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Showing 141 to 160 of 590 Records

• 2011 (10) TMI 643
  
  Issues involved: Taxability of transfer fees, taxability of non-refundable security deposits, taxability of nominee occupancy charges, taxability of interest income.
  
  Taxability of transfer fees:
  The appellant, a company, collected transfer fees from shareholders at the time of transferring flats to intending purchasers. The Assessing Officer held that the concept of mutuality does not apply to companies and rejected the claim for exemption. The Commissioner (Appeals) granted relief to the appellant. The Tribunal, citing previous orders and the judgment of the Jurisdictional High Court, held that transfer fees received by the appellant, being a mutual concern, are not taxable under the principle of mutuality. Therefore, the Revenue's appeal was dismissed.
  
  Taxability of non-refundable security deposits:
  The issue of non-refundable security deposits collected by the appellant for allowing repairs to flats was also considered. The Tribunal noted that these deposits were collected from members, applying the principles of mutuality, and therefore cannot be taxed. Consequently, the Revenue's appeal was dismissed.
  
  Taxability of nominee occupancy charges:
  The appellant received nominee occupancy charges from members, which were added to the total income. The appellant contended that these charges are exempt under mutuality. The Tribunal, following its previous orders and the judgment of the Jurisdictional High Court, held that nominee occupancy charges are exempt from taxation on the principles of mutuality. Therefore, this ground of the appellant was allowed.
  
  Taxability of interest income:
  The appellant's interest income on fixed deposits with banks and other sources was added to the total income. The appellant claimed exemption based on mutuality. However, the Tribunal, in line with the Jurisdictional High Court's decision, held that this interest income was taxable as it did not possess the character of mutuality. As a result, the appellant's appeal was partly allowed.
  
  In conclusion, the Revenue's appeal was dismissed, and the appellant's appeal was partly allowed based on the considerations of mutuality in each issue.

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• 2011 (10) TMI 642
  
  Issues Involved:
  1. Allowing credit on TDS.
  2. Addition towards pipe damages, scrap sales, and sundry balance.
  3. Levy of penalty u/s 271(1)(c).
  
  Summary:
  
  1. Allowing Credit on TDS:

  The assessee received a loan from the contractee as mobilisation advances, and TDS was deducted. The assessing officer denied credit for the TDS certificates as the corresponding turnover was not offered for tax purposes. The CIT(A) allowed the appeal, reasoning that the assessee's funds were retained by the contractee in the form of tax liability. The Tribunal upheld the CIT(A)'s decision, referencing a similar case (ACIT Vs. M/s Bhoorathnam & Company) where credit for TDS was given as per Rule 37BA of the IT Rules, 1962. However, the Tribunal later followed the decision in M/s Limak Soma JV, stating that unless the income is offered for taxation, TDS credit cannot be given. Consequently, the Tribunal allowed the Revenue's appeal, setting aside the CIT(A)'s order.

  2. Addition Towards Pipe Damages, Scrap Sales, and Sundry Balance:

  The assessing officer added amounts for pipe damages, scrap sales, and sundry balance write-off as other income. The CIT(A) estimated profit on these at 9%. The Tribunal held that the entire turnover should be considered as income, as the expenditure incurred to earn this income is already claimed in the profit and loss account. Therefore, the Tribunal reversed the CIT(A)'s order, deciding in favor of the Revenue.

  Regarding the sundry balance write-off, the Tribunal referenced the Supreme Court judgment in CIT Vs. Sugauli Sugar Works (P) Ltd., which held that unilateral write-off does not extinguish the debt. However, due to an amendment by the Finance Act, 1996, unilateral write-off is considered income u/s 41(1). Thus, the Tribunal decided against the assessee and in favor of the department.

  3. Levy of Penalty u/s 271(1)(c):

  During assessment, it was found that the assessee incurred unaccounted expenditure and made an unaccounted investment in immovable property. The assessee disclosed additional income but did not contest the further addition made by the Assessing Officer. The Assessing Officer levied a penalty u/s 271(1)(c). The Tribunal noted contradictory findings in the assessment order and found no conclusive evidence of concealment or furnishing inaccurate particulars of income. Therefore, the Tribunal deleted the penalty.

  Conclusion:

  In the result, the appeals in ITA 73 & 74/H/2011 are allowed, and the appeal of the assessee in ITA No.72/H/2011 is also allowed. Order pronounced in the open Court on 12th October, 2011.

