|
Advanced Search Options
Case Laws
Showing 201 to 220 of 636 Records
-
2006 (1) TMI 476
Issues:
Department's appeal regarding deletion of interest on enhanced compensation by CIT(A) for assessment years 1993-94 to 1995-96.
Analysis:
The case involved the Department's appeals for assessment years 1993-94 to 1995-96, concerning the deletion of interest on enhanced compensation by the CIT(A). The assessee received enhanced compensation and interest for compulsory land acquisition. The interest income was not taken on receipt basis, leading to reassessment under section 147. The Department contended that since compensation is taxable on receipt basis, interest should also be taxable. The assessee argued that the interest was disputed, pending appeal by the Union of India, and should not be taxed until final decision, citing a Supreme Court judgment. The CIT(A) agreed with the assessee, directing to await the final decision before taxing the disputed interest amount.
The Department challenged the CIT(A)'s decision, arguing that the Supreme Court judgment cited by the assessee was not applicable as it predated certain tax provisions. However, the Tribunal disagreed with the Department's stand. Referring to a Karnataka High Court decision, the Tribunal explained that for section 45(5)(b) to apply, two conditions must be met: enhancement of compensation by a Court/Tribunal/Authority and receipt of such enhanced compensation. As the Union of India was appealing the interest award, the final decision on the interest was pending. The Tribunal upheld the CIT(A)'s decision, emphasizing that until the final decision is made, the interest cannot be taxed. The Tribunal clarified that the legal position remained unchanged despite the timing of the Supreme Court judgment.
Ultimately, the Tribunal dismissed all three appeals of the Department, finding no error in the CIT(A)'s order. The decision highlighted the importance of waiting for a final decision on disputed amounts before taxing them, especially in cases where the amount is subject to appeal and remains uncertain.
-
2006 (1) TMI 475
Unexplained expenditure - Appellate Tribunal provisions of section 2542(B) - estimate of expenditure - household and personal expenses - difference of opinion between the Hon’ble Members - Whether, the tax authorities were justified, in estimating the withdrawals at Rs. 12,000 P.M. ? - Award costs, which is equivalent to the institution fee paid by the assessee for the two years under consideration.
HELD THAT:- There is no material to support that any extra, expenditure was incurred by the assessee on entertainment and miscellaneous items like club expenses or on account of domestic servant. There is no evidence to show that the assessee was receiving floating relatives, guests coming and going. The estimate of expenditure at the rate of Rs. 12,000 per month is based on surmises as elaborately pointed out by the learned Judicial Member in his proposed order. I am not repeating all the reasons recorded by him. I deem it sufficient to hold that without proper material inference of expenditure on various alleged items could not be drawn. Thus the onus that lies on the Revenue u/s 69C cannot be taken to be discharged in these cases.
Evidently either the assessee had withdrawn more than Rs. 5,000 per month from bank or had some other source of withdrawal which was utilized and thus sufficient cash was left with the assessee for months of October 1995 to March 1996. If we go by withdrawal of Rs. 5,000 per month as observed by Assessing Officer, the total amount should have been Rs. 30,000 and not Rs. 73,127. Therefore, some source of cash available for utilization for household expenses at Rs. 73,127 was definitely there. This was not examined. Therefore on facts it is not possible to reject the assessee’s claim that his wife had sufficient cash with her to last through the year. Revenue authorities brought no material on record to show why the withdrawal could not be accepted. No comparative case was cited to justify the estimated expenditure of Rs. 1,44,000 in the two years under appeal. Therefore, on facts and circumstances of the case, I am of the view that revenue authorities did not bring sufficient material on record to apply the provisions of section 69C of the I.T. Act and accordingly addition for low household withdrawals in the two years were not sustainable.
The learned Judicial Member rightly deleted them in the proposed order. I am unable to agree with the learned Accountant Member that estimate of assessee’s household expenses at Rs. 12,000 per month is justified on fact. I agree with the view taken by the learned Judicial Member that additions made in two years are liable to be deleted.
Levy of cost - Normally, discretion to award cost is vested with the Tribunal to check filing of frivolous and unjustified appeals. The present appeals filed by the revenue cannot be said to be frivolous appeals to levy of heavy cost of Rs. 20,000. The Assessing Officer did enquire into the aspect of expenditure incurred by the assessee and made addition in a bona fide manner by making estimate of household expenses. It is a different thing that the Tribunal as an appellate authority has not agreed with the above view. Even then, one of us, the learned Accountant Member has held that the addition made is fully justified. The revenue authorities were of the view that sufficient material to estimate household expenses at Rs. 12,000 per month is available on record.
May be the Tribunal as per majority does not agree with the above view. It is a case of difference of opinion and, therefore, I do not see any good reason to agree with the learned Judicial Member’s order that the Revenue should be burdened with cost of Rs. 20,000. I agree with the learned Accountant Member that this is not a fit case in which cost should be imposed.
I answer the above questions referred to me as above - The matter should now be placed before the regular Bench for disposal of both the appeals in accordance with law.
-
2006 (1) TMI 474
Issues Involved:
1. Whether the Assessing Officer was justified in issuing an intimation under section 143(1)(a) of the Income-tax Act, 1961, simultaneously with a notice under section 143(2) of the Act.
Issue-wise Detailed Analysis:
1. Issuance of Intimation under Section 143(1)(a) Simultaneously with Notice under Section 143(2):
The core issue was whether the Assessing Officer (AO) was justified in issuing an intimation under section 143(1)(a) while simultaneously issuing a notice under section 143(2) of the Income-tax Act, 1961.
Background and Relevant Facts:
- The AO issued an intimation under section 143(1)(a) on 24-11-1998, the same date he issued a notice under section 143(2).
- The Judicial Member held that the intimation was issued after the AO decided to commence regular assessment proceedings, thus it was not in accordance with the law and should be canceled.
- The Accountant Member disagreed, noting that the assessee did not raise a specific ground for cancellation of the intimation under section 143(1)(a) but inferred it from Ground No. 11, which challenged the application of section 143(1)(a) after the issuance of notice under section 143(2).
