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Showing 161 to 180 of 871 Records
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2012 (5) TMI 716
Issues involved: Revenue's appeal against the order of Ld. CIT(A) regarding the disallowance of the Assessee's claim of exemption of Rs. 34,04,680/- u/s.10A of the IT Act for the assessment year 2008-09.
The Appellate Tribunal ITAT Ahmedabad heard the revenue's appeal challenging the Ld. CIT(A)'s order regarding the disallowance of the Assessee's claim of exemption of Rs. 34,04,680/- u/s.10A of the IT Act for the assessment year 2008-09. The revenue contended that the Ld. CIT(A) erred in law and on facts by deleting the disallowance and should have upheld the Assessing Officer's order. The Ld. A.R. supported the Ld. CIT(A)'s decision, citing a previous tribunal order in the assessee's own case for the assessment year 2002-03. This previous order was confirmed by the Hon'ble Gujarat High Court. After considering the submissions and reviewing the orders of the authorities below, the Tribunal found no reason to interfere with the Ld. CIT(A)'s decision, as it was based on the previous tribunal order upheld by the High Court. Consequently, the appeal of the revenue was dismissed, affirming the Ld. CIT(A)'s order.
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2012 (5) TMI 715
Issues involved:
The judgment involves the appeal against the order of Commissioner of Income Tax (Appeals) related to assessment year 2007-08 under section 143(3) of the Income-tax Act.
Issue 1: Contravention of Section 250(6) of the Income Tax Act
The appellant contended that the order passed by the CIT(A) erred in contravention of the provisions of Section 250(6) of the Income Tax Act, 1961.
Issue 2: Addition of Payment to Contractors under Section 40(a)(ia)
The main issue raised in the appeal was against the addition of Rs. 16,70,760/- made by invoking provisions of section 40(a)(ia) of the Act for non-deduction of tax at source under section 194C of the Act.
Details of the Judgment:
The Assessing Officer noted that the assessee had made payments to subcontractors totaling Rs. 44,88,764/-, out of which Rs. 16,70,760/- had no tax deducted at source. The CIT (Appeals) upheld the disallowance of these payments under section 40(a)(ia) of the Act.
The appellant argued that the issue was covered by precedents such as CIT Vs. Virgin Creations and ACIT Vs. Rajamahendri Shipping & Oil Field Services Ltd. The appellant also highlighted that TDS was deducted and deposited before the due date of filing the return of income.
After considering the contentions, the Tribunal found that the provisions of section 40(a)(ia) were not applicable to the amount paid to subcontractors during the year. The Tribunal referred to the Special Bench decision in ACIT Vs. Merilyn Shipping & Transports, stating that non-deposit of TDS does not merit disallowance if the expenditure has been paid.
The Tribunal also discussed the amendment to section 40(a)(ia) by the Finance Act, 2010, and the retrospective nature of the proviso. Citing various decisions, including CIT Vs. Virgin Creations, the Tribunal held that once tax was deducted and deposited before the due date of filing return of income, there was no merit in disallowing the expenditure.
In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the Assessing Officer to allow the claim of expenditure of Rs. 16,70,760/-.
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2012 (5) TMI 714
Penalty u/s.271(1)(b) - conduct of the assessees or their Chartered Accountant in the proceedings - Held that:- On the careful perusal of the assessment order it is seen that nowhere any grievance is raised by the A.O. that the assessees or their Chartered Accountant were ‘non-cooperative’ or made any conscious defiance of noting dt. 14.10.09. As stated above, in fact, it is seen that the assessee’s responded on all the dates as required by the A.O. Merely because on 20.10.2009 the Chartered Accountant of these assessees has not appeared or filed some details as asked by the A.O., the extreme step is taken to penalise these assessees by levying the penalty u/s.271(1)(b). In the present cases, nowhere it is alleged that the conduct of the assessees or their Chartered Accountant in the proceedings was deliberate defiance of law on their part.
There was no justification on the part of the A.O. to levy penalty on all these assessees for the non-compliance by filing the details on 20.10.2009. Therefore, allow all these appeals filed by the assessees and delete all the penalties levied by the A.O. u/s.271(1)(b) of the Act.
