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2011 (6) TMI 884
Issues involved:
The judgment deals with the following Issues:
1. Eligibility of deduction u/s 80IB(10) for a residential project with commercial establishments exceeding the specified limit.
2. Applicability of amendment in law w.e.f 1-4-2005 on deduction u/s 80IB(10).
3. Entitlement to deduction u/s 80IB(10) based on project approval and formation of Assessee AOP.
Issue 1:
The Revenue contended that the residential project had commercial establishments exceeding the limit, disentitling the assessee from claiming deduction u/s 80IB(10). However, the Tribunal referred to the decision of the Hon'ble Bombay High Court in CIT vs. Brahma Associates, emphasizing that once the project is approved by local authorities, deduction must be allowed on the entire project, rejecting the Revenue's objection.
Issue 2:
Regarding the amendment in law w.e.f 1-4-2005, the Tribunal cited the case of Hiranandani Akruti JV vs. DCIT, highlighting the hardship faced by assessees due to retrospective application. The Tribunal held that the law as it existed when the project was approved should apply, rejecting the Revenue's objection.
Issue 3:
The Revenue argued that the AOP was formed after project approval, disqualifying the assessee from deduction u/s 80IB(10). However, the Ld. CIT(A) ruled in favor of the assessee, noting that the project was developed by the AOP led by a physically challenged individual, Shri Harish P. Doshi. The Tribunal upheld the decision, stating that sec.80IB(2)(i) is not applicable for claiming deduction u/s 80IB(10), and dismissed the Revenue's appeal.
In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the assessee's entitlement to deduction u/s 80IB(10) based on the project's approval and development by the AOP.
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2011 (6) TMI 883
Issues Involved:
1. Validity of reassessment proceedings initiated u/s 147.
2. Quantum of addition made during reassessment proceedings.
Summary:
Validity of Reassessment Proceedings:
The cross objection by the assessee challenges the validity of reassessment proceedings initiated u/s 147. The assessee argued that the notice u/s 148 dated 28.3.2008 for reopening the completed assessment u/s 143(3) dated 19.12.2003 was invalid as the assessee had declared full and true particulars of its income. The reassessment was based on a retrospective amendment to section 80 HHC, which was not applicable at the time of the original assessment. The Tribunal upheld the assessee's grievance, noting that reassessment proceedings initiated after four years from the end of the relevant assessment year are invalid unless it is established that the assessee failed to disclose all material facts necessary for the assessment. The Tribunal cited the decision in Dharmik Exim Pvt Ltd v ACIT, which held that reopening based on retrospective amendment is invalid if the assessee had fully disclosed all material facts at the time of the original assessment. Consequently, the reassessment proceedings were quashed.
Quantum of Addition:
The departmental appeal challenged the CIT(A)'s order on the quantum of addition made during the reassessment proceedings, specifically regarding the deduction u/s 80 HHC on DEPB licenses. However, since the reassessment proceedings were quashed, the issue of the quantum of addition became academic and infructuous. The Tribunal noted that the correctness of the additions made during the reassessment proceedings was covered against the assessee by the Jurisdictional High Court's judgment in Kalpataru Colours and Chemicals. However, since the reassessment proceedings themselves were invalid, this aspect ceased to have any practical implication.
Conclusion:
The cross objections filed by the assessee were allowed, and the appeals filed by the revenue were dismissed as infructuous. The Tribunal emphasized that reassessment proceedings initiated after four years based on retrospective amendments are invalid if the assessee had fully disclosed all material facts at the time of the original assessment.
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2011 (6) TMI 882
Judgment: High Court MADRAS HIGH COURT
Citation: 2011 (6) TMI 882 - MADRAS HIGH COURT
Judges: D. Murugesan and Mr. K.K. Sasidharan
Decision: Petition dismissed.
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2011 (6) TMI 881
Issues involved:
The issue involves the levy and confirmation of penalty u/s 271B of the Income Tax Act, 1961.
Summary:
Issue 1: Penalty u/s 271B
The Assessing Officer initiated penalty proceedings u/s 271B as the assessee failed to get accounts audited within the specified time for the relevant Assessment Year. The assessee cited illness as the reason for the delay and submitted medical evidence. The Assessing Officer rejected the explanation and levied a penalty. The First Appellate Authority upheld the penalty. The assessee appealed against this decision.
Details:
The assessee was ill from 31st October, 2005 to 5th November, 2005, and got the audit completed on 8th November, 2005, filing the report on 16th November, 2005. The assessee provided medical evidence to support the illness claim. The Revenue Authorities did not consider the evidence sympathetically. The assessee argued that the delay was due to his health condition, constituting a reasonable cause for the delay in filing the audit report as required by law.
