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Showing 201 to 220 of 1191 Records
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2011 (3) TMI 1642
Issues involved: Appeal against deletion of penalty u/s 271(1)(c) of the Income Tax Act.
Summary:
The appeal was filed by the Revenue challenging the deletion of penalty of Rs. 2,87,115/- imposed u/s 271(1)(c) by the Commissioner of Income Tax (Appeals). The assessee firm, engaged in the business of insulated cable, had claimed deduction u/s 80IB for job work. The Tribunal had previously restored the issue back to the file of the CIT (A) for further review. The argument presented was that the issue was debatable and therefore not liable for penalty. It was contended that the deduction claim was genuine and there was no finding of it being bogus in the assessment order. The Revenue did not assert any false material or incorrect details were furnished. Citing the decision of Reliance Petroproducts Ltd., it was concluded that a mere unsustainable claim does not amount to furnishing inaccurate particulars. The Tribunal upheld the CIT (A)'s decision and dismissed the Revenue's appeal.
The judgment was pronounced in Open Court on 18/3/2011.
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2011 (3) TMI 1641
Issues involved: Cross appeals relating to assessment year 2005-06, involving disallowance under section 14A and interest disallowance under section 36(1)(iii) and section 115JB.
Disallowance under section 14A and interest disallowance under section 36(1)(iii): The dispute arose regarding the disallowance made under section 14A read with Rule 8D of the Income Tax Rules, and the disallowance of interest under section 14A while computing the book profit for section 115JB. The Assessing Officer disallowed interest paid by the assessee, stating that the interest expenses were mainly towards investments generating exempt income. The Tribunal found that the loans were utilized for taxable income purposes, such as wind energy business and hotel projects, not for earning exempt income. The matter was restored to the Assessing Officer for a fresh decision on the allowability of interest, considering the facts presented. The Tribunal also directed the Assessing Officer to adhere to guidelines provided by the Bombay High Court before invoking section 14A. The assessee's appeal was allowed for statistical purposes.
Treatment of interest on non-convertible debentures and unsecured loans: The CIT(A) erred in treating the interest on non-convertible debentures and unsecured loans as business income. The Tribunal directed the Assessing Officer to assess the interest under the head "Business" based on a previous decision favoring the assessee. The issue was resolved in favor of the assessee.
Deletion of interest on loans given to a major shareholder: The CIT(A) deleted the interest on loans given by the assessee to a major shareholder. The Tribunal confirmed this decision based on findings that the debt became irrecoverable due to the financial condition of the shareholder, and the decision to wipe the interest was taken on grounds of business expediency. The Tribunal upheld the deletion of interest.
Conclusion: The assessee's appeal was allowed for statistical purposes, and the department's appeal was dismissed. No costs were awarded in the case.
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2011 (3) TMI 1640
Issues Involved:1. Exemption of income on the principle of mutuality. 2. Deletion of addition made by the AO on account of interest on cumulative deposits. Summary:Issue 1: Exemption of Income on the Principle of MutualityThe assessee, a Cooperative Society, claimed its income as exempt based on the principle of mutuality, arguing that it was not profit-oriented and had no share capital or profit distribution. The AO rejected this claim, stating that the assessee did not fulfill the mutuality requirement, particularly regarding the distribution of surplus assets among members upon dissolution. The AO referenced the case of CIT Vs Shree Jari Merchants Association 106 ITR 542, noting the absence of a clause for surplus distribution among members. The assessee countered by citing CIT Vs Adarsh Co-op. Housing Society Ltd. 213 ITR 677, where the Gujarat High Court upheld mutuality despite similar conditions. The CIT(A) sided with the assessee, emphasizing that Sections 114 and 115 of the Gujarat Co-operative Societies Act allowed members to decide on surplus distribution, aligning with the principle of mutuality. The CIT(A) also referenced the ITAT Cochin Bench decision in Bus Operators Association Vs ACIT (2006) 100 TTJ 904, supporting the assessee's claim. Issue 2: Deletion of Addition Made by the AO on Account of Interest on Cumulative DepositsThe AO added &8377; 24,49,026/- as interest income, arguing it should be taxed on an accrual basis. The assessee, following a cash system of accounting, contended that interest on surplus funds was exempt on the principle of mutuality and should be taxed on a receipt basis. The CIT(A) agreed, noting that the assessee's income was exempt on mutuality grounds and that the cash accounting system was permissible under section 145 of the IT Act. Resolution and RemandTo avoid further litigation, the assessee passed a resolution in its Annual General Body Meeting, adding clause No.9A to its byelaws, ensuring surplus distribution among members upon liquidation. This resolution was sanctioned by the Director of Sugar, Gujarat State. Both parties agreed to remand the matter to the AO for reconsideration in light of this new development. The Tribunal set aside the orders of the authorities below and restored the issues to the AO for fresh consideration, directing the AO to pass a reasoned order after providing the assessee with a reasonable opportunity to be heard. ConclusionAll appeals of the revenue were allowed for statistical purposes, and the matters were remanded to the AO for reconsideration in accordance with the modified byelaws. Order PronouncedOrder pronounced in the open Court on 25-03-2011.
