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Showing 141 to 160 of 721 Records

• 2010 (11) TMI 1004
  
  Issues involved: Service tax demand, appropriation of amount, free supply of materials, works contract, value of goods supplied by contractee, Notification No.15/04-ST, Notification No.18/05-ST, pre-deposit requirement, waiver of balance demand.
  
  Service tax demand and appropriation: The petitioner contested a service tax demand of Rs. 10,62,65,767, with an amount of Rs. 2,83,91,383 ordered for appropriation. The petitioner argued that an additional amount of Rs. 1,20,98,505 had not been considered for appropriation, emphasizing the significant deposit made to protect the Revenue's interest.
  
  Free supply of materials and works contract: The demand comprised two parts - free supply of materials and works contract. The petitioner claimed that the demand related to free supply of materials should be around Rs. 9.00 Crores, while the rest pertained to works contract. The High Court had stayed proceedings regarding free supply of materials, leading the petitioner to request a waiver of further deposit during the appeal's pendency.
  
  Value of goods supplied by contractee: The Revenue contended that the value of goods supplied by the contractee should be included in the gross value of taxable service, citing a Tribunal decision. Despite the petitioner's plea for concession, the Revenue insisted on the discharge of the entire service tax liability.
  
  Notification interpretation and pre-deposit requirement: The Adjudicating Authority examined Notification No.15/04-ST and Notification No.18/05-ST to include the value of materials supplied by the contractee. Considering the Revenue's success in a cited case and the pending High Court proceedings, the Tribunal directed the appellant to make a pre-deposit of Rs. 2.00 Crores within eight weeks, with the balance demand waived during the appeal's pendency.
  
  Interim modality and undue hardship consideration: The Tribunal's decision on the pre-deposit requirement was influenced by legal precedents and the need to protect the Revenue's interest. The order aimed to strike a balance between the parties' contentions, ensuring compliance while not causing undue hardship to the appellant. The decision was made based on a holistic assessment of the case's facts and circumstances.

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• 2010 (11) TMI 1003
  
  Issues involved:
  Challenging deletion of penalty u/s 271AA and directing AO to allow deduction u/s 80HHE based on adjusted book profits u/s 115JB for assessment years 2002-03 and 2003-04 respectively.
  
  I.T.A. No. 1126/Mds/2010 for the assessment year 2002-03:
  The assessee, engaged in exporting engineering design services, filed its return declaring income at Rs. Nil. Penalty u/s 271AA was imposed for non-maintenance of documents concerning international transactions. The CIT(A) deleted the penalty citing compliance with section 92D and upheld by the Transfer Pricing Officer. The Department appealed, arguing non-compliance with section 92D. The TPO's order confirmed arms-length pricing. The Tribunal upheld the CIT(A)'s decision, noting no fault in the assessment.
  
  I.T.A. No. 1127/Mds/2010 for the assessment year 2003-04:
  Similar to the previous year, the assessee filed its return declaring NIL income and claimed deduction u/s 80HHE. The CIT(A) allowed the deduction based on adjusted book profits u/s 115JB, citing precedents. The Department contested, claiming the decision was not final. The Tribunal upheld the CIT(A)'s decision, stating it was based on established precedents and no contrary evidence was presented.
  
  In both cases, the Tribunal dismissed the appeals of the Revenue, upholding the CIT(A)'s decisions.

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• 2010 (11) TMI 1002
  

  CENVAT credit - canteen services - whether Service tax paid on canteen services is input service in manufacture of final product ? - Held that: - the questions raised in this Appeal are covered by the judgment of this Court in the case of The Commissioner of Central Excise, Nagpur v. Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT], where it was held that the definition of input service is not restricted to services used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product and allowed credit on canteen services - matter is restored to the file of CESTAT who will decide the questions raised in this Appeal in accordance with the decision of this Court in the case of Ultratech Cement Ltd. - appeal allowed by way of remand.

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• 2010 (11) TMI 1001
  
  Issues Involved:
  1. Validity of transfer of assessment proceedings u/s 127 of the Income Tax Act, 1961.
  2. Adequacy of reasons provided for the transfer.
  3. Compliance with the requirement of giving a reasonable opportunity to the assessee.
  
  Summary:
  
  1. Validity of Transfer of Assessment Proceedings u/s 127 of the Income Tax Act, 1961:
  The petitioners challenged the transfer of their assessment proceedings from Kanpur to Allahabad. The transfer was initiated following a search and seizure operation conducted by the Income Tax Department u/s 132 at the business premises of M/s. Bhola Food Product Pvt. Ltd., belonging to the Kesarwani Group. The petitioners argued that they had no business or family connections with the Kesarwani Group and were regularly assessed at Kanpur.
  
  2. Adequacy of Reasons Provided for the Transfer:
  The petitioners contended that the notices issued did not contain any material or reasons for the transfer, thus preventing them from filing effective objections. The respondents justified the transfer citing 'administrative convenience and coordinated investigation'. However, the court noted that the show cause notice did not disclose any material linking the petitioners with the Kesarwani Group or any undisclosed income. The court held that merely stating the need for coordinated investigation without specific reasons was insufficient.
  
