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Showing 161 to 180 of 1191 Records

• 2011 (3) TMI 1683
  
  Issues Involved:
  1. Deletion of addition u/s 68 on account of unsecured loan.
  2. Deletion of addition u/s 68 on account of unexplained share capital.
  3. Deletion of addition u/s 68 on account of share application money.
  4. Levy of penalty u/s 271D for contravention of section 269SS.
  
  Summary:
  
  1. Deletion of addition u/s 68 on account of unsecured loan:
  The first issue raised by the Revenue was the deletion of addition of Rs. 1,23,35,523/- made by the Assessing Officer (AO) u/s 68 on account of unsecured loan received in cash. The AO observed that the appellant had accepted cash deposits in the bank accounts but failed to explain the source of these deposits. The Ld. Commissioner of Income Tax (Appeals) found that the appellant had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transaction. The Tribunal upheld the order of the Ld. Commissioner of Income Tax (Appeals), finding no infirmity in the deletion of the addition.
  
  2. Deletion of addition u/s 68 on account of unexplained share capital:
  The second issue was the deletion of addition of Rs. 1,48,82,000/- made by the AO u/s 68 on account of unexplained share capital received from various parties. The AO added the amount as income from undisclosed sources due to the receipt of cash payments without sufficient documentary evidence. The Ld. Commissioner of Income Tax (Appeals) noted that the appellant had provided affidavits, acknowledgment of returns, balance sheets, and bank statements of the investors. The Tribunal upheld the deletion, citing the Supreme Court decision in the case of Lovely Exports Pvt Ltd, which held that the Department could not regard share application money as undisclosed income if the names of the shareholders were provided.
  
  3. Deletion of addition u/s 68 on account of share application money:
  The third issue was the deletion of addition of Rs. 98,30,000/- made by the AO u/s 68 on account of share application money received from certain individuals. The AO doubted the creditworthiness of the investors based on their declared incomes. The Ld. Commissioner of Income Tax (Appeals) found that the identity and sources of the share applicants were established, and the amounts were received towards share application money. The Tribunal upheld the deletion, again referring to the Supreme Court decision in Lovely Exports Pvt Ltd.
  
  4. Levy of penalty u/s 271D for contravention of section 269SS:
  The final issue involved the levy of penalty u/s 271D for accepting cash payments in violation of section 269SS. The AO imposed a penalty of Rs. 3,70,47,523/-. The Ld. Commissioner of Income Tax (Appeals) found that share capital of Rs. 19,00,000/- was received by cheque and reduced the penalty amount to Rs. 3,51,47,523/-. The Tribunal dismissed the Revenue's appeal regarding the Rs. 19,00,000/- received by cheque and deleted the penalty on the unsecured loan of Rs. 1,23,35,523/-. For the remaining share capital money, the Tribunal followed the decision of the Hon'ble Madras High Court in the case of C.I.T. vs. Rugmini Ram Raghav Spinners Pvt. Ltd., which held that share application money was not a deposit or loan under section 269T, and deleted the penalty.
  
  Conclusion:
  The Tribunal dismissed the Revenue's appeals and allowed the Assessee's appeal, upholding the deletions made by the Ld. Commissioner of Income Tax (Appeals) and deleting the penalties imposed u/s 271D.

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• 2011 (3) TMI 1681
  
  Issues involved: Appeal against sustaining disallowance u/s 14A of the Act and Rule 8D of the I.T. Rules, 1962.
  
  The Appellate Tribunal ITAT DELHI, comprising of I. P. Bansal (Judicial Member) and K. G. Bansal (Accountant Member), heard the appeal where the assessee challenged the disallowance of &8377; 26,76,963/- u/s 14A of the Act and Rule 8D of the I.T. Rules, 1962. Both parties agreed that the decision of the special Bench of Mumbai Tribunal in the case of Daga Capital Management (P) Limited is no longer valid due to the ruling of the Hon'ble Bombay High Court in the case of Godrej and Boyce Manufacturing Company Limited Vs. DCIT. The High Court held that the provisions of section 14A and Rule 8D are valid and applicable from the assessment year 2008-09 onwards. However, for years prior to that, the Assessing Officer must inquire into the expenditure incurred for earning non-taxable income and make a reasonable disallowance based on facts of the case. As this exercise was not conducted by the lower authorities, the matter was remanded to the Assessing Officer for appropriate decision. Any new decisions from other High Courts should also be considered by the Assessing Officer during finalization of the assessment. The appeal was treated as allowed for statistical purposes, with the order pronounced on 31.03.2011.

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• 2011 (3) TMI 1680
  
  Issues involved: Whether the Tribunal was justified in deleting the additions made by the Assessing Officer towards the assessee's claim of payment to labour contractor and salary and wages paid to the workers/supervisors.
  