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2011 (3) TMI 1639
Issues Involved:
The judgment involves the deletion of additions made by the Assessing Officer (AO) u/s 68 of the Income Tax Act (ITA) on account of unexplained cash credit, interest on cash credit, Diwali expenses, and office expenses.
Unexplained Cash Credit (u/s 68):
The AO added a sum of Rs. 64,81,500 as unexplained cash credit due to doubts about the genuineness of unsecured loans from 43 persons. The AO questioned the creditworthiness of the creditors and their ability to provide loans. The AO disbelieved the documents provided by the assessee and treated the amount as unexplained cash credit.
Before the ld. CIT(A), the assessee argued that all necessary details and documents were submitted to prove the identity and creditworthiness of the creditors. The ld. CIT(A) noted that the onus shifted to the AO to disprove the assessee's claim once initial documents were provided. The ld. CIT(A) found that all loans were repaid in subsequent years, and since the assessee had discharged the initial burden, the addition was deleted.
The Tribunal upheld the ld. CIT(A)'s decision, stating that the assessee had provided complete details of the creditors and had a reasonable cause for not producing them before the AO. The Tribunal emphasized that once the initial burden was discharged, the onus shifted to the Revenue to prove the claim untrue, which was not done in this case. Therefore, the addition u/s 68 was deemed unjustified.
Interest on Cash Credit:
After confirming the genuineness of the cash credits, the ld. CIT(A) also allowed the interest on these loans. The Tribunal found no reason to interfere with this decision, and the Revenue's ground regarding interest on loans was rejected.
Diwali Expenses and Office Expenses:
The AO had disallowed Diwali expenses of Rs. 25,000 and 25% of office expenses totaling Rs. 26,585. The ld. CIT(A) allowed both claims after considering the explanations and evidence provided by the assessee. The Tribunal found no contrary material to warrant interference and rejected the Revenue's grounds related to Diwali and office expenses.
In conclusion, the appeal filed by the Revenue challenging the deletion of additions on various grounds was dismissed by the Tribunal.
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2011 (3) TMI 1638
Issues Involved: Appeal against deletion of addition of share application money u/s 68 of the Income Tax Act, 1961.
The Appellate Tribunal ITAT DELHI dismissed the appeal filed by the revenue against the order of the CIT (A) dated 12th August, 2010 for assessment year 2001-02. The grounds of appeal included the erred deletion of the addition of Rs. 7,00,000/- made on account of share application money u/s 68 of the Income Tax Act, 1961. The department contested the deletion of the addition of Rs. 7 lac, noting that the tax effect on the present appeal was below the monetary limit fixed by CBDT instruction No.3/2011 of Rs. 3 lac for filing appeals in income-tax matters before the Tribunal. The total income of the assessee as assessed by the Assessing Officer was Rs. 7,19,030/-, with a tax effect of Rs. 2,84,376/-, including surcharge. The Tribunal cited precedents where the monetary limit was held applicable to all pending appeals, leading to the dismissal of the revenue's appeal for being below the monetary limit.
The revenue's appeal was dismissed as it fell below the monetary limit set by CBDT instruction No.3/2011 for filing appeals in income-tax matters before the Tribunal, which was Rs. 3 lac. The Tribunal emphasized that the total tax effect in the present appeal was less than Rs. 3 lac, making the appeal unadmitted and dismissed in limine. The decision was based on the recent instruction issued by the CBDT and supported by jurisdictional High Court decisions in similar cases. Consequently, the appeal filed by the Department was dismissed, in line with the monetary limit set by the Circular.
In conclusion, the Appellate Tribunal ITAT DELHI dismissed the revenue's appeal against the deletion of addition of share application money u/s 68 of the Income Tax Act, 1961, as the appeal fell below the monetary limit fixed by CBDT instruction No.3/2011 for filing appeals in income-tax matters before the Tribunal, which was Rs. 3 lac.