Legal Precedents and Interpretations:
- The Supreme Court in CIT v. Gujarat Electricity Board [2003] 260 ITR 841 (SC) clarified that once regular assessment proceedings under section 143(2) commence, there is no need for summary proceedings under section 143(1)(a).
- The Calcutta High Court in Indian Aluminium Co. Ltd. v. Union of India [2004] 271 ITR 731 held that it is not possible for the AO to exercise powers under section 143(1) and section 143(2) simultaneously.
Arguments and Observations:
- The Judicial Member observed that the intimation was not issued in accordance with the law as it was subsequent to the decision to commence regular assessment proceedings.
- The Accountant Member noted that both the intimation under section 143(1)(a) and the notice under section 143(2) were signed on the same date. He concluded that the intimation was signed prior to the notice based on the order sheet entries, thus validating the intimation.
- The Third Member analyzed the statutory provisions and judicial precedents, emphasizing that the AO cannot simultaneously exercise powers under section 143(1)(a) and section 143(2). The case law from the Calcutta and Gujarat High Courts supported this view.
Conclusion:
- The Third Member concluded that the simultaneous issuance of intimation under section 143(1)(a) and notice under section 143(2) is not permissible.
- The proceedings under section 143(1)(a) were held to be without jurisdiction, and the intimation was canceled.
- The AO could carry on with the proceedings under section 143(3) of the Income-tax Act.
Final Decision:
- The appeal was allowed, agreeing with the Judicial Member's view that the intimation was contrary to the scheme of the Income-tax Act and liable to be canceled.
- The matter was directed to be placed before the regular Bench for disposal in accordance with the law.
-
2006 (1) TMI 473
Issues Involved:
1. Deduction of various expenditures claimed by the assessee.
2. Addition on account of sundry creditors not proved.
3. Disallowance of brokerage expenses.
4. Disallowance of advertisement expenses.
5. Disallowance of architect's fee and other development expenses.
Issue-wise Detailed Analysis:
1. Deduction of Various Expenditures Claimed by the Assessee:
For the assessment year 1996-97, the assessee declared a loss of Rs. 4,71,480, claiming deductions for various expenses totaling Rs. 5,83,501. The Assessing Officer disallowed these expenses, concluding that the company had not commenced the sale of its construction and the claimed expenses were not satisfactorily justified. The CIT (Appeals) allowed these expenses, treating them as revenue expenditure not directly related to land development. The Tribunal directed the Assessing Officer to allow deductions only for expenses directly related to the receipt of Rs. 82,481 offered for assessment.
2. Addition on Account of Sundry Creditors Not Proved:
For the assessment year 1997-98, the Assessing Officer added Rs. 1,31,31,392 due to unproven sundry creditors. The CIT (Appeals) restored this issue to the Assessing Officer for further verification.
3. Disallowance of Brokerage Expenses:
The Assessing Officer disallowed Rs. 31,58,100 out of Rs. 66,55,850 claimed as brokerage expenses, citing lack of confirmation and details of services rendered. The CIT (Appeals) deleted this disallowance, noting that the brokerage was related to collections during the year. The Tribunal restored this matter to the Assessing Officer, allowing deductions only for expenses incurred on behalf of other associate companies.
4. Disallowance of Advertisement Expenses:
The Assessing Officer disallowed Rs. 5,10,000 out of Rs. 15,40,870 claimed for advertisement expenses, including Rs. 10,000 paid to the Delhi District Cricket Association. The CIT (Appeals) deleted this disallowance, recognizing the expenses as related to advertisement and publicity for selling plots/flats. The Tribunal restored this issue to the Assessing Officer for further verification.
5. Disallowance of Architect's Fee and Other Development Expenses:
The Assessing Officer disallowed Rs. 1.25 crores, including Rs. 25 lakhs as architect's fee, citing lack of proof for the genuineness of the expenses. The CIT (Appeals) deleted this disallowance, noting that the expenses were properly vouched and the assessee maintained audited books. The Tribunal upheld the CIT (Appeals) decision, noting that the issue is open for adjudication in the year the deduction is claimed.
Conclusion:
The Tribunal partly allowed the revenue's appeals for both assessment years, directing the Assessing Officer to verify and allow deductions only for specific expenses directly related to the receipts offered for assessment and incurred on behalf of associate companies.
-
2006 (1) TMI 472
Issues Involved:
1. Deletion of addition of Rs. 10 lakhs by CIT(A) as unexplained investment.
2. Validity of the transaction and receipt of Rs. 10 lakhs as on-money.
3. Applicability of Section 68 of the Income-tax Act.
4. Requirement of corroborative evidence and cross-examination of witnesses.
5. Similarity of facts for assessment years 1996-97 and 1997-98.
Issue-wise Detailed Analysis:
1. Deletion of Addition of Rs. 10 Lakhs by CIT(A):
The revenue's primary grievance was that the CIT(A) erred in deleting the addition of Rs. 10 lakhs, which was considered unexplained investment by the Assessing Officer (AO). The CIT(A) held that the assessee had properly explained the receipt of Rs. 10 lakhs, and it could not be treated as unexplained investment.
2. Validity of the Transaction and Receipt of Rs. 10 Lakhs as On-Money:
The assessee claimed to have sold agricultural land and received Rs. 16.5 lakhs, of which Rs. 10 lakhs was received through a bearer cheque from M/s. Karthik Enterprises. The AO questioned the genuineness of this transaction, noting discrepancies in the statements of the assessee and the purchaser, Shri Poddar. The AO concluded that the assessee failed to establish that the Rs. 10 lakhs represented consideration from Shri Poddar, treating it as unexplained income. However, the CIT(A) accepted the assessee's explanation, noting that the land prices were higher than recorded in the documents and the assessee's small Kirana shop could not generate such substantial income from undisclosed sources.