  Summary:
  The High Court of Bombay addressed the appeal concerning the deletion of additions made by the Assessing Officer regarding the payment to a labour contractor and salary/wages to workers/supervisors. The Assessing Officer based the additions on a worker/supervisor's statement during survey proceedings. However, the Tribunal found that the worker's statement was retracted and inconsistent with the facts on record. Additionally, statements from a partner and another worker confirmed that more than 10 persons were working at the unit, supported by payment vouchers and books of accounts showing payments made through cheques. Consequently, the Tribunal concluded that the deletion of the additions was justified based on these factual findings. The appeal was dismissed, as no merits were found in challenging the Tribunal's decision.

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• 2011 (3) TMI 1679
  
  The Bombay High Court dismissed the appeals regarding higher depreciation for security vans used in transportation of cash and valuables, as the Tribunal found that the vans were used in the assessee's business activities. No substantial question of law arose in the case.

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• 2011 (3) TMI 1678
  
  Issues Involved:
  1. Deduction u/s 80IA for Earth Stations
  2. Disallowance u/s 43B for Gratuity Provision
  3. Allowability of Repairs and Maintenance Expenditure
  4. Allowability of Foreign Exchange Fluctuation Expenditure
  5. Allowability of Prior Period Expenses
  6. Depreciation on Indefeasible Right to Use Undersea Cables
  7. Capitalization of Foreign Travel Expenditure
  8. Amortization of Leasehold Land
  
  Summary:
  
  1. Deduction u/s 80IA for Earth Stations:
  The assessee's appeal regarding the deduction u/s 80IA for Earth Stations was dismissed. The issue was covered against the assessee in its own case for A.Y. 1996-97, reported in 299 ITR (AT) 234 (Mum)(SB).
  
  2. Disallowance u/s 43B for Gratuity Provision:
  The assessee's appeal on the disallowance u/s 43B was allowed. The provision for gratuity was based on actuarial valuation and paid to the gratuity trust before the due date of filing the return. The decision of the Hon'ble Supreme Court in CIT Vs. Alom Extrusions Ltd., 319 ITR 306 (SC) was applied, leading to the deletion of the disallowance.
  
  3. Allowability of Repairs and Maintenance Expenditure:
  The additional ground raised by the assessee on the allowability of repairs and maintenance expenditure was dismissed as not pressed.
  
  4. Allowability of Foreign Exchange Fluctuation Expenditure:
  The revenue's appeal on the allowability of foreign exchange fluctuation expenditure was allowed. The assessee's mistake in conversion and calculation of foreign exchange gains in the previous year should have been rectified in that year, not as prior period expenditure in the current year.
  
  5. Allowability of Prior Period Expenses:
  The revenue's appeal on prior period expenses was dismissed. The First Appellate Authority's finding that the liability crystallized during the year was upheld, supported by case laws from the Hon'ble Gujarat High Court and Hon'ble Calcutta High Court.
  
  6. Depreciation on Indefeasible Right to Use Undersea Cables:
  The revenue's appeal on the depreciation of indefeasible rights to use undersea cables was dismissed. The assessee was deemed the beneficial owner of the rights, satisfying the conditions for ownership and entitlement to depreciation, as per the decision of the Hon'ble Supreme Court in Mysore Minerals Ltd. Vs. CIT, 239 ITR 775.
  
  7. Capitalization of Foreign Travel Expenditure:
  The revenue's appeal on the capitalization of foreign travel expenditure was dismissed. The expenditure was for examining the feasibility of acquiring capacities in undersea cables and was rightly capitalized, with depreciation allowed on the capitalized value.
  
  8. Amortization of Leasehold Land:
  The revenue's appeal on the amortization of leasehold land was dismissed. The expenditure was considered advance rent, following the decision of the Hon'ble Karnataka High Court in CIT Vs. HMT Limited, 203 ITR 820, and was consistently allowed in previous years.
  
  Conclusion:
  Both the appeals of the assessee and the revenue were allowed in part. The order was pronounced on 30th March 2011.

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• 2011 (3) TMI 1677
  
  Issues Involved:
  1. Addition u/s 69 for alleged unexplained investment.
  2. Disallowance of petrol, vehicle depreciation, and telephone expenses.
  3. Deletion of addition u/s 41(1) for cessation of liability.
  
  Summary:
  
  Issue 1: Addition u/s 69 for alleged unexplained investment
  
  The assessee challenged the addition of Rs. 16,34,700/- made by the AO u/s 69 of the Act, based on the difference between the purchase price of properties and the stamp duty valuation. The AO treated this difference as unexplained investment, relying on section 50C. The CIT(A) upheld this addition, applying the deeming provision of section 50C to the buyer. However, the Tribunal held that section 50C, being a deeming provision, is strictly applicable only for the purpose of section 48 and cannot be extended to other sections like section 69. The Tribunal cited similar judgments from ITAT Ahmedabad and the Punjab and Haryana High Court, emphasizing that without positive evidence of additional consideration, the addition cannot be justified. Consequently, the Tribunal deleted the addition of Rs. 16,37,700/- made u/s 69C.
  