Judgment:
The Tribunal found that the assessee's illness was supported by documentary evidence, which was not refuted by the Revenue Authorities. Considering the circumstances and the evidence presented, the Tribunal concluded that the assessee had established a reasonable cause for the delay. Consequently, the penalty u/s 271B was canceled, and the appeal by the assessee was accepted.
Conclusion:
The Tribunal allowed the appeal filed by the assessee, canceling the penalty imposed under section 271B of the Income Tax Act, 1961.
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2011 (6) TMI 880
Issues Involved:
1. Validity of assessment orders under section 143(3) r/w section 153A of the Income Tax Act, 1961.
2. Legitimacy of direction under section 142(2A) for special audit.
3. Disallowance of various expenses (labour charges, direct expenditure, indirect expenditure, cash payments, unexplained cash balance, repairs, self-assessment tax, foreign travel expenses, office renovation charges, unrecorded investment, LTCG, purchase of fixed assets, deposits, jewellery).
4. Levy of interest under sections 234A, 234B, and 234C.
5. Validity of assessment orders under section 143(3) r/w section 153C.
6. Penalty under section 271(B) for failure to get accounts audited under section 44AB.
Issue-wise Detailed Analysis:
1. Validity of Assessment Orders under Section 143(3) r/w Section 153A:
The Tribunal examined the legitimacy of the assessment orders passed under section 143(3) r/w section 153A. It was argued that the assessment was invalid as no incriminating material was found during the search. The Tribunal observed that the search did not yield significant undisclosed assets or complex accounts. The assessment was based on regular books of account and ad-hoc disallowances, which were not justified. Hence, the assessment order was deemed invalid and bad in law.
2. Legitimacy of Direction under Section 142(2A) for Special Audit:
The Tribunal scrutinized the direction for a special audit under section 142(2A). It was noted that the Assessing Officer (AO) ordered the special audit close to the time-barring period without establishing the complexity of accounts. The Tribunal cited several case laws, including Alidhara Texpro Engineering P. Ltd. v/s DCIT and Rajesh Kumar & Ors. v/s DCIT, emphasizing that the AO must form an opinion based on objective considerations and provide an opportunity for the assessee to be heard. The Tribunal concluded that the special audit was ordered to gain additional time and was not justified, rendering the assessment barred by limitation.
3. Disallowance of Various Expenses:
The Tribunal addressed the disallowance of various expenses such as labour charges, direct and indirect expenditures, cash payments, unexplained cash balance, repairs, self-assessment tax, foreign travel expenses, office renovation charges, unrecorded investment, LTCG, purchase of fixed assets, deposits, and jewellery. It was observed that the AO made ad-hoc disallowances without proper justification. The Tribunal held that the disallowances were excessive and not supported by evidence. The AO should have estimated the profit based on sections 44AD or 44AF, which provide for presumptive taxation. Consequently, the disallowances were set aside.
4. Levy of Interest under Sections 234A, 234B, and 234C:
The Tribunal noted that the levy of interest under sections 234A, 234B, and 234C is mandatory and consequential. Therefore, no separate adjudication was needed on this issue.
5. Validity of Assessment Orders under Section 143(3) r/w Section 153C:
The Tribunal examined the validity of assessment orders under section 143(3) r/w section 153C. Similar to the earlier findings, it was noted that the AO did not justify the need for a special audit and did not provide a list of seized documents. The Tribunal held that the special audit reference was bad in law, and the assessment was barred by limitation. The Tribunal's directions and views expressed in the earlier part of the judgment were applied to these appeals as well.
6. Penalty under Section 271(B) for Failure to Get Accounts Audited under Section 44AB:
The Tribunal addressed the penalty under section 271(B) for failure to get accounts audited under section 44AB. It was noted that the assessee did not maintain regular books of account, and therefore, the question of their audit did not arise. Citing the Pune Bench decision in Shri Ramchandra D. Keluskar, the Tribunal held that the penalty under section 271(B) was not justified and directed the AO to delete the penalty.
Conclusion:
The Tribunal allowed all the appeals filed by the assessee, setting aside the orders of the Commissioner (Appeals) and holding that the assessments were barred by limitation and the disallowances were not justified. The penalties under section 271(B) were also cancelled. The judgment emphasized the importance of objective considerations and procedural fairness in tax assessments and audits.
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2011 (6) TMI 879
Issues involved: Appeal against CIT(A) order u/s 250(6) of the Income-tax Act, 1961 for AY 2004-05.