  3. Compliance with the Requirement of Giving a Reasonable Opportunity to the Assessee:
  The court emphasized that u/s 127, it is mandatory to give the assessee a reasonable opportunity of being heard and to record reasons for the transfer. The court found that the petitioners were not given a proper opportunity as the notices lacked specific reasons and material. The court concluded that the transfer orders were passed in a mechanical manner without addressing the objections raised by the petitioners.
  
  Conclusion:
  The court set aside the impugned orders of transfer dated 30.3.2010 and the consequential notices dated 16.4.2010 issued u/s 153-C. The petitions were allowed, and the rule was made absolute in terms of the prayer clauses, quashing the transfer orders and prohibiting the respondents from proceeding with the assessment at Allahabad. No order as to costs was made.

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• 2010 (11) TMI 1000
  
  Issues involved: Appeal against order of learned CIT(A)-XXX, Mumbai regarding disallowance of interest and other expenditure u/s. 14A and direction to recompute disallowance as per Rule 8D for A.Y. 1998-99 and 1999-2000.
  
  Summary:
  
  Issue 1: Disallowance of interest and other expenditure u/s. 14A
  
  The appeals were filed by the assessee company against the order of learned CIT(A)-XXX, Mumbai pertaining to A.Y. 1998-99 and 1999-2000. The common ground in both appeals was that the learned CIT(A) erred in confirming the disallowance of interest and other expenditure u/s. 14A and in directing the Assessing Officer to recompute the disallowance as per Rule 8D of the Income Tax Rules.
  
  Issue 2: Recomputation of disallowance u/s. 14A
  
  Both the Assessing Officer and the learned CIT(A) determined that the computation of disallowance should be done u/s. 14A of the Income Tax Act in conjunction with Rule 8D. The counsel for the assessee referred to a decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd., ITA No. 626 of 2010 dated 12.8.2010, and argued that the matter needed to be reconsidered in accordance with the law. The learned DR did not object to this submission.
  
  Conclusion:
  
  After considering the facts of the case, the Appellate Tribunal deemed it fair and reasonable to set aside the issue to the file of the Assessing Officer. The Assessing Officer was directed to recompute the amount disallowable u/s. 14A in line with the decision of the Hon'ble Bombay High Court. As a result, the appeals filed by the assessee were treated as partly allowed. The order was pronounced on the 1st day of November, 2010.

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• 2010 (11) TMI 999
  
  Issues Involved:
  1. Applicability of the provisions of Section 2(22)(e) of the Income Tax Act.
  2. Inclusion of investment allowance reserve and subsidy from DIC in accumulated profits for computing dividends.
  3. Levy of interest under Section 234B of the Income Tax Act.
  4. Disallowance of bad debts written off.
  
  Issue-wise Detailed Analysis:
  
  I. Applicability of the Provisions of Section 2(22)(e) of the Income Tax Act:
  
  Assessment Year 2001-02:
  - Facts: The assessee received an advance of Rs. 16.64 lakhs from Bagmane Pharmaceuticals (P) Ltd (BPPL). The AO treated this amount as deemed dividend under Section 2(22)(e) of the Act, as the assessee was a beneficial owner holding more than 10% of equity shares in BPPL.
  - AO's View: BPPL was a closely-held company and the transaction could not be considered part of its normal business activities. The AO relied on the Supreme Court ruling in P. Sarada v. CIT (229 ITR 444) to treat the amount as deemed dividend.
  - CIT(A)'s Decision: Upheld the AO's decision, noting that the amount was shown under 'loans and advances' in BPPL's balance sheet and that the assessee failed to prove the transaction was not for individual benefit.
  - Tribunal's Decision: Confirmed the AO's and CIT(A)'s findings, stating that the assessee did not provide sufficient evidence to contradict the AO's conclusions.
  
  Assessment Years 2002-03 to 2007-08:
  - Facts: The assessee received various amounts from Bagmane Developers (P) Ltd (BDPL), which were treated as deemed dividends by the AO under Section 2(22)(e) of the Act.
  - AO's View: The amounts were unsecured loans and advances, and BDPL had accumulated profits. The AO concluded these amounts were for the individual benefit of the assessee.
  - CIT(A)'s Decision: Upheld the AO's decision, reasoning that the payments were made for the individual benefit of the assessee and not for business purposes.
  - Tribunal's Decision: Reversed the AO's and CIT(A)'s findings, stating that the transactions were in the course of business and for business exigency. The Tribunal relied on the Supreme Court ruling in S.A. Builders v. CIT (288 ITR 1) and the Delhi High Court decision in CIT v. Creative Dyeing and Printing Pvt. Ltd. (318 ITR 476), concluding that the amounts were not advances or loans but business transactions.
  
