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2010 (7) TMI 1097
Issues involved:
The issues involved in this case include the rejection of a revision application under section 264 of the Income Tax Act, the timing of the application, and the question of delay in filing the application.
Revision Application under Section 264:
The petitioner filed a revision application under section 264 of the Income Tax Act seeking relief for the assessment year 2003-04. The petitioner claimed that certain expenditures disallowed while computing total income led to an incorrect income declaration. The application was initially filed on 19.12.2008 but was withdrawn and refiled on 13.4.2009 after a show cause notice was issued regarding the premature filing. The respondent contended that the application was barred by limitation as more than four years had passed since the intimation was served upon the assessee.
Timing of Application and Allegations of Delay:
The petitioner argued that the intimation under section 143(1) of the Act was served on them for the first time on 27.3.2009, contrary to the respondent's claim that it was served in 2005. The Commissioner held that the application under section 264 was filed after a lapse of about six years, citing the petitioner's failure to file a revised return earlier. The petitioner contended that they filed the application promptly after receiving the intimation in 2009 and that there was no reason to believe there was any delay.
Principles of Natural Justice and Decision of the Court:
The Court found that the Commissioner's decision to reject the application based on a delay of six years was unjust as the petitioner was not given an opportunity to explain or seek condonation of any delay. The Court held that the lack of a hearing on the question of delay violated principles of natural justice. Consequently, the impugned order dated 03.12.2009 was quashed and set aside, and the revision application was restored to the Commissioner for a fresh decision in accordance with the law, with specific instructions to address the delay issue as a preliminary matter after providing the petitioner with a fair hearing.
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2010 (7) TMI 1096
Issues involved:
The judgment involves issues related to the disallowance of depreciation on electric fittings and the disallowance of filtration expenses claimed as revenue expenditure.
Disallowance of depreciation on electric fittings:
The appellant claimed depreciation on electrical fittings at 25%, while the Assessing Officer allowed depreciation at 15% as per the Income Tax Act. The Commissioner of Income Tax(Appeals) upheld the disallowance. The Tribunal found that the fittings were integral parts of the Plant & Machinery and should be allowed depreciation at 25%. However, as details of the assets were not provided, the issue was remanded back to the Assessing Officer for proper verification and fresh adjudication.
Disallowance of filtration expenses claimed as revenue expenditure:
The appellant claimed filtration expenses as revenue expenditure, but the Assessing Officer treated it as capital expenditure due to entries in the register. The Commissioner of Income Tax(Appeals) confirmed the disallowance. The Tribunal, referring to a previous order, allowed the deduction of filtration expenses as revenue expenditure, stating that they were day-to-day consumables without creating any capital asset. The Tribunal directed the Assessing Officer to allow the deduction of filtration expenses but to withdraw the depreciation allowed. The appeal of the assessee was allowed in this regard.
The judgment was signed, dated, and pronounced in the Court on 9th July 2010.
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2010 (7) TMI 1095
Issues Involved:
1. Disallowance u/s 145A
2. Disallowance u/s 14A
3. Disallowance u/s 80IA on electricity tax
4. Disallowance u/s 80IA on allocation of indirect expenses
5. Disallowance u/s 80IA on receipts from sludge and steam
6. Levy of interest u/s 234A, 234B, 234C, and 234D
7. Disallowance u/s 40A(9) on subsidy for employees' canteen
Summary:
1. Disallowance u/s 145A:
The assessee's ground of appeal regarding the disallowance of Rs. 2,62,40,633/- u/s 145A was dismissed as infructuous since the AO had already provided relief in the order passed u/s 154.
2. Disallowance u/s 14A:
The assessee did not press the ground related to the disallowance of Rs. 5,00,000/- u/s 14A, and it was dismissed as not pressed.
3. Disallowance u/s 80IA on electricity tax:
The AO excluded 5% of electricity charges amounting to Rs. 4,03,06,140/- from the exemption claimed u/s 80IA, which was confirmed by the CIT(A). The Tribunal, following its previous decisions in the assessee's own case, allowed the assessee's claim, holding that the electricity tax should be included in the market price for the purpose of deduction u/s 80IA.
4. Disallowance u/s 80IA on allocation of indirect expenses:
The AO allocated 25% of certain indirect expenses to the eligible business and disallowed Rs. 68,09,675/- from the exempt amount. The CIT(A) upheld this action. The Tribunal, following its previous decisions, allowed the assessee's claim, stating that only income derived from the industrial undertaking should be considered for deduction u/s 80IA, and indirect expenses not directly relatable to the industrial unit should be ignored.
5. Disallowance u/s 80IA on receipts from sludge and steam:
The AO disallowed the claim u/s 80IA on receipts from the sale of sludge and steam amounting to Rs. 53,31,084/-, which was confirmed by the CIT(A). The Tribunal, following its previous decisions, held that deduction u/s 80IA is not allowable on income from the sale of sludge but is allowable on income from the sale of steam.
