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Showing 201 to 220 of 628 Records
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2011 (12) TMI 594
Issues involved:
The only issue in this appeal is against the order of ld. CIT(Appeals) confirming the action of Assessing Officer in treating the long-term capital gain on sale of shares as short-term capital gain.
Details of the judgment:
Issue 1: Treatment of capital gains as short-term instead of long-term:
The Assessing Officer noted discrepancies in the purchase and sale of shares of Magma Leasing Limited by the assessee. The AO opined that since the actual purchase of shares was on 29.03.2005, and the sale occurred on 20 & 21/03/2006, the capital gain should be treated as short-term instead of long-term. Ld. CIT(Appeals) upheld this decision.
Issue 2: Assessee's contention and supporting evidence:
The assessee purchased shares on 11.06.2004 from Celica Developers Pvt. Ltd. for a total consideration of &8377; 4,20,750/-, supported by a purchase bill and bank statement. Despite receiving the shares in the Demat account on 31.03.2005, the assessee corresponded with Celica Developers Pvt. Ltd. for the release of shares, which were eventually delivered on 01.04.2005. The CBDT Circular No. 704 dated 28.04.1995 was cited to support the contention that the date of contract of sale should be treated as the date of transfer.
Judgment and Conclusion:
The Tribunal found that the intention of the parties was clear that the date of contract of sale, i.e., 11.06.2004, should be considered the date of transaction. Referring to the CBDT Circular, it was concluded that the assessee earned long-term capital gain and not short-term capital gain as assessed by the lower authorities. Consequently, the appeal of the assessee was allowed.
Outcome:
The appeal filed by the assessee was allowed, and the judgment was pronounced in the open court on 14/12/2011.
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2011 (12) TMI 593
Issues involved: Interpretation of section 2(22)(e) of the IT Act regarding deemed dividend taxation in a case involving loan received by an assessee company from another company where a common shareholder holds substantial interest.
Summary:
The Appellate Tribunal ITAT Delhi heard an appeal by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals) concerning the addition of a loan amount u/s 2(22)(e) for assessment year 2006-07. The Assessing Officer found that the provision of section 2(22)(e) applied as a shareholder holding substantial interest in both the loan provider and the assessee company. The Ld. Commissioner of Income Tax (Appeals) upheld the addition, noting lack of complete details provided by the assessee. The Tribunal considered the issue in light of a precedent where it was held that the condition of 10% voting power must be seen with respect to the shareholder. As the assessee company was not a registered shareholder in the loan provider company, section 2(22)(e) was deemed not applicable. Relying on the precedent, the Tribunal allowed the appeal, setting aside the lower authorities' orders and deciding in favor of the assessee.
In conclusion, the Tribunal ruled in favor of the assessee, holding that the provisions of section 2(22)(e) were not attracted due to the lack of shareholding by the assessee company in the loan provider company. The decision was based on the interpretation of relevant legal principles and precedents, leading to the allowance of the appeal.
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2011 (12) TMI 592
Issues involved: The judgment involves issues related to the computation of deduction under sections 10A and 10B of the Income Tax Act for the assessment year 2004-05.
Issue 1 - Treatment of certain charges in turnover calculation:
The Revenue appealed against the CIT(A)'s decision regarding the exclusion of link charges, interest charges, and per diem expenses from the export turnover and whether the same should also be excluded from the total turnover for computing deductions under sections 10A and 10B.
The Tribunal referred to a Special Bench decision and held that amounts deducted from the export turnover should also be deducted from the total turnover for computing deductions under sections 10A and 10B. Consequently, the second ground raised by the Revenue was dismissed.
Issue 2 - Disallowance under section 43B for working out eligible profits under section 10A:
The Revenue contended that disallowances under section 43B should be considered for working out eligible profits under section 10A, while the assessee argued that such disallowances should not be excluded from deduction under section 10A as the profits were solely derived from the export of computer software.
