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Showing 221 to 240 of 1054 Records
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2011 (2) TMI 1416
Undisclosed negative peak credit - Addition on the basis of seized materials noted as A/GAR/5 - undisclosed money-lending business - materials seized on the basis of which the addition was made - assessee submitted before the lower authorities that it does not belong to him - Reliability on handwritten loose documents - HELD THAT:- The seized material A/GAR/05 found during the course of search and the statement recorded is some piece of evidence to make an addition. The AO has to establish the link between the seized material A/GAR/05 and other books of accounts of the assessee. It cannot be considered alone as conclusive evidence. The words 'may be presumed' appearing in s. 132(4A) gives an option to the authorities concerned to presume the things. But it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee has every right to rebut the same by producing the same in support of his claim. The entire case depends on the rule of evidence. The assessee has every right to shift the burden of proof. There is no conclusive presumption.
In the present case, the assessee as well as the assessee's son and also assessee's brother Shri S.K. Agarwal categorically stated in every stage of examination and statement recorded under s. 132(1) or 132 that the seized material A/GAR/05 did not at all belong to them. In spite of this the AO proceeded to conclude that these seized materials conclusively belonged to the assessee.
Leave alone the issue relating to authorship of the document seized and the findings of the GEQD, the Department should find out and establish the nexus of these seized materials to the assessee's business while concluding block assessment.
In the present case the assessee is having grievance for not providing the opportunity of cross-examining the parties whose statements were relied on by the AO while completing the assessment. The circumstances surrounding the case are not strong enough to justify the rejection of assessee's plea asking the opportunity of cross-examination. In view of this, we set aside the block assessment order and remand back the matter to the file of the AO. The AO is directed to give an opportunity of cross-examination of the parties as required by the assessee and thereafter if there is any sufficient evidence other than the unsubstantiated note book/loose slips marked as document A/GAR/5 or if this document (viz., A/GAR/05) is substantiated by any other evidence to establish that the assessee is having undisclosed income, then the AO shall complete the assessment in accordance with law determining the undisclosed income covering this block period in addition to the other undisclosed income uncontested before us.
The appeal of the assessee is allowed for statistical purposes.
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2011 (2) TMI 1415
Deduction u/s 10B - Assessee is engaged in the business of exporting granite - AO observed from the sales invoices that the goods exported are not polished granites, denied the deduction - Assessee was allowed the benefit of section 10B in AY 2005-06, therefore, CIT(A) allowed the deduction
HELD THAT:- We are in agreement with the ld. CIT(A) that there is no change in the business of the assessee from earlier years and similar type of export is being done in this year too. Therefore, assessee becomes entitled to deduction u/s 10B under identical facts and circumstances.
Deduction u/s 10B - Third Party Exports - Deduction on sales to 100% Export Oriented Undertakings (EOU), where assessee is not exporter itself
HELD THAT:- The issue stands covered in favour of the assessee by the decision of DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11 (4) , BANGALORE VERSUS INTERNATIONAL STONES INDIA PVT. LTD. [2010 (3) TMI 1106 - ITAT BANGALORE] in which under similar circumstances it has been held that even the third party exports are eligible for the benefit u/s 10B.
The third party exports are also considered as export when such exports are made 100% EOU which manufactures the articles or things are received or brought into in convertible foreign exchange, either by the 100% EOU itself or through the third party exporter then such exports amounts to export turnover and are fully eligible for the benefit u/s 10B.
The assessee has exported goods through other 100% EOU within a period of six months, thus such sale made by the assessee has to be treated as deemed export. Units registered under 100% EOU Scheme are allowed to sell to another 100% EOU and such sales are known as ‘deemed export’ in trade parlance.
The assessee has sold only 20% of the total turnover as ‘deemed export’ to other 100% EOU and evidence regarding realization of foreign exchange, is duly certified by a CA. Thus, the goods in question are manufactured by a 100% EOU (which is the assessee) and goods have been exported out of the country as per the Foreign Trade Policy provisions, for which convertible foreign exchange has been brought into India. Hence, as per the clear provisions stated above, the assessee becomes entitled to deduction under section 10B - Decision in favour of Assessee
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2011 (2) TMI 1414
Disallowance of depreciation - HELD THAT:- We find that the CIT( A) is justified in holding that the assessee had purchased the software and capitalized the cost in asset account. Therefore, he is justified in holding that the payments made by the assessee against purchase of software cannot be held as "Royalty" and deleting the disallowance of depreciation for both the assessment years under appeal.