6. Levy of interest u/s 234A, 234B, 234C, and 234D:
The assessee's ground challenging the levy of interest u/s 234A, 234B, 234C, and 234D was dismissed, as the charging of interest is mandatory and consequential in nature.
7. Disallowance u/s 40A(9) on subsidy for employees' canteen:
The AO disallowed Rs. 22,80,000/- u/s 40A(9) being subsidy paid for employees' canteen. The CIT(A) allowed the claim, following the Tribunal's orders in the assessee's own case for earlier years. The Tribunal, following its previous decisions, dismissed the Revenue's appeal on this issue.
Conclusion:
The appeal filed by the assessee was partly allowed, and the appeal filed by the Revenue was dismissed.
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2010 (7) TMI 1094
Issues involved:
The judgment involves the disallowance of depreciation claimed on machineries purchased under the Technology Up-gradation Fund Scheme (TUFS) of the Government of India for the assessment year 2005-06.
Issue 1: Disallowance of depreciation
The Assessing Officer (AO) disallowed depreciation claimed on plant and machinery under TUFS, stating that the higher depreciation claimed was not eligible under Income Tax Rules. The CIT(A) confirmed this finding. The Tribunal, however, considered the issue in favor of the assessee based on previous judgments and held that texturising and twisting activities are part of processing, covered under the relevant rules. The Tribunal allowed the claim of the assessee, setting aside the orders of the lower authorities and deleting the entire addition.
Key Details:
- The AO disallowed depreciation claimed under TUFS for plant and machinery.
- The CIT(A) upheld the AO's decision.
- The Tribunal ruled in favor of the assessee, stating that texturising and twisting activities are part of processing.
- Previous judgments were cited to support the assessee's claim.
- The Tribunal allowed the claim and deleted the entire addition.
Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the orders of the lower authorities and deleting the disallowed depreciation amount.
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2010 (7) TMI 1093
Issues involved: Appeal against order u/s 147/143(3) for AY 2004-05 - Deletion of addition of loans - Deletion of addition of marriage expenses - Deletion of addition of unexplained investment in property.
Deletion of addition of loans:
The Assessing Officer made an addition of Rs. 8 lakh on loans taken by the assessee, treating them as unexplained. However, the CIT(A) deleted the addition, noting that the assessee provided confirmations from lenders, income tax details, and other supporting documents. The ITAT upheld the CIT(A)'s decision, stating that the AO did not disprove the documents provided by the assessee and failed to conduct further enquiry before rejecting the explanation.
Deletion of addition of marriage expenses:
The AO added Rs. 5 lakh as unexplained expenditure on the marriage of the assessee's daughter, which was later deleted by the CIT(A) for lack of evidence. The ITAT agreed with the CIT(A), stating that the AO did not establish any basis for estimating the expenses at Rs. 5 lakh, especially when the assessee had explained the source of Rs. 2 lakh spent on the marriage.
Deletion of addition of unexplained investment in property:
The AO added Rs. 12 lakh as unexplained investment in a property based on a valuation report, which was deleted by the CIT(A) due to lack of evidence of undervaluation. The ITAT upheld the CIT(A)'s decision, noting that the AO did not provide any material to prove additional investment by the assessee beyond the amount mentioned in the sale agreement.
In conclusion, the ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decisions in all three issues.
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2010 (7) TMI 1092
Issues Involved:
1. Deduction eligibility under Section 11.
2. Disallowance of income application in fixed assets acquisition.
3. Addition of advance fee received.
4. Addition of refundable deposits.
5. Disallowance of Building Development Fund (Corpus Fund).
6. Disallowance of depreciation claimed.
7. Disallowance of deduction under Section 11(1)(a).
8. Excess payment of rent.
9. Excess remuneration paid to persons covered under Section 13(2).
10. Payment of personal telephone and mobile bills.
Detailed Analysis:
1. Deduction Eligibility under Section 11:
The Revenue contended that the assessee was ineligible for deduction under Section 11 due to violations of Sections 13, 11(3), and 11(5). The AO found that the assessee's depreciation claim was not allowable as the cost of assets had already been allowed as an application of income. The AO also noted that advance fees and refundable deposits were not shown in the income and expenditure statement, violating Sections 11 and 12A. The CIT(A) quashed the AO's findings, holding that there was no violation of Sections 13, 11(3), or 11(5), and the assessee was eligible for deduction under Section 11.
2. Disallowance of Income Application in Fixed Assets Acquisition:
The AO disallowed the claim of Rs. 40,26,264/- towards the application of income in acquiring fixed assets. The CIT(A) allowed the claim, stating that the acquisition of fixed assets was an application of income for charitable purposes.
3. Addition of Advance Fee Received:
The AO added Rs. 13,10,639/- as income, stating that advance fees were not shown in the income and expenditure statement. The CIT(A) deleted the addition, noting that the advance fees were correctly bifurcated and shown as income in the respective years.