The Tribunal considered a similar issue in a previous case and held that unpaid PF contributions of employees cannot be considered as business income and should be treated as income from other sources, thereby disallowing exemption under section 10A. Consequently, the finding of the CIT(A) was reversed on this issue, and the ground of the Revenue was allowed.
Issue 3 - Treatment of reimbursement of expenses in turnover calculation:
The Cross Objection filed by the assessee challenged the inclusion of reimbursement of miscellaneous expenses and travel expenses in the total turnover. The assessee argued that these reimbursements were not part of the turnover as they were actual expenses incurred and reimbursed by Virtusa Corporation, USA.
The Tribunal referred to previous decisions and held that reimbursement of miscellaneous expenses and travel expenses should be reduced from both export turnover and total turnover while computing deductions under section 10A. Therefore, the ground taken by the assessee in its Cross Objection was allowed.
Conclusion:
In conclusion, the appeal of the Revenue and the Cross Objection filed by the assessee were partly allowed based on the Tribunal's findings on the various issues raised in the judgment.
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2011 (12) TMI 591
Addition as commission and bonus to the directors - there was non-compliance and violation of the provisions of Section 36(1)(ii) - whether the respondent company was avoiding payment of dividend distribution tax @ 13.5% under Section 115O of the Act - Held that:- The Managing Director and the two Directors of the respondent company were paid bonus and commission of ₹ 77,37,965/-. The aforesaid amount as per the provisions of the Act was treated as salary paid and TDS was deducted. As per the findings recorded by the tribunal, the said Directors have paid tax in the highest tax bracket. The tribunal has rightly noticed that dividend has to be paid to all shareholders equally as per the provisions of the Companies Act, 1956. The said position cannot be disputed by the Revenue. The respondent company is a closely held company and it is accepted that all shareholders are not directors in the respondent company. It may be also noted that the directors in question, were working directors and had contributed to the earnings/profit earned by the company respondent. A non-working director or a mere shareholder does not contribute and put in efforts or labour towards earning of profits. A shareholder merely makes an investment and contributes to the share capital. It is not the number of shareholders, but the principle which matters.
The tribunal has further recorded that the respondent company has been paying commission/bonus to the directors for last 30 years. It is submitted by the Revenue that with regard to the assessment years 2002- 03, 2005-06 and 2007-08, the Revenue had raised objections and disallowed commission/bonus payments made. The tribunal has decided the issue in favour of the assessee in the aforesaid assessment years.
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2011 (12) TMI 590
Issues involved: Appeal against order passed by CIT u/s 263 of the IT Act directing re-assessment.
Summary:
Issue 1: Depreciation on lease hold land
The assessee, a company in the software sector, claimed depreciation on lease hold land as an intangible asset. The CIT found the assessment erroneous as the AO allowed depreciation without proper application of mind. The CIT directed re-assessment, stating that lease hold rights on land were not eligible for depreciation. The assessee argued that the AO had considered the issue and applied his mind, thus the assessment was not erroneous. The Tribunal held that the AO had called for details, considered submissions, and allowed depreciation after due diligence. The CIT's order u/s 263 was quashed as there was no lack of application of mind by the AO.
Issue 2: Application of mind by assessing authority
The Tribunal observed that the assessing authority had called for details regarding depreciation on lease hold rights and had considered the submissions before allowing depreciation. The CIT's opinion that the AO's enquiries were inadequate was not supported by provisions of the Act. The Tribunal held that where two views are possible and the assessing authority adopts one, it cannot be deemed as lack of application of mind. The Tribunal concluded that the CIT had no power to revise the assessment order u/s 263 as the AO had applied his mind and the assessment was not erroneous.
This judgment highlights the importance of the assessing authority's application of mind in allowing deductions and the limitations on the CIT's power to revise assessment orders under section 263 of the IT Act.
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2011 (12) TMI 589
Issues involved:
The judgment involves the issue of Excise Duty refund claimed as exempt under Section 80IB of the Income-tax Act, 1961.