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2011 (3) TMI 1637
Issues Involved:
1. Allowability of expenditure for HRC Plant before commercial production.
2. Deductibility of rent and depreciation for guest house expenses.
3. Allowability of loss below the ground level of stockyard.
4. Deductibility of lease expenses after change in accounting policy.
5. Deductibility of premium paid on redemption of debentures.
6. Allowability of compensation paid to tenants for vacating premises.
Detailed Analysis:
1. Allowability of Expenditure for HRC Plant Before Commercial Production:
The assessee, engaged in steel manufacturing, claimed a deduction of Rs. 615,58,31,000 for expenses related to its new HRC project, despite commercial production starting after the fiscal year. The AO disallowed this, treating it as capital expenditure, referencing a similar disallowance in AY 1994-95. The CIT(A) allowed the deduction, considering the HRC project an extension of existing business. The Tribunal upheld CIT(A)'s decision, emphasizing the integration and common management between HBI and HRC projects, thus treating them as the same business.
2. Deductibility of Rent and Depreciation for Guest House Expenses:
The assessee claimed rent and depreciation for a guest house. The CIT(A) allowed it, but the Tribunal, referencing the Supreme Court's decision in Britania Industries Ltd., ruled these expenses non-deductible under Section 37(4) as they related to hospitality, thus allowing the revenue's appeal on this ground.
3. Allowability of Loss Below the Ground Level of Stockyard:
The assessee claimed a loss of Rs. 95,60,800 due to contamination of iron ore oxide fines stored in the open. The AO disallowed this, citing lack of past claims and proof. The CIT(A) allowed it as a business loss. The Tribunal upheld CIT(A)'s decision, noting the reasonableness and past acceptance of similar claims, despite the AO's objections regarding proof and stock valuation.
4. Deductibility of Lease Expenses After Change in Accounting Policy:
The assessee claimed a deduction of Rs. 9,28,34,501 for lease rent, which was shown less in the books due to a change in accounting policy. The AO disallowed it, but the CIT(A) allowed the claim, stating the change in book treatment doesn't alter the expenditure's nature. The Tribunal agreed with CIT(A), emphasizing the actual liability over book entries.
5. Deductibility of Premium Paid on Redemption of Debentures:
The assessee claimed Rs. 85.00 lacs as a deduction for premium paid on debenture redemption. The AO treated it as capital expenditure. The CIT(A) allowed it as revenue expenditure. The Tribunal upheld this, noting the assessee's option to claim it in the year incurred, referencing the Supreme Court's decision in Punjab State Industrial Corporation, which allows such claims either spread over the debenture's life or in the year incurred.
6. Allowability of Compensation Paid to Tenants for Vacating Premises:
The assessee included Rs. 14 crores paid to a tenant for vacating premises in the cost of acquisition for computing capital gains. The AO disallowed it, citing a collusive transaction as per findings in the tenant's case. The CIT(A) allowed it, considering it enhanced the property's value. The Tribunal upheld CIT(A)'s decision, referencing a similar allowance in AY 1995-96 and the Jurisdictional High Court's ruling in Miss Piroja C. Patel, treating such compensation as cost of improvement.
Conclusion:
The Tribunal's decision partially allowed the revenue's appeal, specifically on the guest house expenses, while upholding the CIT(A)'s decisions on other grounds, emphasizing the principles of business integration, actual liability, and reasonable business loss claims.
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2011 (3) TMI 1636
Issues Involved:
1. Classification of income from letting out premises.
2. Entitlement to depreciation and deduction of expenses.
Summary:
1. Classification of Income from Letting Out Premises:
The primary issue was whether the income received by the assessee from letting out premises should be classified as 'business income' or 'property income'. The Assessing Officer (AO) classified it as 'property income', rejecting the assessee's claim of it being 'business income'. The AO noted that the assessee was not carrying on any business activity and merely let out the premises to a sister concern under an unregistered agreement.
2. Entitlement to Depreciation and Deduction of Expenses:
The assessee contended before the Commissioner of Income Tax (Appeals) [CIT(A)] that its business involved buying and leasing properties, and this activity was authorized by its memorandum of association. The CIT(A) referred to the Apex Court's decision in Shambhu Investments Pvt. Ltd. 263 ITR 143, which classified income from letting out property as 'Income from house property'. However, the CIT(A) allowed the claim for depreciation u/s 32 for the portion of the premises used for business purposes and also allowed administrative and establishment expenses incurred in the normal course of business.
Appeal by Revenue:
The Revenue appealed, arguing that the assessee was not entitled to deductions for expenses and depreciation since no business activity was carried out during the year. The CIT(A) had noted that the assessee earned service charges and business conducting charges in subsequent years, supporting the claim of business activity.
Tribunal's Decision:
The Tribunal observed that the Revenue failed to provide necessary records and evidence to support its appeal. The Tribunal upheld the CIT(A)'s decision, stating that the assessee was engaged in business activity and was entitled to depreciation and deduction of expenses. The Tribunal dismissed the Revenue's appeal, finding no infirmity in the CIT(A)'s order.
