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Showing 21 to 40 of 935 Records
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2013 (6) TMI 923
Issues:
The appeal filed by the revenue under Section 260A of the Income Tax Act challenging the order of the Income Tax Appellate Tribunal for the assessment year 1993-94.
Revaluation of Assets:
The assessment for the year 1993-94 was reopened due to the revaluation of assets, resulting in an increase in value by Rs. 17,34,86,772. The Assessing Officer considered this increase as short term capital gain under Section 50 of the Act.
Appellate Proceedings:
The CIT(A) upheld the Assessing Officer's order, but the Tribunal allowed the appeal of the respondent-assessee based on the Supreme Court decision in CIT vs. Hind Construction. The Tribunal held that revaluing assets does not attract capital gain tax.
Conversion of Partnership Firm:
The revenue argued that the revaluation was done for the purpose of converting the partnership firm into a limited company, making the capital gain tax applicable under Section 45(4) of the Act. However, it was found that the conversion took place in a subsequent year, not during the relevant assessment year.
Precedent and Decision:
The Tribunal's decision was supported by the Punjab & Haryana High Court case of CIT Vs. Rita Mechanical Works, where it was held that mere revaluation of assets in a partnership firm does not result in capital gain tax liability. The Tribunal's reliance on the Hind Construction case was deemed appropriate, and no substantial question of law was found to arise.
Conclusion:
The High Court dismissed the appeal, stating that the revaluation of assets did not attract capital gain tax as there was no transfer or sale involved. The decision of the Tribunal, based on relevant precedents, was upheld, and no costs were awarded.
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2013 (6) TMI 922
Issues involved: Assessment of expenses, disallowances, estimation of income, appeal against CIT(A) order.
Assessment of expenses: The AO disallowed portions of material purchase, labour charges, and diesel expenses due to lack of supporting documentation and suspicion of inflation. Suppliers did not respond to summons, bills were not furnished, and expenses were estimated leading to additions to total income.
Disallowances: The AO disallowed 20% of material purchase expenses and 10% each of labour charges and diesel expenses. Additionally, labour charges shown in the balance sheet were deemed bogus and added to the total income.
Estimation of income: The CIT(A) considered the nature of contracts, places of work, and past orders. Despite lack of cooperation from the assessee, an estimate of 9% net profit of contract receipts was directed, partially allowing the appeal.
Appeal against CIT(A) order: The revenue appealed the CIT(A) decision before the Tribunal, arguing against the estimation of income without rejecting the books of account. The Tribunal upheld the CIT(A) decision, justifying the 9% net profit estimate and dismissing the revenue's appeal.
This judgment by the Appellate Tribunal ITAT Bangalore involved the assessment of expenses, disallowances, and the estimation of income in an appeal against the CIT(A) order. The AO disallowed portions of expenses due to lack of documentation and suspicion of inflation, leading to additions to total income. The CIT(A) partially allowed the appeal, directing an estimate of 9% net profit of contract receipts. The Tribunal upheld this decision, dismissing the revenue's appeal.
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2013 (6) TMI 921
Issues Involved:
1. Addition of Rs. 14,65,000/- u/s 68 of the IT Act.
2. Disallowance of Rs. 2,53,124/- out of depreciation on plant and machinery.
Summary:
1. Addition of Rs. 14,65,000/- u/s 68 of the IT Act:
The assessee challenged the addition of Rs. 14,65,000/- made by the AO u/s 68 of the IT Act, which was share application money received from 30 agriculturists. The AO contended that the assessee failed to prove the identity and creditworthiness of the agriculturists. The CIT(A) upheld the AO's decision, despite the assessee providing various documents like share applications, identity proofs, affidavits, and income certificates. The ITAT, however, found that the assessee had sufficiently discharged the burden of proof by providing comprehensive details and documents supporting the identity and creditworthiness of the share applicants. The ITAT referred to several judicial precedents, including the Supreme Court's decision in CIT vs. Lovely Exports (P) Ltd., which held that if the share application money is received from identified shareholders, it cannot be regarded as undisclosed income of the assessee company. Consequently, the ITAT deleted the addition of Rs. 14,65,000/-.
2. Disallowance of Rs. 2,53,124/- out of depreciation on plant and machinery:
The AO reduced the value of subsidy from the cost of plant and machinery, resulting in a disallowance of Rs. 2,53,124/- from the depreciation claimed by the assessee. The assessee argued that the subsidy received from NABARD was not at its disposal and was to be adjusted only upon the completion of the project. The CIT(A) did not accept this contention. The ITAT noted that the matter required reconsideration, as the subsidy was not final and related to the total project cost, not just specific assets. The ITAT directed the AO to verify the scheme and determine the accrual of the subsidy upon the project's completion. Therefore, the ITAT set aside the orders of the authorities below and restored the issue to the AO for re-examination.