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2012 (5) TMI 713
Allowance of commission expenses - Held that:- There was no agreement between the assessee and the commission agents and there was no document on the basis of which it could be said that the commission was due and payable. As it has been already pointed out, even the agreements do not bind the Assessing Officer from enquiring into deductibility of commission. In this case there are no agreements and also there was no evidence of any correspondence or any personal meetings between the assessee and the commission agents to suggest that there was any relationship on the basis of which the commission agents procured customers for the assessee for which they were entitled to receive commission.
The understanding between the parties was an oral understanding and it was doubtful that such an oral understanding could have been arrived at without any longstanding relationship having been established between the assessee and the commission agents involving such huge amounts of money over a period of time. Further, the assessee is unable to furnish the details of customers introduced by each agent and also the exact working of commission payment made to each of the agents. Mere payment of commission through account payee cheque after deduction of TDS does not absolve the assessee from discharging its burden with regard to proving business purpose of the payments.
In the absence of any credible evidence for making such payments, we are inclined to disallow the same.
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2012 (5) TMI 712
Default of non-payment of taxes due on the returned income - Form of appeal and limitation - Held that:- This is a case of deemed payment. In the situation, to our mind, the expression ‘paid’ used in the Act is inclusive of all kinds of payments including ‘deemed payment’, if any, and that being so, the case of the assessee must be considered as covered by the said expression and consequently, assessee must be deemed to have paid the taxes due on the income returned by him for the years under appeal.
It is trite law that right of appeal is a precious right, which must be protected and should not be taken away from the assessee for the reasons discussed by the authorities below. Therefore, we are of the opinion that the impugned orders of the CIT(A) are required to be reversed. We accordingly set aside the impugned orders of the CIT(A) for both the years, and restore these matters to the file of the CIT(A), with a direction to condone the delay in the payment of taxes on admitted income by the assessee, which has taken place only on account of late adjustment of cash seized at the time of search, by the Revenue towards the taxes due from the assessee for the years under appeal, and proceed to dispose off the appeals for both he appeals before him afresh on merits in accordance with law and after giving reasonable opportunity of hearing to the assessee.
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2012 (5) TMI 711
Issues involved: Challenge to impugned order of Ld. CIT -30, Mumbai for A.Y. 2005-06 regarding reference to DVO for determining Fair Market Value (FMV) of property as on 01.04.1981.
Summary:
Issue 1: Reference to DVO for FMV valuation
The assessee challenged the order of Ld. CIT -30, Mumbai for A.Y. 2005-06 regarding the reference made by the A.O. to the Valuation Officer u/s.55A for determining the FMV of the property as on 01.04.1981. The A.O. was not satisfied with the valuation adopted by the assessee and referred the matter to the DVO. The DVO's report valued the property at a different amount than declared by the assessee. The A.O. used this valuation to calculate capital gains. The issue was whether the A.O. had the authority to make such a reference.
The Ld. Counsel argued that for A.Y. 2005-06, there was no provision in sec.55A to refer the valuation to find out if the assessee declared more value of the property. Citing a case law, it was contended that the A.O. could only make a reference if the declared value was lesser. The Tribunal found that the issue was covered in favor of the assessee by a decision of the Hon'ble High Court of Bombay, which held that the A.O. did not have the authority to refer the valuation to the DVO to find out if the assessee declared excess FMV. Therefore, the Tribunal directed the A.O. to accept the valuation declared by the assessee for the cost of acquisition.
In conclusion, the Tribunal allowed the assessee's appeal, holding that the A.O.'s reference to the Valuation Officer u/s.55A for FMV valuation was without jurisdiction, based on the decision of the Hon'ble High Court of Bombay.
Order pronounced in the open court on 28th May, 2012.
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2012 (5) TMI 710
Issues involved: Disallowance of business loss, Nature of interest income, Disallowance of claim of setting off business loss, Disallowance of expenses, Levy of interest under section 234B.
Dispute 1 - Disallowance of Business Loss:
The assessee claimed a business loss of Rs. 37,494 from shares/securities due to valuation. The AO disallowed the loss stating it was not genuine. CIT(A) upheld the disallowance as the assessee was not engaged in any business activity post-2001 securities scam. Tribunal confirmed the disallowance based on the previous year's decision. The loss was disallowed as it was not considered a business loss.