Issue 1:
The first issue revolves around whether the Ld. CIT(A) was correct in allowing relief on account of deduction u/s 80IB on Central Excise Duty refund based on the High Court's order, which considered the receipt as a capital receipt due to the policy's aim of tackling unemployment in the State.
Issue 2:
The second issue questions whether the Ld. CIT(A) erred in not appreciating the judgments of the Supreme Court, which held similar receipts as revenue receipts since they were not for setting up industries but for established ones.
Issue 3:
The third issue concerns whether the Ld. CIT(A) was correct in not considering the decision in the Seaham Harbour Dock Company case, which provides tests for determining if a receipt is a trading or capital receipt.
Issue 4:
The fourth issue examines whether the Ld. CIT(A) was right in not applying the purpose test as laid down by the Supreme Court, considering that the money received was not mandated for substantial expansion of the industry.
Judgment Summary:
The Appellate Tribunal ITAT Amritsar heard thirty-seven appeals by the Revenue on the common issue of Excise Duty refund under Section 80IB. The AO disallowed the claim, but the Ld. CIT(A) ruled in favor of the assessee, following a High Court decision treating the refund as a capital receipt. The Tribunal upheld this decision based on the High Court's analysis of the industrial policy's objective to generate employment. The High Court concluded that the incentives were for public interest and not mere production incentives, thus classifying the refund as a capital receipt. Consequently, the Tribunal dismissed all thirty-seven appeals by the Revenue, confirming the Excise Duty refund as a non-taxable capital receipt.
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2011 (12) TMI 588
Issues involved: The judgment involves the issue of Excise Duty refund claimed as exempt under Section 80IB of the Income-tax Act, 1961.
Summary:
1. The common grounds of appeals revolve around the Excise Duty refund claimed as exempt under Section 80IB of the Income-tax Act, 1961. The Assessing Officer (AO) disallowed the claim, stating that the receipts on account of Excise Duty refund were not eligible for deduction u/s 80IB.
2. The Ld. CIT(A) allowed the relief based on the decision of the Hon'ble Jurisdictional High Court, treating the Excise Duty refund as a 'capital receipt' not liable to be taxed. The Revenue appealed against this order before the Tribunal.
3. The Tribunal found that the issue was in favor of the assessee based on the High Court's decision. The High Court discussed the new industrial policy's objectives, emphasizing the generation of employment in Jammu and Kashmir through industrial development.
4. The High Court concluded that the Excise Duty refund, interest subsidy, and insurance subsidy were not production incentives but capital receipts, following the law laid down by the Supreme Court. Therefore, the Tribunal upheld the Ld. CIT(A)'s order treating the Excise Duty refund as a 'capital receipt.'
5. Following the High Court's judgment, the Tribunal dismissed all thirty appeals filed by the Revenue, confirming that the Excise Duty refund is a 'capital receipt' in the hands of the assessee and not subject to taxation.
6. The order was pronounced on 9th December 2011 by the Appellate Tribunal ITAT Amritsar, with the appeals being disposed of collectively due to a common issue for convenience.
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2011 (12) TMI 587
Issues involved:
The judgment involves issues related to the jurisdiction of the Commissioner under section 263 of the Income Tax Act, 1961, regarding the taxability of certain benefits received by the assessee and the disallowance of filing fees paid in connection with a rights issue.
Taxability of benefits received by the assessee:
The appeal was against the order of the Commissioner passed u/s 263 of the IT Act, 1961, concerning the taxability of benefits received by the assessee due to a change in the company's name. The Commissioner found that the benefit should have been assessed as taxable income u/s 28(iv) of the Act, which was not considered in the assessment order dated 11/12/2007. The assessee contended that the benefit was a capital receipt exempted from tax u/s 47(vi) of the Act, arising from the transfer of a capital asset. The Tribunal agreed with the assessee that the benefit did not arise from the business and could not be taxed as business income u/s 28(iv) of the Act.
