|
Advanced Search Options
Case Laws
Showing 141 to 160 of 851 Records
-
2011 (6) TMI 904
Denied Registration u/s 12AA - Exemption u/s 80G - Registration was denied as Assessee didn't commence its activities as contemplated in the Trust Deed - The registration u/s. 80G has also been denied for the same reason
HELD THAT:- In assessee's own case M/S. GINIA DEVI TODI CHARITABLE TRUST VERSUS DIRECTOR OF INCOME-TAX (EXEMPTION) [2010 (4) TMI 1155 - ITAT KOLKATA], the case of DHARMA SANSTHAPAK SANGH (NIYAS). VERSUS COMMISSIONER OF INCOME-TAX. [2008 (8) TMI 393 - ITAT DELHI-A] was followed, where it was held that "the objects of the trust are specifying purpose of religious activities. The registration cannot be denied to the assessee for the reason that it is not carrying on charitable activities. Religious activities are also construed to be charitable activities as per the decision of Hon‘ble Allahabad High Court in the case of COMMISSIONER OF INCOME-TAX VERSUS RADHASWAMI SATSANG SABHA [1953 (10) TMI 36 - ALLAHABAD HIGH COURT] and the decision of the Hon‘ble Supreme Court in the case of HAZARAT PIRMAHOMED SHAH SAHEB ROZA COMMITTEE VERSUS COMMISSIONER OF INCOME-TAX, GUJARAT [1966 (10) TMI 43 - SUPREME COURT]. The carrying of charitable activity at the stage of commencement of institution is not relevant to decide that whether such trust/ institution is entitled for registration. So long the objects of the trust are charitable in nature, registration cannot be refused"
Respectfully following the precedent, we direct the D.I.T. (E) to grant registration to the assessee-trust u/s. 12AA and also grant exemption certificate u/s. 80G - Decision in favour of Assessee.
-
2011 (6) TMI 903
Issues involved:
The issues involved in this case are the annulment of assessment orders passed u/s 143(3) r.w.s. 147 of the Act, deletion of disallowance of proportionate expenses u/s 14A against exempt income u/s 10B, and deletion of disallowance u/s 14A with reference to dividend income exempt u/s 10(35).
Assessment Year 2004-05:
The Revenue filed an appeal against the order of the ld. CIT(A) annulling the assessment order and deleting the disallowance of expenses under section 14A. The assessee, a software development company, claimed deduction under section 80IB for the assessment year. The AO disallowed proportionate expenses under section 14A for earning income u/s 10B and 10(35). The ld. CIT(A) held that no further disallowance was justified as the AO had already considered the expenses related to exempted income while computing the deduction u/s 10B. The Tribunal upheld the CIT(A)'s decision, annulling the assessment and dismissing the grounds raised by the Revenue.
Assessment Year 2005-06:
Similar to the previous year, the Revenue appealed against the CIT(A)'s order annulling the assessment and deleting the disallowance of expenses under section 14A. The AO disallowed proportionate expenses under section 14A for earning income u/s 10B and 10(35). The ld. CIT(A) held that no disallowance under section 14A was warranted as the exemption u/s 10B was allowed after excluding expenses related to such income. The Tribunal upheld the CIT(A)'s decision, annulling the assessment and dismissing the grounds raised by the Revenue.
Conclusion:
The Tribunal upheld the CIT(A)'s decision to annul the assessments for both years and dismissed the Revenue's appeals. It was held that the reopening of assessments based on audit objections was not justified, and no disallowance under section 14A was warranted as the exemption under section 10B already considered the related expenses. The Tribunal rejected all grounds raised by the Revenue and upheld the CIT(A)'s orders.
-
2011 (6) TMI 902
Issues involved: Department's appeals for assessment years 1999-2000 to 2003-04 and 2005-06 raising similar issues regarding annulment of assessment u/s 153 C of the Income Tax Act based on seized documents not belonging to the assessee.
The ld. CIT(A) annulled the assessment u/s 153 C of the Income Tax Act, stating that the seized documents did not belong to the assessee, thus the AO was not justified in initiating action u/s 153A read with section 153 C of the Act. The Department initiated action u/s 132 of the I.T. Act in the B.M. Gupta group of cases, seizing incriminating documents and books of account. The assessment revealed that the assessee had advanced cash loans and earned interest income, leading to a revised income determination. The Department argued that the seized entries constituted "books of account" u/s 153C of the Act, while the assessee contended that the seized material did not belong to them, and therefore, the assessment was correctly annulled by the ld. CIT(A).
Section 153C(1) mandates that if the Assessing Officer is satisfied that seized books of account belong to a person other than the one referred to in section 153A, then action can be taken against such other person. In this case, the books of account seized did not belong to the assessee, and the entries in the seized material did not amount to "books of account" of the assessee. The Department failed to establish otherwise, and the seized documents only indicated names of persons, including the assessee, who had given cash loans. The ld. CIT(A) rightly held that the documents did not belong to the assessee, and the AO invoked section 153C without proper satisfaction note, leading to the confirmation of the order annulling the assessment.
Separate Judgement: The observations made in the primary case (ITA No. 43(Del)2010) were found applicable to related cases (ITA Nos. 37 to 40 & 44 (Del)2010), leading to the rejection of the Department's grievance in all appeals and the dismissal of the appeals.
