not considered.
4. Examination of the Evidence and Statements Regarding the Source of Rs. 6 Lakhs:
The Enforcement Directorate seized Rs. 6 lakhs from the assessee's residence. The ITO initiated assessment proceedings and made a best judgment assessment. The assessee provided a detailed explanation regarding the source of the money, including contributions from various individuals for purchasing shares. The ITO, however, found discrepancies in the evidence and treated the sum as income from undisclosed sources.
5. Assessment of the Genuineness of Loans and Their Inclusion in the Total Income:
The AAC and the Tribunal examined the evidence and statements of individuals who allegedly contributed to the Rs. 6 lakhs. While the AAC accepted the genuineness of certain loans amounting to Rs. 5,31,000, it did not accept loans totaling Rs. 88,000. The Tribunal upheld the AAC's findings and dismissed both the assessee's and the Department's appeals.
6. Determination of Whether the Assessee Consciously Concealed Income:
The Tribunal, in its detailed analysis, concluded that there was no cogent material or evidence to establish that the assessee consciously concealed the income of Rs. 88,000. The Tribunal referred to the Supreme Court's judgment in CIT Madras vs. Khoday Eswarsa & Sons, emphasizing that mere rejection of the assessee's explanation does not automatically lead to a conclusion of concealment.
7. Consideration of the Presumption under the Explanation to Section 271(1)(c):
The Tribunal examined whether the assessee's case fell within the mischief of the Explanation to Section 271(1)(c). The Tribunal noted that the assessee had rebutted the presumptions by providing consistent explanations and evidence regarding the source of the money. The Tribunal found that the assessee's failure to return the correct income was not due to fraud or gross or willful neglect.
Conclusion:
The Tribunal, after re-examining the evidence and considering the High Court's directions, concluded that the assessee had successfully rebutted the presumptions under the Explanation to Section 271(1)(c). The Tribunal canceled the penalty, emphasizing that the Revenue had not established that the assessee consciously concealed income. The appeal was allowed, and the penalty was canceled.
-
1989 (7) TMI 144
Issues: Lumpsum addition due to low percentage of G.P., Disallowance of Kharajat expenses, Charge of interest under s. 215 of the Act
Lumpsum addition due to low percentage of G.P.:
The case involved a wholesale tea dealer whose Gross Profit (G.P.) percentage decreased from 7.9% to 5% in the assessment year. The Assessing Officer (AO) made a lump sum addition of Rs. 30,000 due to the inability of the assessee to provide quantity details in kilograms. The Commissioner of Income Tax (Appeals) [CIT(A)] reduced the addition to Rs. 15,000, citing defects in the quantity accounts. However, the Appellate Tribunal found that there was no justification for the addition as the assessee had consistently shown varying G.P. rates in line with market conditions. The Tribunal noted that the AO failed to provide evidence of unaccounted goods or unreliable sales rates, leading to the deletion of the addition.
Disallowance of Kharajat expenses:
The AO disallowed Rs. 3,000 out of Kharajat expenses to prevent possible leakage from various expense claims. The CIT(A) reduced the disallowance to Rs. 1,000, considering some items as unvouched. However, the Appellate Tribunal found no justification for any disallowance, emphasizing the lack of verification or vouching of claimed expenses. Consequently, the Tribunal deleted the disallowance, highlighting the necessity of proper verification before resorting to disallowances.
Charge of interest under s. 215 of the Act:
The last issue pertained to the charge of interest amounting to Rs. 2,119 under section 215 of the Income Tax Act. The Tribunal deemed this charge as consequential and directed its modification. The Appellate Tribunal modified the CIT(A)'s order and instructed the AO to pass appropriate orders for the assessee and its partners. As a result, the appeal was allowed, and the cross-objection was dismissed, concluding the judgment.
-
1989 (7) TMI 143
Issues:
1. Assessment of a trust as an 'individual' or an 'Association of Persons (AOP)'
2. Levy of interest under sections 139(8) and 217 of the IT Act, 1961
Analysis:
Issue 1: Assessment of Trust as an 'Individual' or an 'AOP'
The appeal involved the assessment of a trust as an 'individual' or an 'Association of Persons (AOP)'. The Tribunal referred to a previous decision regarding a similar trust and concluded that the trust should be assessed as an 'individual' based on relevant legal precedents. The Tribunal held that despite the plurality of trustees, the trust should be treated as an 'individual' for assessment purposes. This decision was based on interpretations of relevant sections of the Income Tax Act, leading to a ruling in favor of the trust being assessed as an 'individual'.
Issue 2: Levy of Interest under Sections 139(8) and 217
Regarding the levy of interest under sections 139(8) and 217 of the IT Act, the CIT(A) had canceled the interest charge based on specific grounds. The CIT(A) considered the advice given by the CBDT not to take penal actions due to the adverse law and order situation in Gujarat at the time. However, the Tribunal disagreed with the CIT(A) and reinstated the interest charge. The Tribunal emphasized that interest under section 139(8) is compensatory and not penal, and the advice given by the CBDT did not negate the statutory requirement for interest payment. The Tribunal highlighted that the CIT(A) erred in considering factors relevant to reduction or waiver of interest, which should be addressed separately.
In conclusion, the Tribunal set aside the CIT(A)'s order regarding the interest charge under section 139(8) and reinstated the charge. Additionally, the Tribunal upheld the charge of interest under section 217, emphasizing that the trust was liable for not filing estimates of income and should pay the interest as per the statutory provisions. The Tribunal clarified that its decision did not prevent the trust from seeking reduction or waiver of interest under sections 139(8) or 217 in separate proceedings.