3. Applicability of Section 68 of the Income-tax Act:
The AO argued that the addition was for unexplained credit as mentioned in the diary, and the onus was on the assessee to explain the sources. The CIT(A) observed that Section 68 applies when any sum is found credited in the books of account maintained by the assessee. Since the diary was not considered a formal book of accounts, the CIT(A) held that Section 68 was not applicable. The Tribunal noted that if the diary is maintained as a memorandum book, it could be considered a book under Section 68, and the AO should examine whether it qualifies as such.
4. Requirement of Corroborative Evidence and Cross-Examination of Witnesses:
The assessee requested the cross-examination of the proprietor of M/s. Karthik Enterprises and other witnesses to establish the genuineness of the transaction. The AO did not allow this request and failed to locate the proprietor of M/s. Karthik Enterprises. The CIT(A) emphasized the need to consider the surrounding circumstances and the assessee's inability to earn such huge income from undisclosed sources. The Tribunal agreed that the assessee should be given sufficient opportunity to provide evidence and cross-examine witnesses, setting aside the assessment for further examination.
5. Similarity of Facts for Assessment Years 1996-97 and 1997-98:
For the assessment year 1997-98, the assessee sold agricultural land to Shri H.P. Nagendra, and similar issues arose regarding the receipt of on-money and the recording of transactions in the diary. The AO did not accept the amounts as received from the sale of land. Given the similarity of facts, the Tribunal set aside the assessment for the assessment year 1997-98 as well.
Conclusion:
The appeals were treated as allowed for statistical purposes, with the Tribunal setting aside the assessments for both assessment years 1996-97 and 1997-98, directing further examination and providing the assessee an opportunity to present corroborative evidence and cross-examine relevant witnesses.
-
2006 (1) TMI 471
Issues:
Cross appeals by revenue and assessee against CIT(A) order dated 14-11-2002 regarding expenditure incurred by assessee.
Analysis:
The only issue in the appeals relates to various expenditures disallowed by the Assessing Officer, totaling Rs. 11,85,500. The CIT(A) sustained the disallowance at 50%, leading to appeals before the Tribunal by both parties. The revenue argued that the CIT(A)'s order is not sustainable, as the assessee failed to provide sufficient evidence to justify the expenses. The revenue contended that the assessment order disallowing the expenses should be upheld. Conversely, the assessee's counsel argued that payments were made via cheques, and the Assessing Officer's concerns about high expenditure in certain months were due to the nature of contract work completion towards the end of the year. The assessee claimed that the entire amount should have been allowed. After hearing both sides, the Tribunal noted that strict monthly correlation of expenditure with receipts was impracticable, especially in cases where payments were made in advance and adjustments were made later. The Tribunal found the assessee's explanations reasonable and accepted the claim in full, deleting the addition sustained by the CIT(A).
In the assessee's appeal, another ground related to disallowance under section 43B of the Act was raised. The Assessing Officer disallowed Rs. 4,21,918 for payments made beyond statutory time limits. However, a review of the payment details revealed that all amounts were paid within the relevant financial year, making them allowable deductions. Citing the precedent set by the Hon'ble Apex Court in the case of M/s. Allied Motors, the Tribunal deleted the addition made by the Assessing Officer.
In conclusion, the Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, thereby ruling in favor of the assessee regarding the disputed expenditures and the disallowance under section 43B of the Act.
-
2006 (1) TMI 470
Deduction of tax at source - Payment made to TAB was for performing the work of dubbing in various languages and for making beta copies - Liable to deduction of TDS u/s "194C or 194J" - "assessee in default" u/s 201(1) - HELD THAT:- The Explanation to section 191 was inserted by the Finance Act of 2003 w.e.f. 1-6-2003. A plain reading of the aforesaid Explanation would show that it is clarificatory in nature and, therefore, would apply for the financial year involved in these appeal also. In the case of Crescent Housing (P.) Ltd. v. ITO [2001 (7) TMI 300 - ITAT MADRAS-C], held that in the event of payment of tax by the recipient (i.e., the payee from the appellant) no further demand could be raised on the person responsible for deducting tax at source. The aforesaid decision related to the financial years 1996-97 and 1997-98. In the said decision even in respect of interest under section 201(1A) it was held that it could be levied only till the date of payment of tax by the payee from the appellant. Even prior to inserting of Explanation to section 191 Courts have taken a view that in a case where the payee pays the tax the payer i.e., the person responsible for deduction of tax at source cannot be held to be an "assessee in default" u/s 201.
The Hon’ble Gujarat High Court in the case of CIT v. Rashikesh Apartments Co-operative Housing Society Ltd.[2001 (6) TMI 17 - GUJARAT HIGH COURT] and the Hon’ble M.P. High Court in the case of CIT v. M.P. Agro Morarji Fertilizers Ltd.[1988 (9) TMI 30 - MADHYA PRADESH HIGH COURT] have taken a similar view. The appellant cannot, therefore, be treated as an appellant in default, if it is found that the payee has made payment on tax of the amounts received from the appellant. Consequently the appellant cannot be considered as an "assessee in default".
As far as charge of interest is concerned it cannot be from the date of deductibility of tax till the payment by the appellant. On the other hand it could be only put to the date of payment of tax by the payee i.e., M/s. TAB. This is because interest is compensatory in nature and the revenue cannot claim payment of interest for the period when the payee has already paid the taxes to the exchequer. This issue will be academic if it is found that the payee had paid the taxes on due date. For the reasons stated above the appeal of the revenue is dismissed. Ground No. 1 of the grounds of appeal of the appellant is allowed to the extent indicated above.
In the result TDS is dismissed, while TDS 209 is partly allowed.
-
2006 (1) TMI 469
Issues Involved:
1. Whether interest under section 244A is allowable to the assessee on the refund of excess tax deducted at source (TDS).