Disallowed filing fees for rights issue:
The Commissioner extended the scope of the 263 power to include the disallowance of filing fees paid for a rights issue, which was not mentioned in the notice. The Tribunal held that the Commissioner cannot travel beyond the reasons mentioned in the notice for assuming jurisdiction u/s 263 of the Act. Citing relevant decisions, the Tribunal emphasized that the Commissioner's power under this section must be exercised cautiously and within the specified scope.
Conclusion:
The Tribunal found that the assessment order was not erroneous and prejudicial to the interest of the revenue, as the benefits received by the assessee were not taxable under section 28(iv) of the Act. The Tribunal quashed the Commissioner's order passed u/s 263 of the Act, stating that the jurisdiction to assume such power was not justified in this case. Consequently, the appeal of the assessee was allowed, and the impugned order of the Commissioner was set aside.
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2011 (12) TMI 586
Issues involved: Appeal against the order of Learned CIT(Appeals)-XV, Ahmedabad directing deduction u/s.80IB(10) for Assessment Year 2007-08 based on ownership of land and development agreement.
Issue 1: Deduction u/s.80IB(10)
The assessee-firm claimed deduction u/s.80IB(10) of Rs. 33,99,602 based on a development agreement with the landowners. The Assessing Officer disallowed the claim as the assessee was not the owner of the land and its name did not appear on the permission letter. The matter was taken to the first appellate authority.
Issue 2: Ownership of Land and Development Agreement
The ld.CIT(A) noted that the investment risk was borne by the assessee and analyzed the clauses of the Development Agreement. It was held that since the assessee had dominant control over the project and undertook the risk, it was eligible for deduction u/s.80IB(10) citing a precedent decision of ITAT "A" Bench Ahmedabad in the case of Shakti Corporation for A.Y. 2005-06.
Judgment Summary:
The Appellate Tribunal ITAT Ahmedabad dismissed the Revenue's appeal against the order of Learned CIT(Appeals)-XV, Ahmedabad directing deduction u/s.80IB(10) for Assessment Year 2007-08. The Tribunal found that the assessee fulfilled the conditions for claiming the deduction based on the development agreement and ownership structure as per the precedent decisions of ITAT Ahmedabad. The Tribunal upheld that the assessee had dominant control over the project and bore the investment risk, making it eligible for the deduction. The Revenue's appeal was therefore dismissed, and the order was pronounced on 30/12/2011.
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2011 (12) TMI 585
Reopening of assessment - Held that:- Originally the return was processed u/s. 143(1). Later on, the AO has recorded the reasons which clearly show that income has escaped assessment and the case is clearly covered by Explanation 2(c) of sec. 147. Further, the Hon’ble Supreme Court has held in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007 (5) TMI 197 - SUPREME Court ) that if a return has been only processed u/s. 143(1), then re-opening is justified.
Disallowing the loss due to Exchange rate fluctuation to the extent of loan which was not paid during the year - Held that:- Total loss was ₹ 12.45 crore out of which loss of ₹ 8.22 crore was of capital expenditure and ₹ 4.23 crore was on revenue side. Part of this has been disallowed mainly on the basis that the payment has not been made and it was only a notional loss. The Hon’ble Supreme Court has clearly held in the case of CIT vs. Woodward Governer (I) Pvt. Ltd. [ 2009 (4) TMI 4 - SUPREME COURT ] that loss incurred on revenue side on account of foreign exchange fluctuation is allowable. Since the disallowance of loss amounting to ₹ 47,01,720/- is admittedly on revenue side, therefore, we set aside the order of ld. CIT(A) and direct the AO to allow this loss.
Exemption u/s.10B - Held that:- We find that as far as the issue regarding premium on transfer of import licences, insurance claim, sundry credit balance written back and staff agreement deposit forfeiture is concerned, the same has been decided against the assessee by the order of Tribunal for earlier year, particularly in asstt. year 1998-99
Compensation for amount received on surplus of assets can also be not related to the business of export and, therefore, the same is also decided against the assessee.