-
2011 (6) TMI 901
Issues Involved:
The main issue in this case pertains to additions made on account of inflated labour expenses.
Details of the Judgment:
Issue 1: Inflated Labour Expenses
The Assessing Officer (A.O.) disallowed a sum of &8377; 36,26,032/- as inflated labour charges, which were added to the total income of the assessee. The A.O. observed abnormal increases in labour charges debited in March 2005, leading to suspicions of fictitious advances and bogus labour expenses. The A.O. alleged that the Managing Director siphoned off cash receipts to suppress company receipts and made disallowances in subsequent assessment years as well.
Issue 2: CIT(A) Decision
The assessee contended that the labour charges were reasonable, constituting less than 30% of the project cost, and were paid to identifiable subcontractors with TDS deductions u/s 194C. The CIT(A) partially accepted the assessee's explanations and directed the A.O. to restrict the disallowance to 25% of the inflated amount.
Issue 3: Tribunal Decision
The Tribunal examined the lower authorities' orders and found that the assessee debited a substantial amount on the last day of the financial year, raising doubts about the genuineness of expenses. The Tribunal upheld the CIT(A)'s decision, emphasizing the onus on the assessee to substantiate claims with adequate evidence. The Tribunal confirmed the disallowances and additions made by the lower authorities.
Separate Judgment:
In a separate issue regarding a difference in net project turnover, the Tribunal upheld the addition of &8377; 2,91,964/- due to discrepancies between project turnover figures. The assessee failed to reconcile the difference, leading to confirmation of the addition by the CIT(A) and subsequently by the Tribunal.
In conclusion, both the appeals of the assessee and the revenue were dismissed by the Tribunal on 3.6.2011, affirming the decisions of the lower authorities regarding inflated labour expenses and the difference in project turnover.
-
2011 (6) TMI 900
Issues Involved:
1. Disallowance of expenditure on staff welfare under section 40A(9).
2. Revenue nature of irrecoverable security deposits and other deposits.
3. Disallowance under section 14A without following Rule 8D.
4. Deduction under section 80IA for a power undertaking.
5. Classification of income from sale of clonal plants, coconut, and sugarcane as agricultural income.
Issue-wise Detailed Analysis:
1. Disallowance of Expenditure on Staff Welfare under Section 40A(9):
The assessee appealed against the disallowance of Rs. 9,00,111/- for staff welfare under section 40A(9). The Assessing Officer (AO) disallowed this amount, stating that the payments were for employees' welfare funds, staff clubs, employees' cooperatives, and sports committees, which were not covered under section 36(1)(iv) and (v). The CIT(A) partially allowed the appeal, disallowing Rs. 9,00,111/-. The Tribunal found that the contributions were for welfare activities due to business expediency and were reimbursed expenses, not direct contributions to a fund or trust. It concluded that Rs. 8,74,311/- was allowable under section 37(1) and restricted the disallowance to Rs. 25,800/-.
2. Revenue Nature of Irrecoverable Security Deposits and Other Deposits:
The Department appealed against the CIT(A)'s decision to treat irrecoverable amounts of Rs. 3,93,303/- as revenue in nature. The AO had considered these amounts as capital in nature. The CIT(A) allowed the appeal, stating that these were trade advances given in the normal course of business. The Tribunal upheld the CIT(A)'s decision, agreeing that the deposits were not for acquiring capital assets but were normal business expenses, thus deductible as trading losses.
3. Disallowance under Section 14A without Following Rule 8D:
The Department's appeal included a ground that the CIT(A) erred in allowing the assessee's claim of disallowance under section 14A without following Rule 8D. The AO had disallowed Rs. 4,91,32,442/- under section 14A, but the assessee did not press this ground before the CIT(A) due to a Special Bench decision. The Tribunal noted that Rule 8D was not applicable for the assessment year under consideration and rejected the additional ground taken by the assessee, as it had accepted the disallowance before the CIT(A).
4. Deduction under Section 80IA for a Power Undertaking:
The Department appealed against the CIT(A)'s decision to allow 100% deduction under section 80IA for the power undertaking at Bhadrachalam. The AO had restricted the deduction to 30%, citing that the undertaking commenced operations in FY 1997-98. The CIT(A) held that the assessee first claimed deduction in AY 2002-03, and as per the amended provisions effective from AY 2002-03, the assessee could claim 100% deduction for ten consecutive years within fifteen years from the commencement of operations. The Tribunal upheld the CIT(A)'s decision, agreeing that the assessee was entitled to the amended provisions allowing 100% deduction for ten years.
5. Classification of Income from Sale of Clonal Plants, Coconut, and Sugarcane as Agricultural Income:
The Department appealed against the CIT(A)'s decision to classify Rs. 65,55,048/- from the sale of clonal plants, coconut, and sugarcane as agricultural income. The AO had treated this income as business income, stating that it arose from biotechnological research, not traditional agricultural activities. The CIT(A) allowed the assessee's claim, citing judicial decisions and a CBDT circular that defined agricultural income to include such activities. The Tribunal agreed with the CIT(A), noting that the activities involved basic agricultural operations and subsequent operations on land, thus qualifying as agricultural income under section 10(1).
Conclusion:
The Tribunal allowed the assessee's appeal in part by restricting the disallowance under section 40A(9) and dismissed the Department's appeal on all grounds, upholding the CIT(A)'s decisions. The order was pronounced in the open court on 10.06.2011.