2. Applicability of Board Circulars and relevant case laws in determining the allowance of interest on such refunds.
Issue-wise Detailed Analysis:
1. Allowability of Interest under Section 244A on Refund of Excess TDS:
The primary issue is whether the assessee is entitled to interest under section 244A on the refund of excess TDS paid. The assessee argued that they paid the TDS voluntarily while awaiting approval from the Ministry of Finance, and thus, the refund should be treated as a payment under the Income-tax Act, making them eligible for interest under section 244A. The CIT(A) rejected this claim, distinguishing the case laws cited by the assessee, and held that no interest under section 244A was allowable because the refund was not under the Income-tax Act.
2. Applicability of Board Circulars and Case Laws:
The CIT(A) and the Tribunal examined various Board Circulars and case laws to determine the applicability of interest on the refund. Circular No. 769 and Circular No. 790 were particularly significant. These circulars provide procedures for refunding excess TDS independent of the Income-tax Act and clarify that no interest under section 244A is admissible on such refunds. The Tribunal noted that the refund allowed to the tax deductor in these situations is not under any statutory provisions of the Income-tax Act but rather independent of it.
Detailed Analysis:
Facts of the Case:
The assessee, engaged in manufacturing soap and importing oils, paid withholding tax on interest payable to foreign suppliers before receiving the necessary approvals for tax exemption under section 10(15)(iv)(c). Upon receiving the approvals, the assessee sought a refund of the excess TDS paid, which was granted but without interest under section 244A. The CIT(A) upheld the decision to deny interest, leading the assessee to appeal to the Tribunal.
Tribunal's Consideration:
The Tribunal reviewed the relevant provisions of sections 240 and 244A, the Board Circulars, and the cited case laws. It found that the refund in question was not covered by the statutory provisions of the Income-tax Act, as no notice of demand under section 156 was issued, and the tax was not paid under the provisions of the Act. The Tribunal emphasized that the Board Circulars clearly state that refunds in such cases are independent of the Act and do not qualify for interest under section 244A.
Case Laws and Circulars:
The Tribunal distinguished the case laws cited by the assessee, including the Supreme Court's decision in ITO v. Delhi Development Authority and the Gujarat High Court's decision in Vasantlal Tulsidas Agrawal v. CIT, noting that these cases involved different factual circumstances. The Tribunal also referenced its own decisions in Tata Engg. & Locomotive Co. Ltd. v. Dy. CIT and Royal Airways Ltd. v. Addl. DIT, finding them distinguishable from the present case.
Conclusion:
The Tribunal concluded that the payment made by the assessee was not under the provisions of the Income-tax Act and thus did not qualify for interest under section 244A. The Board Circulars, being benevolent and intended to mitigate hardship, explicitly stated that no interest was to be paid on such refunds. Therefore, the CIT(A) was justified in rejecting the assessee's claim for interest, and the Tribunal dismissed the appeals for both assessment years.
-
2006 (1) TMI 468
Issues:
- Appeal against deletion of interest levied under section 234C on book profits determined under section 115JA for assessment year 2000-01.
Analysis:
1. The appellant, an assessee-company, filed a return of income showing nil income processed under section 143(1) under MAT on book profit of Rs. 4,81,04,048, resulting in a demand due to interest levied under section 234C. The appellant applied for deletion of interest under section 154, citing inapplicability when income was determined under section 115JA. The Assessing Officer rejected the application, relying on certain court judgments. However, the CIT(Appeals) deleted the interest based on previous orders in the appellant's case for other assessment years.
2. The learned DR cited a decision by the Delhi Bench of the Tribunal and a judgment of the Rajasthan High Court to support the department's stance. The Rajasthan High Court's judgment related to an assessee's liability for interest on capital gains arising after the last date for payment of advance tax. The High Court ruled that the Assessing Officer cannot determine interest liability beyond the claims made by the assessee under section 143(1) of the Act. This decision highlighted the limitations on the Assessing Officer's authority in such matters.
3. The Tribunal analyzed the Rajasthan High Court's judgment and its implications on the current case. It emphasized that the Assessing Officer lacks jurisdiction to determine interest liability beyond the claims made by the assessee under section 143(1) of the Act. The Tribunal noted that this limitation applies to cases involving income determined under section 115JA as well. It clarified that the Assessing Officer should resort to regular assessment procedures under section 143(3) to levy interest if required, instead of interpreting provisions during initial processing under section 143(1). The Tribunal, therefore, upheld the deletion of interest in favor of the appellant.
4. In conclusion, the Tribunal dismissed the department's appeal, emphasizing the Assessing Officer's duty to adhere to statutory procedures and not engage in interpretative exercises beyond the scope of initial processing under section 143(1). The judgment underscored the importance of following due process and respecting the assessee's claims within the framework of the Income-tax Act.
-
2006 (1) TMI 467
Issues:
Rectification of order due to incorrect mention of case laws relied upon by the parties, applicability of various case laws related to penalty under section 271(1)(c) for concealment of income, satisfaction of Assessing Officer before levying penalty.
Analysis:
1. Rectification of Order:
The assessee filed Misc. Petitions against the consolidated order passed by the Tribunal, claiming a defect in the order regarding the mention of case laws relied upon. The Tribunal wrongly stated that the case laws were relied upon by the Department's Representative, while they were actually cited by the assessee. The Tribunal acknowledged this error and rectified the order to reflect that the case laws were cited by the assessee's Authorized Representative.
2. Applicability of Case Laws on Penalty for Concealment:
The assessee argued that penalty under section 271(1)(c) cannot be levied as there was no satisfaction on the part of the Assessing Officer, citing various case laws. These cases highlighted instances where penalties were canceled due to revised returns being voluntarily filed, admissions of concealment before detection by revenue, lack of concealment when responding to notices, and other similar circumstances. However, the Tribunal found that the circumstances of the present case, involving tampering with TDS certificates to show lower receipts, did not align with the scenarios in the cited case laws. The Tribunal concluded that the decisions cited by the assessee were not applicable in the current case due to the apparent conduct of the assessee in concealing income.
