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Showing 141 to 160 of 1047 Records
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2011 (1) TMI 1458
Issues Involved:
1. Allowance of bad debts claimed by the appellant.
2. Disallowance of Research & Development (R&D) fee.
3. Disallowance of payment for Keyman Insurance Policy.
Detailed Analysis:
1. Allowance of Bad Debts Claimed by the Appellant:
The appellant, a share and stock broker, claimed bad debts of Rs. 27,48,260/-. The Assessing Officer (AO) disallowed the claim, arguing that the appellant had only shown brokerage as income and not the entire proceeds, thus not fulfilling the conditions under section 36(2). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision.
The Tribunal found that this issue was covered in favor of the appellant by the Special Bench decision in the case of Dy. CIT vs. Shri Shreyas S. Morakhia, which held that amounts receivable by a share broker from clients against share transactions constitute trading debts. When brokerage/commission from such transactions is included in the income computation, it satisfies section 36(2)(i), allowing the bad debt claim under section 36(1)(vii) if written off as irrecoverable. The Tribunal remitted the matter back to the AO to verify if brokerage/commission was credited to the customers' accounts and if any security or proceeds from shares were credited against the bad debts.
2. Disallowance of Research & Development (R&D) Fee:
The appellant claimed Rs. 47,55,000/- as R&D fees paid to Swiss Consultancy and Premium Investments for providing information on various companies. The AO disallowed the claim, citing insufficient evidence of services rendered and discrepancies in the accounts of Swiss Consultancy, which lacked the infrastructure and capability to conduct equity research worth Rs. 42 lakhs. The CIT(A) upheld the AO's decision, finding the claim non-genuine and aimed at reducing tax liability.
The Tribunal noted that the appellant failed to provide detailed research reports and only submitted two reports, which contained information easily available in newspapers or online. The Tribunal also highlighted discrepancies in the outstanding amounts shown by the appellant and Swiss Consultancy. Consequently, the Tribunal upheld the CIT(A)'s decision, confirming the disallowance of the R&D fee.
3. Disallowance of Payment for Keyman Insurance Policy:
The appellant claimed a deduction of Rs. 1,25,000/- for a Keyman Insurance Policy premium paid for the director, Shri Ketan B. Mehta. The AO disallowed the claim, noting that the premium covered the period 1-4-2005 to 31-3-2006, which pertains to the next financial year. The CIT(A) confirmed the AO's action.
The Tribunal acknowledged the decision of the Hon'ble Bombay High Court in CIT vs. B. N. Exports, which allows the deduction of Keyman Insurance Policy premiums. However, the Tribunal remitted the matter back to the AO to verify the appellant's accounting policy regarding prepaid expenditure and to decide the issue in light of the Bombay High Court's decision.
Conclusion:
The Tribunal partially allowed the appellant's appeal for statistical purposes, remitting the issues of bad debts and Keyman Insurance Policy back to the AO for further verification and decision. The disallowance of the R&D fee was upheld.
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2011 (1) TMI 1457
Issues involved: Assessment of income from technical handling services provided by a company incorporated in Netherlands, taxability of such receipts in India under Double Tax Avoidance Agreement, appeal against assessment order.
Assessment of Income:
The assessee, a company incorporated in Netherlands, filed a return declaring nil income which was subsequently processed u/s 143(1). The case was selected for scrutiny, and the AO concluded that income from operating aircraft internationally is not taxable in India under the Double Tax Avoidance Agreement. However, receipts from providing technical services to airlines in India were deemed taxable. After adjustments, the total income was computed and the assessee was assessed accordingly.
Grounds of Appeal:
The assessee appealed the assessment order, primarily contending that the AO failed to consider previous judgments in favor of the assessee. Only one ground was pressed before the Tribunal, emphasizing that the issue was already decided in favor of the assessee in previous assessment years.
Tribunal's Decision:
The Tribunal considered submissions from both parties. The counsel for the assessee argued that the issue was settled in the assessee's favor in previous Tribunal orders. The DR, however, disputed this position citing OECD commentary and differences in treaty provisions. The Tribunal referred to a previous order where it was held that such receipts are not taxable in India, citing specific treaty provisions and case law. The Tribunal upheld the assessee's appeal based on the binding precedent set by the earlier order.