Refund of sales-tax - We agree with the contention of the ld. Sr. Advocate, Shri Y.P. Trivedi, that when sales-tax is initially paid, that will go on to increase the purchases which means profit is reduced and when sales-tax is refunded the profit would increase and therefore payment and reimbursement would nullify each other. Therefore, we hold that refund of sales-tax cannot be reduced from profits.
Ddisallowing the interest u/s.36(i)(iii) being the amount capitalized in the Books - Held that:- The assessee was entitled to deduction under section 36(1)(iii) prior to its amendment by the finance Act, 2003, in relation to money borrowed for purchase of machinery even though the assessee had not used the machinery in the year of borrowing.
Disallowing Commission paid to M/s. L.K. Corporation by relying on order for the earlier Assessment Years - Held that:- Even in earlier year a sum of ₹ 1,50,000/- paid to M/s. L.K. Corporation as commission was disallowed and the Tribunal has in earlier year restored this matter to the file of AO for reconsideration. Consistent with the earlier order, we restore this issue to the file of AO with a direction to reconsider the same and the decide the same as per decision of earlier year.
Disallowing the Forfeiture of employees security deposit - Held that:- Similar disallowance was made even in earlier year and the matter travelled to Tribunal. After considering the submissions, the Tribunal decided the issue against the assessee, which is also an admitted position in the chart. Therefore, following the earlier year order, we decide this issue against the assessee.
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2011 (12) TMI 584
TDS u/s 194C - Held that:- In the present case, the findings recorded by the CIT(Appeals) and Income Tax Appellate Tribunal are that the composite bills were not raised. The payments in question were towards the reimbursement of the exact amount which has been paid to the airlines towards freight charges. There is no finding that these agents deliberately separated/bifurcated the bills and service charges were independently paid or were included in the said bills.
With regard to the second addition of ₹ 8,84,881/-, the concurrent findings recorded by the CIT(Appeals) and ITAT are that the said payments were less than ₹ 50,000/- to a single party and, therefore, TDS under Section 194C was not required to be deducted. The appellant has drawn our attention to the grounds of appeal in which it is stated that as per the books of accounts some of the parties were made payment of more than ₹ 50,000/- in aggregate. Copy of the account book has not been filed along with the grounds of appeal. The names and details of the said parties are not indicated. It is not stated that this contention was raised before the Tribunal and copy of the account book was filed before the tribunal
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2011 (12) TMI 583
Addition in contract account - GP determination - sub-letting commission paid to the main contractor from whom the work was received on the basis of the payment of sublet commission - interest received on FDR, NSC etc. pledged with the department for obtaining contract work as business income and not from other sources
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2011 (12) TMI 582
Issues Involved: Appeal u/s 260(1) of the Income Tax Act, 1961 against rejection of application u/s 5 of the Limitation Act for condonation of delay in filing the appeal for assessment year 1990-91.
Summary:
The appeal was filed against the judgment and order of the Income Tax Appellate Tribunal, Amritsar Camp at Meerut, which had rejected the application seeking condonation of delay in filing the appeal. The appellant had handed over the appeal papers to an advocate, but due to financial constraints, the fee was not paid, resulting in the advocate not filing the appeal. Upon realizing this, a new counsel was engaged who filed the appeal along with an application u/s 5 of the Limitation Act. Both the party's affidavit and the counsel's affidavit remained uncontroverted. It was noted that the appellant would not gain anything from the delay in filing the appeal.
The High Court opined that the delay should have been condoned, as the appellant was not at fault and stood to gain nothing from the delay. Therefore, the Court set aside the Tribunal's order and directed it to decide the appeal on merits. The appeal was allowed, succeeding in favor of the appellant.