4. Addition of Refundable Deposits:
The AO added Rs. 9,49,039/- on account of refundable deposits, treating them as income. The CIT(A) deleted the addition, holding that refundable deposits could not be treated as income.
5. Disallowance of Building Development Fund (Corpus Fund):
The AO treated Rs. 1,17,20,800/- received for the Building Development Fund as taxable. The CIT(A) deleted the addition, stating that the amount was part of the corpus fund and could not be taxed as income.
6. Disallowance of Depreciation Claimed:
The AO disallowed Rs. 18,10,894/- claimed as depreciation, arguing that the cost of assets had already been allowed as an application of income. The CIT(A) allowed the depreciation claim, citing judicial precedents that depreciation is an application of income even if the cost of assets has been treated as an application of income.
7. Disallowance of Deduction under Section 11(1)(a):
The AO disallowed Rs. 18,61,261/- claimed under Section 11(1)(a). The CIT(A) allowed the deduction, following the Supreme Court's decision that Section 11(2) does not restrict the operation of Section 11(1).
8. Excess Payment of Rent:
The AO found that the assessee paid excessive rent of Rs. 2,94,000/- to Shri K.L. Thakral's proprietary concern, M/s. Alka Industries. The CIT(A) deleted the addition, holding that the rent of Rs. 50,000/- per month was reasonable considering the size of the land used by the assessee society.
9. Excess Remuneration Paid to Persons Covered under Section 13(2):
The AO disallowed Rs. 1,75,000/- as excessive remuneration paid to Shri K.L. Thakral, Shri Praveen Thakral, and Shri Arun Sachdeva. The CIT(A) deleted the addition, stating that the remuneration was reasonable considering the services rendered by these individuals.
10. Payment of Personal Telephone and Mobile Bills:
The AO disallowed Rs. 16,732/- for telephone and mobile bills, treating them as personal expenses of Shri K.L. Thakral. The CIT(A) deleted the addition, holding that there was no evidence of personal use, and the expenses were for the society's purposes.
Conclusion:
The appeals filed by the Revenue were dismissed, with the Tribunal upholding the CIT(A)'s decisions on all issues. The Tribunal found that the assessee was eligible for deductions under Section 11, the application of income in acquiring fixed assets was valid, and the additions made by the AO were unwarranted. The Tribunal also held that the remuneration and rent paid were reasonable, and there was no evidence of personal use of telephone bills.
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2010 (7) TMI 1091
Issues involved: Assessment of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for concealment of income.
Summary:
1. The Department appealed against the cancellation of a penalty of Rs. 3,75,00,000 imposed on the assessee u/s 271(1)(c) for the assessment year 1996-97. The dispute arose from the treatment of a receipt from Hewlett Packard (HP) as a capital receipt by the assessee, while the Assessing Officer considered it as business profits.
2. The CIT(A) cancelled the penalty, stating that the assessee had disclosed all relevant facts and documents regarding the receipt from HP. The AO's claim of concealment was based on the rejection of the assessee's claim, which was considered a difference of opinion rather than deliberate concealment.
3. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee's claim was not frivolous and that there was no deliberate attempt to conceal income. The Tribunal found that the dispute was based on interpretation of the nature of the receipt from HP and did not involve concealment or furnishing inaccurate particulars.
4. Citing precedents and legal principles, the Tribunal concluded that the assessee's appeal to the High Court, along with the framing of substantial questions of law, supported the validity of the claim. The Tribunal dismissed the Revenue's appeal, affirming the cancellation of the penalty.
Judgment: The penalty u/s 271(1)(c) was cancelled by the Tribunal, as the dispute over the nature of the receipt from HP did not amount to concealment of income or furnishing inaccurate particulars. The assessee's disclosure of all relevant details and legal support for their claim demonstrated a bona fide difference of opinion rather than deliberate concealment.
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2010 (7) TMI 1090
Issues involved:
The judgment involves issues related to the valuation of long term capital gains on the sale of land, specifically focusing on the fair market value determined by the registered valuer and the valuation officer. The key question is whether the reference to the valuation officer under section 55A(a) was valid and if the fair market value adopted by the assessing officer was correct.
Summary:
Valuation of Long Term Capital Gains:
The appellant, an individual, challenged the assessment of long term capital gains on the sale of land for the assessment year 1998-99. The original assessment was set aside for a denovo assessment by the ld. CIT(A) under section 263 of the Income Tax Act, 1961. The dispute arose regarding the fair market value of the land as on 1.4.1981, with the registered valuer valuing it at &8377; 24,07,855/- and the valuation officer at &8377; 11,33,000/-. The assessing officer adopted the lower value for calculating the long term capital gains.
Validity of Reference to Valuation Officer:
The appellant contended that the reference to the valuation officer under section 55A(a) was invalid as the fair market value determined by the registered valuer was higher than that of the valuation officer. Citing relevant case laws, the appellant argued that the reference to the valuation officer should only be made if the value claimed by the registered valuer is less than the fair market value. The appellant further argued that the valuation officer's report was received after the completion of the original assessment order, diminishing its relevance.