Conclusion:
The Tribunal allowed the appeal, stating that the issue was already settled in favor of the assessee in a previous order. The Tribunal emphasized the importance of consistency in decisions and the lack of new material to warrant a different interpretation. The appeal was allowed in favor of the assessee.
This judgment highlights the importance of consistency in legal decisions and the significance of treaty provisions in determining the taxability of income in cross-border transactions.
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2011 (1) TMI 1456
Issues involved: Re-assessment proceedings based on unsustainable reasons u/s. 148.
Summary:
The appeal pertains to re-assessment proceedings initiated by the AO for the assessment year 1999-2000. The first ground of appeal challenges the re-assessment based on reasons that were later found to be unsustainable by the AO. The reasons included incorrect calculation of deduction u/s. 80HHC and lack of proof for donations paid. The AO completed the assessment without making any disallowances based on these reasons, indicating no income escapement. The appellant argued that if the reasons for re-opening assessment did not lead to income escapement, the AO cannot assess any other income discovered during re-assessment. Citing the judgment in CIT vs. Jet Airways (I) Ltd., the Tribunal held that since the issues for re-opening assessment did not result in income escapement, the AO had no jurisdiction to assess any other income. Consequently, the Tribunal allowed the appeal, setting aside the assessment order.
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2011 (1) TMI 1455
Issues Involved: Penalty u/s 271B for non-compliance with section 44AB of the Income-tax Act, 1961.
Summary:
Issue 1: Penalty u/s 271B for non-compliance with section 44AB
The appellant, engaged in civil contracting, filed income tax return without Tax Audit Report as per section 44AB. The Assessing Officer imposed a penalty u/s 271B for not getting the books audited. The appellant argued non-maintenance of account books and declared income on estimate basis. The Commissioner of Income-tax (Appeals) upheld the penalty citing turnover exceeding the limit. The appellant cited judgments to support that penalty u/s 271B applies only for failure to audit books, not for non-maintenance. The appellant explained reasons for non-maintenance and subsequent compliance. The Departmental representative argued that non-maintenance under section 44AA does not excuse non-compliance with section 44AB.
Issue 2: Interpretation of section 44AB in absence of maintained account books
The Tribunal noted the appellant did not maintain account books, thus audit requirement u/s 44AB did not apply. Citing judgments, the Tribunal held that penalty u/s 271B does not apply if no accounts are maintained, as in this case. The Tribunal set aside the penalty imposed by the Commissioner of Income-tax (Appeals) and directed deletion of the penalty amount.
In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that penalty u/s 271B does not apply when account books are not maintained, as per the provisions of the Income-tax Act, 1961.
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2011 (1) TMI 1454
Issues Involved:
Validity of reassessment proceedings u/s 150
Interpretation of section 26 of the Income-tax Act
Validity of Reassessment Proceedings u/s 150:
The assessee, an Association of Persons (AOP), challenged the correctness of the CIT(A)'s order for the assessment year 2002-03, primarily on the ground that the initiation of reassessment proceedings was unsustainable in law. The Assessing Officer reopened the assessment upon discovering that the assessee had not paid municipal taxes for certain years, despite claiming deductions for them. The assessee contended that quantification of income in the hands of the AOP was not necessary for taxing the co-owners' shares, as per section 26 of the Act. The Departmental Representative argued that the reassessment was valid and necessary for determining the co-owners' shares. The Tribunal held that the assessment of the AOP did not impact the taxability of individual shares of income in the hands of co-owners, quashing the reassessment proceedings.
Interpretation of Section 26 of the Income-tax Act:
Section 26 of the Income-tax Act deals with property owned by co-owners and specifies that their shares in the income from the property shall be included in their total income. The Tribunal analyzed the provisions of section 26 and the legal implications of assessing an AOP consisting of co-owners. It was established that the quantification of income in the AOP's assessment was not a prerequisite for taxing individual shares of income in the co-owners' hands. The Tribunal rejected the Departmental Representative's argument that income from house property must first be determined in the AOP's assessment before allocating shares to co-owners. The reassessment proceedings were quashed based on the understanding that no income had escaped assessment in the hands of the assessee AOP.
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2011 (1) TMI 1453
Issues involved: Appeal against CIT(A) order regarding loss on valuation of unmatured forward exchange contract and allowance of interest u/s 244A.