Conclusion:
The Tribunal concluded that the assessee's income from letting out premises should be classified as 'property income', but allowed depreciation and business-related expenses for the portion of the premises used for business activities. The Revenue's appeal was dismissed due to lack of supporting evidence.
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2011 (3) TMI 1635
The activities of the society not being carried out in accordance with the objects of the society - Order passed by the CIT, canceling the Registration granted to the society u/s 12A - Interpretation of provisions of Section 12AA(3) of the I.T. Act, 1961 - HELD THAT:- In the present case, the ld. CIT invoked the provisions of section 12AA(3) of the I.T. Act, which provides that the CIT has to satisfy himself about either of the two conditions prescribed therein, namely, that the activities were not genuine or that the activities were not being carried out in accordance with the objects of the trust or the institution, as the case may be. However, in the instant case, the ld. CIT has not brought any material on record to substantiate that the activities of the assessee were not genuine or that the activities were not being carried out in accordance with the objects of the assessee. On a similar issue, this Bench of the Tribunal vide order dated 30.8.2010 in the case of Chaturvedi Har Prasad Educational Society vs.CIT [2010 (8) TMI 757 - ITAT LUCKNOW].
In the instant case, the ld. CIT without bringing on record that the activities of the assessee were not genuine or were not being carried out in accordance with the objects of the assessee-society, cancelled the registration which amounts to reviewing of his earlier order when the registration was granted u/s 12A of the Act after considering and on being satisfied that the conditions specified were fulfilled by the assessee. We, therefore, considering the totality of the facts, are of the view that the action taken by the ld. CIT does not fall within the parameters of sub- Section (3) of Section 12AA of the I.T. Act. Therefore, his action in cancelling the registration by invoking the provisions of section 12AA(3) of the I.T. Act is not sustainable. In that view of the matter, we set aside the order of the ld. CIT passed u/s 12AA(3)of the I.T. Act and allow the appeal of the assessee.
In the result, the appeal is allowed.
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2011 (3) TMI 1634
Re-assessment Proceedings u/s 147 - Mere Change in Opinion - reason to believe - reopening was made by AO on the basis of "tangible material‟ in the form of tax audit report filed by the assessee and on the basis of information available in the Profit and Loss account - ITAT quashed the reassessment order as the reopening was on mere change of opinion on the basis of material already available on record at the time of completion of the original assessment
HELD THAT:- It is not in dispute that the re-assessment proceedings were initiated by the AO on the basis of tax audit report filed by the assessee in Form No.3CD and on the basis of information available in the Profit and Loss account. There was no reference to any new material by the AO which had come into his possession after the completion of original assessment under Section 143(3) of the Act.
It is also a matter of record that before initiating re-assessment proceedings by issuing notice under Section 148 of the Act, the AO had initiated proceedings under Section 154 of the Act for the same reasons and proceedings initiated under Section 154 were dropped by him after the issuance of notice under Section 148 and were thus pending on the date of initiation of the re-assessment proceedings. In these circumstances, the Tribunal while setting aside the reassessment proceedings relied upon the Full Bench Judgment of this Court in the case of Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT], where held that No new material has come on record. No information has been received. It is merely a fresh application of mind by the same Assessing Officer to the same set of facts.
Also held if a notice under Section 148 has been issued without the jurisdictional foundation under Section 147 being available to the Assessing Officer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this Court. If 'reason to believe' be available, the writ court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available.
We do not find any substantial question of law that would arise for consideration in this appeal. The appeal is devoid of any merit and is accordingly dismissed.
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2011 (3) TMI 1633
Issues involved: Appeal against dismissal order, violation of natural justice in departmental proceedings.
Dismissal Order Challenge: The respondent was charge sheeted for absence without leave, leading to a dismissal order on 01.11.2001. The Central Administrative Tribunal quashed the dismissal order and directed to proceed from the stage of providing a copy of the Report of the Union Public Service Commission.
Writ Petition and Impugned Order: The appellants filed a writ petition in the High Court of Gujarat against the Tribunal's order, which was dismissed. The Supreme Court found no infirmity in the impugned order.
Principle of Natural Justice: It is a settled principle that in departmental proceedings, a charge sheeted employee must be provided with any material to be relied upon in advance to have a chance to rebut it. The Court disagreed with the appellant's argument that supplying the report along with the dismissal order was valid based on a previous decision.
Union Public Service Commission Report: The Court held that if authorities consult and rely on the Commission's report for disciplinary action, the employee must be given a copy in advance for rebuttal to adhere to natural justice principles. Failure to provide the report in such cases would violate natural justice.