Judgment and Decision:
The ld. CIT(A) upheld the assessing officer's decision to adopt the valuation made by the valuation officer, leading to the confirmation of the addition of long term capital gains. However, the appellate tribunal ruled in favor of the appellant, citing precedents that supported the appellant's argument. The tribunal held that the reference to the valuation officer under section 55A(a) was invalid in this case. Consequently, the tribunal directed the assessing officer to accept the value of the asset as shown by the appellant and allowed the benefit of deduction u/s. 54F. As a result, the appellant's appeal was allowed.
This judgment highlights the importance of following the statutory provisions and ensuring that references to valuation officers are made in accordance with the law, especially when determining fair market values for capital assets.
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2010 (7) TMI 1089
Issues involved: Appeal against order of CIT (Appeals) regarding disallowance of expenses, addition of unexplained share application money u/s 68 of the IT Act.
Disallowed expenses: The Assessing Officer disallowed expenses under various heads totaling about &8377; 1.27 crores on estimate basis. The CIT (Appeals) upheld this disallowance, considering it reasonable at 2.81% of total expenses claimed. However, the ITAT found this calculation erroneous and restricted the disallowance to 10% of the unverified expenses, providing relief to the assessee.
Unexplained share application money: The Assessing Officer added &8377; 61,50,000 under section 68 of the IT Act as unexplained share application money. The CIT (Appeals) confirmed this addition, but the ITAT disagreed. It held that the burden was on the Revenue to verify the creditworthiness of the shareholders, and the addition should have been made in the hands of the shareholders, not the assessee. Citing relevant case laws, the ITAT deleted the addition of &8377; 61,50,000 u/s 68.
Conclusion: The ITAT partly allowed the appeal, providing relief to the assessee by restricting the disallowance of expenses and deleting the addition of unexplained share application money. The decision was based on the erroneous calculation of disallowance and the burden of proof regarding share application money, as per legal precedents.
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2010 (7) TMI 1088
Issues Involved:
1. Jurisdiction of the District Consumer Disputes Redressal Forum.
2. Error by the National Consumer Disputes Redressal Commission in refusing to consider the Deputy Secretary's report.
3. Deficiency of service by the appellant.
4. Maintainability of the complaint.
5. Limitation period for filing the complaint.
6. Validity of the Deputy Secretary's report.
Summary:
Jurisdiction of the District Consumer Disputes Redressal Forum:
The Supreme Court examined whether the District Consumer Disputes Redressal Forum, Phulbani had the jurisdiction to entertain and allow the complaint filed by respondent No.1 for correction of his date of birth recorded in the matriculation certificate.
Error by the National Consumer Disputes Redressal Commission:
The Court also considered whether the National Consumer Disputes Redressal Commission committed an error by refusing to consider the report dated 31.10.1995 submitted by the Deputy Secretary of the appellant Board regarding the eligibility of respondent No.1 to take the supplementary examination.
Deficiency of Service by the Appellant:
Respondent No.1 claimed that he was a consumer and there was a deficiency of service on the appellant's part, leading to incalculable loss due to rejection of his candidature by various recruiting agencies for non-production of the original matriculation certificate.
Maintainability of the Complaint:
The Supreme Court noted that the National Commission overruled the appellant's objection regarding the maintainability of the complaint, observing that the appellant's counsel had agreed for disposal of the complaint on merits.
Limitation Period for Filing the Complaint:
The appellant argued that the complaint filed in 1999 for correction of the date of birth recorded in the matriculation certificate issued in 1983 was barred by time, and the District Forum committed a jurisdictional error by entertaining the same.
Validity of the Deputy Secretary's Report:
The Court highlighted that the Deputy Secretary's report found that respondent No.1 had taken admission in Class X based on a fake transfer certificate, suggesting that the original pass certificate issued to him should be canceled. The State Commission and the National Commission ignored this report, dismissing it as an afterthought.
Conclusion:
The Supreme Court set aside the orders of the National Commission, State Commission, and District Forum, remitting the matter to the District Forum for fresh adjudication. The District Forum was directed to decide the objection to the maintainability of the complaint and the issue of limitation, consider the Deputy Secretary's report, and give respondent No.1 an opportunity to reply. The parties were left to bear their own costs.
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2010 (7) TMI 1087
Arbitration petition - decree in terms of the award - umpire exceeded jurisdiction - The present case relates to an international commercial contract and as noted earlier the appellant and MII had agreed to subject themselves to the domestic laws of India as well as the International law and conventions. On this background the appellant wanted to safeguard itself in the event of change of law in India to which the respondent had agreed. It was submitted that any narrow interpretation of Clause 17.3 to exclude the reimbursement of the income tax liability of the sub-contractor will defeat the purpose in providing this safeguard under clause 17.3 and will make it otiose.