-
2011 (6) TMI 899
Issues Involved:
1. Disallowance of productivity linked wages.
2. Disallowance of sales incentives.
3. Disallowance of administrative expenses under Section 14A.
4. Disallowance of sales incentives given to UPSGEWC.
5. Classification and allowance of technical knowhow payment.
6. Disallowance of managerial and administrative expenses.
7. Treatment of MIS charges.
8. Disallowance of inter-corporate deposits written off.
9. Treatment of interest income.
10. Adjustment of short-term capital gains to book profits under Section 115JB.
11. Allowance of salary/remuneration paid to an employee of Bajaj Auto Ltd.
Detailed Analysis:
1. Disallowance of Productivity Linked Wages:
The primary issue was the disallowance of Rs. 1,12,16,256 incurred towards employees' cost pursuant to a productivity-linked settlement. The Assessing Officer (A.O.) disallowed the expense, stating that the liability crystallized only after the Memorandum of Settlement was signed on 07.04.2000, not during the assessment year 2000-01. The CIT(A) deleted the disallowance, noting that the settlement was reached on 30.03.2000, and the liability was certain and contractual. The Tribunal upheld the CIT(A)'s decision, referencing a similar issue in the assessee's case for A.Y. 1995-96, where the liability was considered crystallized during the relevant year.
2. Disallowance of Sales Incentives:
The A.O. disallowed Rs. 2,57,34,649 towards sales incentives reimbursed to Bajaj Auto Ltd., questioning the benefit derived by the assessee and the timing of the approval by Bajaj Auto Ltd.'s Chairman. The CIT(A) deleted the disallowance, recognizing the joint promotional schemes between the assessee and Bajaj Auto Ltd. The Tribunal upheld the CIT(A)'s decision, emphasizing that the expenses were incurred for mutual benefit and were genuine business expenses.
3. Disallowance of Administrative Expenses under Section 14A:
The A.O. disallowed Rs. 49,88,696, estimating it as 5% of the dividend income and interest on tax-free bonds. The CIT(A) reduced the disallowance to Rs. 1 lakh, considering the minimal managerial expenses involved in earning the dividend income. The Tribunal upheld the CIT(A)'s decision, finding the A.O.'s estimate excessive and irrational.
4. Disallowance of Sales Incentives to UPSGEWC:
The A.O. disallowed Rs. 10,41,250 paid to Uttar Pradesh State Government Employee Welfare Corporation (UPSGEWC), classifying it as a capital expenditure. The CIT(A) deleted the disallowance, stating it was a simple case of sales incentives and not for warding off competition. The Tribunal upheld the CIT(A)'s decision, agreeing that the expenses were not capital in nature.
5. Classification and Allowance of Technical Knowhow Payment:
The A.O. treated the payment of Rs. 4,62,35,081 for technical knowhow as capital expenditure, eligible for depreciation. The CIT(A) and the Tribunal, referencing earlier decisions, held the payment as revenue expenditure, thus allowing it fully.
6. Disallowance of Managerial and Administrative Expenses:
The issue was the disallowance of Rs. 1 lakh towards estimated managerial and administrative expenses for earning exempt income. The CIT(A) upheld the disallowance, which was subsequently upheld by the Tribunal, referencing the reasoning in revenue's appeal.
7. Treatment of MIS Charges:
The A.O. disallowed Rs. 12,37,434 towards MIS charges, treating them as capital expenditure. The CIT(A) divided the expenses into software, hardware, and miscellaneous, allowing depreciation on software and hardware and treating miscellaneous expenses as revenue. The Tribunal upheld the CIT(A)'s decision.
8. Disallowance of Inter-Corporate Deposits Written Off:
The A.O. disallowed Rs. 17,81,500 written off as bad debts, questioning the business nature of the deposits. The CIT(A) and the Tribunal, referencing earlier decisions, allowed the write-off as business expenditure, recognizing the systematic activity of placing inter-corporate deposits.
9. Treatment of Interest Income:
The issue was whether interest income should be taxed under "Income from Business" or "Income from Other Sources." The CIT(A) and the Tribunal upheld the classification under "Income from Other Sources."
10. Adjustment of Short-Term Capital Gains to Book Profits under Section 115JB:
The issue was whether short-term capital gains should adjust book profits under Section 115JB. The CIT(A) and the Tribunal held that the provisions of Section 115JB do not permit such adjustments, thus deciding in favor of the assessee.
11. Allowance of Salary/Remuneration Paid to an Employee of Bajaj Auto Ltd.:
The A.O. disallowed the salary paid to Shri Rege, an employee of Bajaj Auto Ltd. The CIT(A) and the Tribunal allowed the salary as a business expenditure, noting the payment was made in accordance with a Board resolution and was for the assessee's business purposes.
Conclusion:
All departmental appeals were dismissed, and the assessee's appeals for A.Y. 2000-01 to 2002-03 were partly allowed, while the assessee's appeal for A.Y. 2003-04 was fully allowed.