Conclusion:
The appeal of the assessee was partly allowed, with the addition of Rs. 14,65,000/- being deleted and the issue of disallowance of Rs. 2,53,124/- being remanded back to the AO for reconsideration.
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2013 (6) TMI 920
Issues involved: Appeals filed by the assessee and Revenue against the order of the Commissioner of Income-tax (Appeals) for assessment years 2008-09 and 2009-10 u/s 143(3) of the Income Tax Act.
Issue 1 - Disallowance of Interest under section 36(1)(iii) of the Act:
- The assessee invested in shares of M/s DSG Papers Private Limited and paid interest on borrowed capital.
- Disallowance of interest was made by the Assessing Officer based on the Punjab & Haryana High Court's ruling in CIT Vs. Abhishek Industries.
- CIT (Appeals) upheld the addition, following the Tribunal's order in the assessee's case for the previous year.
- Tribunal upheld the disallowance based on similar issue in the assessee's case for assessment year 2007-08.
Issue 2 - Disallowance under the proviso to section 36(1)(iii) of the Act:
- Disallowance of Rs.20,921/- for assessment year 2008-09 and Rs.59,063/- for assessment year 2009-10 under the proviso to section 36(1)(iii) was contested by the assessee.
- Tribunal allowed partial relief for assessment year 2008-09 by directing re-computation for a specific period.
- Disallowance for assessment year 2009-10 was upheld by the Tribunal.
Issue 3 - Disallowance of expenditure on purchase of items:
- The Assessing Officer disallowed expenditure on various items as not being in the nature of repair and maintenance but as addition to capital assets.
- CIT (Appeals) allowed the claim of the assessee, considering the expenditure to be revenue in nature.
- Tribunal upheld the majority of the expenditure as repair and maintenance, but directed depreciation on capital items like pumps and printers.
Conclusion:
- The appeal for assessment year 2008-09 by the assessee was partly allowed, while for assessment year 2009-10 it was dismissed.
- The Revenue's appeal for assessment year 2008-09 was partly allowed.
- The Tribunal's order was pronounced on June 28, 2013, addressing all the issues raised by the parties.
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2013 (6) TMI 919
Issues Involved:
The judgment involves issues related to the non-recognition of interest income on non-performing assets (NPAs) by the assessee, the applicability of RBI guidelines and accounting standards, the authority of the Assessing Officer to add income on NPAs, and the justification for making such additions.
Issue 1: Non-recognition of Interest Income on NPAs
The Assessing Officer contended that interest accrued on NPAs should be added to the assessee's income, which the assessee had not done. The assessee argued that income was not recognized on NPAs in accordance with RBI guidelines and accounting standard 9. However, the Assessing Officer disagreed, stating that RBI guidelines cannot override Income Tax Authorities' provisions and that the assessee follows the 'mercantile system' of accounting, leading to the addition of income on NPAs.
Issue 2: Justification for Addition by Assessing Officer
The Assessing Officer added income on interest on NPAs to the assessee's account, citing that the loans had become bad debts and no real income had accrued to the assessee. The assessee relied on accounting standards to support their position, referencing various case laws to argue that no interest income should be recognized on doubtful recovery loans. The Ld. CIT(A) agreed with the assessee, stating that the notional interest income, not actually received by the assessee, should not be a basis for addition, leading to the deletion of the Assessing Officer's addition.
Issue 3: Applicability of RBI Guidelines and Accounting Standards
The ITAT Delhi, in its judgment, highlighted the RBI guideline that interest on NPAs should not be recognized and accounting standard 9's requirement for income recognition only with reasonable certainty of receipt. Citing precedents like CIT Vs. Elgi Finance Ltd., the ITAT upheld the Ld. CIT(A)'s decision to delete the addition made by the Assessing Officer, emphasizing the non-recognition of interest on NPAs in line with RBI notifications and accounting standards.
In conclusion, the ITAT upheld the decision of the Ld. CIT(A) to delete the addition of notional interest income on NPAs, emphasizing the adherence to RBI guidelines and accounting standards in income recognition, leading to the dismissal of the revenue's appeal.
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2013 (6) TMI 918
Issues involved: Determination of book profit u/s. 115JB of the Income Tax Act and adjustment of Security Transaction Tax credit against demand.
Issue 1 - Determination of book profit u/s. 115JB:
The appeal by the revenue challenges the CIT(A)'s order regarding the determination of book profit u/s. 115JB of the Act for the assessment year 2007-08. The AO had made additions to the book profit, including disallowance of Security Transaction Tax (STT) and donation. The CIT(A) held that these additions were not in accordance with the provisions of the Act as they were not covered by the specified items in the explanation to section 115JB. The CIT(A) deleted the additions of STT and donation, citing that they were outside the scope of section 115JB. The Tribunal confirmed the CIT(A)'s decision, noting that the issue was also covered by a previous decision of the ITAT Bangalore bench in a similar case.