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2011 (12) TMI 581
Issues involved: Appeal against reduction of penalty u/s 272B of Income-tax Act, 1961 for non/quoting of PANs in TDS returns.
Summary:
1. The Department appealed against the reduction of penalty u/s 272B by the ld. CIT(A) for non/quoting of PANs in TDS returns for AY 2006-07.
2. The AO levied a penalty of &8377; 3,70,000 for non/quoting of PANs in 37 cases in the TDS return for financial year 2005-06.
3. The ld. CIT(A) reduced the penalty citing non-compliance with section 139A and directed a penalty of &8377; 10,000 per default u/s 272B(1).
4. The Department contended that the penalty of &8377; 10,000 per default was correctly levied by the AO.
5. The Tribunal confirmed the ld. CIT(A)'s order, stating that Section 272B does not provide for penalty per default, upholding the reduction of penalty.
6. The appeal by the Department was dismissed, and the order was pronounced on 5.12.2011.
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2011 (12) TMI 580
Disallowance u/s 14A - shareholders’ fund of a company is utilized for the purchase of fixed assets - interest free funds generated or available with the company - the shareholders fund is much more than the amount advanced by the assessee without any interest to its sister concerns.
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2011 (12) TMI 579
Canceling the registration u/s 12AA - Non charitable activities - Held that:- There is no dispute to the fact that the assessee has been declaring its income from the assessment year 2001-02 to 2005-06 as business income as is evident from page 3 of DIT(Exemption) order. Thereafter, the assessee applied for the registration u/s 12AA which was granted to it only w.e.f. 01.04.2005 and the registration sought form 1997 was refused by not condoning the delay. As a matter of fact, we find no material on record where the funds have been utilized for profit motive or for non charitable purpose and there is no basis found in this regard in the order of DIT (Exemption). The assessee has also invited our attention to the P & L account up to the year ended 31.03.2008 in which the assessee has used 85% of the funds collected. There is nothing on record that the assessee has violated any conditions laid down u/s 12AA(3) of the Act. - Decided in favour of assessee.
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2011 (12) TMI 578
Issues Involved:
1. Deletion of addition on account of non-inclusion of Excise Duty in closing stock.
2. Disallowance of depreciation on lease assets.
3. Disallowance of interest payment on lower interest-bearing advances.
4. Addition on account of valuation of closing stock.
5. Disallowance of long-term capital gain on shares.
6. Deduction under Section 80IA.
7. Disallowance of claim towards replacement of plant and machinery.
8. Charging of interest under Sections 234B and 234D and withdrawal of interest under Section 244A.
Issue-wise Detailed Analysis:
1. Deletion of Addition on Account of Non-Inclusion of Excise Duty in Closing Stock:
The Revenue appealed against the deletion of an addition of Rs. 1,88,50,685/- for non-inclusion of excise duty in the closing stock as per Section 145A. The CIT(A) had deleted the addition, stating that the excise duty payable on the closing stock should be added to the value of closing stock. However, since the excise duty was paid before the due date for filing the return, the CIT(A) allowed the deduction under Section 43B. The Tribunal upheld the CIT(A)'s decision, referencing the Hon'ble Gujarat High Court's ruling in ACIT vs. Narmada Chematur Petrochemicals Ltd., which stated that excise duty is not payable until goods are removed from the factory premises.
2. Disallowance of Depreciation on Lease Assets:
The Revenue challenged the CIT(A)'s deletion of the disallowance of depreciation on lease assets amounting to Rs. 85,55,303/-. The CIT(A) had based its decision on appellate orders from previous assessment years, which were confirmed by the Tribunal. The Tribunal upheld the CIT(A)'s decision, following its earlier rulings in favor of the assessee.