3. Satisfaction of Assessing Officer for Penalty:
The Tribunal noted that the penalty proceedings were initiated by the Assessing Officer after being satisfied that it was a fit case for penalty levy, as evident from the assessment order and other records. The Tribunal upheld the order passed by the Assessing Officer, stating that there was no mistake in the merits of the case for rectification. Consequently, the Tribunal affirmed the original order, finding it justified and requiring no interference, and partly allowed the Misc. Petition.
In conclusion, the Tribunal rectified the order to reflect the correct attribution of case laws, analyzed the applicability of various case laws related to penalty for income concealment, and confirmed the Assessing Officer's satisfaction before levying the penalty.
-
2006 (1) TMI 466
Issues Involved:
1. Methodology for determining the market value of unquoted shares.
2. Direction to tax short-term capital gain in the correct assessment year.
3. Justification for reopening the assessment.
4. Adoption of the yield method for market value determination.
Detailed Analysis:
1. Methodology for Determining the Market Value of Unquoted Shares:
The primary issue was the methodology employed for determining the market value of unquoted shares of Marico Industries Ltd. (Marico) received by the assessee-trust from Harsh Archana Trading and Investments Ltd. (Harsh Archana) upon its liquidation. The Assessing Officer (AO) used the break-up method based on Rule 11 of Schedule III of the Wealth-tax Act, which was contested by the assessee. The assessee adopted Rs. 165 per share based on the offer price in Marico's public issue in March 1996.
The CIT(A) rejected the AO's approach, stating that the break-up value method was inappropriate for a going-concern like Marico and that the yield method was more suitable. This decision was supported by the Supreme Court's ruling in CWT v. Mahadeo Jalan, which emphasized the yield method for valuing shares of a going-concern. The CIT(A) directed the AO to adopt Rs. 165 per share as the market value, aligning with the assessee's valuation.
2. Direction to Tax Short-Term Capital Gain in the Correct Assessment Year:
The AO initially assessed the short-term capital gain in the assessment year 1996-97, which was contested by the CIT(A). The CIT(A) directed the AO to tax the short-term capital gain in the assessment year 1997-98 if a higher authority decided so. This direction was based on the timing of the public issue and the receipt of sale proceeds.
3. Justification for Reopening the Assessment:
The AO reopened the assessment under section 148 of the Income-tax Act, 1961, on the grounds of under-assessment and escapement of revenue. The CIT(A) upheld the reopening, rejecting the assessee's contention against it. The reassessment resulted in a revised total income, incorporating both long-term and short-term capital gains.
4. Adoption of the Yield Method for Market Value Determination:
The CIT(A) emphasized that the yield method, rather than the break-up method, should be used for determining the market value of Marico shares. This approach was supported by the Supreme Court's rulings in CWT v. Mahadeo Jalan and CGT v. Smt. Kusumben D. Mahadevia, which highlighted the yield method for valuing shares of a going-concern. The CIT(A) accepted the assessee's valuation of Rs. 165 per share, aligning with the yield method.
The CIT(A) also noted that adopting a higher value of Rs. 187 per share, as suggested by the assessee's report, would unintentionally benefit the assessee and reduce the overall tax liability. Therefore, the CIT(A) maintained the valuation at Rs. 165 per share for computing long-term capital gains under section 46(2) of the Income-tax Act, 1961.
Conclusion:
The appeal of the Revenue was dismissed, and the cross-objections filed by the assessee were also dismissed without prejudice. The CIT(A)'s order was upheld, adopting the yield method and quantifying the market value of Marico shares at Rs. 165 per share for computing long-term capital gains. The CIT(A)'s well-reasoned findings were entirely agreed upon, and the directions for recomputing the capital gains were affirmed.
-
2006 (1) TMI 465
Refunds - Whether interest u/s 244A granted to assessee in the proceedings u/s 143(1)(a) of the Act is taxable in the year of its receipt or in the year in which proceedings u/s 143(1)(a) attains finality ? - HELD THAT:- In our view, the right to grant interest is absolute since existence of such right is not dependent on any event. For example, assessee is granted interest on the date of granting refund. Subsequently, u/s 244A(3), it is reduced by virtue of assessment u/s 143(3). In our opinion, the right of interest came into existence on the date of refund by virtue of section 244A(1) though its quantification may or may not vary depending upon the outcome of assessment.
The view of ours is justified by the judgment of the Hon’ble Supreme Court in the case of Kedarnath Jute Mfg. Ltd. Co. Ltd. v. CIT [1971 (8) TMI 10 - SUPREME COURT], approving the judgment of the Hon’ble Madras High Court in the case of Pope the King Match Factory v. CIT [1962 (3) TMI 81 - MADRAS HIGH COURT].
It has been apprehended by assessee’s counsel that assessee would be without remedy if the interest is reduced by virtue of assessment u/s 143(3). This apprehension, in our opinion, is unfounded. If interest is reduced by virtue of sub-section (3) of section 244A on account of assessment u/s 143(3), the interest granted in earlier year gets substituted and it is the reduced amount of interest that would form part of income of that year. Thus, it would amount to mistake rectifiable u/s 154 of the Act. In our opinion, if the basis, on which income was assessed is varied or ceases to exist, then such assessment would become erroneous and can be rectified. This can be explained with an example. Similarly, any income assessed may become non-taxable by virtue of retrospective amendment and consequently, erroneous assessment can be rectified. Therefore, in our humble opinion, if the interest granted u/s 244A(1) is varied under sub-section (3) of such section, then the interest originally granted would be substituted by the reduced/increased amount as the case may be. Thus, income on account of interest if assessed can be rectified u/s 154.
Thus, we are of the view that interest on refund u/s 244A(1) would be assessable in the year in which it is granted and not in the year in which proceedings u/s 143(1)(a) attain finality.
The matter will now go to the regular Bench for decision on merits.