Payments and Services made outside India exception available u/s.09(1)(b) - HELD THAT:- it was held in Ishikawajima-Harima Heavy Industries v. DIT [2007 (1) TMI 91 - SUPREME COURT],that the services which are sources of income sought to be taxed in India must (i) be utilized in India and (ii) rendered in India. In the present case of payments to foreign countries, both the conditions have not been satisfied simultaneously. Therefore, the exception available u/s.09(1)(b) applies to the payments made to the two foreign companies. Hence, the CIT(A) is justified in deleting the disallowance for the asst. year 2005-06 and for the asst. year 2006-07, being the payments made to German company and Singapore company respectively. confirming the disallowance for the asst. year 2005-06 being the payment made to Indian company.
Nature of FCCB expenses ''Capital or Revenue'' - HELD THAT:- The assessee company had incurred expenses in connection with the issue of foreign currency convertible bonds. The assessing authority held that the bond holders had the option to convert the bonds to equity shares and therefore, the collection of funds through the issue of bonds needs to be treated as to increase the capital and therefore the connected expenses would be capital in nature and hence disallowed.
Quantum of benefit available u/s010A - HELD THAT:- It is held in ITAT, SAK Soft Ltd.,[2009 (3) TMI 243 - ITAT MADRAS-D], that the exclusion must be made from total turnover as well. Therefore, we direct the AO to exclude the telecommunication charges from total turnover as well and revise the computation of the quantum of benefit available u/s010A.
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2011 (2) TMI 1413
Issues Involved:
1. Quantum of interest under sections 234A, 234B, and 234C.
2. Debatable nature of the levy of interest u/s 234A, 234B, and 234C.
3. Invocation of section 154 for rectifying the mistake of non-levy of interest.
Summary:
Quantum of Interest:
The Tribunal first addressed the quantum of interest. It was noted that the provisions of section 234A(3) and 234B(3) specify the computation of interest for returns filed in response to a notice u/s 153A. The Tribunal clarified that a return filed in response to a notice u/s 153A is treated as a return filed u/s 139(1). Consequently, the due date for filing the return shifts to the date prescribed in the notice u/s 153A. The Tribunal directed that the computation of interest u/s 234A should commence from the day immediately following the expiry of the time allowed in the notice u/s 153A. Interest u/s 234B should be computed on the amount by which the tax on the total income determined in the assessment u/s 153A exceeds the tax on the total income determined under section 143(1) on the return filed in response to the notice u/s 153A. The issue of computation of interest was restored to the file of the Assessing Officer for re-adjudication.
Debatable Nature of Levy of Interest:
The Tribunal held that the levy of interest is compensatory in nature and the method of computation is specifically provided in sections 234A(3) and 234B(3) for assessments u/s 153A. Non-application of a specific provision of the Act constitutes a mistake apparent from the record. Therefore, the finding of the CIT(A) that the Assessing Officer was right in invoking the provisions of section 154 for rectifying the mistake of non-levy of interest was upheld. The Tribunal concluded that there can be no two views regarding the levy of interest under sections 234A, 234B, and 234C, as the provisions themselves specifically provide for the levy.
Invocation of Section 154:
The Tribunal agreed with the CIT(A) that the non-application of specific provisions of the Act was a mistake apparent from the record, justifying the invocation of section 154. The Tribunal found that the Assessing Officer was correct in invoking section 154 to rectify the mistake of non-levy of interest under sections 234A, 234B, and 234C in the original assessment.
Conclusion:
The appeals of the assessees were partly allowed, with directions for re-adjudication of the computation of interest under sections 234A and 234B by the Assessing Officer. The Tribunal upheld the invocation of section 154 for rectifying the mistake of non-levy of interest.
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2011 (2) TMI 1412
Issues involved: Appeal against order u/s 12AA (3) of the Income Tax Act regarding withdrawal of registration u/s 12A of the Income Tax Act.
The assessee, a development authority constituted by the Govt. of Uttar Pradesh, appealed against the order of the Ld. Commissioner of Income Tax withdrawing its registration u/s 12A of the Income Tax Act. The Ld. Commissioner based the withdrawal on the view that the appellant's activities, involving procurement and sale of land on commercial principles, were not in line with charitable purposes. The proviso to section 2(15) of the Act, added by the Finance Act 2008, was cited in this regard.
Upon careful review with the assistance of the Ld. Representative, it was noted that the proviso to section 2(15) was made applicable from 1st April, 2009, while the registration was withdrawn w.e.f. 1st April, 2008. As the proviso was not in effect during the relevant period, the Ld. Commissioner lacked the authority to withdraw the registration based on this provision. The Tribunal held that without considering the nature of the assessee's activities, the withdrawal was unjustified. Consequently, the order of the Ld. Commissioner was deemed unsustainable and quashed, leading to the allowance of the assessee's appeal.
Separate Judgement: None.