  II. Inclusion of Investment Allowance Reserve and Subsidy from DIC in Accumulated Profits for Computing Dividends:
  
  Assessment Year 2001-02:
  - Facts: The AO included investment allowance reserve and subsidy from DIC in the accumulated profits for computing deemed dividends.
  - CIT(A)'s Decision: Upheld the AO's inclusion, supported by the Supreme Court decision in P.K. Badiani v. CIT (105 ITR 642).
  - Tribunal's Decision: Agreed with the CIT(A), noting that accumulated profits should be taken in a commercial sense, including investment allowance reserve and subsidy.
  
  III. Levy of Interest under Section 234B of the Income Tax Act:
  
  All Assessment Years:
  - Facts: The assessee contested the levy of interest under Section 234B.
  - CIT(A)'s Decision: Upheld the levy of interest, stating it is mandatory and consequential.
  - Tribunal's Decision: Dismissed the assessee's appeal on this ground, affirming that the levy of interest under Section 234B is mandatory and consequential.
  
  IV. Disallowance of Bad Debts Written Off:
  
  Assessment Year 2004-05:
  - Facts: The AO disallowed the bad debts written off by the assessee, totaling Rs. 49.35 lakhs.
  - CIT(A)'s Decision: Upheld the AO's disallowance, stating the assessee failed to provide sufficient evidence.
  - Tribunal's Decision: Reversed the CIT(A)'s decision, citing various judicial pronouncements, including T.R.F. Ltd. v. CIT, which held that it is sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee.
  
  Conclusion:
  - Assessment Year 2001-02: The assessee's appeal was dismissed.
  - Assessment Years 2002-03 to 2007-08: The assessee's appeals were partly allowed, with the Tribunal reversing the applicability of Section 2(22)(e) and allowing the bad debts written off. The levy of interest under Section 234B was upheld for all years.

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• 2010 (11) TMI 998
  
  Issues Involved:
  1. Initiation of proceedings under Section 153C of the Income Tax Act.
  2. Applicability of Section 2(22)(e) of the Income Tax Act regarding deemed dividends.
  3. Computation of the current year's profit.
  4. Levy of interest under Section 234B of the Income Tax Act.
  
  Issue-wise Detailed Analysis:
  
  1. Initiation of proceedings under Section 153C of the Income Tax Act:
  The assessee contended that the provisions of Section 153C were not applicable since no incriminating documents were found during the search, only regular books of accounts were seized. The CIT(A) upheld the AO's action, stating that the same AO had jurisdiction over both the searched entity (BDPL) and the assessee, thus no need to hand over documents to another AO. The Tribunal agreed with the CIT(A), emphasizing that the AO was within his rights to invoke Section 153C as the documents seized belonged to a person other than the one referred to in Section 153A.
  
  2. Applicability of Section 2(22)(e) of the Income Tax Act regarding deemed dividends:
  The AO treated amounts received by the assessee from BDPL as deemed dividends under Section 2(22)(e), citing that the beneficial owner of shares in BDPL also held substantial interest in the assessee company. The CIT(A) upheld this decision, noting the lack of evidence to prove the advances were for business purposes. The Tribunal, however, found that the funds were provided for business expediency and not as loans or advances. The Tribunal referred to the Supreme Court ruling in S.A. Builders v. CIT, which emphasized commercial expediency. The Tribunal concluded that the amounts received were for business purposes, not loans or advances, and thus not deemed dividends under Section 2(22)(e).
  
  3. Computation of the current year's profit:
  This issue was not directly addressed in the Tribunal's decision as the primary contention regarding the applicability of Section 2(22)(e) was resolved in favor of the assessee. The Tribunal's finding that the amounts received were not deemed dividends implicitly resolved the computation issue.
  
  4. Levy of interest under Section 234B of the Income Tax Act:
  The Tribunal upheld the CIT(A)'s decision on the levy of interest under Section 234B, stating that it is mandatory and consequential in nature. The assessee's contention on this ground was dismissed.
  
  Conclusion:
  The Tribunal concluded that the AO was justified in initiating proceedings under Section 153C but erred in applying Section 2(22)(e) to treat the amounts received as deemed dividends. The levy of interest under Section 234B was upheld. Consequently, the assessee's appeal was partly allowed.

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• 2010 (11) TMI 997
  
  Issues Involved:
  
  1. Legality of proceedings initiated under Section 153C of the Income Tax Act.
  2. Applicability of the provisions of Section 2(22)(e) of the Income Tax Act regarding deemed dividends.
  3. Computation of 'current year's profit' for tax purposes.
  4. Levy of interest under Section 234B of the Income Tax Act.
  
  Issue-wise Detailed Analysis:
  
  1. Legality of proceedings initiated under Section 153C of the Income Tax Act:
  
  The assessee contended that the provisions of Section 153C were not applicable as no incriminating documents were found during the search, only regular books of accounts. The assessee argued that the proceedings initiated under Section 153C should be annulled. The Tribunal noted that for the assessment year 2007-08, the assessment was concluded under Section 143(3) and no notice under Section 153A read with Section 153C was issued. Hence, the ground raised for the AY 2007-08 was dismissed as not maintainable. For the other years, the Tribunal upheld the AO's action, stating that the AO was within his realm to issue notices under Section 153C, as the documents seized belonged to the assessee.
  