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• 2011 (10) TMI 641
  

  Benefit of Section 80IA - grant the approval under Section 10(23G) - Held that:- A reading of Section 10(23G) of the Income Tax Act shows that where an assessee makes an application in respect of the income by way of dividend or by way of long term funding in any enterprise or undertaking engaged in the business referred to under Section 80IA (4) or (3) or Section 80IB(10) approved by the Central Government, the same shall be exempted in the computation of income. Explanation (1) to Section 10(23G) defines "infrastructure capital company and infrastructure capital fund". As far as infrastructure capital company is concerned, it is defined to mean company, which had made investment by way of acquiring shares or providing long term finance to an enterprise wholly engaged in the business referred to in this clause. It is no doubt true that Section 10(23G), inserted with effect from 01.04.1997, was subsequently omitted from the Statute. As the law then stood, given the definition of an eligible business under the provisions of Section 80IA and the fact that the assessee has taken on lease the windmill, which is infrastructure facility, I have no hesitation in allowing the Writ Petition, thereby quashing the order passed by the Central Board of Direct Taxes.

  Touching on the scope of Section 84 as it originally stood, later on substituted as Section 80J before its repeal, the Central Board of Direct Taxes, vide F.No15/5/63-IT (AI) dated 13.12.1963, pointed out that "the benefit of Section 84 of the Income Tax Act 1961 (now Section 80J) attaches to the undertaking and not to the owner thereof. The successor will be entitled for the unexpired period of five years provided the undertaking is taken over as a running concern". As far as the present case is concerned, the reasoning of the Board went on the aspect of lease, a fact which does not stand in the way of the assessee claiming approval under Section 10(23G) or the relief under Sec 80IA(4).

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• 2011 (10) TMI 640
  

  TDS u/a 194A - non-deduction of tax on chit dividend paid / distributed by the assessee though it represents the interest as per section 2(28A) and was within the meaning and purview of section 194A - Held that:- The payment to the subscribers of a chit towards dividend does not partake the character of interest. In this view of the matter, we uphold the orders of the CIT(A) impugned in these appeals, in holding that the assessee is not liable to deduct TDS u/s. 194A of the Act and not liable for interest u/s. 201(1) and 201(1A) of the Act, and consequently, reject the grounds of the Revenue in both these appeals.

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• 2011 (10) TMI 639
  

  Disallowance made under section 40A(3) - Rule 6DD applicability - - Held that:- The provisions of section 40A(3) says that if the cash payment exceeds ₹ 20,000/- and they do not fall under the exceptional clause of Rule 6DD, then addition @ 20% of such cash payment has to be made. However, the background of the case has to be seen and it should be enquired whether there is any real difficulty with the assessee to make payment in cash. In the present case it is seen that assessee was forced to make cash payment as agriculturists were not ready to accept the cheques as many other purchasers were available in the market and willing to pay in cash. Being a prudent businessman, the assessee thought it proper to make cash payment so that their agreement of purchase of land may not be cancelled or agriculturists may refuse to sell the land to assessee the next day. In view of these facts and circumstances we are of the view that case of the assessee falls under the exceptional clause of Rule 6DD of IT Rules.

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• 2011 (10) TMI 638
  

  Interest on securities has to be taxed on due basis - Held that:- Holder of the security cannot encash the security prematurely before the date of redemption like bank deposits. A fixed bank deposit can be redeemed even before the maturity date and the depositor may get a portion of the interest accrued on the deposit till the date of surrender. In such cases, the interest is generated on accrual basis. But in the case of a Government security, it is not possible to encash it prior to the due date. A holder of the security may be able to sell it to another person; but there is no provision for premature encashment. Encashment can be made only on the due date. When the principal amount involved in the instrument itself is redeemable only on due date, there is no reason to hold that the interest element would be generated on accrual basis. The interest also goes along with the principal amount in the case of securities. The fall out of the above position is that in the case of a Government security, the interest could be recognized only on due date and not on accrual basis.

  This fundamental character of a Government instrument itself is sufficient to justify the method of interest income recognition by the assessee-bank. We find that the order of the Commissioner of Income-tax (Appeals) is just and proper in law. The appeal filed by the Revenue fails.