Dispute 2 - Nature of Interest Income:
Interest income of Rs. 19,31,399 from FDRs was treated as income from other sources by the AO. CIT(A) confirmed this, stating lack of nexus between FD and the assessee's business. Tribunal, based on a previous decision, held that interest from FDRs pledged in connection with business should be treated as business income. The claim was allowed as the business was only suspended, not closed.
Dispute 3 - Disallowance of Setting off Business Loss:
The claim of setting off business loss against income from other sources became infructuous as interest income was allowed as business income. The ground was dismissed as not pressed.
Dispute 4 - Disallowance of Expenses:
Expenses of Rs. 30,65,040 claimed by the assessee were disallowed by the AO, stating the business had closed. CIT(A) confirmed the disallowance, mentioning lack of proof regarding certain expenses. Tribunal held that the business was under suspension, not closed, and expenses should be allowed. Professional expenses related to tax matters were to be verified for this year. The issue was restored to the AO for further examination.
Dispute 5 - Levy of Interest under section 234B:
The levy of interest under section 234B was considered consequential, to be recomputed by the AO at the time of implementing the order.
In conclusion, the appeal of the assessee was partly allowed by the Tribunal on various grounds.
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2012 (5) TMI 709
Issues involved: Addition made u/s 41(1) of the IT Act & Disallowance of labour expenses.
Addition made u/s 41(1) of the IT Act:
The case involved the deletion of an addition made u/s 41(1) of the IT Act regarding sundry creditors in the balance sheet. The Assessing Officer proposed an addition due to outstanding liabilities, which the assessee contested by providing details of payments and addresses of creditors. The Commissioner of Income Tax(Appeals) restricted the disallowance, considering the reduction in outstanding balances. The Tribunal upheld the Commissioner's decision, emphasizing that as long as the assessee acknowledges and repays the liabilities, cessation cannot be assumed solely based on age or lack of confirmations.
Disallowance of labour expenses:
The Assessing Officer disallowed a portion of labour expenses due to lack of proper vouchers, suspecting inflation of costs based on self-made labour cards. The Commissioner of Income Tax (Appeals) reduced the disallowance by estimating the income at 5% of the turnover, following a Tribunal decision. The Tribunal affirmed the Commissioner's decision, noting that the estimation was reasonable and upheld the addition of a reduced amount.
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2012 (5) TMI 708
Issues involved: Appeal against CIT(A) order for assessment year 2007-08 regarding deletion of additions for non-provision of interest on outstanding amounts.
Issue 1 - Addition of interest on outstanding amount to State Govt.:
The Assessing Officer added interest on outstanding amount of &8377; 39.30 crores due to the State Govt. The CIT(A) deleted this addition based on a previous order in the assessee's favor for the assessment year 2006-07.
Issue 2 - Addition of interest on amount receivable from Food Corporation of India (FCI):
The Assessing Officer disallowed interest of &8377; 12.72 crores on the outstanding amount of &8377; 106.03 crores receivable from FCI. The CIT(A) deleted this addition, also relying on the previous order for the assessment year 2006-07.
The Tribunal upheld the CIT(A) order for both issues, stating that the outstanding amounts were on account of trading activities and not interest-free advances, hence no disallowance of interest expenditure was justified. The Tribunal dismissed the appeal, noting the similarity of facts with the assessment year 2006-07 and following the previous order.
In conclusion, the appeal against the CIT(A) order for the assessment year 2007-08 was dismissed by the Tribunal based on the precedent set in the assessment year 2006-07, where additions for non-provision of interest were deleted in favor of the assessee.
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2012 (5) TMI 707
Issues involved: Search and seizure operations, assessment proceedings u/s 153C, penalty proceedings u/s 271(1)(c), concealment of income, disallowance of depreciation interest and loss on asset, quantum appeal, penalty on non-existing assets, bank interest, prior period expenditure, levy of penalty, legal arguments, case laws cited.
Assessment Years 2003-04 and 2005-06:
- Search and seizure operations were conducted leading to assessment proceedings u/s 153C and initiation of penalty proceedings u/s 271(1)(c).