Revenue's Grounds of Appeal:
1. Dispute over treating Debit Note as genuine for profit reduction.
2. Lack of basis for disallowance apportionment.
3. Justification for relief on debit note u/s 40A(2)(b).
Assessee's Grounds of Appeal:
Concern over relief of Rs. 32,35,509/- allowed by CIT(A).
Facts of the Case:
- Assessee filed return for AY 2004-05 with total income of Rs. 13,60,620/-.
- AO observed debit of Rs. 52,35,509/- on 29.2.2004 based on a supplier's debit note.
- Debit note explained as rate difference adjustment by supplier.
- AO disallowed Rs. 52,35,509/- citing colorful device to adjust profits.
- CIT(A) deleted Rs. 32,35,509/-, confirmed Rs. 20,00,000/- addition.
- Revenue appealed against CIT(A) decision.
Arguments:
- Revenue's DR supported AO's order.
- Assessee's counsel backed CIT(A)'s decision.
Judgment:
- ITAT considered submissions, evidence, and lower authorities' orders.
- CIT(A) decision reasoned and based on credible material.
- CIT(A) confirmed Rs. 20,00,000/- addition, deleted balance Rs. 32,35,509/-.
- ITAT found no infirmity in CIT(A) findings, dismissed revenue's appeal.
- Assessee's CO not separately adjudicated, as revenue's appeal dismissed.
- Appeal by revenue and CO by assessee both dismissed.
Conclusion:
The appeal and cross-objection were dismissed by the ITAT in the case involving the treatment of a debit note and the subsequent relief allowed by the CIT(A) for the assessment year 2004-05.
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2011 (6) TMI 878
Issues involved: Appeal against deletion of addition of Rs. 18,33,676 u/s 143(3) for assessment year 2003-04.
Addition of Rs. 18,33,676:
The Appellate Tribunal ITAT DELHI heard an appeal by the revenue against the deletion of an addition of Rs. 18,33,676 made by the Assessing Officer. The case involved unexplained credits in bank accounts. The Assessing Officer contended that the assessee failed to explain the deposits in the bank accounts, leading to the addition. However, the assessee argued that the deposits were from income earned by plying trucks on hire, covered u/s 44AE, and that she did not maintain daily account books. The assessee detailed deposits made in two bank accounts and explained withdrawals for business expenses. The CIT(Appeals) found that total withdrawals exceeded deposits, indicating a circulation of the same money in the banks. The CIT(Appeals) also applied the peak credits theory to show that the deposits were explained. The Tribunal upheld the CIT(Appeals)' decision, noting that the Assessing Officer did not properly verify the facts and that the total deposits did not match the amount in question. The Tribunal found no reason to interfere with the CIT(Appeals)' order and dismissed the revenue's appeal.
This judgment highlights the importance of thorough verification of facts by the Assessing Officer and the application of relevant legal provisions, such as the peak credits theory, in determining the legitimacy of additions in tax assessments.
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2011 (6) TMI 877
Issues Involved:
The judgment involves appeals filed by the revenue and cross objections filed by the assessee against the order passed by the ld. CIT(A) regarding additions made in the case of the assessee based on incriminating documents found during a search in the group cases of Shri Brij Mohan Gupta.
Additions Made in the Case:
The additions made in the case of the assessee were related to unexplained investments u/s 69A and undisclosed interest on such investments for the assessment years 2001-02 to 2005-06, based on incriminating documents found during the search in the group cases of Shri Brij Mohan Gupta.
Decision of CIT(A):
The ld. CIT(A) deleted the additions on the grounds that they were made solely on the basis of material found during the search in the case of Shri Brij Mohan Gupta, without providing the material to the assessee and without following due process of law. However, the validity of reassessment proceedings was upheld, and the additions were deleted on merits.
Contentions of Parties:
In the appeals filed by the revenue, the deletion of additions was challenged, while in the cross objections filed by the assessee, the validity of reassessment proceedings was contested.
Comparison with Similar Cases:
The counsel of the assessee highlighted that similar additions made in other cases based on documents found during the search on Shri B.M. Gupta were deleted by the ld. CIT(A) and upheld by the Tribunal. The counsel presented orders from other cases to support this argument.
Tribunal's Decision:
After considering the contentions of both parties and reviewing relevant orders, the Tribunal found that the facts in the present case were similar to those in previous cases where additions were deleted. Therefore, the Tribunal dismissed the appeals filed by the revenue and the cross objections filed by the assessee, as they were covered by earlier Tribunal orders.
Relevant Previous Tribunal Order:
The Tribunal reproduced an earlier order where additions were deleted based on the failure to establish a relationship between individuals mentioned in seized material, emphasizing the importance of concrete evidence to make additions.