  Issue 2: Disallowance of petrol, vehicle depreciation, and telephone expenses
  
  The assessee contested the disallowance of Rs. 12,337/- for petrol expenses and vehicle depreciation, and Rs. 1,078/- for telephone expenses. The AO disallowed 1/5th of these expenses, attributing them to personal use. The Tribunal found no specific arguments against this disallowance and upheld the AO's decision, rejecting the assessee's ground.
  
  Issue 3: Deletion of addition u/s 41(1) for cessation of liability
  
  The Revenue appealed against the deletion of Rs. 6,80,732/- by the CIT(A), which was added by the AO u/s 41(1) due to the assessee's failure to furnish creditor confirmations. The CIT(A) found that the assessee had ongoing transactions and payments with these creditors in preceding and subsequent years, indicating that the liabilities were still alive. The Tribunal agreed with the CIT(A) that the basic condition of cessation of liability was not satisfied and upheld the deletion, dismissing the Revenue's appeal.
  
  Conclusion:
  
  The assessee's appeal was partly allowed, and the Revenue's appeal was dismissed. The Tribunal pronounced the order in Open Court on 18th March 2011.

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• 2011 (3) TMI 1676
  

  Assessment u/s 153A - Papers found in search u/s.132 - Addition of ‘on-money’ - calculation of year wise ‘on money’ receipt based on loose papers - relevance of statement recorded u/s.132(4) -the search was conducted and the statement was recorded not only on the date of the search and but later on several statements were recorded u/s.131 - also Affidavit which was sworn however placed before the Revenue authorities later those statements were retracted.

  HELD THAT:- The admitted factual position is that consequence upon the search u/s.132 of the Act conducted on 18/06/2003 no unaccounted cash, no unaccounted asset, no unaccounted jewellery or incriminating material of like nature was seized.

  The question of incriminating material has also been addressed by ld. AR. In the present case, the incriminating material on which the Revenue has placed reliance are three loose papers

  In the present case, the AO has proceeded to extrapolate the ‘on-money’ of ₹ 180/- for rest of the flats in respective years. But there was no material in his possession to conclusively demonstrate that in respect of the other flats the assessee had in fact charged ‘on-money’ from the customers. Once the Revenue Department has taken the extreme step of conducting a raid on this assessee, then it is expected to unearth every penny of unrecorded money, but the fact is that neither any unaccounted money was recovered nor any such document was found in possession of the assessee through which it could be held that the assessee was in the practice of charging on-money on other facts as well.

  As far as the general principle is concerned,an admission can be said to be an extremely important piece of evident, if made as per the prescribed law. But such an admission cannot be said to be conclusive.

  It is open for the assessee to show that the said admission was incorrect. The said retrieval is termed as“retraction”in legal terminology.A retraction is admissible but it must be within a reasonable time and the onus is on that person to establish that the impugned admission was incorrect. He has to place convincing reason or evidence to show that the earlier admission was not the correct position of fact but the correct position was as per the retracted statement.as far as the present case is concerned, since the statement is not by the partner of the firm and moreover the same was retracted by filing an affidavit, coupled with the fact that no incriminating material was found, therefore, the view taken by the AO could not said to be permissible in the eyes of law. Therefore, we hereby hold that the extrapolation was incorrect. The AO is empowered to confine himself on the incriminating material found during the course of search and material is to be treated as true and correct. Meaning thereby the AO is expected to confine himself in respect of the sale transaction of Flat No.A/204, alleged to be purchased by one Smt. Saralaben M.Patel. Therefore, we are not of the opinion that no addition at all is warranted in respect of all the flats.

  We are not with the view taken by the ld.CIT(A) that the entire addition is to be deleted. We, therefore, direct AO to reinvestigate the transaction in respect of Flat No.A/204, purchased by Smt. Saralaben and if the explanation offered by the assessee is found unsatisfactory, then the consequential action can be taken as per law but only in respect of that solitary transaction. With the result, rest of the addition pertaining to other flats as deleted by Ld. CIT(A) is hereby affirmed. For this year the said ground of the Revenue is partly allowed.

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• 2011 (3) TMI 1675
  
  Issues Involved:
  1. Deduction under Section 80IB(10) of the Income Tax Act.
  2. Transfer of rights and obligations under local authority approval.
  3. Sale of unutilized Floor Space Index (FSI).
  
  Detailed Analysis:
  
  Issue 1: Deduction under Section 80IB(10) of the Income Tax Act
  The main issue was whether the assessee, engaged in the construction and development of residential houses, was entitled to a deduction under Section 80IB(10) of the Income Tax Act. The Assessing Officer (AO) disallowed the claim for deduction on the grounds that the assessee was not the actual owner of the land and the approval for the project was in the name of the landowners. The AO also observed that the landowners had sold the land directly to unit holders, and the assessee acted merely as a confirming party, functioning as a contractor rather than a developer.
  