Issue 2 - Adjustment of Security Transaction Tax credit against demand:
The second ground of appeal was against the demand raised for the year, with the appellant contending that the Security Transaction Tax paid should be adjusted against the demand u/r 88E. The appellant referred to a decision of the ITAT Bangalore bench in a similar case. The Tribunal found that the items disallowed by the AO were not covered under the specified items for additions to the book profit u/s. 115JB. Additionally, the Tribunal noted that the issue was already addressed in a previous decision of the ITAT Bangalore bench. Consequently, the Tribunal upheld the CIT(A)'s decision on this issue.
In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order on both issues.
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2013 (6) TMI 917
Issues Involved:
1. Whether the appellants should be treated as a single unit/group for the purpose of regulation 10 of the SAST Regulations, 1997.
2. Whether there was a violation of the norm of creeping acquisition of 5% additional voting rights prescribed in Regulation 11(1) of the SAST Regulations, 1997, and the appropriate penalty for any such violation.
Summary:
Issue 1: Regulation 10 of the SAST Regulations, 1997
The appellants, part of the promoter group of the Company, were alleged to have violated regulation 10 of the SAST Regulations, 1997, which deals with the acquisition of 15% or more of the shares/voting rights of any company. The Respondent argued that KLL's individual shareholding increased from 10.52% to 17.16% on March 12, 2007, necessitating a public announcement. However, the Tribunal held that KLL acted in concert with the other appellants, and thus, the collective shareholding should be considered. Since the collective shareholding of the promoter group had always been more than 15%, there was no violation of regulation 10. The Tribunal noted that the SAST Regulations, 1997 allow persons/entities to act in concert and that specific provisions making an individual liable for a public offer in case of increased individual shareholding were absent in the 1997 regulations but included in the SAST Regulations, 2011. Therefore, the finding against KLL was set aside.
Issue 2: Regulation 11(1) of the SAST Regulations, 1997
Regulation 11(1) pertains to creeping acquisition, allowing an acquirer with persons acting in concert to acquire shares in the range of 15% to 55% of the shares/voting rights in a company, with a limit of 5% per financial year. The Tribunal found that the appellants' shareholding increased by 8.38% on March 12, 2007, due to two separate transactions, violating regulation 11(1). However, considering the appellants' bona fide actions and the inordinate delay of about 5 years by the Respondent in issuing the show cause notice, the Tribunal deemed a public announcement at this stage would be superfluous. Instead, a monetary penalty of Rs. 25 lac was imposed on the appellants for the breach of regulation 11(1) on March 12, 2007. The appellants were directed to deposit the penalty amount with the Respondent within six weeks from the date of the order.
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2013 (6) TMI 916
Issues Involved:
1. Validity of the sale consideration and its determination during trial.
2. Correctness of the valuation of the suit and payment of court-fee under Tamil Nadu Court-fees and Suits Valuation Act, 1955.
3. Effect of the death of one of the principals on the Power of Attorney and subsequent sale deed execution.
Summary:
Issue 1: Validity of Sale Consideration
The learned I Additional District Munsif, Coimbatore, observed that the question of whether the sale consideration is genuine or fraudulent can only be determined during the trial through evidence. The court opined that the averments made by the Petitioners/Defendants could be used as a defense during the trial, leading to the dismissal of the petition without costs.
Issue 2: Valuation of the Suit and Payment of Court-fee
The Petitioners/Defendants challenged the dismissal of their application for the rejection of the Plaint, arguing that the Trial Court did not address the requirements of Section 40 and Section 25(d) of the Tamil Nadu Court-fees and Suits Valuation Act, 1955. The Petitioners/Defendants contended that the Respondents/Plaintiffs should pay the court-fee based on the sale value under Section 40, not under Sections 25(d) & 29(c) as they had done. The Respondents/Plaintiffs argued that they were not parties to the sale deed and thus correctly valued the suit under Section 25(d).
Issue 3: Effect of Death on Power of Attorney
The Respondents/Plaintiffs claimed that the Power of Attorney lapsed upon the death of one of the principals, Veerasamy, making the subsequent sale deed executed by the 1st Petitioner/1st Defendant in favor of the 2nd Petitioner/2nd Defendant fraudulent and not binding. The Petitioners/Defendants argued that the Power of Attorney remained operative for the surviving principals, making the sale deed valid.
Court's Final Decision:
The Court upheld the Trial Court's decision, confirming that the issues raised, including the adequacy of the court-fee, should be addressed during the trial. The Civil Revision Petition was dismissed, and the Trial Court was directed to dispose of the main suit within four months, ensuring the cooperation of the parties.
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2013 (6) TMI 915
Issues involved: Appeal against deletion of addition of unexplained money by the ld. CIT(A).