- Assessing Officer made additions for disallowance of depreciation interest and loss on asset, leading to penalty imposition for concealment of income.
- Assessee contended no intentional withholding of information, but Assessing Officer found discrepancies in explanations provided.
- CIT(A) considered quantum appeal decisions and deleted penalties for disallowed depreciation and bank interest.
- CIT(A) upheld penalty for disallowed prior period expenditure, as assessee indirectly admitted to wrong claims.
- Legal arguments presented by both parties, with assessee arguing against automatic penalty imposition.
- Tribunal held that mere acceptance of additions in quantum appeal does not justify penalty imposition, hence penalties were deleted for both years.
Assessee's Appeal:
- Assessee challenged penalties on disallowances for sale of assets and prior period expenditure.
- Assessee argued no concealment and provided explanations to authorities.
- Assessee cited legal precedents to support their case.
- Departmental Representative relied on CIT(A) orders.
- Tribunal referred to Supreme Court ruling stating that unsustainable claims do not necessarily indicate inaccurate particulars.
- Tribunal concluded that suspicion from Assessing Officer's disallowances does not prove concealment or inaccurate particulars, hence penalties were deleted for both assessment years.
- Both appeals filed by the assessee were allowed.
Conclusion:
The Tribunal ruled in favor of the assessee, deleting the penalties imposed for the assessment years 2003-04 and 2005-06, based on the lack of evidence showing intentional concealment of income or furnishing of inaccurate particulars. The decision highlighted the importance of proving fraud or wilful negligence to justify penalty imposition, emphasizing that mere acceptance of additions in quantum appeal does not automatically warrant penalties. The legal arguments and precedents cited by the assessee supported the Tribunal's decision to overturn the penalties.
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2012 (5) TMI 706
Issues involved: Revenue's appeal against deletion of addition made on account of disallowance u/s 40(a)(ia) for assessment year 2006-07.
Summary:
The revenue appealed against the deletion of an addition made under Section 40(a)(ia) by the Assessing Officer. The assessee, an advertising agency acting as an agent for newspapers, had not deducted TDS from payments made to various agencies. The Assessing Officer disallowed expenses of Rs. 29,78,272 and added it to the assessee's income u/s 40(a)(ia) for non-compliance with Section 194C of the ITI Act. The assessee contended that as a sub-agent on commission basis, TDS deduction was not required. The ld. CIT(A) accepted the assessee's argument and deleted the addition. The revenue's appeal was dismissed by the ITAT Ahmedabad, upholding the CIT(A)'s decision based on CBDT circular and judicial precedents.
The Assessing Officer found that the assessee failed to deduct TDS u/s 194C from payments to advertising agencies, resulting in the addition of Rs. 29,78,272 to the income u/s 40(a)(ia). The assessee argued that as a sub-agent on commission basis, TDS deduction was not mandatory, citing a CBDT circular and a judicial decision. The ld. CIT(A) agreed with the assessee's position and deleted the addition.
The ITAT Ahmedabad upheld the CIT(A)'s decision, stating that the assessee, acting as an agent for media, was not obligated to deduct TDS u/s 194C on payments to advertising agencies. The ITAT relied on the CBDT circular and a previous ITAT decision to support the conclusion that the provisions of Section 40(a)(ia) did not apply in this case. Consequently, the revenue's appeal was dismissed.
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2012 (5) TMI 705
Determination of Annual Letting Value (ALV) - Held that:- It becomes apparent that the rateable value of the property in the instant case be considered for determining the ALV of the property, as has been accepted by the AO himself in the succeeding year. The further contention raised by the assessee that deduction should be allowed towards municipal taxes is not acceptable in view of the reason that such taxes were paid by the tenant and not the assessee. We, therefore, modify the impugned order to this extent.
Determination of ALV - Held that:- For the immediately preceding assessment year 2004-05 we have held that the ALV of the property be taken at ₹ 11,13,700/- without deduction of any municipal taxes which were borne by the tenant and not the assessee. In this view of the matter, the impugned order is upheld and the ground raised by the assessee is dismissed.