Precedent and Judgment: The Court referred to a previous case where it was established that if a subsequent bench wants to take a different view, it must refer the matter to a larger bench. Since the decision in the present case was not in line with the prior decision, it was considered per incuriam, and the appeal was dismissed accordingly.
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2011 (3) TMI 1632
Issues Involved:1. Deletion of addition of Rs. 30,57,000/- related to construction expenses of a bungalow. 2. Addition of Rs. 1,40,922/- related to cash deposits in the bank account of the assessee's wife. 3. Addition of Rs. 50,000/- related to investment in construction of a house in Kerala. Summary:Issue 1: Deletion of Addition of Rs. 30,57,000/- Related to Construction Expenses of a BungalowThe Revenue's appeal against the deletion of Rs. 30,57,000/- addition made by the Assessing Officer (AO) u/s 158BC(c) of the Income-tax Act, 1961, was dismissed. The AO had added this amount based on loose papers found during a search, which indicated expenses on carpentry and painting for a bungalow in Kerala. The assessee contended that these papers were mere quotations and not actual bills, supported by affidavits from the carpenter and other contractors. The Commissioner of Income-tax (Appeals) found no corroborative evidence from the AO to support the addition and deleted it. The Tribunal upheld this decision, noting the lack of reliable evidence and the proper explanation provided by the assessee. Issue 2: Addition of Rs. 1,40,922/- Related to Cash Deposits in the Bank Account of the Assessee's WifeThe assessee's cross-appeal contended that the Commissioner of Income-tax (Appeals) erred in confirming an addition of Rs. 1,40,922/- out of Rs. 9,32,565/- representing cash deposits in his wife's bank account. The Commissioner of Income-tax (Appeals) had held that since the income from the business carried out in the name of the wife was assessed in the hands of the husband, the deposits should also be considered in the husband's hands. The Tribunal found no error in this approach and dismissed the Revenue's appeal in the case of the wife. However, it was noted that amounts of Rs. 36,000/- and Rs. 46,000/- for assessment years 1999-2000 and 2000-01 respectively had already been declared by the assessee. Thus, the Tribunal directed the deletion of these amounts from the addition, sustaining only Rs. 58,922/- out of Rs. 1,40,922/-. Issue 3: Addition of Rs. 50,000/- Related to Investment in Construction of a House in KeralaThe assessee's appeal against the addition of Rs. 50,000/- for the assessment year 1998-99, related to investment in the construction of a house in Kerala, was dismissed. The Tribunal found no substantiating material on record to support the assessee's claim that this amount had been disclosed as income towards the construction of the house. Therefore, the addition was affirmed. Conclusion:The Tribunal dismissed the Revenue's appeals (ITA Nos 612/PN/04 and 615/PN/04) and partly allowed the assessee's appeal (ITA No 695/PN/04), with the decision pronounced in the open Court on March 31, 2011.
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2011 (3) TMI 1631
Issues involved: Appeal against order of Income-tax Appellate Tribunal affirming assessee as an agent u/s 163 of the Income-tax Act for assessment year 1996-97.
The High Court of Calcutta heard an appeal by the assessee against the order of the Income-tax Appellate Tribunal affirming the assessee as an agent u/s 163 of the Income-tax Act for the assessment year 1996-97. The Tribunal had quashed the assessment proceedings due to the notice served after the expiry of two years from the end of the relevant assessment year. The Respondent-Revenue did not appeal against part of the order quashing the assessment, leading to finality on that aspect. The Court noted that the question of the assessee being an agent became academic since the assessment itself was quashed. The concept of agent under section 149(3) of the Act is relevant only for assessment purposes. Therefore, the Court decided to quash the finding that the appellant was an agent, as it was no longer necessary given the quashing of the assessment. The appeal was disposed of accordingly, with a certified copy of the order to be provided to the parties.
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2011 (3) TMI 1630
Addition on account of un-availed MODVAT Credit - In absence of documentary evidence filed by the assessee to substantiate the reduction in the profits, AO disallowed the claim - Assessee submitted he submitted that opening and closing modvat credit as stated in the computation of income are already there in the audit report. Also, most of the records, in the meantime were destroyed due to flood - HELD THAT:- We deem it proper to restore the matter back to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate its claim of un-availed Modvat credit. The AO shall decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The ground raised by the assessee is accordingly allowed for statistical purpose - Matter Restored
Disallowance of Amortization of the Premium Paid for Leasehold Land - Assessee, referring own case for AY 2001-02 submitted that this issue stands decided against the assessee - HELD THAT:- In view of the decision of the Tribunal in assessee’s own case in the immediately preceding assessment year on the same issue we hold that the CIT(A) is justified in confirming the disallowance of amortization of the premium paid for leasehold land. The ground raised by the assessee is accordingly dismissed.