Final Decision:
Respectfully following the aforementioned orders and finding similarities in facts, the Tribunal dismissed the appeals filed by the revenue and the cross objections filed by the assessee, as they were covered by previous Tribunal decisions.
This summary provides a detailed overview of the issues, decisions, and arguments presented in the judgment, highlighting the key aspects of the legal proceedings and the Tribunal's final decision.
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2011 (6) TMI 876
Issues involved: Challenge to cancellation of penalty u/s. 271(1)(c) of the I.T. Act by the Ld. CIT(A) in relation to assessment year 2001-02.
Summary:
The appeal was filed by the Revenue against the order of the Ld. CIT(A) cancelling the penalty of Rs. 2,15,24,700/- levied u/s. 271(1)(c) of the I.T. Act. The major addition of Rs. 4,35,45,000/- was on account of Relatable interest on tax free investments disallowed u/s.14A of the I.T. Act, which was considered a debatable issue not warranting penalty. The Tribunal had previously allowed the claim of Premium amortization on purchase of securities and the addition of Rs. 70,56,000/- was sent back to the AO for verification, hence no penalty was justified. The addition of Rs. 5,00,000/- for Difference in investment depreciation added back was found to be due to non-application of mind by the AO, and the penalty was deleted. The addition of Rs. 33,22,018/- for Lease depreciation and lease equalization reserve was considered debatable and the penalty was cancelled as full disclosures were made and the issue was previously allowed by the Ld. CIT(A). The appeal filed by the Revenue was dismissed, upholding the order of the Ld. CIT(A) cancelling the penalty.
The judgment was pronounced on June 24th, 2011.
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2011 (6) TMI 875
Issues Involved:
1. Disallowance of deduction under Section 36(1)(viii) of the Income Tax Act.
2. Disallowance of grant as deductible expenditure under Section 36(1)(xii).
3. Disallowance under Section 14A for expenses related to tax-free income.
4. Disallowance of employees' contribution to PF/ESI paid beyond the grace period.
5. Additional grounds of appeal regarding depreciation, interest income, and contribution to Employees' Recreation Trust.
Issue-wise Detailed Analysis:
1. Disallowance of Deduction under Section 36(1)(viii):
The assessee's claim for deduction under Section 36(1)(viii) amounting to Rs. 5,28,36,280 was disallowed. The Tribunal had previously ruled against the assessee in Assessment Year (A.Y.) 2003-04, determining that the assessee's activities did not qualify as providing long-term finance for industrial or agricultural development. The CIT (A) upheld this decision, noting that the facts remained unchanged from A.Y. 2003-04. The assessee conceded that the facts were identical and the matter was pending in the High Court. Consequently, the Tribunal dismissed this ground of appeal, following the precedent set in A.Y. 2003-04.
2. Disallowance of Grant as Deductible Expenditure under Section 36(1)(xii):
The assessee challenged the addition of Rs. 2,29,25,823 as deductible expenditure under Section 36(1)(xii). The AO had previously disallowed similar expenses in A.Y. 2003-04, and the Tribunal had upheld this decision. The CIT (A) followed this precedent, noting that the assessee's Miscellaneous Application for rectification in A.Y. 2003-04 was pending. The Tribunal agreed to remand the matter back to the AO for reconsideration, as the Tribunal had recalled its earlier order for A.Y. 2003-04 and the issue was still pending before the AO.
3. Disallowance under Section 14A for Expenses Related to Tax-Free Income:
The AO disallowed Rs. 2,95,89,940 under Section 14A by applying Rule 8D, which the AO believed had retrospective effect. The CIT (A) upheld this decision, relying on the Special Bench decision in Daga Capital Management Pvt. Ltd. However, the Tribunal noted that the Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT had ruled that Rule 8D was not retrospective and applicable from A.Y. 2008-09. The Tribunal remanded the matter to the AO for reconsideration, directing the AO to determine if any expenditure was incurred in relation to tax-free income and to adopt a reasonable basis for apportionment.
4. Disallowance of Employees' Contribution to PF/ESI Paid Beyond the Grace Period:
The AO disallowed Rs. 2,06,934 as employees' contribution to PF/ESI paid beyond the grace period. The CIT (A) allowed deductions for payments made within the grace period but disallowed those made beyond it. The Tribunal directed the AO to verify if the contributions were made before the due date for filing the return under Section 139(1) and to grant relief accordingly, following the decisions of the Delhi High Court in CIT vs. P.M. Electronics Ltd. and the Supreme Court in CIT vs. Vinay Cement.
5. Additional Grounds of Appeal:
- Depreciation on Closing Written Down Value: The Tribunal noted that no facts were available on record to adjudicate this issue, as it was raised for the first time before the Tribunal.