  2. Applicability of the provisions of Section 2(22)(e) of the Income Tax Act regarding deemed dividends:
  
  The assessee argued that the transactions with Bagmane Developers Pvt. Ltd. (BDPL) were in the course of business activities and not in the nature of 'loans and advances'. The AO treated the amounts received from BDPL as deemed dividends under Section 2(22)(e), as BDPL had accumulated profits and the beneficial owner of BDPL also had a substantial interest in the assessee company. The Tribunal analyzed the agreement between the assessee and BDPL, which indicated that the funds were provided for business purposes and not as loans or advances. The Tribunal cited the Supreme Court's ruling in S.A. Builders v. CIT, emphasizing that commercial expediency should be considered. The Tribunal concluded that the funds were provided for business exigencies and not as loans or advances, and hence, Section 2(22)(e) was not applicable.
  
  3. Computation of 'current year's profit':
  
  The assessee's grievance regarding the computation of 'current year's profit' was not addressed separately, as the main issue of applicability of Section 2(22)(e) was resolved in favor of the assessee.
  
  4. Levy of interest under Section 234B of the Income Tax Act:
  
  The Tribunal held that the charging of interest under Section 234B is mandatory and consequential in nature. Hence, this ground was dismissed.
  
  Conclusion:
  
  The appeals were partly allowed. The Tribunal ruled that the AO was not justified in invoking Section 2(22)(e) for the assessment years under dispute. The levy of interest under Section 234B was upheld as mandatory and consequential. The legality of proceedings under Section 153C was upheld for the relevant assessment years, except for AY 2007-08, where the ground was dismissed as not maintainable.

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• 2010 (11) TMI 996
  
  Issues involved: Interlocutory application for correction/clarification of order dated 15th November, 2010; deposit of a sum of Rs. 2,500 crores by petitioner; securing balance amount of Rs. 8,500 crores by giving bank guarantee; undertaking by Department and petitioner regarding return/payment of deposited amount with interest; permission for Department to withdraw deposited amount; stay on coercive recovery steps by Department; allowance of amendments in writ petition and filing of comprehensive reply by Department; final disposal date set for 19th July, 2011; disposal of S.L.P. (C) No.30928 of 2010.
  
  The Supreme Court, in response to an interlocutory application for correction/clarification of an order, decided to recall the earlier order dated 15th November, 2010, and issue a fresh order for the sake of clarification. The petitioner was directed to deposit Rs. 2,500 crores with the Registry of the Court within three weeks from the mentioned date. Additionally, the petitioner was granted liberty to deposit the amount via 'wire transfer,' with coordination between the Advocate-on-Record and the Drawing and Disbursing Officer of the Supreme Court. The remaining balance of Rs. 8,500 crores was to be secured by the petitioner through a bank guarantee from a Nationalised Bank, to be provided within eight weeks from the specified date.
  
  In the event that the initial deposit of Rs. 2,500 crores was made within the stipulated period, the Department was permitted to withdraw the amount, subject to an Undertaking by the Director General, International Taxation, ensuring the return of the sum with interest if the petitioner ultimately succeeds. A similar Undertaking was required from the Managing Director of the petitioner, stating that if the special leave petition/civil appeal is dismissed, the balance amount would be paid with interest as determined by the Court. Both the Department and the petitioner were directed to provide these Undertakings within eight weeks from the specified date.
  
  Furthermore, the Court ordered a stay on any coercive steps by the Department to recover the outstanding demand until further notice. The Court allowed amendments in the writ petition and the filing of a comprehensive reply by the Department within eight weeks. The petition was scheduled for final disposal on 19th July, 2011. Additionally, in relation to S.L.P. (C) No.30928 of 2010, which was filed against an order dated 22nd October, 2010, the Court noted that it would not survive in light of the order passed on the current matter and accordingly disposed of the same.

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• 2010 (11) TMI 995
  
  Issues Involved: Dispute over estimated disallowances on repair and maintenance, business promotion expenses, and traveling expenses.
  
  Repair and Maintenance Disallowance: The assessee, engaged in chemical manufacturing, claimed expenses under various heads without producing supporting bills and vouchers. The Assessing Officer (A.O.) made estimated disallowances without providing a basis for the disallowance. The CIT(A) upheld the disallowance, leading to the appeal. The tribunal noted that while the A.O. could consider disallowances due to lack of evidence, such disallowances must be based on material and not arbitrary. Since the A.O. failed to provide any basis for the disallowance, the tribunal set aside the CIT(A)'s order and deleted the additions.
  
  Business Promotion Expenses Disallowance: Similar to repair and maintenance expenses, the A.O. had made estimated disallowances without any basis for business promotion expenses. The tribunal emphasized that the A.O. must justify disallowances with material and not arbitrary figures. As no such justification was provided, the tribunal set aside the CIT(A)'s order and deleted the additions made under this head.
  