Disallowance of Inventory Written off - In absence of production of other details as to why the inventory has been written off and noting that the list contains certain items which cannot become obsolete, the Assessing Officer disallowed the claim - HELD THAT:- Admittedly, the reasons for such write off was not available before the AO or before the CIT(A) and filed for the first time before us. We, therefore, in the interest of justice, deem it proper to restore the matter back to the file of the AO. Ground of the assessee is accordingly allowed for statistical purpose.
Disallowance of Set off of Loss in Computing Book Profit u/s 115JB - As per AO, assessee company has simply twisted the computation of figures of brought forward loss and unabsorbed deprecation so as to increase the amount of set off available, book profit arrived at of the earlier year is incorrect - CIT(A) confirmed the action of disallowance - HELD THAT:- After relying on the decision of AMLINE TEXTILES (P.) LTD. [2008 (11) TMI 438 - ITAT MUMBAI], we hold that aggregate amount of unabsorbed deprecation or brought forward losses of the years taken together which losses was to be reduced for the purpose of computing book profit u/s 115JB. It cannot be considered on a year to year basis. The ground raised by the assessee is allowed.
Addition made while computing Book Profit u/s 115B - AO made an addition of amount claimed by the assessee as provision for gratuity, leave encashment and doubtful debts - HELD THAT:- We have considered the order of the Tribunal in assessee’s own case for AY 2001 where tribunal upheld order of CIT on ground that liability on account of provision for gratuity and leave encashment was not worked out on the basis of scientific method i.e. calculation made by an actuary and no documentary evidence was filed to support that the provision is based on definite liability - As provision made in the impugned year is different. The Auditors in their audit report have already mentioned that the liability for gratuity and leave encashment is provided on the basis of actuarial valuation. By following the decision of BHARAT EARTH MOVERS VERSUS COMMISSIONER OF INCOME-TAX [2000 (8) TMI 4 - SUPREME COURT], provision for gratuity and leave encashment having been made on the basis of actuarial valuation cannot be added while computing the book profit for the purpose of sec. 115JB of the act. Therefore, ground is allowed.
Addition on account of doubtful debts is concerned, the same has to be upheld in view of the retrospective amendment to the act. Therefore, ground is dismissed.
Disallowance of Depreciation u/s 32(1) on electric feeder lines - As per AO, since the ownership of the electric feeder lines do not vest with the assessee company, claim of depreciation over the same contravenes the conditions laid down in sec. 32(1) - CIT(A) deleted the disallowance - HELD THAT:- We find identical issue had come up before the Tribunal in assessee’s own case for the AY 2001-02, where it was held that, this expenditure has been incurred prior to commencement of business - As decided in SANGRUR VANASPATI MILLS LTD. [2006 (9) TMI 101 - PUNJAB AND HARYANA HIGH COURT]expenditure incurred by the assessee on the cost of power line for independent feeder, incurred prior to commencement of production has to be treated as part of plant and machinery being necessary for commencement of production and has to be capitalized. Therefore, ground raised by the revenue is dismissed.
Manufacturing and Trading Expenses and Other Expenses - in spite of number of opportunities granted, the assessee failed to file the details called for - AO observed that the auditors have not quantified the expenses incurred by way of fine/penalty - HELD THAT:- It is the settled proposition of law that for claiming any expense; onus is always on the assessee to substantiate with evidence to the satisfaction of the Assessing Officer that such expenditure is wholly and exclusively for the purpose of business. However, in the instant case, the assessee admittedly has not discharged the onus cast on it. The CIT(A) has correctly held that such claims have to be either allowed or disallowed in toto. In absence of furnishing of full details before the Assessing Officer, in our opinion the order of the CIT(A) restricting the disallowance to 5% on the above items is justified.Order of the CIT(A) on this issue is upheld.
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2011 (3) TMI 1629
The Delhi High Court dismissed a writ petition stating that the respondent is not liable to tax for Off-Shore supplies based on a previous judgment. Other questions raised by the petitioner were deemed irrelevant. The citation for the case is 2011 (3) TMI 1629 - DELHI HIGH COURT.
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2011 (3) TMI 1628
Disallowance u/s 40(a)(ia) - TDS on commission payments to non-resident agents - Held that:- no tax is deductible under section 195 of the Act on commission payments and consequently the expenditure on export commission payable to non-resident for services rendered outside India becomes allowable expenditure and the same is outside rigors of the section 40(a)(ia) of the Act.
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2011 (3) TMI 1627
Unexplained Cash Credit u/s 68 - During search and seizure, AO observed that the assessee did not have the cash balance as claimed, cash has been introduced by the assessee only to explain the investment of expenses in the subsequent years - Addition was made
HELD THAT:- It is admitted fact that the assessee is regularly filing his returns of income for the preceding assessment years and furnished documents in support of his claim that his income was assessed regularly in the earlier years.