  On appeal, the CIT(A) allowed the deduction, referencing the decision in the case of M/s Radhe Developers and M/s Shakti Corporation. The CIT(A) noted that the assessee had incurred all expenses related to the development and construction of the housing project, bore all risks, and was fully authorized to transfer the land along with the construction to any person. The CIT(A) emphasized that the developer had dominant control over the project and developed the land at its own cost and risk.
  
  The Tribunal upheld the CIT(A)'s decision, stating that the assessee had acquired dominant control over the land and developed the housing project at its own cost and risk. The Tribunal referenced the case of Radhe Developers, where it was held that the deduction under Section 80IB(10) is available to an undertaking developing and building housing projects, regardless of whether the land is owned by the developer. The Tribunal also referred to the Supreme Court's decision in Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd., which clarified that the nature of the agreement determines whether the developer is a service provider or a co-adventurer in a joint venture.
  
  Issue 2: Transfer of Rights and Obligations under Local Authority Approval
  The AO argued that the approval by the local authority and the completion certificate were granted to the landowner, not the assessee, and the rights and obligations under the approval were not transferable. The CIT(A) and the Tribunal rejected this argument, noting that the assessee had obtained all necessary permissions, incurred all related expenses, and bore all risks associated with the project. The Tribunal emphasized that the developer's dominant control over the project and the assumption of all risks and costs were crucial factors in determining eligibility for the deduction under Section 80IB(10).
  
  Issue 3: Sale of Unutilized Floor Space Index (FSI)
  The AO also denied the deduction for proceeds attributable to the sale of unutilized FSI, arguing that such proceeds could not be termed as profit 'derived' from developing and building housing projects. The CIT(A) disagreed, referencing the decision in the case of M/s Shakti Corporation, which allowed the deduction for proceeds from the sale of unutilized FSI. The Tribunal upheld the CIT(A)'s decision, noting that the issue had been decided in favor of the assessee in the case of Radhe Developers, where it was held that the benefit under Section 80IB(10) would be available if the developer had dominant control over the project and developed the land at its own cost and risk.
  
  Conclusion:
  The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the deduction under Section 80IB(10) to the assessee. The Tribunal emphasized the importance of the developer's dominant control over the project and the assumption of all risks and costs in determining eligibility for the deduction. The Tribunal also upheld the deduction for proceeds from the sale of unutilized FSI, consistent with the decisions in the cases of Radhe Developers and Shakti Corporation.

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• 2011 (3) TMI 1674
  
  Issues involved: Appeal against CIT(A)'s order for AY 2006-07 - Disallowance u/s 40(a)(ia) - Disallowance u/s 80IB(10) without completion certificate.
  
  Issue 1: Disallowance u/s 40(a)(ia)
  The Revenue appealed against CIT(A)'s order deleting the disallowance of `7,23,081/- u/s 40(a)(ia) for failure to deduct tax at source. CIT(A) acknowledged the liability to deduct tax and upheld the disallowance. However, CIT(A) directed AO to allow deduction u/s 80IB(10) on the disallowed amount, as the assessee qualified for it due to deriving income from eligible business. The appeal by Revenue was rejected, noting the absence of appeal by the assessee against the disallowance under Section 40(a)(ia).
  
  Issue 2: Disallowance u/s 80IB(10) without completion certificate
  The AO disallowed the assessee's claim u/s 80IB(10) due to lack of completion certificate. The assessee later provided the certificate to CIT(A), who directed AO to allow the claim, suggesting rectification u/s 154 for the assessment order. The AO did not rectify the order based on the certificate. The Tribunal decided to send the matter back to AO for examining and verifying the completion certificate to decide on the deduction u/s 80IB(10), providing the assessee with a reasonable opportunity to be heard. The appeal by Revenue was partly allowed for statistical purposes.
  

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• 2011 (3) TMI 1673
  

  Long term capital gain Computation - Reference to DVO u/s 55A - Determination of FMV - assessee transferring property has adopted FMV of property as on 1/4/81 - whether reference made by the AO to the DVO under section 55A of the for determining the FMV as on 1/4/1981 was legally valid? - CIT(A) held such reference made to DVO is invalid - HELD THAT:- Section 55A could be invoked only if the Ld. Assessing Officer is of the opinion that the value declared by the assessee is less than the fair market value of the asset. In the assessee’s case, the ld. AO has made this reference because he felt that the value of the property as on 1/4/1981 declared by the assessee is more than the fair market value. Thus, the condition of clause (a) of section 55A is not satisfied. Respectfully following the decision of the Tribunal referred to above we uphold the order of the CIT(A) and dismiss the appeal by the revenue.

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• 2011 (3) TMI 1672
  

  Valuation - Clearance to sister concerns at less rates as compared to price charged to independent buyers - the decision in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI Versus SPECIAL STEEL LTD. [2010 (8) TMI 779 - CESTAT-MUMBAI] contested - Held that: - appeal dismissed.