Summary:
The Revenue appealed against the deletion of an addition of Rs.24,44,772 made by the AO on account of unexplained money. The AO found that the assessee had deposited cash of Rs.29,26,000 in a bank account, leading to the addition. The assessee explained that the cash was withdrawn for business purposes and redeposited. The AO rejected this explanation and added the entire deposit as unexplained investment u/s 69 of the Act. The ld. CIT(A) observed that while the deposits were unexplained, the entire amount could not be added back, relying on precedents. The CIT(A) directed the AO to consider only the peak balance as unexplained investment, leading to the deletion of Rs.24,44,772. The Revenue appealed against this decision.
The Tribunal upheld the CIT(A)'s decision, noting that the AO had failed to show any error in the CIT(A)'s order. The Tribunal found no reason to interfere with the CIT(A)'s decision, confirming the deletion of the balance amount of Rs.24,44,772. The appeal of the Revenue was dismissed.
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2013 (6) TMI 914
Issues Involved:
1. Validity of the reopening of the assessment u/s 147.
2. Deletion of additions made by the Commissioner of Income-tax (Appeals).
Summary:
Issue 1: Validity of the Reopening of the Assessment u/s 147
The first issue concerns the jurisdictional question of whether the reopening of the assessment by the Assessing Officer (AO) u/s 147 was valid. The original return was filed on 29-12-2006, and the scrutiny assessment was completed u/s 143(3) on 31-12-2008. A notice u/s 148 was issued on 25-3-2011 to verify expenses claimed by the assessee, including land development costs and payments subject to TDS.
The assessee objected, stating that all issues raised by the AO were already examined during the original assessment. The Commissioner of Income-tax (Appeals) found that the AO had indeed scrutinized all relevant details during the original assessment, and no new material evidence justified reopening the case. The Commissioner relied on the judgments of CIT vs. Cholamandalam Investment and Finance Company Ltd. and CIT vs. Kelvinator of India Ltd., which held that reassessment cannot be based merely on a change of opinion without tangible material indicating income escapement.
The Tribunal upheld the Commissioner's decision, stating that the AO reopened the assessment to re-examine issues already scrutinized, without any fresh evidence. Thus, the reopening was deemed invalid.
Issue 2: Deletion of Additions Made by the Commissioner of Income-tax (Appeals)
Given that the assessment itself was set aside, the issues raised by the Revenue on the merits of the case became academic and infructuous. The Tribunal did not address these issues in detail as the primary jurisdictional issue invalidated the entire reassessment process.
Conclusion:
The appeal filed by the Revenue was dismissed, and the reassessment proceedings u/s 147 were declared invalid. The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision to set aside the assessment, rendering the Revenue's additional contentions moot.
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2013 (6) TMI 913
Issues involved: Appeal against the order of CIT(A) directing grant of exemption u/s 11 of the I.T. Act to the assessee trust and challenge regarding the status of the assessee as AOP.
Appeal against CIT(A) order for exemption u/s 11:
The appeal pertained to the CIT(A) directing the AO to grant exemption under section 11 of the I.T. Act to the assessee trust. The assessee trust had been regularly assessed to tax as a registered trust and was granted registration under section 12A of the Income Tax Act. Subsequently, the CIT, C-III, Kolkata cancelled the registration under section 12AA(3), but the Tribunal quashed this order and allowed the assessee's appeal. However, the AO denied exemption under section 11, citing the status of the assessee as AOP. The CIT(A) considered the Tribunal's orders for previous assessment years and directed the AO to grant exemption under section 11, as the registration of the trust was restored.
Challenge to assessee's status as AOP:
The AO assessed the assessee as an AOP instead of a trust due to the earlier cancellation of registration by the CIT, C-III, Kolkata. However, the Tribunal's order quashed this cancellation, thereby restoring the trust's registration. Consequently, the status for assessment should be as a trust and not as an AOP. The Revenue's appeal against this direction was dismissed, and the AO was directed to assess the assessee trust as a trust.
Conclusion:
The Revenue's appeal was dismissed as there was no evidence presented to show that the Tribunal's order had been reversed by the High Court or stayed. The CIT(A)'s direction to grant exemption under section 11 was upheld, and the status of the assessee as a trust was confirmed for assessment purposes.