3. Disallowance of Interest Payment on Lower Interest-Bearing Advances:
The Revenue contested the CIT(A)'s decision to restrict the disallowance of interest payment to Rs. 2,80,410/- from Rs. 13,85,024/-. The CIT(A) found that the loans were given at lower rates due to business commitments and the average interest cost to the assessee was only 8.60%. The Tribunal upheld the CIT(A)'s decision, agreeing that the lower rate of interest was justified and the addition should be restricted.
4. Addition on Account of Valuation of Closing Stock:
The Revenue appealed against the deletion of an addition of Rs. 27,21,000/- on account of valuation of closing stock. The CIT(A) found that the method of valuation had been consistently followed by the assessee and any addition would result in a corresponding adjustment in the next year's opening stock. The Tribunal upheld the CIT(A)'s decision, agreeing that the consistent method of valuation should not be disturbed.
5. Disallowance of Long-Term Capital Gain on Shares:
The Revenue challenged the CIT(A)'s reduction of the disallowance of long-term capital gain on shares from Rs. 5,91,995/- to Rs. 76,610/-. The CIT(A) allowed the loss on sale of shares of M/s Swan India Ltd and M/s S.C. Kuchhal Finance Co. Ltd but disallowed the loss on shares of Shree Rajasthan Texchem Ltd due to lack of documentary evidence. The Tribunal upheld the CIT(A)'s decision, stating that the transactions were genuine and the loss should be allowed.
6. Deduction under Section 80IA:
The Revenue's appeal on the deduction under Section 80IA was deemed academic as the deletion of the addition of Rs. 1.88 crores under Section 145A resulted in a business loss. The Tribunal noted that the issue would arise in the year where the deduction under Section 80IA is allowable.
7. Disallowance of Claim Towards Replacement of Plant and Machinery:
The assessee's appeal against the disallowance of a claim towards replacement of plant and machinery amounting to Rs. 5,98,640/- was considered. The CIT(A) found that the replacement of machinery provided an enduring benefit and should be treated as a capital expenditure. The Tribunal upheld the CIT(A)'s decision, referencing the Hon'ble Apex Court's ruling in CIT vs. Sarvana Spinning Mills (P) Ltd., which stated that replacement generally does not fall under "current repairs."
8. Charging of Interest under Sections 234B and 234D and Withdrawal of Interest under Section 244A:
The Tribunal noted that the charging of interest under Sections 234B and 234D and the withdrawal of interest under Section 244A are mandatory and consequential in nature.
Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, confirming the decisions of the CIT(A) on all issues. The order was pronounced in the open Court on 09-12-2011.
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2011 (12) TMI 577
Inclusion of interest income from FD, AVVNL and job receipts for the purpose of computing deduction under section 80IB - Held that:- Allocation made by the AO on-the basis of turnover is illogical and uncalled for in the case of the appellant, accordingly the exclusion for computation of eligible profit for deduction u/s. 80IB of the Act by the AO is not justified. The appeal is allowed on this issue.
TDS u/s 194C - Addition made under section 40(a)(ia) on reimbursement of expenses - no TDS
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2011 (12) TMI 576
Issues Involved:
1. Validity of reopening u/s 147.
2. Merit of addition made in respect of long-term capital gain.
Summary:
Validity of Reopening u/s 147:
The assessee challenged the validity of reopening u/s 147. The return was initially processed u/s 143(1), and no opinion was formed by the Assessing Officer (AO) during this processing. As per the Supreme Court's verdict in Rajesh Jhaveri, 291 ITR 500, the passing of an intimation u/s 143(1) does not amount to an "assessment," and thus, there is no question of a "change of opinion." Therefore, the reassessment was held valid by the CIT(A), and the tribunal found no infirmity in this decision.
Merit of Addition in Respect of Long-Term Capital Gain:
The assessee sold agricultural land and declared long-term capital gains based on the actual sale consideration received. The AO noticed that the valuation of the land by the Stamp Duty Authority was higher than the actual consideration received and referred the matter to the District Valuation Officer (DVO). The DVO's valuation was lower than the Stamp Duty Authority's but higher than the actual sale consideration. The AO adopted the DVO's valuation for computing the capital gain, which was upheld by the CIT(A).