- Interest Income on North Kerala Project Development Fund: The Tribunal observed that the assessee had conceded the issue during assessment proceedings and had not obtained COD approval for appeal in earlier years. The Tribunal declined to admit this ground.
- Contribution to Employees' Recreation Trust: The Tribunal noted that this issue had been decided against the assessee in A.Y. 2003-04 and the assessee had conceded the taxability of the contribution. The Tribunal declined to admit this ground as well.
Conclusion:
The Tribunal dismissed the appeal on the disallowance under Section 36(1)(viii), remanded the issues under Sections 36(1)(xii) and 14A to the AO for reconsideration, and directed the AO to verify the PF/ESI contributions. The additional grounds of appeal were not admitted. The appeal was partly allowed for statistical purposes.
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2011 (6) TMI 874
Issues involved: Interpretation of section 244A of the Income Tax Act regarding interest on self assessment tax refund.
Summary:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-10, Mumbai for the assessment year 2001-02. An adjournment application was moved on behalf of the assessee, but the Tribunal proceeded to hear the appeal on an ex parte basis as the issue raised by the Revenue was covered in favor of the assessee.
The Revenue raised grounds related to the allowance of interest u/s. 244A of the Act on self assessment tax refund. The Ld. CIT(A) had decided the issue in favor of the assessee based on the interpretation of section 244A(1). The Ld. CIT(A) referred to various decisions, including the case of ACIT vs. Novartis India Ltd., to support the assessee's entitlement to interest on refund arising from excess payment of self assessment tax.
The Tribunal, after considering the submissions and relevant material, upheld the decision of the Ld. CIT(A) based on the precedents cited and declined to interfere in the order. Consequently, the Revenue's appeal was dismissed, and the order was pronounced on June 15, 2011.
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2011 (6) TMI 873
Issues involved: Appeal against CIT(A) order deleting addition made u/s 68 of the Act for bogus entries of capital gain and brokerage.
Summary:
1. The appeal was filed by the Revenue against the CIT(A)'s order deleting the addition of Rs. 6,68,135/- & Rs. 13,363/- made u/s 68 of the Act on account of bogus entries of capital gain and brokerage without appreciating the facts of the case.
2. The Assessing Officer initiated proceedings u/s 147 against the assessee based on information received regarding accommodation entries of bogus long-term capital gain by a share broker. The AO concluded that the amount received by the assessee was income from undisclosed sources and added it u/s 68 of the Act. However, the CIT(A) deleted the addition after considering evidence provided by the assessee related to share transactions.
3. The ITAT noted that the CIT(A) rightly deleted the addition as the assessee had furnished substantial evidence to prove the purchase and sale of shares, including bills, account statements, receipts, and certificates. Enquiries by the Investigation Wing did not find any adverse findings, and the shares were listed at the stock exchange. Considering the documents and lack of evidence showing them as false, the ITAT upheld the CIT(A)'s decision to delete the addition.
4. Consequently, the appeal of the revenue was dismissed by the ITAT.
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2011 (6) TMI 872
Issues Involved:
1. Taxability of interest on security deposit.
2. Accrual of income.
3. Set-off of interest income against preoperative expenditure.
4. Presumption of interest rate on security deposit.
Detailed Analysis:
1. Taxability of Interest on Security Deposit:
The core issue in this appeal is whether there was an accrual of income by way of interest on a security deposit placed by the assessee company with the Madhya Pradesh Electricity Board (MPEB). The assessee company entered into a Power Purchase Agreement (PPA) with MPEB, which required a security deposit of 2% of the project cost. The financial closure was to be achieved within two months of providing a bankable escrow agreement. The security deposit was to be returned with interest upon achieving financial closure, failing which it would be forfeited. The MPEB failed to provide a bankable escrow agreement, leading to the forfeiture of the security deposit. The assessee requested a refund with interest, but MPEB refused, leading to legal disputes. The Hon'ble High Court quashed the forfeiture order and directed MPEB to provide a bankable escrow agreement or refund the deposit with interest. However, the matter was sub judice, and the assessee ultimately accepted the forfeiture for commercial reasons.
2. Accrual of Income:
The Assessing Officer held that income had accrued to the assessee as the High Court's decision directing MPEB to refund the deposit with interest remained in force until the SLP was withdrawn. The assessee's decision to forgo the deposit was seen as a commercial decision. The Commissioner (Appeals) upheld this view, stating that interest would accrue on the deposit until its forfeiture in the assessment year 2003-04. The Tribunal, however, concluded that no income accrued to the assessee as the right to receive interest was contingent upon achieving financial closure, which never occurred. The Tribunal relied on the real income theory and several legal precedents to hold that no real income accrued to the assessee due to the ongoing dispute and the lack of a bankable escrow agreement.