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2013 (6) TMI 912
Issues Involved:1. Filing of audit report u/s 80-IA(7) of the Income-tax Act, 1961. 2. Allowance of depreciation rate on certain assets u/s 154 of the Income-tax Act, 1961. Summary:Issue 1: Filing of Audit Report u/s 80-IA(7)2.1. The Revenue contended that the CIT(A) erred in holding that filing of the audit report along with the return is not mandatory but directory, and if the audit report is filed before the assessment, the requirement of section 80-IA(7) is met. 2.2. The CIT(A)'s decision was supported by the judgments of the Hon'ble High Courts of Delhi and Karnataka, which held that the provisions of section 80-IA(7) are directory. The assessee claimed deduction u/s 80-IA for windmills installed in earlier financial years. 2.3. The Tribunal upheld the CIT(A)'s decision based on judicial interpretations. 2.4. Consequently, the appeal filed by the Revenue in ITA No.2265(Mds)/2012 was dismissed. Issue 2: Allowance of Depreciation Rate u/s 1543.1. The assessment u/s 143(3) was completed on 29-12-2011, and the assessee claimed 80% depreciation on certain assets, which the Assessing Officer allowed at 15%. 3.2. The assessee filed a rectification petition u/s 154, claiming that the 15% depreciation was a mistake and should be rectified to 80%, providing supporting documents. 3.3. The Assessing Officer rejected the rectification petition, stating that the higher depreciation rate was not applicable to certain assets like transformers and breakers, citing the judgment in CIT vs. Adar Tea Products Co. 3.4. The CIT(A) allowed the appeal, directing the Assessing Officer to allow 80% depreciation, following the Tribunal's decision in Asian Handloom vs. DCIT. 3.5. The Revenue raised an additional ground, arguing that the issue was debatable and not a mistake apparent from the record, thus not rectifiable u/s 154. 3.6. The Tribunal considered the rival submissions and found that the CIT(A) had considered the appeals independently, even though disposed of simultaneously. 3.7. The Tribunal concluded that the issue of the rate of depreciation required detailed enquiry and verification of fresh materials, which is not a mistake apparent from the record. 3.8. Therefore, the Tribunal held that the CIT(A) exceeded his jurisdiction in adjudicating the matter on merits and upheld the Assessing Officer's order u/s 154, setting aside the CIT(A)'s order. 4. In conclusion, the appeal filed by the Revenue regarding the assessment order u/s 143(3) was dismissed, and the appeal concerning the section 154 order was allowed. Orders pronounced on Tuesday, the 11th of June, 2013 at Chennai.
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2013 (6) TMI 911
Issues involved: Appeal and Cross Objection against the order of the Commissioner of Income Tax (Appeals)-I, Nashik dated 03.11.2011 regarding an addition made under Section 40(a)(ia) of the Income-tax Act, 1961 for the assessment year 2006-07.
Revenue's Appeal - Section 40(a)(ia) Disallowance:
The Revenue appealed against the deletion of an addition of Rs.1,09,44,818/- made by the Assessing Officer under Section 40(a)(ia) of the Act. The Assessing Officer disallowed the expenditure as the tax deducted at source was not deposited within the prescribed time limits. The CIT(A) deleted the disallowance based on a Tribunal decision. However, the Tribunal held that the CIT(A)'s decision was untenable based on a subsequent judgment of the Calcutta High Court, leading to the Revenue's success in the appeal.
Assessee's Cross Objection - Correct Status as AOP:
The assessee filed a Cross Objection resisting the disallowance, arguing that as a joint venture, it should be assessed as an Association of Persons (AOP) and not as a firm. The assessee pointed out the amendment in Section 194C of the Act and the CBDT Circular supporting its stance. The assessee contended that if assessed as an AOP, the provisions of Section 40(a)(ia) would not apply.
Assessment Status - Firm vs. AOP:
The assessee claimed that it should be assessed as an AOP, not a firm, despite mistakenly mentioning "firm" in the return of income. The Tribunal noted that the absence of a partnership agreement supports the assessee's claim. The correct status determination is crucial as it affects the tax liability. The Tribunal emphasized that the issue can be raised before the Tribunal even if not raised before lower authorities, citing legal precedent.
Decision and Remand:
The Tribunal found merit in the assessee's claim of being an AOP and remanded the matter to the Assessing Officer to determine the correct status as per law. The Assessing Officer was directed to consider the plea of the assessee on its merits, allowing the assessee to provide supporting material. The Cross Objection of the assessee was allowed for statistical purposes, and both the Revenue's appeal and the assessee's Cross Objection were allowed.
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2013 (6) TMI 910
Issues involved: Appeal against order u/s 143(3) passed by ITO, unexplained cash credits, unexplained credit entry.
Issue 1 - Appeal against order u/s 143(3): The assessee appealed against the order passed by CIT(A) under section 143(3), contending that the CIT(A) erred in not appreciating the submissions and grounds of appeal, leading to the dismissal of the appeal. The Assessing Officer treated a gift received by the assessee as unexplained income after finding discrepancies in the donor's bank transactions and relationship with the assessee. Despite detailed explanations provided by the assessee, the Assessing Officer deemed the gift as non-genuine and added it to the assessee's income.
Issue 2 - Unexplained cash credits: The Assessing Officer made additions for unexplained cash credits and unexplained credit entry in the assessee's books. The assessee was required to provide details regarding these transactions, failing which the amounts were treated as unexplained income u/s 68 of the Income Tax Act. The Assessing Officer concluded that the credited amounts were the assessee's unaccounted money introduced into her books under different names, as the source of these credits was not substantiated by the assessee.