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• 2011 (3) TMI 1671
  

  Interest component in MACT Award to be treated as Taxable income or as part of compensation which being in the nature of capital receipt is not Taxable - Assessee failed to deduct tax at source out of interest income received by the claimants as per awards by MACT, the assessee was held to be assessee in default

  HELD THAT:- In our view, interest component is a part of compensation which being in the nature of capital receipt is not taxable. Admittedly, compensation under the award of MACT is not income. The expression ‘income’ used in Entry 82 of List I of Seventh Schedule to the Constitution can be given widest meaning. Under Section 2(24), inclusive and not exhaustive definition has been given. In absence of an express provision to the contrary, income can be held to refer to something earned. What is received as compensation for loss in one or the other form may not be income.

  In SENAIRAM DOONGARMALL VERSUS COMMISSIONER OF INCOME-TAX, ASSAM [1961 (3) TMI 7 - SUPREME COURT], the question was whether compensation received from military authority on account of loss of earning of tea estate was income or capital receipt. It was observed that quality of payment was decisive of the character of income and compensation received was not income.

  In the context of compensation received under the Motor Vehicle Act, the compensation is either on account of loss of earning capacity on account of death or injury or on account of pain and suffering. Such receipt is not by way of earning or profit. Award of compensation is on the principle of restitution to place the claimant in the same position in which he would have been had the loss of life or injury not been suffered.

  In GOBALD MOTOR SERVICE LTD. & ANOTHER VERSUS R.M.K. VELUSWAMI & OTHERS. [1961 (4) TMI 100 - SUPREME COURT] "The claim for damages falls under two separate heads. First, if the deceased had not been killed, but had eked out the full span of life to which in the absence of the accident he could reasonably have looked forward, what sums during that period would he probably have applied out of his income to the maintenance of his wife and family"

  Having regard to nature of receipt of compensation as per award under the M.V.Act, compensation is in the nature of capital receipt for death or injury and cannot be held to be in the nature of income. It appears to be for this reason that the said receipt is not sought to be treated as income.

  Interest on account of delay in adjudication - Part of compensation or a separate component of income?- Receipt of interest after amount has been received by the claimant u/s 194A(3)(ix) - HELD THAT:- In context of compensation under the provisions of Land Acquisition Act, 1894, the Hon'ble Supreme Court in COMMISSIONER OF INCOME-TAX, FARIDABAD VERSUS GHANSHYAM (HUF) [2009 (7) TMI 12 - SUPREME COURT], held that interest paid by the Collector was part of compensation and was treated to be at par with the compensation for purposes of taxability. The principle in Ghanshyam applies to award of interest from the date of claim to the date of receipt of the awarded amount under the Land Acquisition Act.

  The apex Court in TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD VERSUS COMMISSIONER OF INCOME-TAX [1997 (7) TMI 4 - SUPREME COURT] had noted that ordinarily, the interest received is income but it would not be of revenue nature where it is received by way of damages or compensation.

  In view of the above, the interest component in compensation awarded by MACT is part of compensation and has to be treated as capital receipt and not income till the claimant received the amount in pursuance of award. However, different consideration will prevail for interest earned by the claimant on the amount so received, after the receipt thereof.

  Section 194A(3)(ix) refers to the provision of receipt of interest after amount has been received by the claimant in pursuance of the award. We are, thus, of the opinion that question of law raised on behalf of the assessee has to be answered in its favour. The view of the Tribunal that interest allowed by the MACT in an accident case was income from interest and, thus, revenue in nature, is not sustainable - Decision in favour of Assesee

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• 2011 (3) TMI 1670
  
  The Bombay High Court dismissed the appeals as the question raised was covered by a previous decision in Commissioner of Income Tax Vs. Brahma Associates. No costs were awarded. (Case citation: 2011 (3) TMI 1670)

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• 2011 (3) TMI 1669
  
  The High Court of Bombay granted leave to amend within one week. The Revenue filed an appeal against the CESTAT order, admitted on substantial questions of law regarding recovery of dues and appeal restoration. Interim relief was granted until March 16, 2011.

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• 2011 (3) TMI 1668
  
  Issues involved: Appeal against order imposing penalty and recovery of disallowed credit u/s 32,81,274/-.
  
  The appeal was filed against an order partly allowing the appeal in relation to the imposition of penalty while confirming the recovery of the disallowed credit amounting to Rs. 32,81,274/- u/s duty paid on inputs, capital goods, and service tax. The Additional Commissioner had disallowed the credit as the final product was non-dutiable, ordering recovery along with interest and an equal amount of penalty.
  
  The Advocate for the appellants relied on arguments presented in a previous case and sought to deposit only a portion of the demanded amount due to financial hardship. The DR, however, referenced a specific notification and argued against total waiver of the demanded amount, stating that the authority had considered the matter comprehensively.
  
  The Tribunal, after considering the arguments and circumstances, found no prima facie case for total waiver of the duty demanded under the impugned order. Consequently, the appellants were directed to deposit 60% of the demanded amount while waiving the interest until the appeal's disposal. The compliance deadline was set for eight weeks from the date of the order. The case was scheduled for further proceedings and compliance report on a specified date.