3. Set-off of Interest Income Against Preoperative Expenditure:
The assessee argued that, if interest income had accrued, it should be set off against the cost of the project. The Commissioner (Appeals) rejected this contention, citing the Supreme Court's decision in Bongaigaon Refinery & Petrochemicals Ltd. v/s CIT, which stated that there was no direct link between the interest income and construction expenditure. The Tribunal did not adjudicate this alternative ground as it allowed the primary ground, making the issue academic.
4. Presumption of Interest Rate on Security Deposit:
The Assessing Officer presumed an interest rate of 9% on the security deposit. The Tribunal did not specifically address this issue as it held that no income by way of interest had accrued to the assessee.
Conclusion:
The Tribunal concluded that no income by way of interest on the security deposit with MPEB accrued to the assessee in the assessment years under consideration due to the ongoing dispute and the lack of a bankable escrow agreement. The appeals were allowed in favor of the assessee, and the alternative grounds were not adjudicated as they were rendered academic.
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2011 (6) TMI 871
Issues involved: Appeal u/s 260-A of the Income Tax Act, 1961 challenging order by the Income Tax Appellate Tribunal for Assessment Year 2001-2000.
Summary:
1. The appellant-revenue challenged the Tribunal's order allowing short term capital loss on sale of mutual funds after earning tax-free dividend income, raising the question of law.
2. The respondent cited a Supreme Court decision to support their position, which was not disputed by the appellant.
3. The Supreme Court decision highlighted that losses pertaining to exempted income cannot be disallowed for cases before 1st April, 2002.
4. As the present case falls before this date, the Tribunal's decision to allow the capital loss was upheld in favor of the assessee.
5. The appeal was dismissed with no costs incurred.
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2011 (6) TMI 870
Issues involved: Challenge to decision of Income Tax Appellate Tribunal u/s 195 of Income Tax Act, 1961 regarding exemption of interest payment on loans from non-resident companies u/s 10(15)(iv)(f) of the Act.
Summary:
Issue 1: Challenge to decision of Income Tax Appellate Tribunal u/s 195 of Income Tax Act, 1961
The appeals were filed by the Revenue challenging the decision of the Income Tax Appellate Tribunal, which allowed the appeals filed by the assessee against the decision of the adjudicating authority u/s 195 of the Income Tax Act, 1961. The assessee had taken loans from non-resident companies for projects in India, claiming exemption for interest payments u/s 10(15)(iv)(f) of the Act. The assessing officer rejected the applications under Section 195, stating that exemptions had been withdrawn by the Central Government. The Commissioner of Income Tax (Appeals) upheld this decision. However, the Income Tax Appellate Tribunal, based on its previous decision in the assessee's case, held that tax deduction at source was not required while paying interest to non-residents. The appeals were filed challenging these orders.
Issue 2: Delay in filing Notices of Motions
The Notices of Motions were filed after a delay of more than 1200 days. The reasons provided for the delay were deemed unconvincing. Additionally, remittances to the non-resident companies had already been made in light of the Income Tax Appellate Tribunal's order. The court found that condoning such a significant delay would cause serious prejudice to the assessee. It was noted that if the Revenue suffered due to the Income Tax Officer's negligence, appropriate action should be taken against the concerned Officer. Consequently, the court decided not to condone the delay and dismissed all the Notices of Motion with no order as to costs, directing the appeal papers to be consigned to the Record Department.
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2011 (6) TMI 869
Issues involved: Appeal against order of ld. CIT(A)-II, Jaipur for assessment year 2007-08.
Excise Duty in Valuation of Finished Stock:
The Tribunal held that Excise Duty should not be included in closing stock valuation as it is only levied on removal of goods from premises. Consistent with earlier decisions, the addition of Excise Duty in closing stock was deleted, concluding that AO was not justified in making the addition.
Accrued Interest on Loans to Farmers:
The Tribunal upheld the assessee's method of accounting interest on loans to farmers on realization basis, deleting the addition made by the AO. Following previous decisions, it was held that the assessee was justified in accounting interest on realization basis.
Export Pass Fee as Allowable Expenditure:
The Tribunal allowed the deduction of Export Pass Fee as the assessee had no right to recover the amount from the government, following previous decisions and factual aspects. The ld. CIT(A) was justified in deleting the addition of Export Pass Fee.