HELD THAT:- As we have noted above the umpire has looked into the evidence before him including that of the respondent’s officer as to how MII had participated in the bid clarification meetings. He considered the submission of the appellant as to how the sub-contract was also tax protected, which was their main plea. It is true that if there is an error apparent on the face of the award or where the umpire had exceeded his jurisdiction or travelled beyond the reference, the court can interfere. However in view of what is noted above it is not possible to say that the award suffers from any of the above defects so as to call for interefence. The intention of the parties in providing a clause like clause 17.3 could not be ignored. It had to be given a due weightage. This is what the umpire has done and has given the direction to the respondent to compensate the appellant for the amount of the necessary and reasonable extra cost caused by change in law. We have no hesitation in holding that the award of the umpire is a well reasoned award and one within his jurisdiction, and which gives a meaningful interpretation to all the clauses of the contract including clause 17.3. In the circumstances in our view the High Court has clearly erred in interfering with the award rendered by the umpire.
However, we are not required to go into that issue since we are otherwise holding that the award was not only a plausible one but a well-reasoned award. In the circumstance the interference by the High Court was not called for. In that view of the matter we allow this appeal and set aside the judgment of the learned single Judge, as well as that of the Division Bench. The award made by the Umpire is upheld and there shall be a decree in terms of the award. The arbitration petition filed by the respondent for setting aside the award shall stand dismissed with cost.
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2010 (7) TMI 1086
Issues involved: Assessment order validity, Addition of unexplained expenditure, Addition of unexplained deposit
Assessment Order Validity:
The AO completed the assessment on 31st December, 2008, and the assessee received the order on 20th January, 2009. The Tribunal rejected the contention that the order was backdated, as there was no evidence to support this claim. Therefore, the ground challenging the validity of the assessment order was rejected.
Addition of Unexplained Expenditure:
The AO observed discrepancies in the assessee's bank transactions, treating total withdrawals as unexplained expenditure under section 69C of the Income Tax Act. Despite inconsistencies in the assessment order figures, the Tribunal concluded that the total amount considered by the AO was Rs. 49,00,000. The assessee appealed this addition, arguing that withdrawals were redeposited and should not be assessed as unexplained expenditure. The Tribunal noted undisclosed bank accounts and unrecorded transactions, ultimately allowing the appeal in part and reducing the addition to Rs. 16,15,261 under section 69 of the Act.
Addition of Unexplained Deposit:
The Ld. CIT(A) directed an addition of Rs. 49,09,000 as unexplained deposit under section 69A, considering undisclosed bank account transactions. The assessee contended that this provision only applied to hard cash, not bank deposits. The Tribunal found that the peak balance in the bank account constituted unexplained investment, modifying the addition to Rs. 16,15,261 under section 69 of the Act. The appeal on this issue was allowed in part.
Conclusion:
The Tribunal partially allowed the assessee's appeal, reducing the total addition under different sections of the Income Tax Act. The decision was pronounced on 30th July, 2010.
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2010 (7) TMI 1085
Issues Involved: Appeal against Commissioner of Income-tax (Appeals) order for Assessment Year 2004-05, regarding estimation of income based on net profit, source of cash deposits, and cheques deposits.
Estimation of Appellant's Income:
The Revenue appealed against the estimation of the appellant's income at 5% net profit on the addition of Rs. 26,55,618 by the Commissioner of Income-tax (Appeals) XXX, Kolkata. The Tribunal found that the entire deposits in the undisclosed bank account could not be considered as trading receipts without corroborative evidence. It was held that the net profit of 5% on the cash and cheques deposits was not justified. Instead, the peak amount deposited in the undisclosed bank account during the relevant Financial Year should be considered as undisclosed income.
Source of Cash Deposits:
The assessee, a manufacturer and trader of Aluminium utensils, had deposited Rs. 10,53,000 in a savings bank account with Standard Chartered Bank, Salt Lake Branch, Kolkata. The Assessing Officer treated this account as undisclosed and added the amount to the total income. Similarly, cheques deposits of Rs. 16,02,618 were observed but not reflected in the books. The Tribunal held that the entire amount deposited in the undisclosed bank account should not be considered as trading receipts without proper evidence. The peak amount of deposit in the undisclosed account was deemed as the undisclosed income.
Cheques Deposits:
The Assessing Officer added the cheques deposits of Rs. 16,02,618 to the total income of the assessee as they were not supported by proper documentation. The Tribunal agreed that the entire deposits in the undisclosed bank account could not be treated as trading receipts without substantiating evidence. It was decided that the peak amount deposited in the undisclosed account should be considered as undisclosed income, modifying the orders of the lower authorities.
Conclusion:
The Tribunal partially allowed the Revenue's appeal by directing the assessment of undisclosed income based on the peak amount deposited in the undisclosed bank account. The Cross objection filed by the assessee was dismissed. The decision was pronounced in open court on 02.07.2010.