  Traveling Expenses Disallowance: The A.O. also made estimated disallowances for traveling expenses without providing a basis for the disallowance. The tribunal reiterated that any disallowance must be supported by material and not arbitrary figures. Since the A.O. did not present any evidence to justify the disallowance, the tribunal set aside the CIT(A)'s order and deleted the additions made under this head.
  
  Conclusion: The tribunal allowed the appeal of the assessee, emphasizing that while the A.O. could consider disallowances for unsupported expenses, such decisions must be substantiated with material and not arbitrary figures. In this case, as the A.O. failed to provide any basis for the disallowances, the tribunal set aside the CIT(A)'s order and deleted the additions made, ruling in favor of the assessee.

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• 2010 (11) TMI 994
  
  Issues involved: Cross appeals against the order of CIT(A)- IV, Mumbai for the assessment year 2005-06.
  
  Depreciation on Membership Cards of FEDAI and BSE:
  The AO disallowed depreciation on Membership Cards of FEDAI and BSE as commercial rights/intangible assets acquired after 1st April, 1998. CIT(A) confirmed the disallowance. ITAT referred to a previous decision and allowed depreciation on the BSE Membership card, following a Supreme Court judgment. The issue regarding FEDAI Membership Card was remitted back to the AO for reevaluation.
  
  Transaction Charges Paid to Stock Exchange:
  AO disallowed transaction charges paid to stock exchange for non-deduction of TDS u/s 194J. ITAT, following precedent, held that such charges are not for technical services and directed AO to delete the addition.
  
  Expenses Pertaining to Exempt Income u/s 14A:
  AO disallowed a portion of expenses related to exempt dividend income. ITAT remitted the matter back to the AO for computation of disallowance u/s 14A based on a recent judgment of the jurisdictional High Court.
  
  Payment to Gratuity Trust:
  AO disallowed payment to a non-approved Gratuity Trust. CIT(A) directed AO to allow the deduction upon approval. ITAT confirmed the deduction based on the approval received by the assessee.
  
  Club Membership Charges and Penalty Payment:
  AO disallowed club membership charges and penalty payment, considering them as capital in nature. CIT(A) allowed the claims based on previous decisions. ITAT confirmed the order of CIT(A) on both counts.
  
  VSAT and Leaseline Charges:
  AO disallowed VSAT and leaseline charges as technical services falling under section 194J. CIT(A) deleted the addition, and ITAT confirmed the decision based on a relevant precedent.
  
  Interest on SEBI:
  AO disallowed interest paid to SEBI based on the mercantile system. CIT(A) allowed the deduction based on the crystallization of liability. ITAT confirmed the order of CIT(A) in allowing the deduction.
  
  In conclusion, the appeal of the assessee was allowed for statistical purposes, and the appeal of the revenue was dismissed. The judgment was pronounced on November 19, 2010.

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• 2010 (11) TMI 993
  

  Claim the deduction u/s. 43B - payment towards excise duty - The fact is that the assessee had made the payment towards excise duty albeit on the direction of the CESTAT as pre-deposit which therefore, would not seize to have the character of excise duty as held in the case of Bharat Carbon & Ribbon Mfg. Co. (P) Ltd. [1999 (8) TMI 1 - SUPREME COURT]. The ultimate decision in the appeal will have no bearing on the issue. Before us, the admitted position is that the said amount of ₹ 7.5 crores is made against as a part payment against the excise duty demand raised by the excise authorities and since it was a statutory liability on that part, therefore, the conditions stipulated in s. 43B are duly fulfilled and thus the assessee was entitled to claim the deduction thereof.

  We thus answer the question in favour of the assessee and against the Revenue and as a result thereof, this appeal is dismissed.

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• 2010 (11) TMI 992
  
  The appeal filed by the assessee against the order of C.I.T.(A)-XIV, Kolkata for assessment year 2006-07 was dismissed by ITAT Kolkata due to lack of prosecution by the assessee.

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• 2010 (11) TMI 991
  
  Issues Involved:
  
  1. Disallowance of bad debt.
  2. Re-computation of deduction under section 80-IA.
  3. Disallowance of ad hoc expenses on repairs and maintenance.
  4. Computation of deduction under section 80HHC.
  5. Addition on account of MODVAT credit.
  6. Disallowance of capital expenditure for scientific research.
  7. Disallowance under section 14A.
  8. Disallowance of non-compete amount paid to ex-managing director.
  9. Exclusion of sales tax and excise duty from total turnover for section 80HHC deduction.
  10. Disallowance of interest on borrowed capital for machinery purchase.
  
  Detailed Analysis:
  
  1. Disallowance of Bad Debt:
  The assessee's appeal contested the disallowance of Rs. 10,064 as bad debt. The Revenue's appeal challenged the deletion of Rs. 29,39,891 by the CIT(A). The Tribunal upheld the CIT(A)'s decision, noting that the bad debt was written off in the books and satisfied section 36(2). However, the Rs. 10,064 was not considered bad debt due to procedural lapses in claiming duty drawback benefits. The matter was remanded to the Assessing Officer (A.O.) for verification.
  