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• 2011 (3) TMI 1667
  
  Issues Involved:
  
  1. Allowability of deduction under Section 80IB of the Income-tax Act, 1961.
  2. Employment of 10 or more workers.
  3. Existence of laboratory testing facilities at Silvassa.
  4. Outsourcing of manufacturing process to Ahmedabad.
  5. Splitting of Ahmedabad unit to form Silvassa unit.
  6. Relevance of statements recorded during the survey.
  7. Whether crushing, grinding, and sieving at Silvassa amounts to manufacturing.
  8. Additional issues for AY 2005-06: Excise income, interest on FD and LC, insurance claim, depreciation on motor car, DEPB income.
  
  Detailed Analysis:
  
  1. Allowability of Deduction under Section 80IB:
  
  The main issue across multiple assessment years (AY 2000-01 to 2005-06) was whether the deduction under Section 80IB was allowable for the activities carried out at the Silvassa unit. The Assessing Officer (AO) had disallowed the deduction, arguing that the Silvassa unit was not engaged in manufacturing activities, but the Commissioner of Income-tax (Appeals) [CIT(A)] allowed the deduction. The Tribunal upheld the CIT(A)'s decision, concluding that the activities at Silvassa constituted manufacturing. The Tribunal noted that the process at Silvassa involved crushing, grinding, and sieving of Ferro Molybdenum Alloy (FMA) slabs into lumps, chips, and powder, which were distinct products with different uses and chemical compositions.
  
  2. Employment of 10 or More Workers:
  
  The AO argued that the Silvassa unit did not employ 10 or more workers, a requirement under Section 80IB. The CIT(A) found that the unit employed more than 10 workers, including casual workers and supervisory staff, and the Tribunal upheld this finding. The Tribunal referred to judicial precedents that casual and supervisory workers should be counted for this purpose.
  
  3. Existence of Laboratory Testing Facilities at Silvassa:
  
  The AO contended that no laboratory testing was done at Silvassa, which was necessary for the manufacturing process. The Tribunal found that the assessee failed to produce evidence of any laboratory testing at Silvassa, such as primary records or equipment. However, the Tribunal held that the absence of laboratory testing did not negate the fact that the activities carried out at Silvassa amounted to manufacturing.
  
  4. Outsourcing of Manufacturing Process to Ahmedabad:
  
  The AO argued that the main manufacturing was done at Ahmedabad, and Silvassa only performed minor activities. The Tribunal found that the process at Ahmedabad was an intermediate stage, and the final manufacturing was completed at Silvassa. The Tribunal held that the activities at Silvassa were integral to the manufacturing process and could not be dismissed as mere outsourcing.
  
  5. Splitting of Ahmedabad Unit to Form Silvassa Unit:
  
  The AO suggested that the Silvassa unit was formed by splitting the Ahmedabad unit. The Tribunal rejected this argument, finding no evidence of machinery transfer from Ahmedabad to Silvassa. The Tribunal noted that new machinery was purchased for Silvassa, and the unit was not a result of splitting the Ahmedabad unit.
  
  6. Relevance of Statements Recorded During the Survey:
  
  The AO relied on statements recorded during a survey to argue that no manufacturing was done at Silvassa. The Tribunal found these statements inconclusive and noted that they were retracted by the employees. The Tribunal emphasized that statements alone could not determine the nature of activities without supporting evidence.
  
  7. Whether Crushing, Grinding, and Sieving at Silvassa Amounts to Manufacturing:
  
  The Tribunal analyzed whether the activities at Silvassa constituted manufacturing. It found that the processes resulted in distinct products (lumps, chips, and powder) with different physical and chemical properties and uses. The Tribunal concluded that these activities met the criteria for manufacturing, as they transformed the raw material into new products with distinct commercial identities.
  
  8. Additional Issues for AY 2005-06:
  
  - Excise Income: The Tribunal held that excise duty refund should be considered as part of the profit derived from the industrial undertaking, following the Delhi High Court's decision in Dhevchand Premchand.
  - Interest on FD and LC: The Tribunal rejected the claim that interest on FD and LC was derived from the industrial undertaking but allowed netting off interest expenditure against interest income, subject to establishing a direct nexus.
  - Insurance Claim: The Tribunal allowed the insurance claim for damages on goods, following the Delhi High Court's decision in CIT vs. Sportkind India Ltd.
  - Depreciation on Motor Car: The Tribunal upheld the CIT(A)'s decision to allow depreciation on a motor car purchased in the name of the Director but used for business purposes.
  - DEPB Income: The Tribunal disallowed the claim that DEPB income was derived from the undertaking, following the Supreme Court's decision in Liberty India vs. CIT.
  
  Conclusion:
  
  The Tribunal upheld the CIT(A)'s decision to allow the deduction under Section 80IB for the Silvassa unit, finding that the activities carried out there constituted manufacturing. The Tribunal also addressed additional issues for AY 2005-06, allowing some claims and rejecting others based on relevant judicial precedents.