-
1989 (7) TMI 142
Issues:
1. Assessment of a trust as an 'individual' or an 'Association of Persons.'
2. Levy of interest under sections 139(8) and 217 of the Income-tax Act, 1961.
Analysis:
1. Assessment of Trust Status:
The issue revolved around the assessment status of the respondent trust as an 'individual' or an 'Association of Persons' (AOP). The Tribunal referred to a previous decision in Sri K. B. Patel Family Trust v. ITO, where it was held that a trust, irrespective of the plurality of trustees, should be assessed as an 'individual' based on the provisions of the Income-tax Act. The Tribunal concluded that the respondent trust should be assessed as an 'individual,' rejecting the revenue's claim that it should be treated as an AOP.
2. Levy of Interest under Sections 139(8) and 217:
Regarding the levy of interest under sections 139(8) and 217, the CIT(A) had canceled the interest charge based on the absence of evidence from the ITO and the advisory from the Central Board of Direct Taxes not to take penal actions due to the law and order situation in Gujarat. The revenue contended that the cancellation was based on irrelevant considerations and that the late filing of the return warranted the interest charge. However, the Tribunal held that the CIT(A)'s decision to cancel the interest charge was erroneous. It emphasized that the provisions of section 139(8) mandated the assessee to pay interest regardless of extensions granted, and the CIT(A) erred in considering factors relevant to reduction or waiver proceedings, not the appeal against the assessment order itself. The Tribunal vacated the CIT(A)'s order and restored that of the ITO regarding the interest charge under section 139(8).
3. Interest Charge under Section 217:
The Tribunal found that the respondent had not filed an estimate of its income and had earned significant share income from a registered firm. The explanation provided by the respondent for not reflecting the share income in its accounts was deemed unconvincing. The Tribunal held that the active participation of the respondent in the partnership business implied knowledge of the share income, justifying the interest charge under section 217. The Tribunal disagreed with the CIT(A)'s interference with the ITO's order on the interest charge under section 217, stating it was justified.
In conclusion, the Tribunal set aside the CIT(A)'s order on the interest charges under sections 139(8) and 217, restored the ITO's orders, and partially allowed the appeal. The judgment clarified that the decision did not affect the respondent's claim for reduction or waiver of interest amounts under the relevant sections.
-
1989 (7) TMI 141
Issues Involved:
1. Validity of the CIT's proceedings under Section 263 of the IT Act, 1961.
2. Jurisdiction of the ITO in passing the assessment orders.
3. Whether the assessments were erroneous and prejudicial to the interests of Revenue.
4. Limitation period for invoking Section 263.
5. Application of the Supreme Court's decision in McDowell & Co. Ltd. vs. CTO.
Detailed Analysis:
1. Validity of the CIT's Proceedings under Section 263:
The CIT initiated proceedings under Section 263 on the grounds that the ITO's assessment orders were erroneous and prejudicial to the interests of Revenue. The CIT observed that the ITO did not conduct adequate inquiries into the relationship between the settlors, trustees, and beneficiaries of the trusts. The CIT concluded that the trusts appeared to be a "sham transaction" created to evade taxes.
2. Jurisdiction of the ITO in Passing the Assessment Orders:
The appellants argued that the ITO had jurisdiction to pass the assessment orders and that the initial show cause notice issued by the CIT, which questioned the ITO's jurisdiction, was invalid. The CIT, however, issued a subsequent notice focusing on the lack of investigation by the ITO, which was deemed valid.
3. Whether the Assessments were Erroneous and Prejudicial to the Interests of Revenue:
The CIT found that the ITO had accepted the claims of the assessees without proper investigation. The trusts were created immediately after a search operation, and the business assets were transferred to the trusts with minimal corpus. The beneficiaries were all members of the Advani Family, and the control and management remained with the same family members. The CIT concluded that the assessments were erroneous and prejudicial to the interests of Revenue.
4. Limitation Period for Invoking Section 263:
The appellants argued that the CIT's order under Section 263 was barred by limitation as it was passed more than two years after the assessment orders. The CIT's order was passed on 28th Jan., 1986, while the assessments were completed on 7th Sept., 1983, and 26th Sept., 1983. The Tribunal referred to a decision of the Madras Bench, which held that the amendment to Section 263 extending the limitation period applied to all pending assessments. The Tribunal concluded that the CIT's order was within the extended time limit.
5. Application of the Supreme Court's Decision in McDowell & Co. Ltd. vs. CTO:
The CIT referred to the Supreme Court's decision in McDowell & Co. Ltd., which emphasized that transactions designed to avoid tax should not receive judicial approval. The CIT concluded that the trusts were created as a device to avoid tax, and the ITO's failure to investigate this aspect rendered the assessments erroneous and prejudicial to Revenue.
Conclusion:
The Tribunal upheld the CIT's consolidated order under Section 263, concluding that the ITO had shown undue haste in completing the assessments without proper investigation. The assessments were set aside, and the ITO was directed to conduct a thorough inquiry and pass fresh orders in accordance with the law. The appeals were dismissed.