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2010 (7) TMI 1084
Issues involved:
The judgment involves issues related to the classification of assets for depreciation, treatment of software expenses as revenue or capital expenditure, and the nature of repair and maintenance expenses incurred by the assessee.
Classification of assets for depreciation:
The appeal was filed by the revenue against the order of the Commissioner of Income-tax (Appeals) regarding the classification of assets like air conditioner, refrigerator, and office equipment for the purpose of depreciation. The assessee claimed these items as part of plant and machinery, while the Assessing Officer considered them to fall under 'Furniture and fittings.' The CIT(A) decided in favor of the assessee, stating that the assets in question demonstrate the nature of "plant and machinery" and not furniture and fittings. The Tribunal upheld the CIT(A)'s decision, emphasizing that the definition of "Plant" should be construed broadly, and the assets fulfilled the function of a plant in the assessee's trading activity.
Treatment of software expenses:
Another issue was the treatment of software expenses as revenue or capital expenditure. The AO disallowed a portion of the software expenses claimed by the assessee as revenue expenditure. However, the CIT(A) held that the software expenses were recurring in nature and provided no enduring benefit, thus allowing them as revenue expenditure. The Tribunal upheld the CIT(A)'s decision, allowing the entire software expenses as revenue expenditure and withdrawing the depreciation granted by the AO.
Nature of repair and maintenance expenses:
The third issue involved the treatment of repair and maintenance expenses of building as revenue or capital in nature. The AO disallowed a significant amount of expenses incurred by the assessee towards the reconstruction of the RCC roof of an existing building. The CIT(A) held that the expenditure was revenue in nature as it involved replacing the existing roof necessary for carrying on the business. The Tribunal agreed with the CIT(A)'s decision, allowing the entire expenditure as revenue and withdrawing the depreciation granted by the AO.
Conclusion:
The Tribunal dismissed the appeal filed by the revenue, upholding the decisions of the CIT(A) on all grounds. The judgment was pronounced on 23rd July 2010.
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2010 (7) TMI 1083
Issues Involved:
1. Levy of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income.
2. Disallowance of agricultural income and related expenditure.
3. Treatment of subsidy received as income from other sources.
4. Disallowance of write-off of property.
5. Disallowance of security charges and municipal taxes.
6. Under-valuation of closing stock.
Summary:
1. Levy of Penalty u/s 271(1)(c):
The appeal by the assessee challenges the penalty of Rs. 12,58,350/- levied u/s 271(1)(c) for furnishing inaccurate particulars of income. The A.O. concluded that the assessee attempted to evade taxes by furnishing inaccurate particulars, leading to the imposition of the penalty.
2. Disallowance of Agricultural Income and Related Expenditure:
The A.O. disbelieved the assessee's claim of agricultural income of Rs. 20,64,389/- and treated it as unaccounted income u/s 68. The related expenditure of Rs. 3,43,328/- was also disallowed. The assessee provided evidence such as revenue records, letters from local authorities, and previous assessments to support its claim. The Tribunal noted that the A.O. had accepted similar claims in other assessment years and found no justification for the disallowance in the impugned year.
3. Treatment of Subsidy Received as Income from Other Sources:
The A.O. treated the agricultural subsidy of Rs. 24,113/- received from the Government of Goa as income from other sources. The Tribunal found that the subsidy was related to the assessee's agricultural activities, which were supported by evidence, and thus, the treatment by the A.O. was incorrect.
4. Disallowance of Write-off of Property:
The A.O. disallowed the write-off of Rs. 3,00,000/- related to a property at Mira Road, considering it as capital expenditure. The Tribunal accepted the assessee's explanation that the amount was an advance paid for property development, which was written off due to non-recovery.
5. Disallowance of Security Charges and Municipal Taxes:
The A.O. disallowed security charges of Rs. 1,19,800/- and municipal taxes of Rs. 1,89,968/-, treating them as non-business expenditure. The Tribunal found that these expenses were genuine business expenditures supported by evidence and should not have been disallowed.
6. Under-valuation of Closing Stock:
The A.O. added Rs. 4,65,992/- to the income for under-valuation of closing stock. The Tribunal accepted the assessee's explanation that the under-valuation was a bona fide mistake by the accountant and noted that the correction was reflected in the subsequent year's opening stock, resulting in no revenue loss.
Conclusion:
The Tribunal concluded that the disallowances and reclassifications made by the A.O. did not amount to furnishing inaccurate particulars of income. The penalty u/s 271(1)(c) was not justified as the assessee had provided sufficient evidence and explanations for its claims. The appeal was allowed, and the penalty order was cancelled.
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2010 (7) TMI 1082
Issues involved:
The judgment involves the challenge to a penalty levied by the Assessing Officer (A.O) under section 271(1)(c) of the Income Tax Act, 1961.