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• 2011 (3) TMI 1666
  
  Issues Involved:
  1. Validity of notice u/s 143(2) of the I.T. Act.
  2. Jurisdiction of the Assessing Officer in the absence of valid service of notice u/s 143(2).
  
  Summary:
  
  Validity of Notice u/s 143(2):

  The assessee challenged the validity of the notice u/s 143(2) dated 30th October 2003, arguing that it was not validly served as per the provisions of section 282 of the I.T. Act read with the Civil Procedure Code 1908. The assessment order dated 30/03/2005 passed u/s 143(3) was therefore claimed to be null and void. The CIT(A) dismissed the grounds raised by the assessee, stating that the notice was within the stipulated time and the Assessing Officer had jurisdiction.

  Jurisdiction of the Assessing Officer:

  The assessee contended that the notice u/s 143(2) was served on Shri Sachin Agarwal, who was not authorized to receive it. The Tribunal had previously ruled in favor of the assessee's brother in a similar case, stating that the assessment framed without proper service of notice was invalid. The Revenue relied on the decision of the Hon'ble Jurisdictional High Court in CIT vs. Sohan Lal Sewa Ram Jaggi, which held that objections regarding jurisdiction must be raised within 30 days of receipt of notice.

  Tribunal's Decision:

  The Tribunal found that the facts of the present case were similar to the case of the assessee's brother, where it was held that the notice u/s 143(2) was not validly served. The Tribunal reiterated that the notice must be served on the assessee or an authorized person within the stipulated period. Since the notice was served on an unauthorized person, the assessment framed u/s 143(3) was deemed void ab initio. The Tribunal annulled the assessment order dated 30/03/2005 passed u/s 143(3) of the Act, following the precedent set in the case of the assessee's brother.

  Conclusion:

  The Tribunal annulled the assessment order due to the invalid service of notice u/s 143(2), rendering the remaining grounds of appeal unnecessary to discuss. The appeal was allowed, and the order was pronounced in the open court on 07/03/2011.

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• 2011 (3) TMI 1665
  
  Issues Involved:
  1. Legitimacy of expenditure claimed towards purchase of materials.
  2. Legitimacy of consultancy fees paid to M/s. B2C India Ltd.
  
  Issue-wise Detailed Analysis:
  
  1. Legitimacy of Expenditure Claimed Towards Purchase of Materials:
  
  The assessee company, engaged in earth filling work, filed its return of income for the assessment year 2005-06. The assessment was completed by the AO, who made a disallowance of Rs. 1,50,000 on account of labor payments, assessing the total income at Rs. 6,46,286. The Commissioner of Income Tax (CIT) examined the assessment records and observed that the assessee had received a sub-contract from M/s. Simplex Concrete Piles (India) Ltd. (SCPIL) for manual dredging and formation of dyke with dredged earth at Gujarat Adani Port Ltd. (GAPL). The consideration for the sub-contract did not cover the cost of materials, and the expenditure claimed towards the purchase of materials was not disallowed by the AO. The CIT issued a show cause notice under section 263(1) of the IT Act, proposing to pass an order under section 263, considering the assessment order erroneous and prejudicial to the interest of the Revenue.
  
  The assessee contended that the work order was a composite contract, including the cost of materials, and submitted a revised clause from SCPIL dated 12th August 2004, clarifying that construction materials issued to the assessee would be charged and deducted from the bill payment. The CIT found that the revised clause was not furnished before the AO and required verification. The assessee argued that if the work order was only for labor, the profit margin would be 84%, which is unrealistic.
  
  2. Legitimacy of Consultancy Fees Paid to M/s. B2C India Ltd.:
  
  The assessee claimed consultancy fees of Rs. 60 lakhs paid to M/s. B2C India Ltd. (BIL) for providing consultancy services and plant and machinery for the project. The CIT observed that the project was to be carried out under the instructions of SCPIL's Project Manager, and there was no requirement for the assessee to engage technical consultants or hire plant and machinery. The CIT noted that the AO allowed the expenditure without proper verification and issued a show cause notice under section 263(1).
  
  The assessee explained that being new in the field, they appointed BIL for consultancy and deducted appropriate TDS from the payment. The CIT found that the AO did not obtain the assessee's submission on this issue and required examination.
  
  Findings and Judgment:
  
  The CIT set aside the assessment order and directed the AO to adjudicate afresh on the issues of the expenditure towards the purchase of materials and consultancy fees, providing the assessee with an opportunity of being heard. The CIT cited several legal precedents to support the decision that failure to make proper inquiries renders the assessment order erroneous and prejudicial to the interest of the Revenue.
  
  The assessee argued that proper inquiries were made by the AO, who issued notices and received replies with supporting documents. The assessee contended that the CIT's approach was unsustainable in law, as the AO had applied his mind to the evidence and material on record. The assessee relied on various judicial decisions, including the Hon'ble Supreme Court's ruling in Malabar Industrial Co. Ltd., which held that if the AO adopts one of the permissible courses under law, it cannot be treated as erroneous or prejudicial to the Revenue.
  