Issue 1: Loss on valuation of unmatured forward exchange contract
The Revenue contended that the claim of loss on valuation of unmatured forward exchange contract is not allowable as it is notional in nature and forward exchange contracts cannot be considered as stock in trade. However, the Tribunal referred to a decision in the case of Bank of Bahrain and Kuwait vs. DCIT where it was held that the loss incurred by the assessee on account of evaluation of the contract before the date of maturity is allowable. Following this precedent, the Tribunal dismissed the Revenue's ground regarding this issue.
Issue 2: Allowance of interest u/s 244A
The Revenue challenged the allowance of interest u/s 244A by CIT(A) on the refund arising from self-assessment tax, arguing that self-assessment tax was not specifically included in the relevant clause of the Act. The Tribunal, citing decisions of the Special Bench and High Courts, upheld the allowance of interest u/s 244A in favor of the assessee. The Tribunal dismissed the Revenue's ground on this issue, stating that it is covered by previous decisions and in line with legal precedents.
Cross objection by the assessee
The assessee filed a cross objection on various grounds, including the allowance of loss on revaluation of unmatured Forward Foreign Exchange Contracts and the claim for credit of tax deducted at source. The Tribunal dismissed certain grounds as infructuous and directed the Assessing Officer (AO) to verify the claim of the assessee for tax credit. Additionally, the Tribunal remitted the issue of interest u/s 244A back to the AO for consideration in accordance with relevant legal decisions. The cross objection of the assessee was allowed for statistical purposes.
In conclusion, the Revenue's appeal was dismissed, and the assessee's cross objection was allowed for statistical purposes. The Tribunal provided directions to the AO regarding the verification of tax credit claims and consideration of interest u/s 244A in line with legal precedents.
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2011 (1) TMI 1452
Issues Involved:
The appeal filed by the Revenue against the order of the CIT(Appeals) for the assessment year 2006-07.
Ground No. 3 - Payment to Sri Murugan Transport:
The Revenue contended that TDS should have been deducted u/s 40(a)(ia) for payments made to Sri Murugan Transport. However, the CIT(A) deleted the disallowance stating that payments were made directly to lorry owners, not exceeding prescribed limits, hence no TDS was required. The Tribunal upheld this finding, emphasizing that as per section 194C, TDS is required at the time of payment, which in this case was made directly to lorry owners.
Grounds No. 4 and 5 - Quality Control Charges:
The Revenue argued that TDS should have been deducted u/s 194J for quality control and inspection charges paid to Naveen Services and Super Quality Services. The authorized representative claimed that no TDS was necessary as the inspection was automated without manual intervention. The Tribunal noted that the issue of human intervention was not examined by the Assessing Officer and, following a similar case pending in the Supreme Court, restored the matter for re-adjudication.
Ground No. 6 - Labour Contract Payments:
Regarding payments to Shri Gunasekar and Shri Ravi, the Revenue invoked section 40(a)(ia) due to delayed remittance of TDS. The authorized representative argued that the Finance Act, 2010 amendments should be read retrospectively, allowing the expenditure claimed. The Tribunal, citing a Supreme Court decision and retrospective application of amendments, ruled in favor of the assessee, confirming the CIT(A)'s decision.
The Tribunal partially allowed the Revenue's appeal for statistical purposes, with the order pronounced on 7/1/2011.
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2011 (1) TMI 1451
Issues involved: Assessment of total income for the assessment year 2007-08, additions made under various heads by the Assessing Officer, disallowances due to non-production of vouchers/bills, applicability of section 40(a)(ia) regarding TDS on labor charges.
The appellant, a firm engaged in embroidery work using computerized machines, filed its income tax return for the assessment year 2007-08 admitting a total income of Rs. 6,70,550. The Assessing Officer (A.O.) made additions totaling Rs. 22,24,810 under different heads, including discrepancies in purchases and sales accounts, absence of bills for labor charges, ESI premium receipts, and non-deduction of TDS on labor charges. The firm appealed against these additions before the Commissioner of Income Tax (Appeals) who upheld the A.O.'s decision.