-
2011 (6) TMI 898
GTA service - payment of service tax in cash of through utilization of cenvat credit - contention of the Revenue is that prior to 19-4-2006, irrespective of whether a person provided taxable service and/or manufactured dutiable final products or did not provide any taxable service or manufactured any dutiable final products, he was required to pay the service tax on the GTA service received by him in cash, not through Cenvat credit - whether service tax on GTA service received can be paid through Cenvat Credit or cash? - Held that: - The ratio of the Delhi Bench in the case of M/s. ITC Ltd. v. Commissioner of Central Excise, Guntur [2011 (3) TMI 186 - CESTAT, BANGALORE], is squarely applicable to the present case, where it was held that - the service tax on GTA service received by them by the appellant which was not paid in cash but was paid through Cenvat credit account the same would be recoverable from them.
Penalty - Held that: - the issue relating to payment of service tax on GTA service through cash was in dispute, the penalty is not sustainable and is liable to be set aside.
Appeal allowed - decided partly in favor of assessee.
-
2011 (6) TMI 897
Issues Involved: The judgment deals with the issue of whether the loss from share transactions by the assessee should be considered as speculation loss or not, and the applicability of the exceptions provided in Explanation to Section 73 of the Income Tax Act.
Summary:
Issue 1: Classification of Loss from Share Transactions
The assessee, a non-banking finance company engaged in granting loans and trading in shares, incurred a loss on share trading. The Assessing Officer treated this loss as speculation loss under Explanation to Section 73, while taxing interest income separately. However, the Ld. Commissioner of Income Tax (Appeals) held that since the main business of the assessee is granting loans, the exceptions provided in Explanation to Section 73 apply. Referring to a Special Bench decision, it was concluded that the loss from share trading cannot be considered as speculation loss. The Ld. Commissioner emphasized the rule of consistency in assessing such cases.
Issue 2: Applicability of Explanation to Section 73
The Special Bench decision highlighted that the Explanation to Section 73 should be strictly construed, and the onus is on the revenue to show that the case falls within the deeming provisions of the law. It was noted that the nature of the assessee's activities, not the income, determines whether the exceptions in the Explanation apply. Based on this precedent, the Tribunal upheld the Ld. Commissioner's decision that the assessee's case falls within the exceptions provided in Explanation to Section 73, and the loss should be treated as a business loss, not speculation loss.
In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the Ld. Commissioner's order regarding the classification of the loss from share transactions and the applicability of the Explanation to Section 73.
This summary provides a detailed overview of the judgment, focusing on the issues raised and the Tribunal's decision on each issue.
-
2011 (6) TMI 896
Issues involved: Disallowance of depreciation claimed on a wind mill due to it not being connected to the power grid despite trial production.
Facts: The assessee, engaged in exporting cotton fabrics, claimed depreciation on a wind mill. The Assessing Officer disallowed the depreciation as the wind mill was not connected to the power grid, relying on an agreement with the Tamil Nadu Electricity Board (TNEB) and a court decision. The Commissioner of Income Tax(A) upheld the disallowance citing lack of concrete proof.
Arguments: The assessee argued that it had complied with the TNEB requirements, remitted fees, and started producing power, thus being connected to the grid. The Assessing Officer's reliance on the agreement was challenged. The Department supported the lower authorities' decisions.
Judgment: The Tribunal found that the agreement alone did not prove the wind mill was not connected to the grid. The commissioning certificate from the Executive Engineer and the initial reading supported the assessee's claim. The Tribunal emphasized that electricity, as a product, remains the same whether from trial or commercial production. Rules on commercial production do not apply to electricity. The assessee was deemed eligible for depreciation, and the disallowance was overturned. The appeal of the assessee was allowed.
Outcome: The appeal of the assessee was allowed, and the disallowance of depreciation on the wind mill was deleted.
-
2011 (6) TMI 895
Issues involved: Appeal against the order of the Commissioner of Income-tax (Appeals) regarding addition towards total cost of construction, disallowance of advertisement and sales promotion expenses.
Cost of Construction Issue: The appellant contested the addition towards the total cost of construction, arguing that the Commissioner of Income-tax (Appeals) erred in not considering reports of approved valuers and in adopting CPWD rates instead of State PWD rates. The appellant's husband procured building materials directly from the market, resulting in cost savings. The tribunal found in favor of the appellant, noting that the CPWD rates overstated the cost of construction compared to State PWD rates, and direct procurement of materials led to significant savings. Consequently, the addition of `6,55,380/- was deleted.
Advertisement and Sales Promotion Expenses Issue: The tribunal confirmed the disallowance of `24,000/- for advertisement expenses and `1,68,010/- for sales promotion expenses, stating that these expenses could not be telescoped into other additions as requested by the assessee.
Conclusion: The appeal filed by the assessee was partly allowed, with the tribunal ruling in favor of the assessee on the cost of construction issue but confirming the disallowance of certain advertisement and sales promotion expenses. The order was pronounced in open court on June 16, 2011, in Chennai.
-
2011 (6) TMI 894
Issues involved: Appeal by Revenue against CIT(Appeals) order, cross objections by assessee, addition of unaccounted investment in building construction.
Appeal by Revenue:
The Revenue challenged the CIT(A)'s decision to delete the addition of unaccounted investment in building construction for the assessment years 2002-03, 2003-04, and 2004-05. The Assessing Officer had added the difference between the cost of construction admitted by the assessee and estimated by the DVO. The CIT(A) accepted the assessee's claim regarding cost index, deduction for conversion of rates, and self-supervision. The Revenue argued that CPWD rates should apply, even for a building in Karur. The DVO's report mentioned a specific construction period and cost index, but the books of accounts impounded during survey were not submitted to the DVO. The CIT(A) granted relief by using State PWD rates and providing deductions, which the Revenue contested.