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• 2011 (10) TMI 637
  

  Benefit for exemption u/s 11 - Held that:- more than 85% of the income has been utilized for charitable purposes - Held that:- Interest of justice will be served, if the matter remitted to the file of the Assessing Officer to consider the issue as to whether after taking into account the donations as the income of the assessee 85% has been utilized for charitable purposes or not. If more than 85% has been utilized for charitable purposes, assessee shall be entitled to benefit u/s. 11 of the IT Act. In that case the addition of the donations as unexplained deposits will be liable to be set aside. Accordingly, issue stands remitted to the files of the Assessing Officer.

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• 2011 (10) TMI 636
  

  Penalty u/s 271(1)(c) - Held that:- The penalty is levied for furnishing of inaccurate particulars, and that there is nothing to indicate incorrectness of particulars of claim of deduction on the facts of this case, we are of the considered view that the impugned penalty, to the extent of ₹ 1,21,255, levied by the AO and sustained by the CIT(A) deserves to be deleted. We, accordingly, direct the AO to delete the penalty imposed on the assessee.

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• 2011 (10) TMI 635
  

  Disallowance of SEBI Interest Regulation Scheme, 2004, by holding that the liability crystalised during the previous year, even though interest pertained to earlier period? - Tribunal allowed claim - Held that:- In the present case, the liability to pay interest crystalised in the assessment year in question even though the interest pertained to the earlier period. Thus, in our opinion, the decision of the ITAT is based on finding of fact and no question of law arises. Accordingly, the first question cannot be entertained.

  Disallowance of VSAT charges and lease line charges by holding that the assessee did not have tax withholding obligation under section 194J - Held that:- Similar question raised by the Revenue in the case of the Income Tax Commissioner Mumbai City-4 vs. Angel Capital & Debit Market Ltd. [2014 (5) TMI 584 - BOMBAY HIGH COURT ] has been dismissed on 28th July, 2011. Accordingly, the second question cannot be entertained.

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• 2011 (10) TMI 634
  
  Issues involved:
  1. Assessment of income for the assessment year 2003-04.
  2. Allowance of credit for TDS for the assessee.
  3. Treatment of advance subscription charges as income.
  
  Issue 1: Assessment of income for the assessment year 2003-04:
  The appeal was against the order passed by the CIT(A) regarding the assessment year 2003-04. The department contended that a specific amount should be brought to tax for the said assessment year and not for the subsequent year. The dispute arose from discrepancies in the gross receipts declared by the assessee. The Assessing Officer added a certain amount to the income of the assessee based on these discrepancies. The CIT(A) upheld this addition. However, the assessee argued that the said amount represented advance subscription charges and should not be treated as income. The ITAT, after considering the facts and evidence, concluded that the amount in question indeed represented an advance related to the assessment year 2004-05. Therefore, the addition made by the Assessing Officer for the assessment year 2003-04 was ordered to be deleted.
  
  Issue 2: Allowance of credit for TDS for the assessee:
  The counsel for the assessee contended that credit for TDS on reimbursement of expenses was not allowed by the Assessing Officer, despite the expenses being accepted as reimbursements. The ITAT noted that the TDS related to the reimbursement of expenses and directed the assessing officer to determine the exact TDS amount related to such reimbursements and allow the credit accordingly. The ITAT found no fault in the CIT(A)'s decision regarding this matter.
  
  Issue 3: Treatment of advance subscription charges as income:
  The primary contention of the assessee was that the amount in question, representing advance subscription charges received from another entity, should not be treated as income but as an advance for services to be provided in the subsequent year. The ITAT agreed with the assessee's argument, observing that both parties had accounted for the advance in their books and that there was no evidence to suggest that the amount was income for services rendered. The ITAT ordered the deletion of the addition made by the Assessing Officer in this regard. However, it directed the Assessing Officer to verify if the amount had been admitted as income in the assessment year 2004-05 and reopen the assessment if necessary.
  
  In conclusion, the ITAT partially allowed the Revenue's appeal for statistical purposes. The judgment emphasized the importance of correctly assessing income for the relevant assessment year, allowing credit for TDS on reimbursements, and distinguishing between advance subscription charges and actual income. The decision provided clarity on the treatment of such financial transactions in the context of income tax assessments.

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• 2011 (10) TMI 633
  
  Issues Involved:
  1. Determination of Arm's Length Price (ALP) of the international transaction.
  2. Exclusion of certain companies from the list of comparables.
  3. Adjustment on account of working capital and risks undertaken.
  4. Applicability of the +/-5% variation benefit under the erstwhile proviso to section 92C(2) of the Income-tax Act.
  5. Disallowance on account of delay in payment of employees' contribution towards provident fund.
  