Upon hearing both parties and examining the records, it was noted that the disallowances were due to the non-production of vouchers and bills. The appellant contended that the A.O. did not verify any bills and did not provide an opportunity to produce them. The significant addition of Rs. 15,24,800 was related to the non-deduction of TDS on labor charges under section 40(a)(ia) of the Income Tax Act. The appellant argued that section 194C was not applicable to their case and section 40(a)(ia) should not be invoked. They claimed that the embroidery work was done by outside embroiderers under their control and supervision, not as a subcontract. The order of the CIT(A) was considered non-speaking, leading to the decision to set it aside and remand all issues back to the Assessing Officer for a fresh assessment after hearing the appellant.
Consequently, the appeal by the assessee was allowed for statistical purposes, and the entire matter was directed to be reconsidered by the Assessing Officer for a de novo assessment. The order was pronounced in an open court on the Eleventh Day of January, 2011.
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2011 (1) TMI 1450
Issues Involved:
1. Reopening of assessment.
2. Taxability of donations given to Ramakrishna Mutt.
Summary:
Reopening of Assessment:
The first issue concerns the reopening of the assessment. The assessee, a public charitable trust registered u/s 12A of the Income Tax Act, 1961, filed its return for the assessment year 2006-07 on 31.10.2006. No notice u/s 143(1) and 143(2) was issued, but a notice for reopening u/s 148 was issued on 17.10.2007. The assessee argued that the assessment made u/s 143(3) read with s.147 is bad in law as the notice u/s 148 was issued before the expiry of the period for issuing notice u/s 143(2). The Tribunal, after considering various judgments, including CIT Vs. Ved & Co. (302 ITR 328) (Del.) and CIT Vs. TCP Ltd. (323 ITR 346) (Mds. HC), held that the reopening of assessment by issuing notice u/s 148 dated 17.10.2007 is bad in law. The Tribunal emphasized that proceedings u/s 147 can only be initiated after the earlier proceedings have terminated, which was not the case here. Hence, the first ground of the appeal was allowed in favor of the assessee.
Taxability of Donations to Ramakrishna Mutt:
The second issue pertains to the taxability of donations given to Ramakrishna Mutt. The assessee contended that the donations received were for a specific purpose (helping Tsunami victims) and thus should not be treated as income. The assessee argued that the donations were tied-up funds and relied on the Tribunal's order in Nirmala Agricultural Society Vs. ITO (71 ITD 152) (Hyd.). However, the Tribunal found no evidence of how the funds were used for the welfare of Tsunami victims and noted that the end utilization was not furnished. The Tribunal held that the donation given to Ramakrishna Mutt cannot be considered as utilization u/s 11(3A) due to the proviso which prohibits such application of income. Consequently, the second ground was decided against the assessee.
Conclusion:
The appeal was partly allowed, with the reopening of assessment being quashed, but the taxability of donations to Ramakrishna Mutt upheld.
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2011 (1) TMI 1449
Issues involved:
The issues involved in the judgment are the legality of the Show Cause Notice issued by Respondent No. 2, the demand of &8377; 24,61,850/- under Section 72 of the Finance Act, 1994, the permissibility of issuing a Show Cause Notice after best judgment assessment under Section 73 of the Finance Act, 1994, and any other appropriate relief deemed just and proper.
Judgment Details:
Issue (a):
The petitioner sought a writ to quash the Show Cause Notice issued by Respondent No. 2 as illegal. During the hearing, the respondents agreed that the adjudicating authority would address the petitioner's objection regarding the issuance of the show cause notice. The court directed the adjudicating authority to decide on the jurisdictional aspect after hearing the petitioner. The order was to be a speaking one, and the authority was given six weeks to make a decision. The writ petition was disposed of with no order as to costs.
Issue (b):
The petitioner requested a writ to quash the demand of &8377; 24,61,850/- created by the respondents through best judgment assessment under Section 72 of the Finance Act, 1994. The court's direction to the adjudicating authority to address the jurisdictional aspect also applies to this issue. The authority was instructed to consider the petitioner's stance and make a decision within six weeks. The writ petition was disposed of without any costs being awarded.
Issue (c):
The petitioner sought a writ to declare that no Show Cause Notice can be issued under Section 73 of the Finance Act, 1994, once a best judgment assessment has been made. The court's directive to the adjudicating authority to examine the jurisdictional aspect covers this issue as well. The authority was given six weeks to decide after hearing the petitioner. The writ petition was disposed of, and no costs were awarded.