In the instant case nothing is brought on record to substantiate that any material was found during the course of search that the assessee either purchased assets or incurred expenses for the year under consideration. Even the AO himself admitted that the said amount was shown in the cash flow statement as opening balance, so it cannot be said that the assessee earned income to the above extent during the year under consideration, as the amount in question does not pertain to the year under consideration, therefore, it cannot be a subject matter of addition u/s. 68.
The above view is fortified as per the ratio laid down by the Hon'ble Delhi High Court in the case of COMMISSIONER OF INCOME-TAX VERSUS USHA STUD AGRICULTURAL FARM LTD. [2008 (3) TMI 91 - DELHI HIGH COURT]. Considering the totality of the facts, we do not see any valid ground to interfere with the findings of the ld. CIT(A) - Decision in favour of Assessee.
Assessment u/s 153A - Disallowance of Business Loss - AO disallowed the business loss on the ground that the final accounts of the business relating to assessee's proprietorship firm (M/s Arohi International) have not been filed by him
HELD THAT:- In the instant case, the AO acknowledge in his assessment order that the assessee attached profit and loss account and balance sheet with the regular return of income, therefore, the AO was not justified in making the disallowance when the assessee had already disclosed the relevant documents in the original return of income, therefore, the AO could not have considered the impugned loss in the proceedings u/s. 153A, particularly when nothing contrary was unearthed during the course of search. We, therefore, considering the totality of the facts do not seen any merit in this ground - Decision in favour of Assesee.
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2011 (3) TMI 1626
Issues Involved:
1. Deletion of addition of Rs. 2.25 Cr. by CIT(A).
2. Consistency in the method of accounting and valuation of stock.
3. Admissibility of loss on valuation of closing stock of shares as speculation loss.
Summary:
Issue 1: Deletion of Addition of Rs. 2.25 Cr. by CIT(A)
The department contested the deletion of Rs. 2.25 Cr. by CIT(A), arguing that there was no change in the method of accounting or valuation of stock. The assessee-company had acquired shares of M/s. Inalsa Appliances Ltd. at Rs. 10/- each, which were later valued at Rs. 1/- per share due to the company's liquidation. The A.O. rejected this valuation, asserting it was inconsistent with Sec. 145A of the Act. However, CIT(A) found the change in valuation method bona fide and consistent with accepted accounting principles, directing the A.O. to delete the addition.
Issue 2: Consistency in the Method of Accounting and Valuation of Stock
The A.O. argued that the assessee adopted different valuation methods for opening and closing stock, which was not permissible u/s 145A. CIT(A) noted that the assessee's accounts were audited and accepted, and the change in valuation method was bona fide, following the principle of cost or market price, whichever is lower. The CIT(A) emphasized that the method was consistently followed in subsequent years and accepted by the A.O., thus upholding the change in valuation method.
Issue 3: Admissibility of Loss on Valuation of Closing Stock of Shares as Speculation Loss
The department claimed that the loss on valuation of shares should be treated as speculation loss. However, the assessee argued that the valuation was done as per Accounting Standard-13, valuing the shares at market value or cost price, whichever is lower. The CIT(A) and ITAT found the valuation method bona fide and consistent with accounting standards, rejecting the department's claim.
Conclusion:
The ITAT upheld the CIT(A)'s decision, confirming that the change in valuation method was bona fide and consistent with accepted accounting principles. The appeal of the Revenue was dismissed, and the addition of Rs. 2.25 Cr. was deleted.
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2011 (3) TMI 1625
Issues Involved:
1. Deletion of addition of Rs. 2.25 crores by CIT(A).
2. Consistency in the method of accounting and valuation of stock.
3. Classification of loss on valuation of shares as speculation loss.
Issue-wise Detailed Analysis:
1. Deletion of Addition of Rs. 2.25 Crores by CIT(A):
The department challenged the deletion of an addition of Rs. 2.25 crores made by the Assessing Officer (A.O.) on account of the valuation of closing stock. The assessee-company had acquired shares of M/s. Inalsa Appliances Ltd. at Rs. 10/- per share, valuing the opening stock at Rs. 2.5 crores. Due to the liquidation of M/s. Inalsa Appliances Ltd., the shares were revalued at Rs. 1/- per share, resulting in a closing stock valuation of Rs. 25 lakhs. The A.O. rejected this valuation, arguing it was against the provisions of Sec. 145A of the Act, leading to an addition of Rs. 2.25 crores to the assessee's income. The CIT(A) found the assessee's method of valuation bona fide, consistent with Accounting Standard (AS) 13, and directed the deletion of the addition.