Cross objections by assessee:
The authorized representative of the assessee withdrew the cross objections filed, leading to their dismissal.
Decision and Analysis:
The Tribunal noted discrepancies in the DVO's valuation due to the construction period and cost index used. It was observed that CPWD rates were not applicable to Karur, and local PWD rates should have been used. The CIT(A) correctly granted deductions and applied PWD rates. The Assessing Officer blindly adopted the DVO's valuation without rejecting the impounded books of accounts, which is impermissible. The Tribunal cited the Sargam Cinema case to support the position that no addition can be made if books of accounts are not rejected. As the assessee did not appeal for further reduction in estimated construction cost, the CIT(A)'s decision was upheld. Consequently, the Revenue's appeals were dismissed, and the cross objections were withdrawn.
Conclusion:
The Tribunal upheld the CIT(A)'s decision to reduce the estimated construction cost, dismissing the Revenue's appeals and the assessee's cross objections.
-
2011 (6) TMI 893
Issues Involved:
1. Deletion of addition on account of exchange rate fluctuation.
2. Reduction of addition on account of estimated sale of scrap.
Summary:
1. Deletion of Addition on Account of Exchange Rate Fluctuation:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 11,83,478/- made on account of exchange rate fluctuation. The assessee, a 100% export-oriented undertaking, claimed deduction u/s 10B of the Income-tax Act, 1961. The AO disallowed this claim, considering the exchange rate fluctuation as a windfall. However, the CIT(A) deleted the addition, relying on various judicial rulings that held such gains as integral to export turnover and eligible for deduction u/s 10B. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the well-reasoned order based on cogent material and facts.
2. Reduction of Addition on Account of Estimated Sale of Scrap:
The Revenue also contended that the CIT(A) erred in reducing the addition to Rs. 4,60,174/- from Rs. 11,53,180/- made by the AO on account of estimated sale of scrap. The AO made the addition due to the assessee's failure to provide detailed records of scrap generation. The CIT(A) partially upheld the addition, considering the sale of scrap as part of total turnover and profit of the industrial undertaking. The Tribunal found no infirmity in the CIT(A)'s findings but, in the interest of natural justice, further reduced the addition to Rs. 3,00,000/- due to the assessee's inability to provide closing stock details.
Conclusion:
The appeal filed by the Revenue was dismissed, and the appeal filed by the assessee was partly allowed. The decision was pronounced in the open court on 10th June, 2011.
-
2011 (6) TMI 892
Issues involved: Cross appeals by the assessee and the revenue challenging the impugned order of the Ld. CIT (A)-VII, Mumbai dated 19.02.2009 for the A.Y. 2005-06.
Issue 1: Disallowance of society charges
The assessee contended that society charges should be deducted from gross rent as direct charges for earning income. However, the A.O. and Ld. CIT (A) denied this deduction. The Tribunal found that only specific deductions are allowed u/s 23 and 24 for A.Y. 2005-06, and society charges were not included. Relying on legal precedents, the Tribunal upheld the denial of deduction for society charges, dismissing the assessee's appeal.
Issue 2: Disallowance of running and maintenance expenditure
The assessee claimed running and maintenance expenditure, arguing they were routine expenses even though no business activity was conducted apart from rental and interest income. The A.O. and Ld. CIT (A) rejected this claim, stating that expenses must be justified under specific income heads. The Tribunal agreed, confirming the denial of deduction for running and maintenance expenditure, as the assessee had no other income sources. The appeal was dismissed.
Issue 3: Addition to Annual Letting Value (ALV)
The A.O. adjusted the ALV based on notional interest on an interest-free deposit received by the assessee, deeming the rent lower than market rates. The Ld. CIT (A) directed to accept the assessee's ALV calculation. The Tribunal referred to guidelines from a High Court case regarding ALV determination and remanded the issue to the A.O. for fresh adjudication in line with those principles. The revenue's appeal was allowed for statistical purposes.
-
2011 (6) TMI 891
Issues involved: Appeal by Revenue for A.Y. 2006-07 against CIT(A) order u/s. 143(3) and Appeal by assessee for A.Y. 2005-06 against CIT(A) order u/s. 144.
A.Y. 2006-07:
The Revenue appealed against the CIT(A)'s direction to assess income on long term capital gains for A.Y. 2005-06 instead of 2006-07 and the consideration of fresh evidence without giving opportunity to AO u/s. 46A of I.T. Rules.
The assessee, subject to a joint development agreement, claimed exemption u/s. 54F for capital gains. AO computed long term capital gain and added unexplained cash credit. CIT(A) held profit from land sale as long term capital gains and profit from built-up area sale as short term. Exemption u/s. 54F was denied, but cash credit addition was deleted.
A.Y. 2005-06:
AO determined capital gains without allowing deduction u/s. 54F. CIT(A) confirmed AO's order except on long term capital gains quantum. Assessee appealed against this order.