Conclusion:
The High Court directed the adjudicating authority to address the jurisdictional aspect raised by the petitioner regarding the Show Cause Notice and the demand created through best judgment assessment. The authority was given six weeks to make a decision after hearing the petitioner, and the writ petition was disposed of without any costs being imposed.
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2011 (1) TMI 1448
Issues involved: Appeal against CIT(A)'s order for assessment year 2006-07 regarding exemption u/s 10(23C)(vi) and u/s 11, acceptance of ITAT decisions, and collection of capitation fees by educational institutions.
Exemption u/s 10(23C)(vi): The Revenue contended that approval u/s 10(23C)(vi) is mandatory for societies with gross receipts over Rs. One crore. It was emphasized that section 10(23)(vi) provides for educational income exemption, not section 11. The Tribunal referred to the T.M.A. Pai Foundations case, stating that institutions collecting capitation fees cannot be considered charitable/educational. The matter was remitted to the assessing officer to determine if capitation fees were collected, emphasizing that such collections would disqualify the institution from exemptions u/s 10(23C) or u/s 11.
Acceptance of ITAT decisions: The Tribunal noted that previous decisions favored the assessee, citing cases like M/s Vasavi Academy Education and St. Theresa's Society. The Tribunal referred to Supreme Court judgments in support of disallowing exemptions for institutions collecting money beyond prescribed fees. The assessing officer was directed to reevaluate the issue in light of these judgments and give the assessee a fair hearing.
Collection of capitation fees: The Tribunal highlighted the need for assessing officers to investigate if educational institutions were collecting capitation fees, as per the T.M.A. Pai Foundations and Islamic Academy of Education cases. The Tribunal set aside the issue for fresh consideration, reiterating that any collections beyond prescribed fees would disqualify institutions from tax exemptions.
Conclusion: The Revenue's appeal was allowed for statistical purposes, and the issue was remitted to the assessing officer for reevaluation in accordance with the Supreme Court judgments. The Tribunal emphasized the importance of assessing whether educational institutions were collecting capitation fees, as this could impact their eligibility for tax exemptions.
Note: Separate judgments were not delivered by the judges in this case.
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2011 (1) TMI 1447
Issues involved:
The issues involved in this case are:
(i) Whether AO was justified in making addition of Rs. 12,12,509/- by applying the net profit rate of 5%.
(ii) Whether learned CIT(A) was justified in making a further addition of Rs. 33,82,487/- by enhancing the rate of net profit from 5% applied by the AO to 12%.
Details of the Judgment:
Issue (i):
The assessee, a proprietor of M/s Krishna Builders, filed a return of income for AY 2006-07 declaring taxable income of Rs. 11,97,694/-. The AO determined the total income at 5% of gross receipts, amounting to Rs. 22,92,698/-, as against the declared income of Rs. 12,80,189/-. The AO rejected the books of account due to incomplete records and lack of bills and vouchers for major expenses.
Issue (ii):
The CIT(A) upheld the AO's decision to reject the books of account and applied a net profit rate of 12% on total contract receipts, citing precedents. The CIT(A) noted the failure of the assessee to produce complete records despite opportunities. The assessee's counsel argued for the production of complete books of account, but failed to provide evidence supporting this claim. The comparative analysis of turnover and net profit over the years showed an increase in turnover, with varying net profit percentages.
The Tribunal found that the AO's application of a 5% net profit rate was reasonable based on past assessments. Considering the incomplete records and the failure to produce complete books of account, the Tribunal determined a net profit rate of 4% as justified. The appeal was partly allowed, directing the AO to modify the assessment order accordingly.
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2011 (1) TMI 1446
Summoning of certain documents - Election Petition - Rejection of application praying for the summoning of certain documents on the ground that it was not permissible to summon the said documents - same person cast two votes in the election - it is alleged that Smt. Kalpana Kunwar and Smt. Kalpana Singh (wife of Petitioner) were one and the same person, but her name was registered at two places in the electoral rolls of the constituency and hence she had cast two votes in the election - it is also the case that Six (6) tendered votes cast in the election must be counted and the six (6) votes originally polled against the tendered votes must be rejected.