-
1989 (7) TMI 140
Issues Involved:
1. Validity of penalties levied under section 18(1)(a) of the Wealth Tax Act, 1957.
2. Limitation period for imposing penalties.
3. Doctrine of merger and its application.
4. Consideration of the assessee's reply by the Wealth Tax Officer (WTO).
Detailed Analysis:
1. Validity of Penalties Levied under Section 18(1)(a) of the Wealth Tax Act, 1957:
The Revenue filed appeals against the order of the Appellate Assistant Commissioner (AAC) of Wealth Tax (WT), who had cancelled the penalties levied on the assessee under section 18(1)(a) for the assessment years 1968-69, 1969-70, 1972-73, and 1973-74. The penalties were initially imposed by the WTO on 19th March 1987, following the modification of assessments directed by the Commissioner of Wealth Tax (CWT) under section 25(2).
2. Limitation Period for Imposing Penalties:
The AAC of WT had cancelled the penalties on the grounds that the penalty proceedings initiated on 30th March 1979 had become time-barred by 31st March 1981. The WTO had neither dropped the penalty proceedings nor passed any order imposing penalties before this date. The Revenue contended that the penalty proceedings initiated on 29th March 1985, following the CWT's order under section 25(2), were valid and within the limitation period. However, the Tribunal upheld the AAC's decision, stating that the limitation period commenced with the completion of the original assessment on 30th March 1979, and expired on 31st March 1981, as per section 18(5)(b).
3. Doctrine of Merger and Its Application:
The Revenue argued that the original assessment order merged with the order passed by the CWT under section 25(2), and thus the assessment proceedings should be deemed completed on 29th March 1985. However, the Tribunal rejected this argument, stating that the CWT's order only directed specific modifications and did not cancel or set aside the entire assessment order. Therefore, the limitation period for imposing penalties could not be extended or altered by the CWT's order.
4. Consideration of the Assessee's Reply by the WTO:
The Tribunal also noted that the WTO had imposed penalties without considering the assessee's reply dated 18th March 1981, which provided reasons for the delay in filing returns for the relevant assessment years. The Tribunal held that the non-consideration of this reply further invalidated the penalties imposed by the WTO.
Conclusion:
The Tribunal dismissed the appeals filed by the Revenue, upholding the AAC's decision to cancel the penalties for the assessment years 1968-69, 1969-70, 1972-73, and 1973-74. The penalties were deemed time-barred as per section 18(5)(b) of the Wealth Tax Act, and the WTO's failure to consider the assessee's reply further invalidated the penalties.
-
1989 (7) TMI 139
Issues Involved:
1. Jurisdiction of the Income Tax Officer (ITO)
2. Legality of the show cause notices issued under Section 263
3. Validity and genuineness of the trusts
4. Applicability of the McDowell & Co. Ltd. judgment
5. Limitation period for invoking Section 263
6. Adequacy of the ITO's investigation during the assessment
Issue-wise Detailed Analysis:
1. Jurisdiction of the Income Tax Officer (ITO)
The Commissioner of Income-tax initiated proceedings under Section 263, initially proposing to set aside the assessments on the ground that the ITO had no jurisdiction. The assessees argued that the ITO was within his jurisdiction to pass the assessment orders, and thus, there was no reason to invoke Section 263.
2. Legality of the Show Cause Notices Issued Under Section 263
The Commissioner issued two show cause notices. The first notice proposed setting aside the assessments due to lack of jurisdiction, while the second notice proposed setting aside the assessments on the grounds that they were erroneous and prejudicial to the interests of revenue. The assessees contended that these notices were illegal as they were based on incorrect facts and lacked proper investigation.
3. Validity and Genuineness of the Trusts
The Commissioner observed that the trusts were created immediately after a search at the premises of the main person behind the Advani Family Group. The trusts took over the running businesses of two firms, and the capital of the businesses continued to remain with the trust. The Commissioner concluded that the trusts were sham transactions created to evade tax, as the control and management continued with the Advani Family, and the trusts were created with minimal corpus amounts.
4. Applicability of the McDowell & Co. Ltd. Judgment
The Commissioner referenced the Supreme Court's decision in McDowell & Co. Ltd., indicating that the trusts were created as a device to avoid tax. The assessees argued that the facts of McDowell & Co. Ltd. were different and not applicable to their case. However, the Commissioner maintained that the principles laid down in McDowell & Co. Ltd. were relevant to the present case.
5. Limitation Period for Invoking Section 263
The assessees raised a preliminary objection that the action under Section 263 was barred by limitation, as the orders were passed beyond the two-year period. The Tribunal, however, upheld the Commissioner's action, citing that the amendment to Section 263 extended the limitation period for pending assessments, and the Commissioner's order was within this extended period.
6. Adequacy of the ITO's Investigation During the Assessment
The Tribunal observed that the ITO showed undue haste in completing the assessments without making relevant and proper inquiries. The assessments were finalized on the same day as the hearings, indicating a lack of thorough investigation. The Tribunal concluded that the ITO failed to examine the detailed documents and relationships between the trustees, beneficiaries, and settlors, leading to the assessments being erroneous and prejudicial to the interests of revenue.
Conclusion
The Tribunal upheld the consolidated order of the Commissioner under Section 263, setting aside the assessments and directing the ITO to make proper inquiries and pass fresh orders in accordance with the law. The appeals were dismissed.
-
1989 (7) TMI 138
Issues:
1. Disallowance of depreciation and investment allowance on capitalised expenditure for technical fees.
2. Treatment of royalty payment as capital expenditure.
Issue 1: Disallowance of depreciation and investment allowance on capitalised expenditure for technical fees:
- The assessee entered into a collaboration agreement with a foreign corporation for product manufacture and sale.
- The agreement involved payment of $18,000 as technical fees, with instalments for licence and know-how.