Judgment:
The Tribunal remitted both appeals back to the AO for fresh consideration, as the Revenue's appeal for A.Y. 2006-07 and the assessee's appeal for A.Y. 2005-06 were interlinked. The AO was directed to re-examine the taxability of capital gains after affording a reasonable opportunity to the assessee and decide in accordance with the law. Both appeals were treated as allowed for statistical purposes.
-
2011 (6) TMI 890
Deduction u/s 54F - Meaning of Residential House - CIT(A) deleted the addition which the AO had allowed in respect of only one unit by treating the units as two separate residential properties
HELD THAT:- We find that issue is squarely covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of COMMISSIONER OF INCOME-TAX VERSUS SMT. KG. RUKMINIAMMA [2010 (8) TMI 482 - KARNATAKA HIGH COURT], where it was held that, “The context in which the expression ‘a residential house’ is used in sec. 54 makes it clear that it was not the intention of the legislation to convey the meaning that it refers to a single residential house. As in the earlier part, the words used are buildings or lands which are plural in number and that is referred to as “a residential house”, the original asset. An asset newly acquired after the sale of the original asset also can be buildings or lands appurtenant thereto, which also should be “a residential house”. Therefore, the letter ‘a’ in the context it is used should not be construed as meaning “singular”. But, being an indefinite article, the said expression should be read in consonance with the other words ‘buildings’ and ‘lands’ and, therefore, the singular ‘a residential house’ also permits use of plural by virtue of sec. 13(2) of the General Clauses Act –COMMISSIONER OF INCOME-TAX AND ANOTHER VERSUS D. ANANDA BASAPPA [2008 (10) TMI 99 - KARNATAKA HIGH COURT]"
We do not find any infirmity or illegality in the order of the CIT(A) and hence, uphold the same - Decision in favour of Assessee.
Portfolio Management Fees - CIT(A) deleting the addition - HELD THAT:- ld. counsel of the assessee conceded that disallowance has been rightly made by the Assessing Officer. Hence, we allow this issue in favour of the Revenue.
-
2011 (6) TMI 889
Issues involved: Appeal by Revenue against order u/s 143(3) for AY 2002-03; Addition of R&D expenditure u/s 80IB; Disallowance u/s 40A(2)(a) & (b); Cross objection by assessee for leave encashment provision.
R&D Expenditure Issue:
The Revenue appealed against the deletion of Rs. 25 lakhs as R&D expenditure attributable to the manufacturing unit of the assessee. The Commissioner of Income-tax (Appeals) found that the R&D establishment was supporting non-eligible units and had been functioning since 1994. As the Assessing Officer failed to specify the exact nature of the R&D expenditure related to the eligible unit, the Commissioner upheld the deletion of the addition. Hence, the order deleting the Rs. 25 lakhs addition was upheld.
Disallowance Issue u/s 40A(2)(a) & (b):
The Revenue contested the deletion of Rs. 91,44,127 disallowance under sec.40A(2)(a) & (b). The Commissioner observed that the assessee's purchase prices from associate firms were not proven to be higher than market rates. In contrast, the associate concerns sold products at higher rates to outside parties. As no evidence indicated overstatement of purchase values, the Commissioner rightly deleted the disallowance. Consequently, the appeal by the Revenue was deemed liable for dismissal.
Cross-objection for Leave Encashment Provision:
The assessee's cross-objection challenged the non-deletion of Rs. 93,815 provision for leave encashment. Citing the decision in Bharat Earth Movers case and the striking down of sec.43B(f) by the Calcutta High Court, the assessee's stance was supported. The assessing authority was directed to allow the deduction for the provision made towards leave encashment. As a result, the appeal by the Revenue was dismissed, and the cross objection by the assessee was allowed.
-
2011 (6) TMI 888
Issues Involved:
1. Disallowance of testing charges paid under Section 40(a)(i) of the IT Act.
2. Disallowance of reimbursement of expenses made to Allergan Australia Pvt. Ltd.
3. Denial of depreciation on plant and machinery acquired during the financial year 1997-98.
4. Denial of depreciation on plant and machinery for the assessment years 2003-04, 2004-05, and 2005-06.
5. Disallowance of write-off of value of demonstration equipment and alternative depreciation thereon.
6. Disallowance of validation charges paid to Nicholas Piramal.
7. Levy of interest under Section 234B of the IT Act.
Issue-wise Detailed Analysis:
1. Disallowance of Testing Charges Paid Under Section 40(a)(i) of the IT Act:
The assessee was disallowed deductions for testing charges paid to European Testing Centre (ETC), Ireland, as it failed to deduct tax at source under Chapter XVIIB. The authorities held the assessee liable under Sections 201(1) and 201(1A). The Tribunal found that the assessee accepted the department's decision and paid taxes in subsequent years. The Tribunal remitted the issue to the assessing authority to verify the payment of taxes and allow deductions under proviso to Section 40(a)(i) if taxes were paid.
2. Disallowance of Reimbursement of Expenses Made to Allergan Australia Pvt. Ltd.:
The assessee booked expenses for training and travel of employees to Allergan Australia but reversed the entries when RBI denied remittance permission. The AO disallowed these expenses, and the CIT(A) confirmed the disallowance. The Tribunal accepted the alternate claim that if expenses are not allowed in the years they accrued (1997-98 and 1998-99), they should be reduced from the business income of AY 2004-05.