  2. Re-computation of Deduction under Section 80-IA:
  The A.O. included indirect labor costs and other expenses in the cost computation for the LABSA plant, reducing the deduction. The CIT(A) upheld this, refusing additional evidence. The Tribunal remanded the matter to the A.O. to verify the inclusion of indirect labor costs and the relevance of R&D and sales commission expenses.
  
  3. Disallowance of Ad Hoc Expenses on Repairs and Maintenance:
  The A.O. disallowed Rs. 28.22 lakhs as capital expenditure due to lack of details, based on the previous year's ratio. The Tribunal found this approach inappropriate and remanded the matter to the A.O. to verify the nature of expenses and make specific additions.
  
  4. Computation of Deduction under Section 80HHC:
  - Commission Income: The A.O. added Rs. 64.55 lakhs due to an auditor's error, which was corrected to Rs. 4.43 lakhs. The Tribunal allowed this correction.
  - Interest Income: The A.O. reduced 90% of gross interest income, which the CIT(A) upheld. The Tribunal agreed, noting section 80HHC's formulaic nature.
  - Miscellaneous Income: The A.O. reduced 90% of various items, including scrap sales and insurance claims. The Tribunal upheld the reductions except for insurance claims, following High Court precedent.
  - Sales Tax Liability Write-back: The Tribunal remanded the issue to the A.O. to verify if Rs. 20 lakhs was excluded from profits before further reduction.
  - Other Write-backs: The Tribunal upheld the reduction of 90% for write-backs of liabilities and exchange differences.
  
  5. Addition on Account of MODVAT Credit:
  The A.O. added Rs. 1.17 crores for closing MODVAT credit. The Tribunal remanded the matter to the A.O. to adjust purchases, sales, and opening stock as per section 145A, following High Court judgments.
  
  6. Disallowance of Capital Expenditure for Scientific Research:
  The A.O. disallowed Rs. 22.34 lakhs, doubting the use of assets for scientific research. The Tribunal found sufficient evidence of R&D activities and allowed the deduction under section 35(1)(iv).
  
  7. Disallowance under Section 14A:
  The Tribunal remanded the matter to the A.O. to determine the disallowance on a reasonable basis, following the High Court judgment in Godrej & Boyce Ltd.
  
  8. Disallowance of Non-compete Amount Paid to Ex-managing Director:
  The A.O. disallowed Rs. 20 lakhs paid to the ex-MD as non-compete fees. The Tribunal allowed the deduction as revenue expenditure, following the High Court judgment in Eicher Ltd.
  
  9. Exclusion of Sales Tax and Excise Duty from Total Turnover for Section 80HHC Deduction:
  The Tribunal upheld the exclusion of sales tax and excise duty from total turnover, following the Supreme Court judgment in Lakshmi Machine Works.
  
  10. Disallowance of Interest on Borrowed Capital for Machinery Purchase:
  The A.O. disallowed Rs. 14.05 lakhs as interest on borrowed funds for asset acquisition. The Tribunal upheld the CIT(A)'s deletion, noting that such interest is deductible under section 36(1)(iii), following the Supreme Court judgment in Core Health Care Ltd.
  
  Conclusion:
  The Revenue's appeal was dismissed, and the assessee's appeal was partly allowed for statistical purposes. The Tribunal provided detailed directions for remand and verification on several issues, ensuring compliance with relevant legal precedents and statutory provisions.

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• 2010 (11) TMI 990
  
  Issues involved:
  The judgment involves issues related to the deletion of additions made by the Assessing Officer (AO) u/s 40A(2)(b) of the Income Tax Act, 1961 for excess payment of building rent and bus rent, and disallowance of depreciation claimed by the assessee trust.
  
  Deletion of Addition of Building Rent and Bus Rent:
  The AO disallowed Rs. 4 lakhs for excess payment of building rent and Rs. 9,28,475 for bus rent to M/s Adarshila Associates, a concern in which some trustees are partners, under section 40A(2)(b). The AO considered the rate of interest to determine reasonableness of payments, but the ld. CIT(A) deleted both additions. The ld. CIT(A) emphasized that reasonableness should be based on market rates, not internal workings of the concern. Without comparative rates for similar properties or services, the AO failed to prove non-reasonableness. The ld. CIT(A) held that the AO did not meet the onus of proof, thus deleting the additions.
  
  Disallowance of Depreciation:
  The AO disallowed Rs. 22,84,246 claimed as depreciation by the trust on assets purchased from trust funds due to lack of explanation. However, the ld. CIT(A) allowed the claim, stating that even in normal business income computation, asset funding nature does not affect depreciation claim. The ld. CIT(A) directed the AO to verify depreciation computation as per the Income-tax Rules, allowing the claim in principle.
  
  Judicial Precedents and Conclusion:
  The assessee cited judgments supporting depreciation claim, emphasizing that trust income should be computed commercially. The Tribunal upheld the ld. CIT(A)'s decision, allowing depreciation on assets owned and used by the trust. Referring to judicial precedents, the Tribunal rejected the Revenue's grounds, emphasizing that depreciation is essential for preserving the trust's corpus. The Tribunal also upheld the ld. CIT(A)'s decision on the reasonableness of building and bus rent payments, dismissing the Revenue's appeal.
  