- The Income-tax Officer disallowed depreciation on the payment following IAC's directions under section 144B.
- The disagreement arose on whether the payment was for licence or know-how.
- The ITAT held that the payment was for both licence and know-how, not separable.
- The agreement's terms indicated the payment stages were for obtaining payment, not for separate elements.
- The ITAT concluded the entire payment of $12,000 was for licence and allowed depreciation.
Issue 2: Treatment of royalty payment as capital expenditure:
- The dispute arose regarding the treatment of royalty payment of Rs. 15,353 to the foreign corporation.
- The agreement defined "know-how" comprehensively, including various technical aspects.
- The agreement specified the return of know-how to the corporation at the agreement's end.
- The agreement's duration was limited to 5 years from production commencement.
- The ITAT analyzed a previous Tribunal decision on the nature of royalty payments for know-how.
- The ITAT distinguished the present case from the previous decision based on the agreement's terms.
- The ITAT concluded that the royalty payment was for services of current use and, thus, of revenue nature.
- Consequently, the ITAT allowed both appeals, considering the nature of the payments.
In conclusion, the ITAT ruled in favor of the assessee, allowing the depreciation and investment allowance on the capitalised expenditure for technical fees and treating the royalty payment as revenue expenditure. The judgment emphasized the integral nature of the licence and know-how in the collaboration agreement and analyzed the specifics of the agreement to determine the nature of the payments involved.
-
1989 (7) TMI 137
Issues Involved:
1. Validity of penalties levied under section 18(1)(a) of the Wealth-tax Act, 1957.
2. Limitation period for passing penalty orders.
3. Impact of the Commissioner's order under section 25(2) on the limitation period.
4. Consideration of the assessee's response to show cause notices.
Detailed Analysis:
1. Validity of Penalties Levied under Section 18(1)(a) of the Wealth-tax Act, 1957:
The revenue filed appeals against the order of the AAC, which canceled the penalties imposed on the assessee under section 18(1)(a) for the assessment years 1968-69, 1969-70, 1972-73, and 1973-74. The WTO initially passed the original assessment orders on 30-3-1979 and simultaneously initiated penalty proceedings. However, the Commissioner of Wealth-tax issued a show cause notice under section 25(2) and directed the WTO to modify the assessments. The WTO, following the Commissioner's order, passed fresh assessment orders on 29-3-1985 and re-initiated penalty proceedings, leading to the imposition of penalties on 19-3-1987.
2. Limitation Period for Passing Penalty Orders:
The AAC canceled the penalties, stating that the penalty proceedings initiated at the time of the original assessments had become time-barred on 31-3-1981. The AAC held that the WTO could not re-initiate penalty proceedings based on the modified assessments, as the original penalty proceedings had already lapsed. The revenue contended that the penalty orders passed on 19-3-1987 were within the limitation period, arguing that the limitation should be calculated from the date of the modified assessments (29-3-1985).
3. Impact of the Commissioner's Order under Section 25(2) on the Limitation Period:
The Tribunal examined the provisions of section 18(5) of the Wealth-tax Act, both before and after the amendment by the Direct Tax Laws (Amendment) Act, 1989. It was noted that, prior to the amendment, there was no specific provision for a separate limitation period where the assessment was subject to revision under section 25(2). The Tribunal concluded that the limitation period for passing penalty orders should be computed from the date of the original assessments (30-3-1979), and the subsequent modification of assessments under section 25(2) did not extend this period. The amendment effective from 1-4-1989, which provided a separate limitation period for revisions under section 25(2), could not be applied retrospectively.
4. Consideration of the Assessee's Response to Show Cause Notices:
The Tribunal also considered the assessee's argument that the WTO had not taken into account the reply submitted by the assessee on 18-3-1981 in response to the show cause notices. The reply provided explanations for the delays in filing returns for the relevant assessment years. The Tribunal observed that the non-consideration of this reply by the WTO further invalidated the penalties imposed. It was presumed that the WTO might have been satisfied with the explanations provided by the assessee, given that no penalty orders were passed before the limitation period expired on 31-3-1981.
Conclusion:
The Tribunal upheld the AAC's decision to cancel the penalties, agreeing that the penalties were barred by limitation and that the WTO had improperly re-initiated penalty proceedings. Additionally, the Tribunal found that the penalties were unsustainable due to the WTO's failure to consider the assessee's timely response to the show cause notices. Consequently, all the appeals filed by the department were dismissed.
-
1989 (7) TMI 136
Issues Involved:
1. Set off of carried forward loss from the assessment year 1983-84 against the income of assessment years 1984-85 and 1985-86.
2. Classification of interest income from Fixed Deposits as business income.
3. Treatment of Fixed Deposits as business assets.
4. Alleged concession by the assessee's counsel during the assessment proceedings.
Detailed Analysis:
1. Set off of Carried Forward Loss:
The primary issue revolves around whether the loss carried forward from the assessment year 1983-84 can be set off against the income of the assessment years 1984-85 and 1985-86. The Income Tax Officer (ITO) disallowed the set off on the grounds that the business of purchase and sale of brass scrap was not continued during these two assessment years, citing the proviso to Section 72(1)(i) of the Income Tax Act. The Appellate Assistant Commissioner (AAC) directed the ITO to allow the set off, reasoning that the interest income from Fixed Deposits, which were treated as business assets, should be considered as business income. The Tribunal, however, disagreed with the AAC, stating that the business of brass scrap had indeed been discontinued and thus, the loss could not be set off against the income of subsequent years.