Accrued Interest on FDR:
The Tribunal deleted the addition of accrued interest on FDR in the name of the assessee, as the assessee did not have absolute right on the interest due to a disputed amount. The ld. CIT(A) was justified in deleting the addition based on previous Tribunal decisions.
Payment of Privilege Fees:
The ld. CIT(A) deleted the addition of privilege fees, considering it as a business expenditure and following the Tribunal's decision for earlier years. The Tribunal highlighted that the privilege fee was necessary to start the business activity and was allowable under section 37(1) of the Act. The appeal of the revenue was dismissed.
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2011 (6) TMI 868
Issues Involved:
1. Deletion of addition of Rs. 7,85,000/- out of total addition of Rs. 8,85,000/- made by the Assessing Officer on account of unexplained loan credit u/s 68.
2. Confirmation of addition of Rs. 1 lac made u/s 68 by the Commissioner of Income Tax (Appeals).
3. Applicability of CBDT circular regarding the prescribed monetary limit for filing appeals.
Summary:
Issue 1: Deletion of Addition of Rs. 7,85,000/- u/s 68
The revenue appealed against the order of the Commissioner of Income Tax (Appeals) who deleted the addition of Rs. 7,85,000/- out of a total addition of Rs. 8,85,000/- made by the Assessing Officer on account of unexplained loan credit u/s 68 of the Income Tax Act. The Tribunal noted that the tax effect in the present appeal is below the prescribed monetary limit for filing an appeal before the Tribunal, which is Rs. 3,00,000/-. The Tribunal cited several precedents where appeals were dismissed due to the tax effect being below the prescribed limit, including the cases of Rajan Cloth Stores, ACIT vs. M/s. Shriram Nutrients Ltd., and Himanshu Flour Mills. Consequently, the appeal of the revenue was dismissed on the ground of low tax effect.
Issue 2: Confirmation of Addition of Rs. 1 lac u/s 68
The assessee filed a cross objection against the confirmation of the addition of Rs. 1 lac made u/s 68 by the Commissioner of Income Tax (Appeals). The assessee contended that the loan of Rs. 1 lac was taken from Shri Ravindra Jain by account payee cheque, and the genuineness of the transaction and the creditworthiness of the loan creditor were established. The Tribunal reviewed the evidence, including the summons issued u/s 131, the affidavit of the assessee, and the bank account details of Shri Ravindra Jain. It was found that the identity, creditworthiness, and genuineness of the transaction were satisfactorily proven. Therefore, the Tribunal deleted the addition of Rs. 1 lac made by the lower authorities.
Issue 3: Applicability of CBDT Circular on Monetary Limit
The Tribunal discussed the applicability of the CBDT circular which revised the monetary limit for filing appeals by the department. The circular, effective from 9.2.2011, set the monetary limit for filing appeals before the ITAT at Rs. 3,00,000/-. The Tribunal referred to the decision of the Hon'ble jurisdictional High Court in CIT v. Ashok Kumar Manibhai Patel & Company, which held that the circular is applicable to pending appeals. Following this, the Tribunal dismissed the revenue's appeal due to the tax effect being below the prescribed limit.
Conclusion:
The appeal of the revenue was dismissed due to the tax effect being below the prescribed monetary limit, and the cross objection of the assessee was allowed, resulting in the deletion of the addition of Rs. 1 lac made u/s 68. The Tribunal's decision was pronounced in open court on 29th June, 2011.
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2011 (6) TMI 867
Issues Involved:1. Deletion of addition on account of difference in supplier/creditors account for AY 1999-00. 2. Disallowance of interest u/s 40A(2)(b) of the Act. 3. Deletion of addition on account of difference in closing stock for AY 2000-01. 4. Deletion of addition on account of difference in supplier/creditors account for AY 2000-01. 5. Approval of action u/s 148 of the Act. Summary:Issue 1: Deletion of addition on account of difference in supplier/creditors account for AY 1999-00The revenue challenged the deletion of addition of Rs. 6,05,330/- made on account of difference in supplier/creditors account. The tax effect in the present appeal is Rs. 1,55,600/-, which is within the prescribed limit. As per the instructions issued by CBDT, the department is not permitted to file the appeal. The appeal of the revenue is dismissed. Issue 2: Disallowance of interest u/s 40A(2)(b) of the ActThe assessee contended that the interest was paid at the rate of 24%. The disallowance of Rs. 1,25,000/- was made out of Rs. 2,24,480/- by the Assessing Officer under section 40A(2)(b) by claiming that the interest at excessive rate was paid. The interest was paid as per the copy of accounts, and all the lenders are assessed in the same Ward. The ground of the assessee in the cross objection is allowed. Issue 3: Deletion of addition on account of difference in closing stock for AY 2000-01The revenue challenged the deletion of addition of Rs. 8,16,000/- made on account of difference in closing stock. The assessee declared total income of Rs. 2,49,460/- from the business of trading in electronic items. During the course of survey, the stock of Rs. 20,57,172/- was found whereas as per the books it was Rs. 29,73,501/-. The alleged variation was explained, and the learned Commissioner of Income Tax (Appeals) deleted the addition. The appeal of the revenue is dismissed. Issue 4: Deletion of addition on account of difference in supplier/creditors account for AY 2000-01The revenue challenged the deletion of addition of Rs. 3,97,375/- made on account of difference in supplier/creditors account. The addition was made without confronting the assessee. The suppliers were debited to the assessee's account the same day but the assessee did not credit their account for want of receipt of goods. The appeal of the revenue is dismissed. Issue 5: Approval of action u/s 148 of the ActThe ground pertaining to approval of the action u/s 148 of the Act was not pressed by the ld. Counsel for the assessee, therefore, this ground is dismissed as not pressed. Final Order:The appeals of revenue are dismissed. C.O. No.8/Ind/2010 is partly allowed and C.O. No.9/Ind/2010 is dismissed as not pressed. Order pronounced in the open Court on 22nd June, 2011.