  In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the ld. CIT(A)'s order on the deletion of additions for building and bus rent payments, as well as allowing the depreciation claim for assets owned and used by the trust.

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• 2010 (11) TMI 989
  
  Issues involved: Appeal against order of CIT(A) regarding addition on account of contribution towards common amenities fund, addition on account of non-occupancy charges, and addition to taxable income as reimbursement of expenses.
  
  Issue 1 - Contribution towards common amenities fund:
  - Facts: Assessee credited Rs. 33 lacs as contribution under "common Amenities Fund" on transfer of flat, claimed as exempt under principle of mutuality.
  - AO's Decision: Held amount not exempt from tax.
  - CIT(A)'s Decision: Deleted addition based on Bombay High Court decision exempting transfer charges under mutuality principle.
  - Tribunal's Decision: Upheld CIT(A)'s decision, citing consistent view that mutuality principle applies to transfer fees by housing society.
  
  Issue 2 - Non-occupancy charges:
  - Facts: Society received Rs. 31,864 as non-occupancy charges, claimed as exempt under mutuality principle.
  - AO's Decision: Held amount not exempt under mutuality principle.
  - CIT(A)'s Decision: Deleted addition based on Tribunal decisions and jurisdictional High Court ruling.
  - Tribunal's Decision: Upheld CIT(A)'s decision citing jurisdictional High Court ruling supporting exemption under mutuality principle.
  
  Issue 3 - Reimbursement of expenses:
  - Facts: Society credited Rs. 91,850 as miscellaneous income, claimed as reimbursement of expenses.
  - AO's Decision: Held receipts not covered by mutuality concept, brought amount to tax.
  - CIT(A)'s Decision: Upheld AO's decision due to lack of evidence supporting exemption under mutuality principle.
  - Tribunal's Decision: Directed AO to allow opportunity for society to substantiate expenses incurred and prove voluntary payment by members, for fresh decision.
  
  Cross Objection:
  - Grounds 1 & 2: Challenge addition of Rs. 91,850 as income from other sources, seek allowance of expenses before taxing.
  - Tribunal's Decision: Directed AO to provide opportunity for society to submit evidence of expenses incurred, to decide afresh.
  - Ground 3: Seek allowance of expenses against exempt receipts.
  - Tribunal's Decision: Dismissed as alternate ground after dismissing revenue's appeal.
  
  Conclusion: Revenue's appeal dismissed, Cross Objection allowed for statistical purpose. Tribunal directed fresh assessment on reimbursement of expenses issue.

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• 2010 (11) TMI 988
  
  Issues involved: Determination of chargeability of profits on sale of penny stocks under the head 'capital gains' u/s 69C of the Income Tax Act and addition u/s 69C for unclaimed expenditure incurred in connection with services related to penny stock transactions.
  
  Issue 1 - Chargeability of profits on sale of penny stocks: The appeals were filed against the order of the CIT(A) regarding the chargeability of profits on sale of penny stocks under 'capital gains'. The AO considered the transactions as bogus and taxable u/s 69C, while the Tribunal held that such income should be taxed under capital gains based on previous cases. The Tribunal emphasized the need for the penny stocks to be delivery-based for taxability under capital gains. The matter was referred back to the AO for further examination.
  
  Issue 2 - Addition u/s 69C for unclaimed expenditure: The addition u/s 69C for unclaimed expenditure related to services for penny stock transactions was disputed by the assessee. The AO disallowed the amount based on assumptions, which the Tribunal deemed unacceptable. The Tribunal found the order of the CIT(A) regarding this addition should be deleted as it was based on ad-hoc calculations and lacked concrete evidence.
  
  Separate Judgement: The Tribunal's decision favored the assessee on both issues, allowing the appeal and directing the AO to reexamine the penny stock transactions for taxability under capital gains. The Tribunal emphasized the importance of the stocks being delivery-based for tax treatment. The decision highlighted the need for proper examination by the AO to determine the nature of gains from the penny stocks.

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• 2010 (11) TMI 987
  
  Issues Involved:
  1. Whether profit earned on the sale of shares should be assessed as capital gains or business income.
  2. Whether the transaction was an adventure in the nature of trade u/s 2(13).
  
  Summary:
  
  Issue 1: Assessment of Profit on Sale of Shares as Capital Gains or Business Income

  The main issue was whether the profit earned on the sale of shares should be assessed as capital gains or business income. The assessee declared profits of Rs. 59,68,498/- as long-term capital gains and Rs. 1,24,011/- as short-term capital gains. The AO contended that these should be assessed as business income, citing the composite nature of the activity and the lack of separate portfolios for trading and investment. The AO's reasoning included the high number of transactions, substantial sale consideration, and the application of criteria from Board's Circular No.1827.