-
2006 (1) TMI 464
TDS u/s 195 - Applicability of section 9 of the Act - TDS liability arise on payments for purchase of software to non-residents ? - Taxability of sale of software as “Royalty” - consideration received on sale of computer software programme i.e. C D ROM as business income OR “Royalty Income” - HELD THAT:- In the instant case, the appellant has acquired the software for business use. The rights acquired in the software are limited to the extent to enable the appellant to operate the programme. The appellant has not acquired any copyright of the software but has only acquired a copyrighted programme. The appellant relied on the judgment of the Supreme Court in the case of Tata Consultancy Services v. State of Andhra Pradesh [2004 (11) TMI 11 - SUPREME COURT] in which the Apex Court held that canned software are goods and liable to sales tax. The worthy Supreme Court further observed that intellectual property has been incorporated in the media for transfer and both cannot be split up.
The facts in the instant case are similar to the facts of Samsung Electronics (P.) Ltd.’s case [2005 (2) TMI 438 - ITAT BANGALORE-A], ruled that a readymade off the shelf computer programme does not grant any right to utilise the copyright of the computer programme and accordingly, the payments for its import would not constitute royalty income in India and no tax needs to be deducted u/s 195 of the Act.
The Special Bench also held that software supplied is goods. Though an information technology product is normally regarded as an intangible asset, once technology is put on a media, then it becomes goods liable to custom duty. Finally, the Special Bench held that the payments for hardware and software were lump-sum payments and no separate consideration should be attributed towards software as "royalty".
Thus, it is held that payments made for import of software is not royalty and tax was not required to be deducted at source. Hence the demand raised u/s 201 for non-deduction of tax at source is cancelled.
In the result, the appeals are allowed.
-
2006 (1) TMI 463
Issues Involved:
1. Taxability of employer's contribution to pension plan as perquisite under section 17(2)(v) of the Income-tax Act.
2. Applicability of section 15 and section 17(2) of the Income-tax Act regarding contingent payments.
3. Comparison with relevant case laws and their applicability to the present case.
Issue-wise Detailed Analysis:
1. Taxability of Employer's Contribution to Pension Plan as Perquisite:
The primary issue in this case revolves around whether the contribution made by the employer to the pension plan should be considered a taxable perquisite under section 17(2)(v) of the Income-tax Act. The Assessing Officer (AO) argued that the contribution to the pension plan constitutes a perquisite and should be taxed accordingly. The AO relied on the decision of the Patna High Court in the case of CIT v. J.G. Keshwani, which held that premium paid for a deferred annuity policy is part of salary income.
2. Applicability of Section 15 and Section 17(2) Regarding Contingent Payments:
The assessee contended that for a benefit to be taxed under section 15, the employee must have a vested interest in the amounts paid by the employer. The argument was that contingent payments, where the employee has no right until the occurrence of a contingency, cannot be termed as perquisites. The CIT(A) agreed with this view, stating that the contributions to the pension plan do not vest in the employee at the time of contribution and are contingent upon certain conditions being met, such as completing five years of service.
3. Comparison with Relevant Case Laws:
The CIT(A) and the Tribunal relied on several case laws to support their decision. The Supreme Court's decision in CIT v. L.W. Russel was particularly significant, where it was held that contingent payments to which the employee has no right until the contingency occurs cannot be considered perquisites. The Tribunal also referred to the Delhi High Court's decision in CIT v. Mehar Singh Sampuran Singh Chawla, which held that contributions to a fund for employee welfare are not deemed perquisites if the employee does not acquire a vested right in the sum contributed.
Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO, concluding that the contributions to the pension plan were contingent payments and did not constitute perquisites under section 17(2)(v). The Tribunal emphasized that the employee did not have a vested right in the contributions at the time they were made, and the benefit was contingent on fulfilling certain conditions. Therefore, the appeal by the Revenue was dismissed.
Significant Phrases and Legal Terminology:
- "Taxability under section 17(2)(v) of the Act"
- "Contingent payments"
- "Vested interest"
- "Perquisite"
- "Employer's contribution to pension plan"
- "Decision of Hon'ble Supreme Court in CIT v. L.W. Russel"
- "CIT(A) deleted the addition"
- "Reliance on relevant case laws"
The judgment meticulously analyzed the nature of the pension contributions, the applicable legal provisions, and relevant case laws to conclude that the contributions did not constitute taxable perquisites.
-
2006 (1) TMI 462
Issues Involved:
1. Whether the discount given to concessionaires by the assessee should be treated as commission for the purpose of deducting income tax under section 194H of the Income-tax Act.
2. Whether the relationship between the assessee and the concessionaires was that of principal to principal or principal to agent.
3. Whether the assessee was justified in not deducting tax at source on the payments made to concessionaires.
4. Whether the assessee should be treated as in default under sections 201(1) and 201(1A) for non-deduction of tax at source.
Issue-Wise Detailed Analysis:
1. Treatment of Discount as Commission:
The primary issue was whether the discount given by the assessee to its concessionaires should be treated as commission under section 194H of the Income-tax Act, necessitating the deduction of tax at source. The Assessing Officer concluded that the payments made to concessionaires were in the nature of commission, as per the provisions of section 194H. The CIT(A) upheld this view, noting that the consideration paid by DMS to its concessionaires was indeed commission, not discount. The Tribunal agreed, stating that the payments fit the definition of commission as outlined in section 194H.
2. Relationship Between Assessee and Concessionaires:
The assessee argued that the relationship with concessionaires was that of principal to principal, not principal to agent. However, the Assessing Officer and CIT(A) found that the concessionaires were agents of DMS, selling milk and milk products on behalf of DMS. The Tribunal supported this view, citing the terms of the agreements and the control DMS maintained over the milk booths and unsold products. The Tribunal concluded that there was no principal to principal relationship, and the concessionaires were indeed agents.
3. Justification for Non-Deduction of Tax at Source:
The assessee contended that the payments were discounts, not commissions, and thus did not require tax deduction at source. The CIT(A) and the Tribunal rejected this argument, noting that the agreements and appointment letters provided during the survey indicated the payments were commissions. The Tribunal found the redrafted agreements presented by the assessee, which replaced the term 'commission' with 'discount,' to be an afterthought and not credible. The Tribunal emphasized that the original agreements clearly indicated a commission-based relationship.