Denial of deduction towards education cess - Held that:- Education cess is nothing but additional surcharge. Since such surcharge or education cess is part of tax, the same, in our considered opinion, cannot be allowed as deduction. Such amount clearly constitutes part of tax which falls within sec. 40(a)(ii). We, therefore, uphold the impugned order on this score.
Disallowance u/s.14A - Held that:- We are unable to find any reason for interfering with the impugned order on this issue because the ld. CIT(A) has directed the AO to follow the mandate of the judgment of the Hon’ble jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ) on some reasonable basis. We uphold the impugned order but clarify that in no case the disallowance to be made by the AO pursuant to the order of ld. CIT(A) should exceed the original disallowance made by him. This ground is, therefore, disposed of accordingly.
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2012 (5) TMI 704
Issues Involved:
1. Reopening and reassessment order u/s 148.
2. Disallowance of business loss on confiscated silver stock.
3. Disallowance of telephone expenses.
4. Penalty u/s 271(1)(c).
Summary:
Issue 1: Reopening and Reassessment Order u/s 148
The assessee challenged the reopening and reassessment order by the Asstt. CIT, arguing that it was a mere fresh application of mind to the same facts or a change of opinion, and that there was no reason to believe for reopening as it was based on an audit objection. The assessee also contended that the reassessment was beyond jurisdiction as no speaking order was passed against the objections raised. However, this ground was not pressed during the hearing and was dismissed as not pressed.
Issue 2: Disallowance of Business Loss on Confiscated Silver Stock
The assessee, a jeweller, claimed a business loss deduction of Rs. 1,05,02,075 for the confiscated silver stock. The silver was seized by the DRI, and the Customs Department did not accept the legality of the purchase from 18 NRIs. The Customs Tribunal (CEGAT) upheld the confiscation, and the Bombay High Court and Supreme Court upheld this decision. The Tribunal found that the loss crystallized in the year under consideration when the CEGAT order was received. The Tribunal held that the loss was a business loss as the silver was part of the stock-in-trade and allowed the deduction, referencing the Supreme Court decision in CIT v. Piara Singh, which allowed losses from illegal activities if they were incidental to the business.
Issue 3: Disallowance of Telephone Expenses
The assessee contested the disallowance of Rs. 5,058 from telephone expenses. The AO had estimated a 5% disallowance for personal use, which was confirmed by the CIT(A). The Tribunal upheld the disallowance, noting that the assessee did not maintain records to substantiate the claim.
Issue 4: Penalty u/s 271(1)(c)
The AO levied a penalty of Rs. 42,00,830 under s. 271(1)(c) for furnishing inaccurate particulars of income by claiming a loss on confiscated silver. The CIT(A) deleted the penalty, noting that the stock was consistently held as 'stock-in-trade' and written off based on the CEGAT order. The Tribunal upheld the CIT(A)'s decision, finding that the penalty was not justified as the quantum appeal had been allowed, and the loss was considered a business loss.
Conclusion:
The appeal of the assessee was partly allowed, specifically on the issue of business loss on confiscated silver stock, while the appeal of the Revenue was dismissed.
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2012 (5) TMI 703
The Allahabad High Court dismissed the review petition as there was no apparent error on the face of the record. The petitioner can appeal within one month based on a Division Bench's judgment in the case of M/s Luxmi Oil & Vanaspati (Pvt.) Limited.
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2012 (5) TMI 702
Issues Involved:
1. Addition of Rs. 3,02,17,147/- as income from undisclosed sources on account of so-called bogus purchases.
2. Initiation of penalty proceedings u/s 271A of the Act.
3. Deletion of addition of Rs. 1 crore on account of share application for want of verification of nature and source thereof.
Summary:
Issue 1: Addition of Rs. 3,02,17,147/- as income from undisclosed sources on account of so-called bogus purchases
The assessee contested the addition of Rs. 3,02,17,147/- made by the Assessing Officer (AO) as income from undisclosed sources on account of bogus purchases. The assessee argued that the purchases were genuine, supported by cogent and corroborative evidence, including statements and affidavits from the suppliers. The AO had treated the purchases from M/s Vikas Kumar Vivek Kumar, M/s Rithala Enterprises, and M/s Shanti Enterprises as bogus based on the statement of Shri Rohtash Mittal and the closure of the other two businesses. The CIT(A) upheld the AO's findings, relying on the decision in CIT v La Medica, 250 ITR 575 (Del). However, the Tribunal found that the suppliers existed and confirmed the transactions through affidavits and bank statements. The Tribunal held that the revenue failed to provide credible evidence to disprove the genuineness of the purchases and noted that the sales from these purchases were accepted by the department. Consequently, the Tribunal allowed the assessee's appeal on this ground.