HELD THAT:- In KAILASH VERSUS NANHKU & ORS. [2005 (4) TMI 542 - SUPREME COURT], this Court held that the trial of an election petition is entirely different from the trial of a civil suit, as in a civil suit trial commences on framing the issues while trial of an election petition encompasses all proceedings commencing from the filing of the election petition up to the date of decision. Therefore, the procedure provided for the trial of civil suits under CPC is not applicable in its entirety to the trial of the election petition. For the purpose of the election petition, the word `trial' includes the entire proceedings commencing from the time of filing the election petition till the pronouncement of the judgment. The applicability of the procedure in Election Tribunal is circumscribed by two riders: firstly, the procedure prescribed in CPC is applicable only "as nearly as may be", and secondly, the CPC would give way to any provisions of the Act or any rules made thereunder. Therefore, the procedure prescribed in CPC applies to election trial with flexibility and only as guidelines.
The object of framing issues is to ascertain/shorten the area of dispute and pinpoint the points required to be determined by the court. The issues are framed so that no party at the trial is taken by surprise. It is the issues fixed and not the pleadings that guide the parties in the matter of adducing evidence - There may be an exceptional case wherein the parties proceed to trial fully knowing the rival case and lead all the evidence not only in support of their contentions but in refutation thereof by the other side. In such an eventuality, absence of an issue would not be fatal and it would not be permissible for a party to submit that there has been a mis-trial and the proceedings stood vitiated.
Thus, it is evident that the party to the election petition must plead the material fact and substantiate its averment by adducing sufficient evidence. The court cannot travel beyond the pleadings and the issue cannot be framed unless there are pleadings to raise the controversy on a particular fact or law. It is, therefore, not permissible for the court to allow the party to lead evidence which is not in the line of the pleadings. Even if the evidence is led that is just to be ignored as the same cannot be taken into consideration.
In the case at hand, the election petitioner/respondent has claimed only that there has been irregularity/illegality in counting of 6 tendered votes and the case squarely falls within the ambit of Section 100(1)(d)(iii) of the Act, 1951. Election petitioner has further pleaded that the result of the election stood materially affected because of improper receiving the six tendered votes and in absence of any Recrimination Petition in the case the appellant cannot be permitted to lead evidence on the fact which is not in issue - there are no cogent reason to interfere with the well reasoned judgment and order of the High Court impugned herein.
Appeal dismissed.
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2011 (1) TMI 1445
Issues Involved:
1. Entitlement to deduction u/s 80IB(10) regarding the minimum area of the plot.
2. Entitlement to deduction u/s 80IB(10) regarding the maximum built-up area of residential units.
3. Entitlement to deduction u/s 80IB(10) regarding the completion of the project before the stipulated date.
Summary:
1. Minimum Area of the Plot:
The AO disallowed the deduction u/s 80IB(10) on the ground that the project was constructed on a plot of land less than 1 acre. The AO noted that the original plot was 5100 sq. mts., but 1186 sq. mts. were surrendered to KDMC for a DP Road, leaving 3914 sq. mts., which is less than 1 acre. The CIT(A) confirmed this view. However, the Tribunal referred to the decision in the case of M/s. Umiya Enterprises, which held that the area surrendered for DP Road should not be excluded for determining the size of the plot u/s 80IB(10)(b). Therefore, this objection does not survive.
2. Maximum Built-up Area of Residential Units:
The AO observed that the built-up area of two units in Building No.3 exceeded 1500 sq. ft., including balconies, projections, terraces, and other exclusive areas. The CIT(A) did not accept the AO's contention and held that the built-up area of each unit was 1451 sq. ft. only, excluding the foyer area and open area. The department did not challenge this finding, so this objection does not survive.
3. Completion of the Project Before the Stipulated Date:
The AO noted that the project was not completed before 31-3-2008, as required u/s 80IB(10)(a)(i), due to ongoing litigation regarding Building No.3. The CIT(A) confirmed this view. The Tribunal acknowledged that the project could not be completed due to circumstances beyond the assessee's control (litigation). Referring to various decisions, including Bengal Ambuja Housing Development Ltd. and Brigade Enterprises (P) Ltd., the Tribunal held that proportionate deduction u/s 80IB should be allowed in the ratio of the area completed to the sanctioned area. The Tribunal clarified that the size of the plot should be taken as 5100 sq. mts. for this purpose.
Conclusion:
The appeal is partly allowed, granting proportionate deduction u/s 80IB based on the completed area relative to the sanctioned area, considering the plot size as 5100 sq. mts.