  Detailed Analysis:
  
  1. Determination of Arm's Length Price (ALP) of the international transaction:
  The primary dispute was the determination of the ALP of the appellant's international transaction for software development services. The appellant initially used the Cost Plus Method (CPM) but later tested the transaction using the Transactional Net Margin Method (TNM Method). The Transfer Pricing Officer (TPO) rejected the appellant's method and applied the TNM Method, which resulted in an upward adjustment of Rs. 2,50,91,747/-. The Dispute Resolution Panel (DRP) directed to exclude two companies with extreme margins and concluded a PLI of 20%, leading to an addition of Rs. 1,31,17,207/- to the appellant's income.
  
  2. Exclusion of certain companies from the list of comparables:
  The appellant contested the exclusion of Goldstone Technologies Ltd. by the DRP, arguing it was done without a hearing and that its margin was not abnormally low. The appellant also argued that Compucom Software Ltd. should be excluded due to significant related party transactions exceeding 25% of total revenue. The Tribunal found merit in the appellant's argument regarding Compucom Software Ltd. and directed its exclusion from the final set of comparables.
  
  3. Adjustment on account of working capital and risks undertaken:
  The appellant sought adjustments for differences in working capital and risks undertaken compared to comparable companies, citing that it was a captive service provider with major risks borne by the parent company. The Tribunal did not explicitly address this issue in the final decision but noted the appellant's detailed submissions and precedents supporting such adjustments.
  
  4. Applicability of the +/-5% variation benefit under the erstwhile proviso to section 92C(2) of the Income-tax Act:
  The Tribunal examined whether the benefit of the erstwhile proviso to section 92C(2), allowing a +/-5% variation from the arithmetic mean, was applicable. The Tribunal concluded that the amended proviso, effective from 1.10.2009, was not retrospective and thus not applicable to the assessment year in question. Consequently, the appellant was entitled to the benefit of the +/-5% variation under the erstwhile proviso.
  
  5. Disallowance on account of delay in payment of employees' contribution towards provident fund:
  The appellant contested a disallowance of Rs. 71,694/- due to a delay in payment of employees' provident fund contributions, arguing the payments were made before the due date for filing the return of income. The Tribunal, referencing relevant precedents, directed the deletion of the disallowance.
  
  Conclusion:
  The Tribunal allowed the appeal of the assessee, granting relief on the primary issue of ALP determination by excluding Compucom Software Ltd. from the comparables and allowing the benefit of the +/-5% variation. The Tribunal also directed the deletion of the disallowance related to the provident fund payment delay.

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• 2011 (10) TMI 632
  
  Issues Involved:
  1. Deletion of addition of Rs. 58,40,226/- out of interest of Rs. 60,92,226/- made by the Assessing Officer on account of loan given without interest.
  2. Deletion of addition of Rs. 1,74,27,588/- made by the Assessing Officer on account of deemed dividend u/s 2(22)(e).
  3. Acceptance of additional evidence during the appellate proceedings in violation of Rule 46A of Income Tax rules, 1962.
  
  Summary:
  
  Issue 1: Deletion of Addition of Rs. 58,40,226/- Out of Interest of Rs. 60,92,226/-
  The Assessing Officer (AO) disallowed interest amounting to Rs. 60,92,226/- out of the interest expenses claimed at Rs. 13,11,79,033/- on the grounds that the assessee had given interest-free loans and advances totaling Rs. 35,32,26,710/- which were not for business purposes. The CIT(A) deleted the addition to the extent of Rs. 58,40,226/- after observing that the appellant had charged interest on loans and advances from certain parties and disclosed the same in the books of account. The CIT(A) found that advances to Kopran Pharmaceuticals and Cargo Co. Ltd. were justified and interest was accounted for in the subsequent year. However, for Shri Bhartiya Sanskriti Sansthan, the nature and purpose of the loan were not specified, leading to a partial disallowance of Rs. 2,52,000/-. The Tribunal upheld the CIT(A)'s decision, finding no violation of Rule 46A and confirming that the assessee had duly received interest on the advances.
  