2. Classification of Interest Income:
The AAC had treated the interest income from Fixed Deposits as business income, allowing the set off of the carried forward loss. The Tribunal noted that while the ITO had treated the Fixed Deposits as business assets, this did not automatically classify the interest income as business income. The Tribunal emphasized that the interest income could not be linked to the discontinued business of brass scrap merely because the Fixed Deposits were used as a guarantee for a business transaction in the assessment year 1983-84.
3. Treatment of Fixed Deposits as Business Assets:
The Tribunal acknowledged the ITO's classification of Fixed Deposits as business assets but clarified that this classification did not integrate them into the discontinued business of brass scrap. The Tribunal pointed out that an individual could withdraw funds from a sole proprietorship and invest them in personal assets, which would not necessarily become business assets. The Tribunal stressed that the Fixed Deposits, although treated as business assets, did not form part of the business activities that generated the loss in the assessment year 1983-84.
4. Alleged Concession by Assessee's Counsel:
The ITO noted that the assessee's counsel had agreed that the set off would not be claimed, which was contested by the assessee before the AAC. The Tribunal chose not to delve into the arguments regarding the alleged concession, focusing instead on the merits of the case. The Tribunal concluded that the purported concession did not affect the legal entitlement to claim the set off.
Conclusion:
The Tribunal ultimately held that the assessee was not entitled to the benefit of the carried forward loss from the assessment year 1983-84, setting aside the consolidated order of the AAC and restoring the orders of the ITO. The appeals were allowed, reinforcing the principle that the continuation of business activities is crucial for the set off of carried forward losses under Section 72(1)(i) of the Income Tax Act.
-
1989 (7) TMI 135
Issues Involved:
1. Investment Allowance Claim
2. Relief under Section 80J
3. Alternative Claim under Sections 80I and 80HH(A)
Issue-wise Detailed Analysis:
1. Investment Allowance Claim:
The assessee, a Public Limited Company, claimed an Investment Allowance for the assessment year 1982-83, arguing that the assets were put to use during this year, despite being purchased in the preceding year. The IAC(A) noted that the assets were installed and ready for use in the previous year (1981-82), and thus, the claim for Investment Allowance was not allowable for 1982-83. However, the prohibition on Investment Allowance for sanitary ware assets was removed starting from 1st April 1982.
The IAC(A) processed the claim by disallowing amounts for assets used in the previous year and for items costing less than Rs. 750. The IAC(A) allowed Investment Allowance for items that received permissions from government agencies during the previous year relevant to the assessment year 1982-83. The assessee argued that the main furnace (Tunnel Kiln) could not be used due to the non-availability of natural gas, and commercial production started only from 1st March 1981 with an imported oil burner.
The Tribunal observed that the facts indicated nominal trial production in the previous year and that regular commercial production commenced from 1st March 1981, relevant to the assessment year 1982-83. The Tribunal held that the claim for Investment Allowance was rightly made for 1982-83, as the assets were put to use in that year. The Tribunal also allowed the claim for Investment Allowance on drawings and designs, as they were used for the installation of the kiln put to use in 1982-83.
2. Relief under Section 80J:
The IAC(A) rejected the assessee's claim for relief under Section 80J, citing the same reasons as for the Investment Allowance, i.e., the commencement of regular production in the previous year. The CIT(A) confirmed this view. The assessee argued that commercial production started from 1st March 1981, relevant to the assessment year 1982-83, and not from the date of trial production (21st July 1980).
The Tribunal accepted the assessee's claim for relief under Section 80J, adopting the same reasoning as for the Investment Allowance. The Tribunal directed the AO to verify the figures and work out the deduction accordingly.
3. Alternative Claim under Sections 80I and 80HH(A):
The assessee raised an alternative claim under Sections 80I and 80HH(A), which was not pressed during the hearing and was thus rejected.
Conclusion:
The appeal was partly allowed, with the Tribunal granting the Investment Allowance and relief under Section 80J for the assessment year 1982-83. The alternative claim under Sections 80I and 80HH(A) was rejected as it was not pursued during the hearing.
-
1989 (7) TMI 134
Issues: Valuation of lands for computation of capital gains, Revisional powers of Commissioner under sec. 263, Competency of Commissioner to pass order after CIT(A) decision, Discrepancy in valuation of land in different cases.
Valuation of lands for computation of capital gains:
The appeal involved the valuation of certain lands for computing capital gains. The assessee claimed the land's value at Rs. 45 per sq.yd., while the ITO initially assessed it at Rs. 28 per sq.yd. The Commissioner, using revisional powers, directed the ITO to reframe the assessment, resulting in the land's value being assessed at Rs. 2.07 per sq.yd. The valuation was based on evidence from the HUF's wealth-tax returns showing the land's value at Rs. 2.07 per sq.yd. The CIT(A) upheld this valuation, rejecting the assessee's arguments regarding Stamp Duty and other family members' valuations. The Tribunal held that the land's value for capital gains must be Rs. 2.07 per sq.yd., regardless of valuations in other cases.
Revisional powers of Commissioner under sec. 263:
The assessee challenged the competency of the Commissioner to pass an order under sec. 263 after the CIT(A) had already decided on the original assessment. The CIT(A) rejected this argument, emphasizing the revisional order's impact on the assessment. The Tribunal affirmed the Commissioner's authority to revise the assessment, leading to a substantial increase in capital gains.