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2011 (1) TMI 1444
Issues Involved:
1. Treatment of software expenditure as capital or revenue expenditure.
2. Disallowance of expenditure on leased premises.
3. Disallowance of payment for non-deduction of TDS u/s 40(a)(ia).
Summary:
1. Treatment of Software Expenditure:
The primary issue was whether the software expenditure of Rs. 2,03,500 should be treated as capital or revenue expenditure. The Assessing Officer (AO) treated it as capital expenditure, relying on the decision of the Hon'ble Rajasthan High Court in CIT v/s Arawali Construction Co. (P) Ltd., 259 ITR 30 (Raj.). The CIT(A) upheld the AO's decision, stating that the nature of expenditure does not change due to the economic environment and that computer software is included in the block of assets with allowable depreciation at 60%. However, the Tribunal, after considering the nature of the software and the need for constant upgradation, concluded that there is no enduring benefit and allowed it as revenue expenditure, setting aside the order of the CIT(A).
2. Disallowance of Expenditure on Leased Premises:
The second issue was the disallowance of Rs. 41,522 towards the capitalization of expenditure on leased premises. The AO found that out of the total expenditure of Rs. 1.11 crore, Rs. 44,32,997 was for renovation and improvement of the building, thus falling under Explanation 1 of Section 32 of the Act. The CIT(A) confirmed the AO's action, stating that the expenses were indeed for renovation/improvement of office premises. The Tribunal upheld the CIT(A)'s decision, agreeing that the expenditure provided a permanent benefit to the company and confirmed the addition of Rs. 41,00,522.
3. Disallowance of Payment for Non-Deduction of TDS u/s 40(a)(ia):
The third issue involved the disallowance of Rs. 2,37,01,175 for non-deduction of TDS on payments made to the parent company, Strategic Capital Corporation. The AO observed that the payments were for work including the supply of labor, attracting TDS u/s 194C. The CIT(A) upheld the AO's decision, stating that the payments were for work and supply of labor, thus TDS was deductible. The Tribunal, however, found that the payments were reimbursements for shared services and infrastructure on a cost-to-cost basis without any markup. It held that TDS was not required on reimbursed expenses as they had already been subjected to tax deductions at source when originally paid. Thus, the Tribunal allowed this ground of appeal.
4. Levy of Interest u/s 234A, 234B, 234C, and 234D:
The last ground regarding the levy of interest charged u/s 234A, 234B, 234C, and 234D was not addressed by the CIT(A). The Tribunal set aside this issue to the file of the CIT(A) for fresh adjudication.
Conclusion:
The appeal was partly allowed, with the Tribunal ruling in favor of the assessee on the treatment of software expenditure and the disallowance of payment for non-deduction of TDS, while upholding the disallowance of expenditure on leased premises. The issue of interest levy was remanded to the CIT(A) for fresh consideration.
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2011 (1) TMI 1443
Issues involved: Appeal by Revenue against reduction of net profit for diminution in value of investment for book profit u/s 115JB for assessment year 2006-07.
Summary:
1. The Revenue appealed against the reduction of net profit by &8377; 1,30,53,000/- for diminution in the value of investment for book profit u/s 115JB.
2. The AO noticed the discrepancy in the computation of income under normal provision and book profit u/s 115JB due to the exclusion of the exceptional item related to diminution in value of investment.
3. The assessee explained that the provision for diminution in the value of investment was rightly reduced in the computation of Book Profit as per the Explanation u/s 115JB(2).
4. The AO added back the amount of &8377; 1,30,53,000/- in the book profit citing the retrospective amendment in the Finance Act, 2009 disallowing such deductions.
5. The Ld. CIT(A) disallowed the addition, stating that the amount written back was part of the provision for which no deduction was allowed earlier, hence should not be included in book profit.
6. The Revenue contended that the provision for diminution in the value of investment was not added back under section 115JB, leading to an incorrect computation of book profit.
7. The Ld. Counsel for the Assessee argued that the amount written back was out of the provision created earlier, which was not claimed as a deduction in the book profit for the relevant year.
8. The Tribunal observed that the provision for diminution in the value of investment was not added back in the assessment year 2001-02, and the Ld. CIT(A)'s direction was based on incorrect facts, thus setting aside the order and restoring that of the AO.
9. Consequently, the appeal of the Revenue was allowed, and the original order was upheld.
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2011 (1) TMI 1442
Issues involved: Stay petition for waiver of pre-deposit of duty and penalty u/s Notification No. 89/95 dated 18.05.1995.