  Issue 2: Deletion of Addition of Rs. 1,74,27,588/- as Deemed Dividend u/s 2(22)(e)
  The AO added Rs. 1,74,27,588/- to the total income of the assessee as deemed dividend u/s 2(22)(e), based on the unsecured loans from Bhaskar Multinet Ltd., where a common shareholder held substantial interest in both companies. The CIT(A) deleted the addition, stating that the entries were not actual loans but transfer entries due to a proposed demerger, and there was no actual flow of funds. The CIT(A) also noted that the assessee company was not a shareholder in Bhaskar Multinet Ltd., and thus, the provisions of Section 2(22)(e) were not applicable. The Tribunal agreed with the CIT(A), emphasizing that the credit balance was due to adjustment entries and not actual loans or advances, and upheld the deletion of the addition.
  
  Issue 3: Acceptance of Additional Evidence in Violation of Rule 46A
  The Tribunal found no evidence that the CIT(A) had accepted any additional documents in violation of Rule 46A while deleting the disallowance of interest. The Tribunal confirmed that the CIT(A) had appropriately considered the advances and the interest received, and there was no procedural violation.
  
  Conclusion:
  The appeal of the Revenue was dismissed, and the Tribunal upheld the CIT(A)'s order for both the deletion of the interest disallowance and the deemed dividend addition. The judgment was pronounced in the open court on 21st October, 2011.

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• 2011 (10) TMI 631
  

  Addition on account of loading, unloading and tempo expenses - failure to produce complete books of accounts, vouchers, details of the parties, etc. - G.P. determination - Held that:- head-wise disallowance of expenses was confirmed by the tribunal in the preceding year and the Tribunal did not hold that 25.22% G.P. rate is to be adopted being reasonable in this business. Hence, in our considered opinion, the percentage of these expenses to gross receipt in the preceding year should be adopted as reasonable in the present year. When we do so, we find that percentage of expenses under two heads is below that of the preceding year. For Tempo charges, the percentage in the present year is higher by 1.88% and if the same percentage is maintained, it will result into a disallowance of ₹ 4,46,976/- out of tempo charges. It will result into G.P. rate of 20.59%, which is higher than G.P. declared by the assessee in the assessment year 2003-04 of 17.22% and in assessment year 2004-05 of 19.91% but we find that in the written submissions of the learned AR of the assessee, it is requested that G. P. rate may be adopted at 21%. We accept this request and hold that in the present case. G. P. rate of 21% be adopted as against 18.70% declared by the assessee. It will result into an addition of 2.3% of Gross Receipt of ₹ 237,75,331/-. Hence, net addition will be of ₹ 546,833/- as against ₹ 19,72,590/- made by the A.O. Since, relief allowed by the Ld. CIT(A) is lower, the appeal of the revenue is dismissed and the appeal of the assessee is partly allowed.

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• 2011 (10) TMI 630
  
  Issues Involved:
  1. Treatment of Long Term Capital Gain (LTCG) as Income from Other Sources.
  2. Treatment of Capital Gain as Short Term Capital Gain (STCG) on a protective basis.
  
  Summary:
  
  Issue 1: Treatment of Long Term Capital Gain (LTCG) as Income from Other Sources
  
  The Revenue appealed against the CIT(A) order treating the profit of Rs. 29,00,317/- on the sale of shares as LTCG, whereas the A.O. had treated it as income from other sources, alleging the transaction was a colourable device to evade tax. The CIT(A) found the A.O.'s observations factually incorrect, noting that the assessee provided sufficient evidence of genuine purchase and sale of shares. The CIT(A) referenced the Hon'ble P&H High Court in CIT vs. Anupam Kapoor, stating that without material evidence, the A.O.'s presumption of a bogus transaction was unfounded. The Tribunal upheld the CIT(A)'s decision, stating that the A.O.'s conclusions were based on presumptions and surmises without proper enquiry, and dismissed the Revenue's appeal.
  
  Issue 2: Treatment of Capital Gain as Short Term Capital Gain (STCG) on a Protective Basis
  
  The A.O. alternatively treated the LTCG of Rs. 27,58,778/- as STCG on a protective basis, citing a lack of material evidence regarding the duration the shares were held. The CIT(A) found that the shares were held for more than 12 months, and the A.O.'s observations were incorrect. The Tribunal agreed with the CIT(A), noting that the assessee provided evidence of the purchase and dematerialization of shares, and there was no basis for treating the gains as STCG. The Tribunal dismissed the Revenue's appeal on this ground as well.
  
  Conclusion:
  
  The Tribunal dismissed the Revenue's appeal, upheld the CIT(A)'s order treating the gains as LTCG, and imposed a token cost of Rs. 100/- on the Revenue for filing an unnecessary appeal and wasting the court's time. The order was pronounced in the open court on 31st October 2011.