Competency of Commissioner to pass order after CIT(A) decision:
The assessee contested the Commissioner's authority to issue a revisional order under sec. 263 post the CIT(A) decision. The CIT(A) rejected this argument, highlighting the revisional order's impact on the assessment. The Tribunal upheld the Commissioner's competence to revise the assessment, resulting in a significant change in the capital gains assessment.
Discrepancy in valuation of land in different cases:
During the hearing, the assessee presented evidence of differing land valuations in other cases, including one where the land was valued at Rs. 35 per sq.yd. The departmental representative pointed out that the valuation in those cases differed from the HUF's wealth-tax records, which showed the land's value at Rs. 2.07 per sq.yd. The Tribunal emphasized the importance of consistency in valuation, holding that the assessee's valuation for capital gains must prevail, despite variations in other cases. Ultimately, the appeal was dismissed, affirming the valuation at Rs. 2.07 per sq.yd.
-
1989 (7) TMI 133
Issues Involved:
1. Investment Allowance
2. Relief under Section 80J
3. Alternative claims under Sections 80-I and 80HH(A)
Issue-wise Detailed Analysis:
1. Investment Allowance:
The primary issue was the assessee's claim for Investment Allowance on assets worth Rs. 84,69,945. The assessee, a Public Limited Company, claimed this allowance for the assessment year (A.Y.) 1982-83, stating that the assets were put to use during this year, although they were purchased in the preceding year (A.Y. 1981-82). The Income-tax Appellate Tribunal (ITAT) noted that the construction of the Kadi unit and installation of machinery were completed in A.Y. 1981-82, and depreciation was claimed and allowed for that year. However, the Investment Allowance was specifically prohibited for sanitaryware manufacturing under the 11th Schedule for A.Y. 1981-82, but this prohibition was removed from A.Y. 1982-83.
The department's stance was that the assets were "used" in A.Y. 1981-82 as they were installed and ready for use, citing cases like Whittle Anderson Ltd. v. CIT and Capital Bus Service (P.) Ltd. v. CIT. The assessee argued that the main kiln was not operational due to the lack of natural gas, and commercial production started only on 1-3-81 with an imported oil burner, making A.Y. 1982-83 the appropriate year for claiming the allowance. The ITAT accepted the assessee's argument, emphasizing that commercial production commenced on 1-3-81, supported by the Industries Commissioner's certificate and various documents. The tribunal concluded that the assets were first put to use in A.Y. 1982-83, thus allowing the Investment Allowance for that year.
2. Relief under Section 80J:
The second issue was the assessee's claim for relief under Section 80J, which was similarly rejected by the department on the grounds that regular production had commenced in A.Y. 1981-82. The ITAT applied the same reasoning as in the Investment Allowance issue, noting that commercial production began on 1-3-81, making A.Y. 1982-83 the relevant year for the claim. The tribunal directed the assessing officer to verify the figures and work out the deduction accordingly, thus deciding this issue in favor of the assessee.
3. Alternative Claims under Sections 80-I and 80HH(A):
The final issue was the alternative claim under Sections 80-I and 80HH(A) of the Income-tax Act, 1961. This ground was not pressed by the assessee during the hearing and was therefore rejected by the tribunal.
Separate Judgment:
The Judicial Member concurred with the conclusions of the Accountant Member but added that the machinery was not physically used in A.Y. 1981-82, and the department's case rested on passive use. He emphasized that the machinery was physically used in A.Y. 1982-83, entitling the assessee to the allowance for that year. He found it unnecessary to delve into the applicability of the Board's Circular pertaining to Section 80J or the distinction between commercial and trial production for the earlier year.
-
1989 (7) TMI 132
Issues Involved:
1. Disallowance of interest expenses of Rs. 1,60,844.
2. Application of principles from Supreme Court judgments.
3. Charging of interest under section 215 of the I.T. Act.
Issue 1: Disallowance of Interest Expenses of Rs. 1,60,844
The appellant, a private limited company engaged in holding investments and financing industrial enterprises, declared a loss of Rs. 50,811 for the assessment year 1982-83. The ITO scrutinized the accounts and noted that the company had claimed interest expenses of Rs. 1,64,024, which included loans from various parties. The ITO found that the loans were used to purchase bonds, but no income from these bonds was declared, and a significant portion of these bonds was donated. The ITO disallowed Rs. 1,60,844 of the interest expenses under section 57(iii) of the I.T. Act, as the interest was not incurred for earning income. The CIT(A) upheld this disallowance, observing that the company's actions were aimed at reducing taxable income and the donations did not relate to earning income. The ITAT agreed with the CIT(A), noting that the company's conduct indicated no intention to earn income and served as a conduit between sister concerns.
Issue 2: Application of Principles from Supreme Court Judgments
The CIT(A) referenced the Supreme Court decision in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 48, emphasizing that the genuineness of transactions should be viewed from their fiscal impact. The ITAT supported this view, stating that the company's rapid transactions of obtaining loans, purchasing, donating, and selling bonds indicated an attempt to evade taxes. The ITAT agreed that the authorities rightly disallowed the interest expenses, as the company's activities did not demonstrate an intention to earn income.
Issue 3: Charging of Interest Under Section 215 of the I.T. Act
The CIT(A) confirmed the charging of interest under section 215 of the I.T. Act. The appellant argued that it could not have anticipated the disallowance of interest expenses. However, the ITAT found this argument unconvincing, noting that the appellant's actions indicated an intention to evade taxes. The ITAT upheld the CIT(A)'s decision, stating that the appellant was not entitled to relief from the interest charge under section 215.