Issue 2: Initiation of penalty proceedings u/s 271A of the Act
The assessee challenged the initiation of penalty proceedings u/s 271A. The Tribunal noted that no appeal lies against the mere initiation of penalty proceedings. Therefore, this ground of appeal was dismissed.
Issue 3: Deletion of addition of Rs. 1 crore on account of share application for want of verification of nature and source thereof
The revenue appealed against the deletion of the addition of Rs. 1 crore made by the AO on account of share application money. The CIT(A) found that the amount represented a book adjustment and not an unrecorded investment. The Tribunal upheld the CIT(A)'s findings, noting that the amount was an adjustment entry in the books of M/s Swarna Industries Ltd. and did not impact the assets and liabilities of the assessee. Therefore, the Tribunal dismissed the revenue's appeal on this ground.
Conclusion:
- The assessee's appeal (ITA No. 264/Chd/2010) was partly allowed.
- The revenue's appeal (ITA No. 411/Chd/2010) was dismissed.
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2012 (5) TMI 701
Issues involved: Jurisdiction of CIT u/s 263 for assessment year 2005-06 regarding deduction u/s 10A for STPI unit and setting off losses of non-STPI unit.
Jurisdiction of CIT u/s 263: The appeal by the Assessee was against the order of the CIT-I, Hyderabad dated 27/01/2010, passed u/s 263 for the assessment year 2005-06. The CIT observed that the assessment completed u/s 143(3) for the AY 2005-06 was erroneous and prejudicial to the revenue as the AO wrongly allowed deduction u/s 10A without setting off the loss of non-STPI unit, resulting in revenue loss. A show cause notice was issued to rectify this error.
Deduction u/s 10A for STPI unit: The CIT held that the deduction u/s 10A for the STPI unit should be computed after setting off the losses of the non-STPI unit. The Assessee's contention that the deduction u/s 10A should be computed for each undertaking without setting off losses of other units was rejected. The CIT directed that the business loss of the non-STPI unit should be set off against the profits of the STPI unit before computing relief u/s 10A for the STPI unit.
Legal Precedents: The issue of whether losses of non-10A unit can be set off against the income of the 10A unit was settled by the Karnataka High Court in CIT v Yokogawa India Ltd. The High Court held that income of the 10A unit should be removed at the source itself, not after computing total income, making the income eligible for exemption u/s 10A not enter into computation. The Special bench of the Chennai Tribunal also reached a similar conclusion in Scientific Atlanta Indi technology P Ltd v ACIT. The existence of multiple views on the matter indicated that the CIT erred in assuming jurisdiction u/s 263.
Decision: The ITAT Hyderabad held that both in terms of jurisdiction and merits, the Assessee succeeded. The Appeal of the Assessee was allowed, overturning the CIT's order.
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2012 (5) TMI 700
The appellate tribunal rejected appeals by both the revenue and the assessee regarding transit loss in the export of Linear Alkyl Benzene (LAB). The tribunal found that the issue was covered by a proviso under Section 35 of the Central Excise Act, making the appeals not maintainable.
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2012 (5) TMI 699
N.P. estimation - Held that:- Estimation of net profit above 5% of the purchases made by the assessee is to be adopted, we direct the AO to estimate net profit at 5% of the purchases or stock put for sale during the year subject to the assessed income not less than returned income. The order of the CIT(A), to this extent, is modified accordingly.
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2012 (5) TMI 698
Issues Involved:
1. Treatment of Rs. 35,49,091/- received as sinking fund.
2. Allowability of expenditure of Rs. 40,88,455/- on replacement of air conditioning plant.
3. Nature of sinking fund receipts as capital or revenue receipts.
4. Usage of sinking fund amounts.
Summary:
Issue 1: Treatment of Rs. 35,49,091/- received as sinking fund
The Ld. Commissioner of Income Tax (Appeals) erred in enhancing the income by Rs. 35,49,091/- received as sinking fund for the replacement of capital goods, treating it as revenue receipts. The assessee argued that this amount, received from flat owners/tenants for capital asset replacement, had always been treated as capital receipts and accepted by the Assessing Officer in previous assessments.