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• 2011 (10) TMI 629
  

  Nature of expenditure - Revenue expenditure or capital expenditure - Held that:- Most of the expenditure pertains to the project consultancy and compensation charges except an amount of ₹ 18 lakhs for construction of compound wall. As far as feasibility study and architectural services are concerned they are, certainly, in the nature of revenue expenditure. As far as other two expenses are concerned an amount of ₹ 18,00,830/- pertains to construction of compound wall in which an asset was created, therefore, that part of the expenditure becomes capital expenditure, whereas the balance expenditure, including compensation charges are concerned, no asset was created by paying this amount. Accordingly, except the amount of ₹ 18,00,830/- claimed in the above, the balance of the amount is to be allowed as revenue expenditure and, therefore ground is partly allowed to the extent stated above. As far as ₹ 18,00,830/- spent for construction of compound wall that has resulted in an asset, thus the same cannot be allowed as the expenditure as it will fall under the nature of capital expenditure. Accordingly ground No. 1 is partly allowed.

  Amount was paid as compensation for idle period during pendency of getting permissions - Held that:- What the assessee has provided in the books of account was only a provision and the claim made by the said contractor was contingent in nature. Not only that as per the admission by the assessee itself the settlement was made on 09.10.2005 which falls in the later assessment year to an extent of ₹ 75.49 lakhs and not the entire amount of ₹ 90 lakhs. Another fact which is to be considered is that this is part of the work-inprogress of Taloja project, Maharashtra, which was set up and started functioning in later year. Therefore the expenditure cannot be considered as expenditure of abandoned project. Thus as the expenditure has not been crystallised in the year under consideration and further the expenditure is part of the setting up of a plant at Taloja which commenced later, the claim cannot be allowed as revenue expenditure in this year. Therefore, the Assessing Officer’s action in treating the same as capital expenditure is upheld. The claim to the extent of ₹ 74.49 lakhs is to be examined by the A.O. whether that can be capitalised or not in the year of commencement of the Taloja project. With these observations ground No. 2 is rejected. The orders of the A.O. and the CIT(A) on this issue stand confirmed.

  Non-inclusion of damaged stock in valuation of closing stock - Held that:- In principle we agree with the findings of the AO that stock of damaged goods should also be required to be valued at the end of the year. As regards estimation of amount of the said stock we find that there is no material available on record for estimation of the different amount of the stock than estimated by the AO. We, therefore, confirm the orders of the revenue authorities on this issue.

  Disallowance under section 14A - Held that:- Godrej & Boyce Ltd. Mfg. Co. VS. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT ] has held that application of Rule 8D is only prospective and, therefore, the said rule cannot be applied to A.Y. 2005-06. In the interest of justice, respectfully following the above decision we restore the issue to the file of the A.O. to examine the disallowance under section 14A considering the submissions of the assessee and the facts of the case, law on the subject and decide the issue afresh.

  Disallowance being 1/5th claimed under section 35DDA - Held that:- Even though assessee claimed that it had incurred the expenditure and be allowed as deferred revenue expenditure, the amount cannot be allowed in the year as the expenditure is not in the nature of deffered revenue expenditure. As the expenditure does not pertain to the year under consideration and also similar claim was not allowed in earlier year, which assessee has not contested, there is no need to consider it in this year. Accordingly the ground 5 is dismissed.

  Withdrawal of interest granted by Department - Held that:- On examination of the facts as placed on record and consequential orders given in this regard, we are of the opinion that this issue requires factual examination by the A.O., as consequent to the orders of the ITAT in A.Y.1993-94, some more interest was granted to assessee. Therefore, the A.O. is directed to examine the interest granted to assessee and interest offered by assessee in respective assessment years and rework out the allowable amount if the amount offered to tax stood withdrawn by the Revenue, to that extent.