4. Treatment of Assessee as in Default:
Given the findings that the payments were commissions and the relationship was principal to agent, the Tribunal upheld the Assessing Officer's decision to treat the assessee as in default under sections 201(1) and 201(1A) for failing to deduct tax at source. The Tribunal also upheld the imposition of interest under section 201(1A).
Conclusion:
The Tribunal dismissed both appeals filed by the assessee, affirming the decisions of the Assessing Officer and CIT(A). The Tribunal concluded that the payments made to concessionaires were commissions, not discounts, and the relationship was that of principal to agent. Consequently, the assessee was required to deduct tax at source under section 194H and was correctly treated as in default for failing to do so.
-
2006 (1) TMI 461
Issues:
- Deletion of penalty under section 18(1)(c) of the Wealth-tax Act, 1957 for the assessment years 1997-98 and 1998-99.
Analysis:
- The appeals were filed by the revenue against the orders of the learned CWT(A) for deleting penalties imposed under section 18(1)(c) of the Wealth-tax Act, 1957 for the assessment years 1997-98 and 1998-99.
- The dispute arose when the assessee, along with two relatives, jointly purchased a property, with each person having a specific share. The revenue alleged that the assessee, as part of an Association of Persons (AOP), concealed wealth leading to the penalty imposition.
- The learned CWT(A) deleted the penalties based on the belief that there was no concealment of wealth. The assessee had included the proportionate share of the property in the wealth return, supported by various decisions and evidence. The department's treatment of the status as AOP was not considered as mala fide by the CWT(A).
- The Tribunal found that the assessee acted under a bona fide belief, including the property share in individual returns. The department had previously accepted the co-owners' status as individuals for wealth-tax purposes, further supporting the assessee's position.
- The Tribunal concluded that the assessee's actions were not mala fide or in conscious disregard of the law. The inclusion of the property under AOP, not co-owners, was due to differing interpretations, providing a reasonable cause for a different view.
- The Tribunal upheld the CWT(A)'s decision to delete the penalties, finding no infirmity in the order. Both appeals by the revenue were dismissed, affirming the deletion of penalties under section 18(1)(c) for the respective assessment years.
-
2006 (1) TMI 460
Issues:
1. Discrepancies in turnover estimation and profit calculation.
2. Validity of estimation of net profit rate.
3. Allowability of expenses without supporting vouchers.
Analysis:
Issue 1: Discrepancies in turnover estimation and profit calculation
The case involved a dispute regarding the turnover estimation and profit calculation based on a survey conducted at the assessee's business premises. The Assessing Officer identified several discrepancies in the assessee's records, such as lack of supporting bills for purchases, unclear basis for closing stock, and discrepancies in salary and rent figures. The Assessing Officer estimated the turnover and applied a net profit rate of 15 percent. However, the CIT(A) disagreed with this estimation, noting that the net taxable income should not exceed the returned income of the assessee. The CIT(A) emphasized that the net profit rate in a small bar-cum-restaurant should not exceed 10 percent and directed the Assessing Officer to adopt the taxable income at the figure of the returned income.
Issue 2: Validity of estimation of net profit rate
During the proceedings, the Departmental Representative (DR) argued that the CIT(A) did not consider the facts found during the assessment and questioned the allowance of expenses without supporting vouchers. However, the DR supported the CIT(A)'s order. The Tribunal, after hearing both parties, referred to the Supreme Court's decision in CST v. H.M. Esufali Issakutty to justify the estimation of turnover based on suppressed sales for a specific period. The Tribunal concluded that due to the incomplete and incorrect accounts, it was fair to estimate the net profit. Section 44AF was applied to determine the net profit rate for retail sales, distinguishing between bar sales and food items sales. The Tribunal upheld a net profit rate of 10 percent for bar sales and 15 percent for food items sales, resulting in a revised net profit figure.
Issue 3: Allowability of expenses without supporting vouchers
The Assessing Officer highlighted the absence of bills for purchases and vouchers for expenses, indicating specific defects in the maintenance of accounts. The Tribunal acknowledged the necessity of accurate accounts and the requirement for supporting documentation. However, the Tribunal's decision to estimate the net profit was based on the overall discrepancies identified in the accounts rather than the specific allowance of expenses without vouchers.
In conclusion, the Tribunal partly allowed the revenue's appeal by revising the estimated net profit figures based on the nature of sales and upholding the principle that the taxable income should not exceed the returned income, considering the specific circumstances and discrepancies in the case.
-
2006 (1) TMI 459
Issues Involved:
1. Validity and competence of the appeal filed.
2. Requirement of Power of Attorney for the authorized signatory.
3. Appearance of a proper authorized representative.
4. Adequate opportunity of being heard.
5. Restriction of depreciation claim on Jack-up Rig.
6. Addition of bank charges and interest without reason.
Detailed Analysis:
1. Validity and Competence of the Appeal Filed:
The main ground of the appeal was the dismissal by the CIT(A) on the basis that Form No. 35, i.e., Memorandum of Appeal, was not signed by an authorized person. The assessee argued that the appeal was dismissed without affording a proper opportunity to prove that the appeals were signed by an authorized signatory, asserting that filing an appeal is a statutory right. The Tribunal examined the provisions of rule 45(2) of the I.T. Rules and section 140 of the I.T. Act, which require the appeal to be signed by a person authorized to sign the return of income. The Tribunal found that the assessee did not file the necessary Power of Attorney along with the appeal, leading to the CIT(A)'s justified belief that the appeal was not signed by an authorized signatory.
2. Requirement of Power of Attorney for the Authorized Signatory:
The assessee contended that it was not required by law to file a copy of the Power of Attorney with the Memorandum of Appeal. However, the Tribunal noted that as per section 140 of the I.T. Act, a Power of Attorney must be attached to the return of income for non-resident companies. The Tribunal found that the Power of Attorney in favor of Mr. Ravi Tandon did not authorize him to delegate his powers to Mr. R.M. Sanghnani, who signed the appeal. As such, the appeal was not signed by a duly authorized person.