Details of the Judgment:
Issue 1: Justification of Penalty u/s 271(1)(c) of the Act
The assessee, a Co-operative Housing Society, declared income from compensation received for allowing companies to use a portion of the terrace of the Society building. The A.O assessed the income under the head 'income from other sources', which was challenged before the CIT(A). The CIT(A) directed the A.O to treat the rental income as 'income from house property'. After further relief from the Tribunal, the income was re-determined. The A.O levied a penalty under section 271(1)(c) for concealing income particulars. The Tribunal found no conscious act of concealing income and canceled the penalty, as the entire income was declared and recorded in the books of account.
Issue 2: Claim of Exemption under Mutuality Principle
The assessee initially claimed exemption on the basis of mutuality for the rental income received, which was later changed to be assessed as 'income from house property'. The A.O disallowed the claim of loss declared by the assessee, stating that contributions exceeding expenses do not attract Income Tax provisions. The Tribunal observed that there was no conscious withholding of particulars by the assessee and found no justification for the penalty under section 271(1)(c) of the Act.
Conclusion:
The Tribunal allowed the appeal filed by the assessee, canceling the penalty imposed by the A.O under section 271(1)(c) of the Income Tax Act, 1961.
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2010 (7) TMI 1081
Income taxable in India - Remittances of conference expenses - liability to deduct tax at source - DTAA between India and USA - PE In India - HELD THAT:- We are of the view that the nature of services rendered by CKP to the assessee-company is such that the same cannot be regarded as technical or consultancy services so as to fall within the definition of "fees for included services" as given in Article 12 of the Indo-US Tax Treaty. The payment made for the said services, thus, is in the nature of business profits in the hands of CSK as covered under Article 7 of the Treaty and the said party admittedly having no PE in India in the year under consideration, the same was not chargeable to tax in its hand in India. Consequently, the assessee-company was not liable to deduct tax at source from the said payment made to CSK and no liability could be fastened on it u/s 201/201(1A). We, therefore, reverse the impugned order of the ld. CIT(A) upholding the order passed by the AO on this issue u/s 201/201(1A) and allow the appeal of the assessee.
TDS u/s 195 - Remittances made to the non-resident - nature of services rendered by CROs - liability u/s 201/201(1A) - assessee, here is a pharmaceutical company having in-house research facility generic drugs developed by the assessee-company are, therefore, sent for testing at the laboratories of CROs abroad. CROs conduct test and experiments on these drugs and send back analysis report containing results of such test and experiment - HELD THAT:- As rightly observed by the ld. CIT(A), the CROs, thus, use their own skills, equipments, etc., to prepare the report - what they ultimately supply to the assessee-company is the analysis report and there is no parting with their skills and know-how to the assessee-company. The services rendered by CROs, thus, are not technical in nature but are merely in the nature of commercial services. The fees paid for such services, in our opinion, therefore, does not amount to fees paid for technical services or fees paid for making available any technology to the assessee-company in order to enable to apply the same for developing/inventing new drugs in future.
We are of the view that the nature of services rendered by CROs to the assessee-company is such that the same cannot be regarded as technical or consultancy services so as to fall within the definition of "fees for included services" and the payment made for such services, therefore, was not chargeable to tax in India in the hands of the concerned CROs. Consequently, the assessee-company was not liable to deduct tax at source from the said payment made to CROs and no liability could be fastened on it u/s 201/201(1A). We, therefore, uphold the impugned order of the ld. CIT(A) giving relief to the assessee on this issue and dismiss the appeal filed by the revenue.
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2010 (7) TMI 1080
Cash credit - Competence of NMMC to levy and collect cess and property taxes - prohibitory order - HELD THAT:- In the present case, undisputedly, the NMMC has attached the cash credit account which in other words is a overdraft facility. The un-utilised overdraft account does not render the banker the debtor in any sense and the banker is, therefore, not a person from whom money is due to the customer. Nor is the banker in such case, a person from whom money may become due. Where the banker lends money on an overdraft and the customer is always in debit there is no stage at which the banker is debtor to the customer, nor at any point of time at which he holds any money of the customer or the later's account.
We respectfully agree with the view expressed by the learned Single Judge of Madras High Court in Adam's case [1957 (10) TMI 32 - MADRAS HIGH COURT] followed by the learned Single Judge of Karnataka High Court in Karnataka Bank's case [1998 (9) TMI 613 - KARNATAKA HIGH COURT]. We have therefore no authority but to set aside the order dated November 29, 2007 passed by the 3rd Respondent under Rule 35 of the Rules. We however make it clear that this will not prevent the NMMC from proceeding to recover the amount of cess liability in any other manner authorised by law.
In our opinion, the petitioners have equally efficacious alternate remedy by filing the appeal u/s.406 of the BMPC Act. It would be open to the petitioners to raise all the contentions before the learned Judge in the appeal u/s.406 of the BPMC Act. We do not express any opinion on these contentions.
The order dated November 29, 2007 passed by the Cess Officer of the NMMC is quashed and set aside with liberty to the NMMC to recover the cess liability in any other manner authorised by law.
Rule is made partly absolute in the aforesaid terms, with no order as to costs.