The assessee argued that the sale agreements were made when the property rates were low, and the entire sale consideration was received through account payee cheques. The assessee also provided a valuation report from a registered valuer, which the AO discarded without proper consideration. The DVO's report was criticized for contradictions and not considering the actual conditions at the time of sale.
The tribunal found that the DVO's rebate of 10% for heavy filling due to pits/trenches and 10% for green belt, nearby railway line, lower category occupancy, and industrial cluster was inadequate. The tribunal directed the AO to allow a 30% rebate for heavy filling and a 20% rebate for the other factors. Additionally, a 5% rebate was directed for adverse possession due to unauthorized encroachment by tribal people. The tribunal instructed the AO to recompute the capital gain accordingly.
Conclusion:
The appeal was allowed in part, with directions to the AO to recompute the capital gain after applying the revised rebates. The order was pronounced in the open court on 29th December 2011.
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2011 (12) TMI 575
Issues Involved:
1. Deletion of addition claimed as 'Goodwill' on account of depreciation.
2. Deletion of disallowances on account of depreciation on patents, trademarks, and intellectual property rights.
3. Allowance of 1/3rd amount out of advertisement and publicity expenditure.
4. Non-allowance of deduction for prior period expenses.
Summary:
1. Deletion of Addition Claimed as 'Goodwill' on Account of Depreciation:
The issue pertains to the deletion of an addition of Rs. 37,50,000 made by the Assessing Officer (AO) claimed as 'Goodwill' by the assessee on account of depreciation on Written Down Value (WDV) paid to Usha International Ltd. for acquiring business and commercial rights. The learned AR argued that the business rights acquired were eligible for depreciation u/s 32 of the Income-tax Act as intangible assets. The ITAT upheld the CIT(A)'s decision, confirming that the amount of Rs. 1,73,00,000 was for exclusive business rights and eligible for depreciation, while Rs. 27,00,000 was treated as goodwill and not eligible for depreciation. The ground of revenue's appeal was dismissed following the ITAT's decision in the preceding year.
2. Deletion of Disallowances on Account of Depreciation on Patents, Trademarks, and Intellectual Property Rights:
The assessee purchased the manufacturing business of M/s. SIEL Aircon Ltd., including intellectual property rights, for Rs. 10,93,00,000, capitalized as patents and trademarks. The AO disallowed depreciation, but the CIT(A) granted relief, following the ITAT's decision in the assessee's own case for the assessment year 2001-02. The ITAT confirmed that intellectual property rights are intangible assets eligible for depreciation u/s 32. The ground of revenue's appeal was dismissed as no distinction of facts from the earlier year was brought on record.
3. Allowance of 1/3rd Amount Out of Advertisement and Publicity Expenditure:
The AO treated the expenditure of Rs. 3,93,98,597 on advertisement and publicity as capital expenditure, while the CIT(A) allowed only 1/3rd of the expenses, considering the enduring benefit. The ITAT, relying on the jurisdictional High Court's decision in CIT vs. Citi Financial Consumer Finance India Ltd., held that such expenditure is revenue in nature and should be fully allowed in the year incurred. The ITAT allowed the assessee's appeal and dismissed the revenue's ground, stating there is no concept of deferred revenue expenditure in Income-tax laws.
4. Non-Allowance of Deduction for Prior Period Expenses:
The assessee claimed deduction for prior period expenses of Rs. 1,050,654, arguing that the liability crystallized during the year. The AO and CIT(A) disallowed the claim, stating the assessee failed to substantiate that the liability accrued during the year under consideration, as the assessee follows the mercantile system of accounting. The ITAT upheld the CIT(A)'s decision, dismissing the assessee's ground.
Conclusion:
The appeal of the revenue was dismissed, and the appeal of the assessee was partly allowed. The order was pronounced in open court on December 23, 2011.
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