  The tribunal considered the rival submissions and material on record, noting that the AO had issued notices and received detailed replies from the assessee. The AO examined the evidence and material on record, and the successor AO's proposal to invoke section 263 was based on a different interpretation of the same evidence. The tribunal found that the CIT's order was not sustainable in law, as it was a case of change of opinion and reappraisal of evidence, which is not permissible under section 263.
  
  The tribunal set aside the CIT's order under section 263 and restored the AO's assessment order dated 20-12-2007, allowing the assessee's appeal. The tribunal emphasized that the CIT must consider the assessee's explanation and cannot invoke section 263 based on a mere change of opinion.
  
  Conclusion:
  
  The tribunal concluded that the CIT's order under section 263 was not valid, as the AO had made proper inquiries and considered the evidence and material on record. The tribunal restored the AO's assessment order, allowing the assessee's appeal. The judgment underscores the importance of proper inquiry and examination by the AO and limits the CIT's revisional jurisdiction under section 263 to cases where the assessment order is genuinely erroneous and prejudicial to the interest of the Revenue.

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• 2011 (3) TMI 1664
  
  Issues involved: Appeal against addition of foreign exchange loss and disallowance of club fees for assessment year 2006-07.
  
  Issue 1: Addition of foreign exchange loss
  
  The appellant challenged the addition of Rs. 5,89,194 made by the Assessing Officer as foreign exchange loss, contending it should be allowed as a revenue expenditure. The appellant cited the judgment in CIT v. Woodword Governor India Pvt. Ltd. (312 ITR 254) where it was held that such losses on current assets/liabilities are allowable as revenue expenditure. The Tribunal noted the distinction between losses on current assets/liabilities versus capital items, directing a fresh examination by the Assessing Officer to determine the nature of the loss. If related to current assets/liabilities, it should be allowed as revenue expenditure; if related to capital items, it should be capitalized. The ground was allowed for statistical purposes.
  
  Issue 2: Disallowance of club fees
  
  The Assessing Officer disallowed Rs. 89,147 debited as club fees, deeming it personal in nature based on the auditor's certification. The appellant argued that the tax audit report contradicted this, stating the personal nature expenditure was nil. The report also detailed the club expenses, with a major portion towards annual membership fees. Citing the decision in OTIS Elevator Co. (India) Ltd. v. CIT (195 ITR 682) allowing club fees as expenditure, the Tribunal found no basis for disallowance. Consequently, the disallowance was deleted, and the appeal was allowed.
  
  In conclusion, the Tribunal directed a fresh examination of the foreign exchange loss issue and allowed the appeal regarding the disallowance of club fees for the assessment year 2006-07.

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• 2011 (3) TMI 1663
  
  Issues Involved:
  1. Classification of net surplus on sale of shares as capital gain or business income.
  2. Set off of short-term capital loss against business income.
  3. Disallowance of expenditure u/s 14A.
  
  Summary:
  
  1. Classification of Net Surplus on Sale of Shares:
  The primary issue was whether the net surplus from the sale of shares should be treated as capital gain or business income. The CIT(A) directed the AO to treat the net surplus on account of the sale of shares as capital gain instead of business income. The CIT(A) observed that the intention of the appellant was to treat shares as investments, as evident from the entries in the books of account and balance sheet. The Tribunal upheld the CIT(A)'s decision, noting that the shares were acquired from an amalgamating company where they were held as investments. The Tribunal emphasized that the initial intention at the time of purchase is crucial in determining whether the transaction is an investment or trading. The Tribunal also referenced the decision in the case of Reliance Trading Enterprises Ltd., which supported the view that shares held as investments should be treated as capital assets. Consequently, the Tribunal rejected the Revenue's appeal on this ground.
  
  2. Set Off of Short-Term Capital Loss:
  The CIT(A) allowed the set off of the short-term capital loss against the current year's short-term capital gain, following the decision to treat the net surplus on the sale of shares as capital gain. The Tribunal upheld this decision, noting that it was a consequential relief following the classification of the net surplus as capital gain.
  
  3. Disallowance of Expenditure u/s 14A:
  The assessee contested the disallowance of expenditure u/s 14A, which was made by applying Rule 8D. The CIT(A) had directed the AO to apply Rule 8D following the decision of the ITAT Special Bench in the case of Daga Capital Management. However, the Tribunal noted that the decision in Daga Capital Management was overruled by the Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd., which held that Rule 8D is prospective and applicable from AY 2008-09. The Tribunal set aside the orders of the authorities on this issue and restored the matter to the CIT(A) for re-adjudication in light of the Bombay High Court's decision.
  
  Conclusion:
  The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection for statistical purposes. The net surplus on the sale of shares was to be treated as capital gain, the short-term capital loss was allowed to be set off against the capital gain, and the disallowance u/s 14A was to be re-adjudicated by the CIT(A).

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