3. Appearance of a Proper Authorized Representative:
The CIT(A) held that no proper authorized representative appeared for the hearing. The assessee argued that Mrs. Kashmira Seth, holding a valid Letter of Authority, appeared on the date fixed for the hearing. The Tribunal did not find sufficient evidence to prove that the authorized representative had the necessary authority to appear on behalf of the assessee.
4. Adequate Opportunity of Being Heard:
The assessee claimed that the CIT(A) dismissed the appeal without giving an adequate opportunity to be heard. The Tribunal acknowledged this argument but emphasized that the appeal must be filed in accordance with the law, which includes being signed by a duly authorized signatory. Despite being given ample time to produce the Power of Attorney, the assessee failed to do so.
5. Restriction of Depreciation Claim on Jack-up Rig:
The JCIT restricted the claim of depreciation on the Jack-up Rig by applying exchange rates prevailing on the last date of respective previous years of additions/upgradations, rather than the rate on the last date of the previous year when the Rig was brought into India and put into operation. The Tribunal did not explicitly address this issue in the summarized judgment.
6. Addition of Bank Charges and Interest Without Reason:
The assessee contended that the addition of bank charges and interest was made without assigning any reason for non-admissibility. The Tribunal did not provide a detailed analysis of this issue in the summarized judgment.
Conclusion:
The Tribunal dismissed the appeals, confirming the order of the CIT(A) on the grounds that the appeals were not signed by a duly authorized signatory. The Tribunal emphasized the importance of adhering to the legal requirements for filing appeals, including the necessity of a valid Power of Attorney. The other issues raised by the assessee were not addressed in detail, as the primary ground for dismissal was the lack of proper authorization.
-
2006 (1) TMI 458
Issues Involved:
1. Validity of reassessment proceedings.
2. Levy of capital gains tax on the appellant-firm due to restructuring.
3. Capital gains tax liability arising from the admission of new partners.
Detailed Analysis:
1. Validity of Reassessment Proceedings:
The appellant contested the initiation and completion of reassessment proceedings by the Assessing Officer (AO). The Tribunal found that the reassessment was validly reopened. The AO had reasons to believe that capital gains chargeable on the transfer of assets during the firm's reconstitution had escaped assessment. This was not a case of change of opinion but a valid reason for reassessment under sections 147/148 of the Income-tax Act, 1961. Thus, the ground of the assessee challenging the reassessment proceedings was rejected.
2. Levy of Capital Gains Tax on Restructuring:
The main grievance was the AO's charge of capital gains on the firm, alleging a transfer of assets during its restructuring. The firm, initially constituted in 1981, had its assets revalued before converting into a private limited company in 1996. The AO argued that the revaluation and subsequent conversion triggered capital gains tax liability under section 45(4) of the Income-tax Act. The CIT(A) upheld this view, emphasizing the distribution of capital assets among partners during reconstitution, which is covered under the term "otherwise" in section 45(4). The Tribunal agreed with the CIT(A) that the reconstitution of the firm and the subsequent distribution of assets among partners constituted a transfer, thus attracting capital gains tax.
3. Capital Gains Tax Liability from Admission of New Partners:
The AO also held that the admission of new partners and the creation of sub-tenancy rights to one of the new partners (M/s. Atco Industries) constituted a transfer of capital assets, thus attracting capital gains tax. The CIT(A) noted that the sub-tenancy rights were created and transferred to Atco for Rs. 4.5 crores, which was then distributed to the old partners. This transaction was considered a transfer of capital assets under section 45(4). The Tribunal upheld this view, stating that the creation and allocation of sub-tenancy rights to Atco constituted a transfer, and the firm received consideration for this transfer, thus attracting capital gains tax.
Conclusion:
The Tribunal concluded that the reassessment proceedings were valid and that the restructuring and admission of new partners resulted in a transfer of capital assets, attracting capital gains tax under section 45(4). The appeal of the assessee was dismissed, and the grounds challenging the reassessment and levy of capital gains tax were rejected.
-
2006 (1) TMI 457
Nature of income - Rental income - Income from house property Or business income - expenses incurred for earning interest income - HELD THAT:- We find that the assessee has been enjoying the tenanted premises uninterruptedly for the last 9 years with the permission to sublet or to make addition or alteration in the tenanted premises without effecting the stability of the building. The assessee has sublet this premises by virtue of lease and license agreement for a period of 3 years initially commencing from 1st of February, 1995 with two further renewal options of three years and one year respectively, which shall be exercised at the sole discretion of the licensee, meaning thereby, it was known to every body that assessee is not a temporary tenant for a period of less than a year. He was rather a permanent tenant i.e., lessee in perpetuity and kept on letting out the property for a period of more than 7 years in part and with that understanding the licensee has paid a sum as interest-free security deposit.
Having read both these lease and license agreements, we are of the considered opinion that it is not a case where it can be held that assessee has taken the lease from month to month or for a period not exceeding one year or excluded from the clutches of sub-section (iiib) of section 27 of the I.T. Act. We, therefore, hold that assessee acquires a permanent right in tenancy in the property with the permission to sublet and make an addition and alteration in the property, as such, he is deemed owner of the property as per provision of section 27(iiib) of the I.T. Act.
In the instant case, assessee has subletted this property only to one person against the fixed rent which according to the assessee was called to be a license-fee. From the perusal of the record, we do not find any iota of evidence on the basis which it can be said that assessee was engaged in the business of licensing the tenanted premises as there was only one tenant in the premises and assessee was not required to do any other activity except recovering rent. We, therefore, of the considered view that rental income earned by the assessee on subletting of the tenanted property is income from house property and not a business income and the assessee is only entitled to those deductions permissible u/s 24(1)(i) of the I.T. Act. We, therefore, do not find any infirmity in the order of the CIT(A).
In the result, the appeal of the assessee is dismissed.
............
|
9911796707