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2011 (6) TMI 866
Issues involved:
The issue involves the claim of depreciation on intangible assets by the assessee, specifically related to pre-operative expenses and SEBI registration fee, for the assessment year 2004-05.
Details of the judgment:
1. The assessee, a company acting as an investment manager of mutual funds, claimed depreciation on intangible assets including pre-operative expenses and SEBI registration fee. The AO questioned the eligibility of these expenses as intangible assets u/s. 32(1)(ii) of the Income Tax Act, 1961.
2. The AO disallowed the depreciation claimed by the assessee on preoperative expenses and SEBI registration fee, stating that these expenses did not qualify as intangible assets as per the provisions of section 32(1)(ii) of the Act.
3. The CIT(A) upheld the AO's decision, disregarding the assessee's argument that depreciation had been allowed on these assets in the previous assessment year, and confirmed that there were no intangible assets eligible for depreciation.
4. The Tribunal noted that in the previous assessment year, depreciation had been allowed on the SEBI registration fee and pre-operative expenses, treating them as part of the block of intangible assets. As per Sec. 32(1)(ii) of the Act, depreciation should be allowed on the written down value of the block of assets, and the AO cannot dispute the opening WDV or change the stand taken in the earlier assessment year.
5. The Tribunal ruled that since depreciation had been allowed in the preceding year, the AO could not take a different stance for the current assessment year. Therefore, the depreciation claimed by the assessee was directed to be allowed, without delving into the classification of the expenses as intangible assets.
6. Consequently, the appeal of the assessee was allowed by the Tribunal, and the order was pronounced on June 15, 2011.
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2011 (6) TMI 865
Issues involved:
The judgment involves an appeal by the Revenue and a cross objection by the assessee against the order of the CIT(A), Jalandhar, relating to the assessment year 2005-06.
Ground raised by Revenue:
The Revenue challenged the inclusion of income from 'Sale of Raddi' and 'Printing got done from outside' in 'Eligible Profit' for deduction u/s.80IC.
Facts of the case:
The assessee's income is derived from printing, publishing, and sale of books, with a total turnover of &8377; 13,92,23,831. The Assessing Officer (A.O.) disallowed deduction u/s.80-IC for 'Sale of Raddi' and 'Printing done from outside.'
CIT(A)'s decision - Sale of Raddi:
The CIT(A) allowed the claim for 'Sale of Raddi,' citing precedents establishing a direct nexus between income and the industrial undertaking. The sale of Raddi, being a by-product of the manufacturing activity, was deemed eligible for deduction u/s.80IC.
CIT(A)'s decision - Printing done from outside:
The CIT(A) upheld the deduction for 'Printing done from outside,' reasoning that the assessee, being an industrial undertaking, should not be disentitled to the deduction for a small portion of work done externally.
Appellate Tribunal's decision:
The Tribunal upheld the CIT(A)'s decisions, emphasizing the direct nexus between income and the industrial undertaking for eligibility under section 80-IC.
Cross Objection by the assessee:
The assessee raised grounds related to the belated appeal filing by the Deputy Commissioner of Income Tax, which were dismissed by the Tribunal.
Conclusion:
The appeal by the Revenue and the Cross Objection by the assessee were both dismissed by the Tribunal, upholding the CIT(A)'s decisions regarding the eligibility of deductions u/s.80IC for 'Sale of Raddi' and 'Printing done from outside.'
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