Judgment: On appeal, the CIT(A) upheld the Assessing Officer's order without providing detailed reasons, leading to the order being set aside for lack of explanation. The matter was remanded to the CIT(A) for a fresh order in accordance with the law, directing him to address all grounds of appeal in a speaking order. The appeal filed by the assessee was treated as allowed for statistical purposes.
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2013 (6) TMI 909
Disallowance of payment made on account of subscription towards “TATA” brand equity and business promotion scheme - services to the global automotive industries - disallowance u/s 14A read with rule 8D of the Income Tax Rules, 1962 - Addition by way of transfer pricing adjustment in respect of assesse’s international transactions pertaining to reimbursement of rework charges to its Associated Enterprise - additional ground - credit of tax deducted at source.
HELD THAT:- It is pertinent to note that in the case of Tata Steel, another company belonging to TATA group, a similar subscription paid by the assessee company to Tata Sons Ltd. was proposed to be disallowed by the A.O. in the draft assessment order for A.Y. 2008-09 and when the assessee objected to the said disallowance before the DRP by relying on the decision of the Tribunal in the case of Rallis India Ltd.[2011 (8) TMI 1343 - ITAT MUMBAI], the DRP directed the A.O. to allow the said expenditure after verifying as to whether the department has accepted the said decision of the Tribunal. On verification, the A.O. found that no appeal was filed by the department against the order of the Tribunal passed in the case of Rallis India Ltd. giving relief to the assessee on the issue of brand equity subscription and accordingly he allowed similar subscription paid by Tata Steel Ltd. in the final assessment completed u/s 143(3) r.w.s. 144-C of the Act vide order dtd. 27-11-2010. It is thus clear that this issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench of this Tribunal in the case of Rallis India Ltd. which has also been accepted by the department. Respectfully following the said decision of the Tribunal, we delete the disallowance made by the A.O. on account of subscription paid by the assessee to Tata Sons Ltd. towards brand equity and promotion scheme and allow ground No. 1 of assessee’s appeal.
Disallowance u/s 14-A - The disallowance on account of interest was worked out by the assessee at 35% of the total interest adopting the ratio of tax free investment to total investment and this basis was accepted by the TPO in principle. As per the working given by the TPO, the ratio between tax free investment and total investment, however, was 38.47% and not 35% as taken by the assessee and accordingly the disallowance u/s 14-A of the Act on account of interest was increased by him to ₹ 1,41,95,393/- in the draft assessment order. At the time of hearing before us, the ld. Counsel for the assessee has made an attempt to show that the ratio of 38.47% worked out by the TPO is not correct and the same actually is less than 35%. It is, however, observed that in the final assessment order, the disallowance on account of interest u/r 8-D(2)(ii) was made by the assessee only to the extent of ₹ 1.07 crores as per the direction of the DRP and the same being lower than the amount of disallowance offered by the assessee u/s 14-A of the Act on account of interest, we are of the view that the assessee cannot be said to have any grievance on this issue.
We are unable to accept this stand of the assessee. The investment activity of the assessee resulting in exempt dividend income of ₹ 16.83 crores was the substantial activity and it cannot be accepted that this entire activity was looked after and handled by one Treasury person drawing the salary of ₹ 6,21,151/-. The administrative expenses incurred by the assessee thus were certainly attributable to the investment activity also which fetched the exempt of dividend income of ₹ 16.83 crores and the same therefore were required to be allocated to the exempt dividend income on some reasonable basis. The basis adopted by the assessee to attribute the administrative expenses only to the extent of salary of one Treasury staff thus was not reasonable and the findings to this effect was recorded by the A.O. in his final order giving specific reasons for not accepting the submissions made by the assessee to justify the quantum of disallowance offered u/s 14-A of the Act.
Having found that the disallowance offered by the assessee on account of administrative expenses u/s 14-A of the Act was not reasonable, the A.O., in our opinion, was fully justified in applying the basis or the formula given in Rule 8-D(2)(iii) of the Income Tax rules, 1962 to compute the disallowance u/s 14-A of the Act on account of other expenses. We are, therefore, of the view that the disallowance u/s 14-A as computed by the A.O. is quite reasonable and confirming the same, we dismiss ground No. 2 of assessee’s appeal.