Conclusion
The ITAT dismissed the appeal, agreeing with the authorities below that the appellant's actions were aimed at reducing taxable income and did not demonstrate an intention to earn income. The disallowance of interest expenses and the charging of interest under section 215 were upheld.
-
1989 (7) TMI 131
Issues Involved:
1. Delay in filing the appeal.
2. Condonation of delay.
3. Maintainability of the appeal due to proper authorization.
Detailed Analysis:
1. Delay in Filing the Appeal:
The appeal was filed by the department against the order-in-appeal dated 18-3-1982 passed by the Appellate Collector, Customs & Central Excise, Calcutta. The appeal was received in the Registry on 23-12-1982 without any application for condonation of delay. The impugned order was communicated to the authorities on 12/13-4-1982, and the Central Government called for the record of the proceedings within the one-year limitation period as per Section 36(2) of the Central Excises & Salt Act. However, the Central Excises & Salt Act was amended by the Finance (No. 2) Act of 1980, introducing a new Chapter VIA, which included provisions for filing an appeal before the Tribunal within three months from the date of communication of the impugned order, as per Section 35B of the Act. The new provisions came into force on 11th October 1982. The Customs, Central Excise & Gold (Control) Removal of Difficulties Order, 1982 extended the period for filing an appeal to six months from the date of communication of the order for orders passed before 11th October 1982.
2. Condonation of Delay:
The department filed an application for condonation of delay, supported by an affidavit from the Assistant Collector of Central Excise, explaining that the delay was due to the transition from the old revision system to the new appeal system under Section 35B. The delay was attributed to the time taken for internal processing and preparation of the appeal. The Tribunal considered the application and the arguments presented by both parties. The Departmental Representative argued that the limitation period should start from 11-10-1982, the date when the right of appeal was conferred, making the appeal within the three-month period. Alternatively, it was argued that the six-month period provided by the Removal of Difficulties Order should apply, and the delay should be condoned based on the principles established by the Supreme Court in the case of Collector, Land Acquisition, Anantnag v. Mst. Katiji.
3. Maintainability of the Appeal Due to Proper Authorization:
The respondent's counsel argued that the appeal was not maintainable because there was no proper and legal authorization by the Collector as required under sub-section (2) of Section 35B of the Act. The authorization on record was of a general nature and did not specifically authorize the filing of the present appeal. The Tribunal reviewed the authorization and found that it did not meet the requirements of sub-section (2) of Section 35B, which mandates a specific direction to file an appeal in a particular matter. The Tribunal referenced a similar case, Collector of Central Excise, Calcutta v. Shalimar Paints Ltd., where a general authorization was deemed insufficient.
Conclusion:
The Tribunal dismissed the appeal as not maintainable due to the lack of proper authorization and also found it to be barred by time. The majority opinion held that the limitation period should be calculated from the date of communication of the order, and the appeal was filed beyond the six-month period provided by the Removal of Difficulties Order. The delay was not sufficiently explained, and the application for condonation of delay was dismissed. A separate opinion by one member suggested that the limitation period should start from 11-10-1982, but this view did not prevail.
-
1989 (7) TMI 130
Issues Involved:
1. Inclusion of the value of malleable cast iron inserts in the assessable value of Monoblock Prestressed concrete sleepers.
2. Applicability of Notification No. 120/75-C.E.
3. Correctness of the value adopted for the inserts.
4. Applicability of the extended period of limitation due to alleged suppression of facts.
Issue-wise Detailed Analysis:
1. Inclusion of the Value of Malleable Cast Iron Inserts:
The primary issue was whether the value of malleable cast iron (MCI) inserts, supplied free of cost by the Railways, should be included in the assessable value of Monoblock Prestressed concrete sleepers. The respondents argued that the value of these inserts should not be included in the assessable value. However, the Assistant Collector held that the value of the inserts had to be included in the assessable value, relying on the judgment of the Supreme Court in the case of Empire Industries Ltd. v. Union of India, which stated that the value of the entire end-product must be taken into account. The Tribunal upheld this view, emphasizing that the intrinsic value of the goods is relevant for ad valorem assessment.
2. Applicability of Notification No. 120/75-C.E.:
The respondents claimed the benefit of Notification No. 120/75-C.E., which allows for the assessable value to be based on the invoice price. The Tribunal examined the conditions laid down in the notification, particularly provisos (iii) and (iv), which require that the invoice price represents the sole consideration for the sale and is not influenced by any commercial or financial relationship. The Tribunal concluded that the respondents did not satisfy these conditions because the MCI inserts were supplied free of charge, influencing the price of the sleepers. Therefore, the benefit of the notification could not be extended to the respondents.
3. Correctness of the Value Adopted for the Inserts:
The Assistant Collector had adopted a value of Rs. 18.00 for the MCI inserts, while the respondents disputed this, arguing that the value should be Rs. 11.50 + 4%. The Tribunal agreed with the Assistant Collector's observation that the lower value did not represent the real money value, as the respondents themselves admitted they were unaware of the correct price. Thus, the Tribunal confirmed that Rs. 18.00 was the normal prevailing price.
4. Applicability of the Extended Period of Limitation:
The issue of whether the extended period of limitation was applicable due to alleged suppression of facts was also addressed. The Department argued that the respondents had not disclosed the contract with the Railways or mentioned that MCI inserts were supplied free of charge in their invoices. The Tribunal referred to the Supreme Court's judgment in M/s. Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise, which held that suppression of facts justified the extended period of limitation. The Tribunal found that the respondents had not produced the contract or mentioned the free supply of inserts, thus justifying the extended period of limitation.