3. Denial of Depreciation on Plant and Machinery Acquired During the Financial Year 1997-98:
The assessee purchased machinery installed in Nicholas Piramal's premises for manufacturing ophthalmic solutions. The AO disallowed depreciation, and the CIT(A) confirmed it. The Tribunal allowed the depreciation, holding that the machinery was used for the assessee's business, satisfying the conditions of ownership and use.
4. Denial of Depreciation on Plant and Machinery for Assessment Years 2003-04, 2004-05, and 2005-06:
The machinery was written off as obsolete in FY 1998-99. The AO disallowed depreciation for subsequent years, and the CIT(A) confirmed it. The Tribunal held that once an asset is part of a block of assets, its individual use is irrelevant. However, as the machinery was considered obsolete, the assessee should have reduced its written-down value from the block of assets. The Tribunal confirmed the disallowance.
5. Disallowance of Write-off of Value of Demonstration Equipment and Alternative Depreciation Thereon:
The assessee issued demonstration equipment to doctors and wrote off its value over three years. The AO treated this as capital expenditure and allowed depreciation only for certain years. The Tribunal held that the expenditure was revenue in nature as it was for promoting business and allowed it in the year claimed.
6. Disallowance of Validation Charges Paid to Nicholas Piramal:
The AO disallowed validation charges reimbursed to Nicholas Piramal without TDS, treating it as a contract for services. The Tribunal remitted the issue back to the AO to verify if the assessee had a liability to reimburse these charges based on the agreement with Nicholas Piramal.
7. Levy of Interest Under Section 234B of the IT Act:
The issue of interest levy under Section 234B for AY 2003-04 was remitted to the AO as it was consequential in nature.
Conclusion:
The appeals for AYs 1997-98 to 2001-02 were allowed, and the appeals for AYs 2003-04 to 2005-06 were partly allowed. The Tribunal directed the AO to verify specific claims and deductions based on the provided evidence and applicable laws.
-
2011 (6) TMI 887
Issues Involved:
1. Computation of capital gains.
2. Disallowance of interest claimed.
3. Disallowance out of commission expenses and advances written off.
4. Treatment of various expenses as entertainment expenses.
5. Disallowance out of vehicle maintenance expenses and telephone expenses.
6. Disallowance of depreciation.
7. Disallowance of claim u/s 35AB.
8. Disallowance of foreign travel expenses.
9. Disallowance out of leasehold land written off and miscellaneous expenses.
10. Disallowance out of gift distribution expenses.
11. Disallowance out of aircraft expenses and legal and professional expenses.
12. Deduction under Chapter VI-A.
13. Premium payable on redemption of debentures.
14. Treatment of special capital incentive as capital receipt.
Summary:
1. Computation of Capital Gains:
The issue pertains to the computation of capital gains at Rs. 60,75,00,000/- as against Rs. 43,28,11,250/- returned by the assessee. The A.O. computed the capital gains by taking the cost of acquisition of the entire shares at NIL, which was upheld by the CIT(A). The Tribunal found this issue in favor of the assessee, citing the decisions in Heinrich de Fries GmbH Vs. Jt. CIT and Alcan Inc. Vs. Dy. Director of Income-tax (International Taxation). The Tribunal directed the A.O. to recompute the capital gains in light of the legal discussion provided.
2. Disallowance of Interest Claimed:
The issue of disallowance of interest amounting to Rs. 68,58,000/- was remitted back to the A.O. for fresh adjudication to ascertain whether the amount advanced to various companies was made out of borrowed funds. The A.O. was directed to decide the issue as per provisions of law and provide a reasonable opportunity of being heard to the assessee.
3. Disallowance out of Commission Expenses and Advances Written Off:
These grounds were not pressed by the learned counsel for the assessee and were dismissed as not pressed.
4. Treatment of Various Expenses as Entertainment Expenses:
The CIT(A) confirmed the disallowance of Rs. 2,23,477/- as entertainment expenses. The Tribunal directed the A.O. to decide the issue based on facts and circumstances, including the decision of the Tribunal in the assessee's own case for A.Y. 1995-96 and 1996-97.
5. Disallowance out of Vehicle Maintenance Expenses and Telephone Expenses:
The Tribunal directed the authorities to delete the impugned disallowances, following the decisions of the Gujarat High Court in Sayaji Iron and Engg. Co. Vs. CIT and Dinesh Mills Ltd. Vs. CIT.
6. Disallowance of Depreciation:
The Tribunal directed the A.O. to allow depreciation on the increased W.D.V. of cost as a result of foreign exchange liability accrued at the end of the year, following its earlier decision in the assessee's own case for A.Y. 1992-93.
7. Disallowance of Claim u/s 35AB:
The issue was restored to the A.O. to examine and verify the details of lump sum consideration paid by the amalgamating company for acquiring know-how and ascertain the amount of deduction u/s 35AB allowable in the remaining years.
8. Disallowance of Foreign Travel Expenses:
The Tribunal decided this issue in favor of the assessee and directed the deletion of the disallowance made out of foreign travel expenses, following its earlier decisions.
9. Disallowance out of Leasehold Land Written Off and Miscellaneous Expenses:
These grounds were not pressed by the learned counsel for the assessee and were dismissed as not pressed.
10. Disallowance out of Gift Distribution Expenses:
The Tribunal directed the deletion of the disallowance of Rs. 4,14,613/- out of gift distribution expenses, following its earlier decision in the assessee's own case for A.Y. 1995-96.