  Cost of acquisition while computing the capital gains on sale of Matunga land - Held that:- The doctrine of merger was applied resulting in ‘drowning’ and ‘sinking’ of inferior right into superior right. Assessee has transferred his complete rights acquired by way of tenancy rights as well as reversionary rights in the property for development. Therefore, we are of the opinion that the CIT(A) has rightly considered the amount of ₹ 3.32 crores paid in 1998 and ₹ 4.77 crores paid for vacating the tenancy as cost of acquisition of the rights transferred. The Assessing Officer’s treatment of acquiring reversionary rights alone as cost of acquisition is not correct as what the assessee has acquired in 2004 from the erstwhile owner, who already surrendered tenancy right, is only part of the reversionary rights with him so that the title is complete in all respects as far as assessee is concerned. No merit in the claim of the Revenue that the lease rights acquired and tenancy rights acquired should not form part of cost of acquisition. It is also to be noted that AO allowed cost of acquiring ‘reversionary rights’ as cost of ‘purchase of land’. Considering the facts of the case, we do not see any reason to interfere with the order of the CIT(A).

  Addition under section 36(1)(iii) - Held that:- As seen from the facts available on record, assessee advanced interest free loans in earlier years and no fresh additional loan has been given in the impugned assessment year. Therefore, the findings given in the earlier year will have a consequential effect in the present assessment year. In A.Y. 2004-05, i.e. immediately preceding assessment year the matter was considered by the ITAT and the issue was restored to the file of the A.O. to examine the matter in the light of the orders in the earlier years.

  Addition made on account of distribution of gift articles - Held that:- The expenditure incurred on school for repair of the building where employees children are also studying has resulted in creating goodwill/brand image for the assessee, therefore, the expenditure incurred is allowable as revenue expenditure.

  TPA - corporate guarantee addition - Held that:- There is no need for making any adjustment. It is on record that HSBC Bank itself has charged an amount at 0.35% totalling to ₹ 15,95,849/- on commercial considerations. It is also on record that the Citybank has not charged any amount during the year but charged 0.25% in the immediately proceeding year, the year in which the TPO has accepted the arms length price. Assessee not only recovered the above cost incurred by it from the subsidiary company but also charged a mark up price @ 0.20% and recovered an amount of ₹ 31,82,729/-. Therefore, in view of the above facts available on record there is no need for making any adjustment on the basis of the ‘naked quote’ available in the website of the Allahabad Bank, HSBC Bank and ICICI Bank where even the report itself indicate that the rates varied from 0.15% to 3%. In view of the facts of the case, we are of the opinion that there is no need to make any adjustment in the transfer pricing provisions and the order of the CIT(A) required to be confirmed

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• 2011 (10) TMI 628
  

  Packing material expenses - invocation of provisions of section 41(1) - disallowance of interest in view of provisions of section 14A - disallowance of telephone expenses - trading addition - withdrawal of depreciation on the Wind Mill - deemed dividend in terms of section 2(22)(e)

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• 2011 (10) TMI 627
  
  Issues involved: Appeal against deletion of addition made by AO u/s 143(3) for fine paid under Gujarat Regulation and Unauthorized Development Act, 2001.
  
  The Appellant, a construction firm, filed return of income for AY 2005-06 showing total income of Rs. 9,90,440. AO disallowed Rs. 12,50,000 as fine under Surat Municipal Corporation Rules. CIT(A) deleted the disallowance stating that the payment was compensatory under the Gujarat Regulation and Unauthorized Development Act, 2001 for regularization of unauthorized construction.
  
  The assessee contended that the impact fees paid for additional area covered in construction project are eligible for deduction u/s 37(1) of the Income-tax Act, 1961. CIT(A) agreed and deleted the disallowance, citing precedents where compensatory payments were allowed as deductions.
  
  The CIT(A) held that the contravention was not detected by Surat Municipal Corporation but voluntarily intimated under the Gujarat Regularization of Unauthorized Development Act, 2001. The payment was compensatory in nature and allowable as deduction u/s 37(1) based on precedents.
  
  The Revenue appealed to the Tribunal against the deletion of Rs. 12,50,000 addition. Despite absence of assessee, the Tribunal upheld CIT(A)'s decision, stating that the payment was compensatory in nature similar to previous cases and therefore allowable as deduction u/s 37(1).
  
  The Revenue's appeal was dismissed by the Tribunal, affirming that the payment made by the assessee was compensatory in nature and hence eligible for deduction u/s 37(1) of the Income-tax Act, 1961.
  

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• 2011 (10) TMI 626
  
  Issues involved: Appeal against penalty u/s 272B of the IT Act, 1961 for failure to quote PANs of deductees.
  
  Summary:
  The appellant challenged the penalty of Rs. 10,000 imposed under section 272B of the IT Act, 1961, for not quoting PANs of deductees in the TDS return. The appellant, a partnership firm engaged in the wholesale business of grocery items, had deducted tax but failed to provide PANs of five deductees. The AO initiated penalty proceedings based on this non-compliance.
  