Issue 2: Allowability of expenditure of Rs. 40,88,455/- on replacement of air conditioning plant
The Ld. Commissioner of Income Tax (Appeals) did not allow the expenditure of Rs. 40,88,455/- incurred on the replacement of the air conditioning plant, treating it as capital expenditure and allowing depreciation instead. The assessee contended that the expenditure should be adjusted from the sinking fund and not treated as revenue expenditure.
Issue 3: Nature of sinking fund receipts as capital or revenue receipts
The Ld. Commissioner of Income Tax (Appeals) held that the sinking fund receipts are revenue receipts, as they are part of the total maintenance receipts and utilized for day-to-day activities. The assessee argued that the Rs. 2 per sq. ft. collected for the sinking fund is specifically for capital asset replacement and should be treated as capital receipts.
Issue 4: Usage of sinking fund amounts
The Ld. Commissioner of Income Tax (Appeals) observed that the sinking fund amounts were not exclusively used for their intended purpose and were merged with other maintenance receipts. The assessee maintained that the sinking fund was utilized for capital repairs and replacements as per the agreement with the flat owners/tenants.
Judgment:
The Tribunal found that the system followed by the assessee, where Rs. 2 per sq. ft. is collected and held in a sinking fund for asset replacement, is cogent and has been accepted by the Revenue in previous years. The Tribunal held that the Rs. 35,49,091/- collected during the year as sinking fund contribution is a capital receipt and not liable to be taxed as revenue receipt. The expenditure of Rs. 40,88,455/- incurred for the replacement of air conditioners should be adjusted from the sinking fund and not allowed as revenue expenditure. The appeal filed by the assessee was partly allowed.
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2012 (5) TMI 697
Issues Involved:
1. Reopening of assessment u/s 147(a) and disallowance of deduction u/s 80P(2)(a)(iii).
2. Interpretation of "marketing of agricultural produce" u/s 80P(2)(a)(iii).
3. Applicability of Rule 8 of the Income-tax Rules.
Summary:
1. Reopening of assessment u/s 147(a) and disallowance of deduction u/s 80P(2)(a)(iii):
The Revenue issued notice u/s 148 to reopen the assessment for the Assessment Years 2003-04 to 2008-09 to withdraw the deduction granted u/s 80P(2)(a)(iii). The Assessing Officer disallowed the claim, arguing that the society's activities constituted trading and manufacturing rather than mere marketing of agricultural produce.
2. Interpretation of "marketing of agricultural produce" u/s 80P(2)(a)(iii):
The Assessing Officer observed that the assessee society purchased green leaves from its members, manufactured tea, and sold it. He contended that this did not qualify as "marketing of agricultural produce" as per section 80P(2)(a)(iii). The ld. CIT(A) disagreed, holding that the manufacturing of tea falls within the processing of agricultural produce to make it suitable for marketing, thus qualifying for the deduction. The CIT(A) relied on several judicial precedents, including the Hon'ble Supreme Court's decision in Broach District Cooperative Cotton Sales, Ginning, and Pressing Society Ltd. v. CIT, which supported a broader interpretation of "marketing."
3. Applicability of Rule 8 of the Income-tax Rules:
The Assessing Officer's argument that Rule 8 applied to the case was rejected by the CIT(A), who clarified that Rule 8 pertains to the computation of income from tea grown and manufactured by the seller, which was not applicable here as the society was involved in marketing agricultural produce grown by its members.
Conclusion:
The Tribunal upheld the CIT(A)'s decision, emphasizing that the activities of the society, including the processing of green leaves into black tea, constituted "marketing of agricultural produce" as per section 80P(2)(a)(iii). The Tribunal dismissed the Revenue's appeals, affirming the assessee's eligibility for the deduction.
Order:
The appeals of the Revenue were dismissed, and the order was pronounced on 25th May 2012 at Chennai.
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