Addition by way of transfer pricing adjustment in respect of assesse’s international transactions pertaining to reimbursement of rework charges to its Associated Enterprise - We find merit in this contention of the ld. counsel for the assessee. The same, however, is only an alternative contention and what is relevant to be seen first is the direct evidence to prove that the amount in question was reimbursed by the assessee to the Associated Enterprise on cost to cost basis and the invoices raised by the third party for repair work is a vital evidence in this regard which can clearly establish the arm’s length price of the repair work done. We, therefore, restore this issue to the file of the A.O. for deciding the same afresh in the light of evidence to be produced by the assessee in support of its claim on this issue as discussed above. If the assessee fails to produce such evidence, the A.O. is directed to consider the alternate contention of the assessee on this issue in accordance with law. Ground No. 3 of assessee’s appeal is accordingly treated as allowed for statistical purpose.
We admit the additional ground filed by the assessee and direct the A.O. to consider and allow the claim of the assessee for TDS amounting to ₹ 44,96,139/- after necessary verification in accordance with law. The additional ground of the assessee is accordingly treated as allowed.
In the result, appeal of the assessee is partly allowed.
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2013 (6) TMI 908
Issues involved:
The judgment involves the exclusion of certain expenses from export turnover for computing deduction u/s 10A of the Act and the exclusion of statutory disallowances from the income derived for the purpose of computation of deduction u/s 10A of the Act.
Exclusion of Certain Expenses from Export Turnover:
The Assessing Officer excluded communication charges, insurance, and professional charges from export turnover for computing deduction u/s 10A of the Act. The assessee contended that these expenses should be reduced from both export turnover and total turnover. The Tribunal agreed with the assessee, citing precedents from the Hon'ble Bombay High Court, Karnataka High Court, and Income-tax Appellate Tribunal. It directed the Assessing Officer to re-compute the deduction u/s 10A after reducing the mentioned expenses from both turnovers.
Exclusion of Statutory Disallowances from Income:
The Assessing Officer excluded statutory disallowances like delay in remittance of employees' PF contribution, provision for leave encashment, and gratuity from the income derived for computing deduction u/s 10A of the Act. The assessee argued that these disallowances should be considered as part of profit for the deduction. The Tribunal, following the decision of the Hon'ble Bombay High Court and other Tribunal benches, held that statutory disallowances cannot be excluded from the income for computing deduction u/s 10A. It directed the Assessing Officer to re-compute the deduction without excluding the disallowances, thereby allowing the grounds raised by the assessee on this issue.
In conclusion, the appeal filed by the assessee was allowed by the Tribunal, and the re-computation of the deduction u/s 10A of the Act was directed based on the considerations outlined in the judgment.
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2013 (6) TMI 907
Issues involved: Appeal against orders of Commissioner of Income tax (Appeals) for assessment years 2004-05 and 2007-08.
For the assessment year 2004-05:
The Revenue appealed against the allowance of depreciation on stone bunds, arguing that stone bunds should not be treated as a separate asset eligible for depreciation at a different rate than salt pans. The Commissioner of Income-tax (Appeals) held that stone bunds are integral to salt pans and should be depreciated at 100% like salt pans. The Tribunal agreed, emphasizing the essential role of stone bunds in operating salt pans and dismissing the Revenue's appeal.
For the assessment year 2007-08:
The Revenue challenged the deletion of additions made under section 2(22)(e) of the Act for loans received from two companies. Regarding the loan from M/s. Archean Granites Pvt. Ltd., the Tribunal held that as the assessee was not a shareholder, section 2(22)(e) did not apply. For the loan from M/s. Goodearth Maritime Ltd., the Tribunal agreed with the Commissioner of Income-tax (Appeals) that it was a running account for business transactions and not a loan. Citing relevant case law, the Tribunal upheld the Commissioner's decision and dismissed the Revenue's appeal for the assessment year 2007-08.
In conclusion, the Tribunal dismissed both appeals filed by the Revenue for the assessment years 2004-05 and 2007-08, upholding the decisions of the Commissioner of Income tax (Appeals) in both cases.
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2013 (6) TMI 906
Issues involved: Appeal against deletion of addition of cash credit u/s 68 of the Income Tax Act for A.Y. 2007-08.
Summary:
The appeal was filed by the revenue against the deletion of addition of Rs. 1,07,00,000 made by the Assessing Officer (AO) on account of unexplained cash credit u/s 68 of the Income Tax Act for the assessment year 2007-08. The Appellate Tribunal considered the evidence presented by the assessee, where it was established that the cash credit was received from a non-resident Indian settled in the United Kingdom through a cheque drawn on an NRE (External) account. The Commissioner of Income Tax (Appeals) (CIT(A)) deleted the addition after verifying the identity and creditworthiness of the creditor, as well as the genuineness of the transaction. The Tribunal noted that the creditor's identity and creditworthiness were proven, and the genuineness of the transaction was established through various documents, including a certificate of net worth and foreign inward remittance confirmation. The Tribunal upheld the CIT(A)'s decision, stating that the revenue failed to provide any material to challenge the findings.