11. Disallowance out of Aircraft Expenses and Legal and Professional Expenses:
These grounds were not pressed by the learned counsel for the assessee and were dismissed as not pressed.
12. Deduction under Chapter VI-A:
This issue was allowed subject to verification by the A.O.
13. Premium Payable on Redemption of Debentures:
This ground was not pressed by the learned counsel for the assessee and was dismissed as not pressed.
14. Treatment of Special Capital Incentive as Capital Receipt:
The Tribunal upheld the CIT(A)'s decision that the special capital incentive amounting to Rs. 20,00,000/- received by the assessee was a capital receipt, following the judgment of the Hon'ble Supreme Court in CIT Vs
-
2011 (6) TMI 886
Issues involved: Cross appeals by the assessee and the Revenue regarding deletion of addition on account of waiver of loan and interest.
Issue 1 - Deletion of addition on account of waiver of loan and interest:
The case involved the assessee, a supplier for FM radio station, who borrowed funds from Indya.com and entered into a loan agreement with Music Broadcast Private Limited (MBPL). The Ministry of Information and Broadcasting issued a notice regarding the loan conversion clause, leading to termination of the relationship. The Assessing Officer added the waived loan amount as income u/s.28(iv), but the CIT(A) deleted the addition. The Tribunal held that the loan transactions were not business-related, thus sec. 28(iv) did not apply.
Issue 2 - Taxability of interest income:
The assessee advanced a loan to MBPL and did not show interest income. The Assessing Officer considered the accrued interest as taxable. The CIT(A) upheld this decision. The Tribunal noted that the assessee waived the principal amount due from MBPL but assigned the accrued interest to another company. As the interest accrued, it was held to be taxable income. The Tribunal upheld the CIT(A)'s decision on this issue.
In conclusion, both appeals were dismissed by the Tribunal on June 30, 2011.
-
2011 (6) TMI 885
Issues Involved:
1. Deduction u/s 80HHC before reducing deductions u/s 80IA and 80G.
2. Exclusion of Sales Tax and Excise Duty from total turnover for deduction u/s 80HHC.
3. Disallowance of Rs. 20,72,017 u/s 80IA for captive power plant.
4. Allocation of expenses for deduction u/s 80IB.
5. Disallowance u/s 43B for unpaid superannuation fund.
6. Disallowance of Rs. 2,67,319 u/s 14A.
7. Deduction u/s 80HHC on DEPB Licenses and other incomes.
Summary:
Issue 1: Deduction u/s 80HHC before reducing deductions u/s 80IA and 80G
The Tribunal upheld the CIT (A)'s direction to allow deduction u/s 80HHC independently before reducing deductions u/s 80IA and 80G, following the precedent set in the case of M/s. Atul Intermediates vs. ITO. The Tribunal rejected the Revenue's appeal, favoring the assessee based on the Bombay High Court's decision in Associated Capsules P. Ltd. vs. DCIT and the principle that when two views are possible, the one favorable to the assessee should be followed.
Issue 2: Exclusion of Sales Tax and Excise Duty from total turnover for deduction u/s 80HHC
The Tribunal found that the issue was covered in favor of the assessee by the Supreme Court's judgment in CIT vs. Lakshmi Machine Works, which held that sales tax and excise duty should not be included in the total turnover for the purpose of section 80HHC. The Tribunal declined to interfere with the CIT (A)'s order.
Issue 3: Disallowance of Rs. 20,72,017 u/s 80IA for captive power plant
The Tribunal upheld the allocation of common headquarter expenses to the CPP unit, agreeing with the CIT (A) that such expenses should be apportioned. The Tribunal also noted that the issue of setting off losses from other units was of academic interest only, as the CIT (A)'s order on interest expense allocation had become final.
Issue 4: Allocation of expenses for deduction u/s 80IB
The Tribunal upheld the allocation of salary, administrative, and general expenses to the Daman and Baddi units for computing deduction u/s 80IB, rejecting the assessee's contention that no part of common expenses should be allocated. The Tribunal found the allocation reasonable and supported by the CIT (A).
Issue 5: Disallowance u/s 43B for unpaid superannuation fund
The Tribunal rejected the need for a specific direction to allow the deduction u/s 43B in the year of payment, noting that the provision itself mandates such allowance.
Issue 6: Disallowance of Rs. 2,67,319 u/s 14A
The Tribunal remitted the matter back to the AO for fresh decision, considering the judgments of the Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT and the Kerala High Court in CIT vs. Catholic Syrian Bank Ltd. & Others.
Issue 7: Deduction u/s 80HHC on DEPB Licenses and other incomes
The Tribunal remitted the issue back to the AO for fresh decision in light of the Bombay High Court's decision in CIT vs. Kalpataru Colours & Chemicals. The Tribunal also upheld the exclusion of 90% of service charges, miscellaneous income, and miscellaneous balance written off from business profit, following the Supreme Court's decision in CIT vs. K. Ravindranathan Nair. Regarding interest subsidy, the Tribunal directed that only the subsidy related to the present year should be reduced from interest expenses, while the subsidy related to earlier years should be excluded from business profit.
Conclusion:
The appeal of the Revenue was dismissed, and the Cross Objections of the assessee were partly allowed as per the detailed discussions above.
............
|
9911796707