The Appellate Tribunal CESTAT Bangalore, comprising M.V. Ravindran, Judicial Member, and P. Karthikeyan, Technical Member, heard a stay petition filed for the waiver of pre-deposit of duty amounting to Rs. 29,00,532/- along with applicable interest and penalty of Rs. 29,00,532/-. The demand of duty arose as the appellant wrongly availed the benefit of Notification No. 89/95 dated 18.05.1995 for waste products generated during the manufacture of Rice Bran Oil. The Tribunal noted a similar case precedent where it was held that waste products arising during the manufacturing process are eligible for the said notification. Consequently, the Tribunal found that the appellant established a prima facie case for the waiver of pre-deposit, allowing the application and staying the recovery until the appeal's disposal.
Conclusion: The Tribunal allowed the waiver of pre-deposit of duty and penalty u/s Notification No. 89/95 dated 18.05.1995, based on the appellant's prima facie case and precedent set in a similar case, staying the recovery until the appeal's final disposal.
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2011 (1) TMI 1441
Appeal for revenue for Assessment - Nature of receipts Capital or Revenue - the AO treated the amount received by the assessee as west Bengal Industrial Promotion Assistance(WBIPA) as 'revenue receipt' and on appeal, the Ld. CIT(A) treated the WBIPA as a capital receipt and directed the AO to delete the additions for all the years under appeal. Aggrieved by the said order, now the revenue is in appeals before us.
HELD THAT:- the sole purpose behind the grant of assistance is to tide over the financial crisis and promotion of industries and that both these activities are related to capital field and cannot be linked up with day to day operations of the appellant in any manner. Respectfully following the jurisdictional Kolkata ITAT and High Court decisions, I treat WBIPA as a capital receipt and direct the A.O to delete the addition. This ground of appeal of the revenue for all the three assessment years are dismissed.
Rule 8D(2)(iii) for disallowance - HELD THAT:- Since Rule 8D was inserted by the IT 5th Amendment Rules 2008 w.e.f. 24.3.2008 and Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] has held that it is not retrospective in nature this rule is not applicable for the year under appeal. Therefore, the Ld. CIT(A) was not justified in directing the AO to apply Rule 8D(2)(iii) for disallowance. In the result, the appeals of the revenue for Assessment Years 2000-01 and 2006- 07 are dismissed and the appeal for Assessment Year 2005-06 of the revenue is partly allowed.
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2011 (1) TMI 1440
Issues Involved:
The judgment involves the confirmation of penalty u/s 271(1)(c) of the IT Act by the Ld. Commissioner of Income Tax (Appeals) for the assessment year 2006-07.
Disallowance of Payment of ROC Fee:
The Assessee claimed deduction for payment of ROC fee for increase in authorized capital under section 35D, but it was disallowed as there is no concept of deferred revenue expenditure in the Income Tax Act for an existing company.
Disallowance of Delayed Payment of Employee's Contribution to PF and ESI:
The Assessee's explanation for delayed payments was based on circulars providing grace periods, but the Assessing Officer held that employees' contributions stand on a different footing than the sums referred to in Section 43B of the IT Act.
Disallowance u/s 14A:
The Assessing Officer disallowed the claim of exempt dividend income under section 10(34) by applying Rule 8D of the Income Tax Rules.
Penalty Levied:
A penalty of &8377; 85,530 was levied against the disallowances, which was confirmed by the Ld. Commissioner of Income Tax (Appeals) based on the Assessee's acceptance of the additions made.
Judgment:
The ITAT Delhi set aside the penalty orders, ruling that the Assessee cannot be held guilty for concealment or furnishing inaccurate particulars regarding the disallowances. The Tribunal found no concealment in the delayed payments towards PF and ESI contributions, and the disallowance u/s 14A was deemed inapplicable as Rule 8D was notified for a later assessment year. The Tribunal cited legal precedents emphasizing that penalties should not be imposed for technical breaches or bonafide beliefs, ultimately allowing the Assessee's appeal and deleting the penalty.
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2011 (1) TMI 1439
The Supreme Court dismissed the appeals in the case with citation 2011 (1) TMI 1439 - SC. Dr. Mukundakam Sharma and Anil R. Dave were the judges.
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