The revenue contended that the genuineness of the transaction was not adequately explained, as the repayment was made to a different individual than the creditor. However, the assessee argued that the identity of the creditor was established through submitted documents, and the repayment was made as per instructions. The Tribunal reviewed the confirmation letter, bank statements, and certificates provided by the assessee, which supported the creditworthiness and genuineness of the transaction. Additionally, the Tribunal considered the repayment details and statements recorded by the Inspector, finding that the assessee had fulfilled the burden of proving the transaction's legitimacy. The Tribunal concluded that the CIT(A)'s decision to delete the addition was justified, as the revenue did not present any new evidence to dispute the findings.
In conclusion, the Appellate Tribunal dismissed the revenue's appeal, confirming the deletion of the cash credit addition u/s 68 of the Income Tax Act for the relevant assessment year.
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2013 (6) TMI 905
Issues Involved:
1. Unauthorized use/misuse of clients' shares kept as margin for pledging.
2. Non-compliance with the requirement of periodical settlement of client accounts.
3. Inter-client adjustments for the purpose of settlement of running accounts.
4. Determination of monetary penalty under Section 15HB of SEBI Act and Section 23 H of SCRA.
Summary:
Issue 1: Unauthorized Use/Misuse of Clients' Shares
SEBI's inspection revealed that the Noticee, M/s. Sharewealth Securities Ltd. (SSL), had pledged clients' securities without their knowledge, even when clients had credit balances or had not traded during the pledge period. SSL argued that pledging was done with clients' written consent for margin exposure, and no undue benefit was derived. The Adjudicating Officer found insufficient evidence of misutilization and gave SSL the benefit of doubt.
Issue 2: Non-Compliance with Periodical Settlement of Client Accounts
The Noticee was found to have settled accounts for only about 20 out of 25,000 clients and engaged in inter-client adjustments for running account settlements. SSL admitted procedural errors and delays in implementing SEBI's quarterly settlement instructions but claimed to have rectified these issues. The Adjudicating Officer concluded that SSL failed to comply with SEBI's procedures, exhibiting low standards of integrity and fairness, thus violating Clause A (1) of the Code of Conduct under Schedule II of Regulation 7 of the SEBI (Stock brokers and Sub brokers) Regulations, 1992.
Issue 3: Inter-Client Adjustments
SSL admitted to making inter-client adjustments with clients' consent to avoid pledging and unpledging charges. The Adjudicating Officer noted that SSL's actions violated SEBI Circular No. MIRSD/SE/Cir-19/2009 dated December 03, 2009, which mandates periodic settlement of client accounts and prohibits inter-client adjustments for running account settlements.
Issue 4: Determination of Monetary Penalty
Under Section 15HB of SEBI Act, 1992, the Adjudicating Officer considered factors under Section 15J, including the absence of quantifiable gain or investor loss and the non-repetitive nature of defaults. A penalty of Rs. 50,000 was imposed on SSL, deemed commensurate with the default.
Order:
The Noticee is directed to pay the penalty amount through a demand draft in favor of "SEBI-Penalties Remittable to Government of India" within 45 days of receipt of the order. Copies of the order are sent to the Noticee and SEBI.
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2013 (6) TMI 904
Issues involved: Application u/s 482 seeking to quash criminal proceedings against A-3 in C.C. No. 570 of 2008 on the file of Judicial First Class Magistrate (Excise), Guntur.
Issue 1: Allegations against the petitioner and contention of the petitioner's counsel
The petitioner, A-3, was accused in a private complaint along with others for involvement in issuing dishonored cheques on behalf of a firm. The petitioner's counsel argued that even if the allegations are true, no offense is made out against the petitioner as he was only a director of the company, and continuing proceedings against him would be an abuse of process of law.
Issue 2: Arguments by the Public Prosecutor and service of notice
The Public Prosecutor opposed the petition, stating that the court should not quash the proceedings based on the allegations against the petitioner. Notice was served on the counsel for the 1st respondent in the trial Court as the original notice could not be served.
Issue 3: Interpretation of Section 141 of the Negotiable Instruments Act
Section 141 of the Act holds individuals in charge of a company responsible for offenses committed by the company. The Act does not automatically make a Director vicariously liable, requiring specific averments to show their involvement. The involvement of Directors, Managers, or other officers must be proven for liability. Previous court decisions emphasized the need for clear allegations against Directors to prevent abuse of the legal process.
Issue 4: Precedents and legal principles
Court references cases where complaints failed to specify the role of Directors in the company's affairs, leading to quashing of proceedings. The absence of specific allegations against the petitioner in managing the company's day-to-day affairs led to the decision that continuing proceedings against him would be an abuse of process of law.
Conclusion:
The court allowed the Criminal Petition, quashing the proceedings against the petitioner/A-3 in C.C. No. 570 of 2008. The decision was based on the lack of specific allegations attributing a role to the petitioner in the company's affairs, aligning with legal precedents and statutory requirements under Section 141 of the Act.
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