2. Consistency in the Method of Accounting and Valuation of Stock:
The assessee argued that the change in the method of valuation was bona fide and aligned with accepted accounting principles, specifically AS-13. The CIT(A) noted that the accounts of the assessee were audited and accepted, with no adverse comments from the A.O. The CIT(A) emphasized that the change in the method of valuation was due to the liquidation of the investee company and was consistently followed thereafter. The CIT(A) cited judicial precedents, including Melmould Corporation v. CIT and CIT v. Delta Corporation, supporting the acceptance of a bona fide change in valuation method. The Tribunal upheld this view, noting that the A.O. did not dispute the rate of valuation or the bona fides of the change.
3. Classification of Loss on Valuation of Shares as Speculation Loss:
The department contended that the loss on valuation of shares should be treated as a speculation loss. However, this issue was not raised in the orders of the authorities below. The assessee maintained that the valuation was done in accordance with AS-13, which mandates valuing current investments at the lower of cost and fair value. The Tribunal found that the valuation method adopted by the assessee was prudent and consistent with accounting standards, and there was no basis to classify the loss as speculation loss.
Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 2.25 crores, finding the change in the method of valuation bona fide, consistent with AS-13, and regularly followed thereafter. The appeal of the Revenue was dismissed.
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2011 (3) TMI 1624
Depreciation on Intangible asset - Applicability of Doctrine of ejusdem generic - satisfaction of conditions viz., development, operation and maintenance were not intended to be cumulative in nature - right to collection of toll from the road over bridge on the parity of reasoning that the assessee was not the owner - HELD THAT:- This issue is covered by the order of the Tribunal Pune Bench, Pune in the case of ASHOKA INFO (P) LIMITED. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX. [2008 (12) TMI 271 - ITAT PUNE-B] wherein with regards to intangible assets and toll collection rights the Tribunal observed that the investment made by the assessee towards construction of a road on built, operate and transfer (BOT) basis in terms of an agreement with the State Government and thereafter an independent right in the form of a licence of toll collection was granted to the assessee for a fixed period of 16 years and 9 months. Applying the doctrine of ejusdem generic for the purpose of interpretation of sec. 32(1)(ii), the word “licence” could be read along with the words “commercial rights of similar nature”. Therefore, the licence granted by the State Government for collection of toll was held as an intangible asset and depreciation was held to be allowable thereon. Nothing contrary was brought to our knowledge - Facts being similar, so following the same reasoning, we hold that the assessee was entitled to claim of depreciation on intangible asset viz. right to collect toll from the road over the bridge on the parity of reasoning that the assessee was not the owner inspite of the fact that the collection was treated as income of the assessee company and was also approved by the State Government.
Allowability of claim of deduction u/s 80-IA of the Act - assessee itself makes the investment and itself executes the development work as has been done by this assessee and the amendment introduced by inserting an explanation retrospectively wef. A.Y. 2000-01 by Finance Act, 2007, and relevant C.B.D.T. Circular No.3 of 2008, becomes applicable to it - HELD THAT:- Since this issue has not been discussed and decided by the lower authorities, because they were not having advantage of decision of Hon’ble Bombay High Court in the case of COMMISSIONER OF INCOME-TAX VERSUS ABG HEAVY INDUSTRIES LIMITED [2010 (2) TMI 108 - BOMBAY HIGH COURT] at the relevant point of time - In the interest of justice, we restore this issue to the file of the Assessing Officer to decide the same as per fact and law after providing adequate opportunity of hearing to the assessee.
Appeal allowed in part.
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2011 (3) TMI 1623
Issues involved: Appeal against disallowance of deduction under s. 80-IA of the Income Tax Act, 1961 for interest income and income from 'Sauda' settlement for assessment year 2000-01.
Deduction under s. 80-IA for interest income:
The respondent assessee claimed deduction for interest income received from M/s Prakash Soya Ltd. and income from 'Sauda' settlement. The AO disallowed the deduction, stating that the income was not from industrial undertaking or manufacturing activities. The CIT(A) allowed the claim, considering the interest income as business income due to delayed payments. The Tribunal affirmed this decision, stating that the interest received was a trading item and derived by the industrial undertaking. The Court found no legal issue in this regard and dismissed the appeal.
Deduction under s. 80-IA for income from 'Sauda' settlement:
The CIT(A) held that the income from 'Sauda' settlement was directly derived from the industrial undertaking, making it eligible for deduction under s. 80-IA. The Tribunal agreed, stating that the income was derived from the business activities of the assessee. The Court found no substantial question of law in this matter and upheld the decisions of the lower authorities, leading to the dismissal of the appeal.
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