  The CIT(A) reversed the AO's findings, holding that the profits should be assessed under the head capital gains. The CIT(A) noted that the shares were shown as investments in the balance sheet, the assessee used own funds for investment, and the transactions did not pass through the profit and loss account. The Tribunal upheld the CIT(A)'s decision, emphasizing the intention of the assessee at the time of acquiring the shares and the maintenance of separate accounts for trading and investment portfolios.

  The Tribunal referenced several judgments, including Sarnath Infrastructure Ltd. vs. ACIT, which laid down principles for determining whether transactions are in the nature of trade or investment. The Tribunal concluded that the assessee had discharged the primary onus of showing that the shares were held as investments, and the Revenue failed to prove otherwise. The Tribunal applied the criteria from the case of Shri Suganchand C. Shah vs. ACIT, determining that shares held for more than 30 days should be treated as investments, resulting in Rs. 59,69,498/- as long-term capital gains, Rs. (-)1,70,841/- as short-term capital loss, and Rs. 2,94,847/- as business profit.

  Issue 2: Adventure in the Nature of Trade u/s 2(13)

  The AO argued that the transactions were an adventure in the nature of trade u/s 2(13), citing the motive of purchasing shares for resale at a profit rather than for earning dividends. The Tribunal, however, emphasized the need to look into the intention of the assessee in acquiring the shares. The Tribunal found that the assessee's intention was to hold the shares as investments, as evidenced by the treatment in the balance sheet, the use of own funds, and the low frequency of transactions. The Tribunal concluded that the Revenue did not provide sufficient evidence to prove that the transactions were an adventure in the nature of trade.

  Conclusion:

  The Tribunal partly allowed the appeal, treating Rs. 59,69,498/- as long-term capital gains, Rs. (-)1,70,841/- as short-term capital loss, and Rs. 2,94,847/- as business profit. The order was pronounced in open Court on 12.11.10.

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• 2010 (11) TMI 986
  
  Issues Involved:
  1. Disallowance of discount by Assessing Officer.
  2. Disallowance of repair expenses as capital expenditure.
  
  Summary:
  
  Issue 1: Disallowance of Discount

  The first common issue in these appeals of assessee is as regards to the order of CIT(A) confirming the disallowance of discount made by Assessing Officer at 50% out of total discount. The Assessing Officer noted that the assessee allowed discounts exceeding those prescribed by TELCO, disallowing 50% of the discounts claimed in the profit and loss account and directly reduced from sales. The CIT(A) confirmed this disallowance, stating that the AO made specific enquiries u/s 133(6) and found discrepancies. The Tribunal found that while the issue is generally covered in favor of the assessee by precedent, the assessee failed to substantiate its claim fully. The Tribunal directed the AO to verify the discount claims by checking 20 random parties. If the majority deny the discount, the entire claim will be disallowed; otherwise, it will be allowed. This issue was set aside to the AO for verification.

  Issue 2: Disallowance of Repair Expenses

  The next issue is the disallowance of repair expenses, with the AO treating Rs. 6,53,212/- as capital expenditure. The CIT(A) upheld this, noting that the expenses were for building stair steps, RCC Chhajjs, slab beam, structure work, and brick work, which were considered new construction. The Tribunal, however, found that these were repairs and not new assets, thus allowing the claim of the assessee as revenue expenditure.

  Conclusion:

  Both appeals of the assessee were allowed partly, with the discount issue set aside for verification and the repair expenses allowed as revenue expenditure.

  Order pronounced in Open Court on 10/12/2010

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• 2010 (11) TMI 985
  
  Issues involved:
  The judgment involves issues related to the applicability of provisions of section 194C (3) of the Act and the disallowance of unaccounted outstanding liability towards payments to truck/lorry owners for the assessment year 2005-06.
  
  Issue 1: Applicability of section 194C (3) of the Act
  
  The assessing officer disallowed an amount under section 40(a)(ia) of the Act and as unexplained liability. The CIT (A) held that the payment made to lorry owners does not fall under the category of sub contract payment as per section 194C(2) of the Act. The CIT (A) found that the lorry owners were simple hirers of the vehicles and not sub contractors. The Tribunal upheld the CIT (A)'s decision, stating that the assessing officer's reasoning was not based on relevant considerations. The Tribunal concluded that the assessee was not liable to deduct tax at source under section 194C (2) and hence deleted the addition made under section 40(a)(ia) of the Act.
  
  Issue 2: Disallowance of unaccounted outstanding liability
  
  The assessing officer disallowed an estimated amount as unexplained liability towards payments to truck/lorry owners. The CIT (A) held that the assessing officer failed to prove that the outstanding liability was not genuine and deleted the addition. The Tribunal upheld the CIT (A)'s decision, noting that the department did not provide evidence to show the liabilities were not genuine. The Tribunal found that the assessee paid the outstanding liability in the subsequent year and upheld the deletion of the addition made by the assessing officer.
  
  Conclusion:
  The Tribunal dismissed the revenue's appeal, upholding the decisions of the CIT (A) regarding both issues. The penalty appeal under section 271(1)© of the Act was also dismissed as infructuous due to the dismissal of the quantum appeal.

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