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2010 (7) TMI 1079
Issues Involved:1. Reservation of posts for visually handicapped candidates under the Disabilities Act, 1995. 2. Identification of posts suitable for reservation under Section 33 of the Disabilities Act, 1995. 3. Implementation of the Disabilities Act, 1995, and the timing of such implementation. Summary:Issue 1: Reservation of posts for visually handicapped candidates under the Disabilities Act, 1995The Respondent No.1, a visually handicapped person with 100% blindness, appeared for the Civil Services Examination in 2006 and was successful. Despite being at serial no.5 in the merit list for visually handicapped candidates, he was not given an appointment due to the claim that only one post was available under the said category. The Respondent No.1 argued that there should have been at least 7 vacancies from the reserved categories of disabilities if the vacancies were considered from the year 1996, when the Disabilities Act, 1995, came into force. Issue 2: Identification of posts suitable for reservation under Section 33 of the Disabilities Act, 1995The Government of India contended that the reservation for visually handicapped persons in Group 'A' and 'B' posts was identified only in 2005, and hence, the reservation could not be applied retrospectively from 1996. The Respondent No.1 and intervenors argued that the identification of posts should have been done simultaneously with the enactment of the Disabilities Act, 1995, and the failure to do so should not deprive the Respondent No.1 of his rightful appointment. Issue 3: Implementation of the Disabilities Act, 1995, and the timing of such implementationThe Supreme Court examined whether the reservation provided for in Section 33 of the Disabilities Act, 1995, was dependent on the identification of posts suitable for such appointment. The Court observed that the legislative intent was to provide for the integration of persons with disabilities into the social mainstream and to ensure equal opportunities. The Court held that the submission made by the Union of India regarding the implementation of Section 33 only after the identification of posts under Section 32 was contrary to the legislative intent. The Court emphasized that the identification of posts should have been undertaken simultaneously with the coming into operation of the Act to give effect to the provisions of Section 33. Conclusion:The Supreme Court dismissed the Special Leave Petition filed by the Government of India, upheld the judgment of the Delhi High Court, and directed the petitioners to offer an appointment to the Respondent No.1 within eight weeks. The petitioners were also ordered to pay the cost of the proceedings to the Respondent No.1, assessed at Rs. 20,000/-, within four weeks.
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2010 (7) TMI 1078
Issues Involved:
1. Jurisdiction of the Labour Court constituted by the State Government.
2. Applicability of Section 33C(2) of the Industrial Disputes Act, 1947.
3. Jurisdiction under Section 10A(2) of the Industrial Employment (Standing Orders) Act, 1946.
Summary:
1. Jurisdiction of the Labour Court constituted by the State Government:
The employee filed an application before the Labour Court, Dibrugarh, constituted by the State Government u/s 7 of the Industrial Disputes Act, 1947, for computing his suspension/subsistence allowance u/s 33C(2) of the Act. The employer questioned the jurisdiction of this Labour Court, arguing that it was not specified by the Central Government. The Labour Court overruled this objection, but the learned Single Judge of the Gauhati High Court upheld the employer's contention, stating, "As the Labour Court at Dibrugarh was not specified by the appropriate Government they have no jurisdiction to issue notice to the Petitioner in both the cases."
2. Applicability of Section 33C(2) of the Industrial Disputes Act, 1947:
The Division Bench of the High Court concurred with the Single Judge that the Labour Court at Dibrugarh, not being specified by the Central Government, had no jurisdiction to entertain the petition u/s 33C(2) of the Industrial Disputes Act, 1947. The Supreme Court reiterated that "money due to a workman has to be decided by such Labour Court 'as may be specified in this behalf by the appropriate Government.'" The Court emphasized that the specification by the appropriate Government is mandatory, and in the absence of such specification, the Labour Court at Dibrugarh lacked jurisdiction.
3. Jurisdiction under Section 10A(2) of the Industrial Employment (Standing Orders) Act, 1946:
The Division Bench found that the claim of subsistence allowance falls within Section 10A(2) of the Industrial Employment (Standing Orders) Act, 1946. It held that "a Labour Court constituted under the 1947 Act, whether by the State Government or Central Government, would have jurisdiction to entertain a claim of subsistence allowance payable to a workman." The Supreme Court agreed, stating that the Labour Court at Dibrugarh, although constituted by the State Government, had jurisdiction to entertain the claim for subsistence allowance as per Section 10A(2) of the Standing Orders Act. The Court noted, "Incorrect label of the application and mentioning wrong provision neither confers jurisdiction nor denudes the Court of its jurisdiction."
Conclusion:
The Supreme Court dismissed the appeals, affirming that the Labour Court at Dibrugarh had jurisdiction to entertain the claim for subsistence allowance under Section 10A(2) of the Industrial Employment (Standing Orders) Act, 1946. The Court directed the Labour Court to decide the dispute within six months and imposed costs of Rs. 25,000 on the appellant.
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