  The appellant contended that it had deposited the tax in time, filed the TDS return, and made efforts to obtain PANs from the deductees by writing letters to them. However, the AO upheld the penalty. The CIT(A) also ruled against the appellant.
  
  The appellant argued that there was a reasonable cause for not providing PANs and cited a Tribunal's order stating that the Act did not empower deductors to compel deductees to provide PANs. The appellant maintained that if any penalty was warranted, it should be on the deductees for not providing PANs.
  
  After considering the contentions and records, it was observed that the appellant had made efforts to comply with the provisions by requesting PANs from the deductees. Sections 272B and 273B of the Act provide discretion to the AO not to impose a penalty if a reasonable cause is demonstrated. In this case, the appellant's efforts to obtain PANs were deemed reasonable, and it was concluded that the penalty should not have been imposed. Consequently, the penalty imposed by the AO was deleted, and the appeal of the appellant was allowed.

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• 2011 (10) TMI 625
  
  Issues Involved:
  1. Jurisdiction u/s 263 of the Income-tax Act, 1961.
  2. Legality of reviving the limitation period u/s 153(2) by invoking sec. 263.
  3. Tax implications of the write-off by Shri Shreya Morakhia.
  
  Summary:
  
  1. Jurisdiction u/s 263 of the Income-tax Act, 1961:
  The assessee challenged the jurisdiction of the Learned Commissioner u/s 263, arguing that no assessment order was passed u/s 143(3)/147, and thus, any remedial action under sec. 263 would be contrary to law. The Tribunal held that the discontinuation or dropping of reassessment proceedings by the Assessing Officer (AO) can be construed as an order within the meaning of "any order passed therein by the Assessing Officer" u/s 263. Therefore, the Learned Commissioner was justified in taking cognizance under sec. 263.
  
  2. Legality of reviving the limitation period u/s 153(2) by invoking sec. 263:
  The assessee contended that it is not legally permissible to revive the limitation period provided in section 153(2) by invoking sec. 263. The Tribunal noted that the Learned Commissioner was not extending the time limit for passing the reassessment order but was correcting the prejudice suffered by the department due to the erroneous action of the AO. The Tribunal upheld the Learned Commissioner's action under sec. 263, stating that the basic object of sec. 263 is to scrutinize the AO's actions administratively.
  
  3. Tax implications of the write-off by Shri Shreya Morakhia:
  The assessee argued that the write-off of Rs. 50,29,896 by Shri Shreya Morakhia does not result in any income in the hands of the assessee company, as the liability was related to the acquisition of shares and the corresponding investment value was reduced. The Tribunal found that the AO had dropped the reassessment proceedings after being satisfied with the assessee's explanation. The Tribunal referred to the judgments of the Hon'ble Mumbai High Court in CIT vs. Jet Airways (I) Ltd. and the Hon'ble Delhi High Court in Ranbaxy Laboratories Vs. CIT, which held that if no income has escaped assessment, the AO cannot examine other issues. Consequently, the Tribunal concluded that the Learned Commissioner could not take cognizance of the issue of excessive capital loss claimed by the assessee under sec. 263.
  
  Conclusion:
  The Tribunal quashed the order passed under sec. 263 by the Learned Commissioner, stating that the AO's action of dropping the reassessment proceedings was not erroneous or prejudicial to the interest of the revenue. The appeal of the assessee was partly allowed.

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• 2011 (10) TMI 624
  

  Reopening of assessment - Held that:- The first sentence in the reasons is about information regarding receipt of two manager’s cheques by the assessee and second sentence holds these cheques received from shri Harish Pawar to be accommodation entries. The basis for holding the amount of ₹ 10 lacs as accommodation entry is nowhere evident from these recorded reasons not there is any material that the amount was escaped income. Not even a whisper has been made in the reasons regarding basis or material for mentioning the amount of aforesaid two manager’s cheques as accommodation entries.

  The aforesaid reasons recorded are not at all self-explanatory and keep any reasonable person guessing as to how the receipt of two cheques become accommodation entries. Therefore, it appears from the reasons that the AO without applying his mind properly, issued notice u/s 148 of the Act. The very basis for reopening of assessment is mere assumption of the AO and the reopening cannot be sustained on the assumptions and surmises and he never cared to verify the factual position correctly. The reopening of assessment made by the AO is invalid and liable to be quashed.

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