Conclusion:
The Tribunal concluded that the value of MCI inserts should be included in the assessable value of the concrete sleepers, the benefit of Notification No. 120/75-C.E. could not be extended to the respondents, the value of Rs. 18.00 for the inserts was correct, and the extended period of limitation was applicable due to suppression of facts. The impugned order was set aside, and the order passed by the Assistant Collector was restored. The revenue's appeals were allowed.
-
1989 (7) TMI 129
Issues Involved:
1. Maintainability of the suit under the Central Excises and Salt Act, 1944.
2. Non-joinder of necessary and proper parties.
3. Validity of the show cause notice dated March 27, 1986, and the order dated January 29, 1988.
Issue 1: Maintainability of the Suit
The plaintiff argued that the suit is maintainable as the proceedings, including the search, show cause notice, and the order dated January 29, 1988, are without jurisdiction, illegal, mala fide, void ab initio, and nullity. The court referenced several judgments, including H.C. Darbara Singh v. The Punjab State and Dhulabhai v. State of Madhya Pradesh, establishing that civil courts have jurisdiction if an authority acts without jurisdiction or violates fundamental principles of judicial procedure. The court concluded that the suit is maintainable, given the allegations of jurisdictional errors and non-compliance with statutory provisions.
Issue 2: Non-joinder of Necessary and Proper Parties
The defendants argued that the suit was bad for non-joinder of necessary parties, such as the Collector of Central Excise, New Delhi, and the Directorate of Anti-Evasion, New Delhi. The court held that the Collector and Directorate were not necessary parties since the Union of India was already impleaded as a defendant. The presence of the Collector or Directorate was not necessary for the court to adjudicate the issues effectively.
Issue 3: Validity of the Show Cause Notice and Order
The plaintiff challenged the show cause notice and the subsequent order on multiple grounds, including:
- The reward scheme for officials leading to departmental bias.
- Lack of jurisdiction of the Director of Publications to act as a Collector of Central Excise.
- The illegal and unilateral transfer of the case from the Collector to the Director of Publications.
- Non-application of mind and lack of material evidence against the plaintiff company.
The court found that the show cause notice was issued without proper jurisdiction and material evidence. The statements of only 5 out of 62 dealers recorded indicated extra payments to Mr. Vyas, the Sales Executive, without implicating the plaintiff company or its directors. The court noted that the total transactions involving alleged extra payments constituted less than 1% of the total sales, and there was no evidence of the plaintiff company's involvement in these transactions. Consequently, the court declared the show cause notice dated March 27, 1986, and the order dated January 29, 1988, as illegal and without jurisdiction.
Relief Granted:
The court decreed in favor of the plaintiff, declaring the show cause notice and the subsequent order as illegal and without jurisdiction, and granted a permanent injunction restraining the defendants from taking any action based on the impugned notice and order. The court also directed that the amount deposited by the plaintiff be accounted for in the records of the defendants.
-
1989 (7) TMI 128
The writ petition was filed to quash demand notices for duty issued to Shri Abdul Hafeez. The Central Excise Authorities were justified in issuing the demand notices without providing a show cause notice as per Rule 160 of the Central Excise Rules. The petition was dismissed by the High Court of Judicature at Allahabad.
-
1989 (7) TMI 127
Issues:
1. Challenge to demanding duty on imported goods based on timing of import and exemption notification.
2. Dispute over the liability to pay duty on imported goods.
3. Interpretation of provisions of Customs Act, 1962 regarding importation of goods.
Analysis:
1. The petitioners challenged the demand for duty on 457 bales of viscose staple fibre imported by petitioner No. 1, arguing that the import was complete before the exemption notification became operative. They sought a writ of mandamus to cancel the duty demand under Section 12(1) of the Customs Act, contending that duties are levied on goods imported into India. The petitioners claimed that the goods were imported when the vessel arrived at "Sandheads" within India's territorial waters before the exemption notification date.
2. The petitioner, Maharaja Shree Umaid Mills Limited, imported the goods from overseas suppliers and presented a bill of entry for home consumption for clearance of the goods. Customs initially classified the goods as duty-free but later claimed duty was leviable, citing the goods were not entitled to exemption under the notification. The Central Government issued exemptions after the goods arrived, leading to a dispute with Customs authorities over duty liability, prompting the petitioners to approach the Court for relief.
3. The Court considered the arguments presented by both parties regarding the liability to pay duty on the imported goods. The petitioners relied on precedents interpreting Sections 25, 15, and 12 of the Customs Act, emphasizing that the liability for duty arises at the time of importation and continues until clearance for home consumption. In contrast, the Customs authorities asserted that duty payment was required at the relevant time and contested the petitioners' claims.
4. After evaluating the submissions and legal provisions, the Court found that the petitioners were liable to pay duty for the imported goods based on the timing of import and relevant provisions of the Customs Act. The Court concluded that the petitioners could not avoid duty payment as claimed, ruling against the writ petition. Consequently, the Court dismissed the petition, discharged the Rule, and vacated any interim orders, with no costs awarded to either party.
5. The judgment highlights the significance of the timing of importation, duty liability, and the interpretation of relevant sections of the Customs Act in determining the obligation to pay duty on imported goods. The decision underscores the Court's analysis of the factual and legal aspects of the case to resolve the dispute between the petitioners and the Customs authorities effectively.
............
|
9911796707