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2011 (2) TMI 1411
Issues Involved:1. Disallowance of computer software expenses. 2. Disallowance of bad debts. Summary:Issue 1: Disallowance of Computer Software ExpensesThe assessee, a company engaged in share and stock broking, claimed a deduction of Rs. 2,09,290/- for computer software expenses, arguing that these were revenue expenses as they did not result in enduring benefits and required regular updates. The DCIT treated the expenses as capital in nature, allowing depreciation of Rs. 1,25,574/- and disallowing Rs. 83,716/- as revenue expenditure, following the decision in CIT vs. Aravali Construction Pvt. Ltd. The CIT(A) upheld the DCIT's decision, referencing the Income-tax (Twenty-fourth Amendment) Rules, 2002, which allowed 60% depreciation on computer software. The Tribunal, however, concluded that the software expenses were revenue in nature as they helped the assessee carry on its business more efficiently without providing enduring benefits. The Tribunal directed that the entire sum of Rs. 2,09,290/- be allowed as a deduction. Issue 2: Disallowance of Bad DebtsThe assessee wrote off Rs. 2,25,422/- as bad debts, which included brokerage not accounted by clients, brokerage slab changes, security system issues, and other reasons. The DCIT disallowed the claim, stating that the bad debts were not established as such. The CIT(A) partially upheld the DCIT's decision, allowing the claim except for Rs. 41,750/- due from Orient Bank of Commerce and UCO Bank, which did not meet the conditions of section 36(2) of the Act. The Tribunal referred to the Special Bench decision in DCIT vs. Shreyas S. Morakhia, which held that brokerage income forms part of the debt receivable by a share broker and satisfies section 36(2)(i) conditions. The Tribunal remanded the issue to the AO to verify the quantification of the bad debts, considering aspects like margin money and sale proceeds adjustments. The Tribunal allowed the ground for statistical purposes. For ITA No.4516/Mum/08, the Tribunal followed the same reasoning as in ITA No.4515/Mum/08 and allowed the deduction of Rs. 1,11,720/- written off as bad debts. In conclusion, both appeals were partly allowed. Order pronounced in the open court on the 25th day of February 2011.
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2011 (2) TMI 1410
Issues involved: Interpretation of provisions u/s 45(3) and 45(4) of the Income Tax Act in a case involving reconstitution of a partnership firm and distribution of assets to retiring partners.
Summary:
The appeal was filed by the Revenue against the order of the Ld. CIT(A)-XXV Mumbai for the A.Y.2006-07 concerning a partnership firm engaged in supplying well water. The firm reconstituted with new partners, and retiring partners carried away their capital, including revaluation amount of a plot. The Assessing Officer applied provisions of section 45(3) and 45(4) of the Income Tax Act, citing a judgment of the Bombay High Court. The appellant contended that the plot was not transferred to partners, relying on decisions of ITAT Mumbai and Kerala High Court.
The Ld. CIT(A) analyzed the case law and held that as the retiring partners did not take away the plot but only the revalued amount, the capital gain taxed by the AO was not applicable. The plot remained the property of the firm even after reconstitution. The Ld. Departmental Representative insisted on following the A.N. Naik & Associates judgment, while the Ld. Counsel for the assessee supported the Ld. CIT(A)'s order.
In the hearing, the case of Smt. Paru D. Dave was discussed, where revaluation did not result in capital gain due to no transfer of assets. The Kerala High Court's decision emphasized that reconstitution of a partnership does not constitute a transfer of assets. Following these precedents, the appeal of the assessee was allowed, and the Revenue's appeal was dismissed.
Conclusion:
The Ld. CIT(A) ruled in favor of the assessee, emphasizing that no transfer of assets occurred during the reconstitution of the firm, in line with the decisions of Smt. Paru D. Dave and CIT Vs Kunnamkulam Mill Board. The judgment highlighted that revaluation alone does not lead to capital gain without an actual transfer of property.
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2011 (2) TMI 1409
Issues involved:
The judgment involves two main issues:
1. Recognition of income under the mercantile system of accounting for a price rise in raw material, and
2. Disallowance of provisions for raw material and components purchased by the assessee.
Issue 1 - Recognition of Income:
The Revenue appealed against the CIT(A)'s order regarding the recognition of income under the mercantile system of accounting for a price rise in raw material. The A.O. preponed the recognition of income earned by the assessee to the A.Y. 2004-05, which the CIT(A) later overturned. The negotiation for the price rise was finalized in May 2004, and the CIT(A) held that the income accrued in A.Y. 2005-06, not in the impugned year. The CIT(A) emphasized that income accrues when the assessee gets an enforceable right to receive it, and the Supreme Court judgment in E.D. Sassoon & Company Ltd. was cited to support this view. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's grounds.
Issue 2 - Disallowance of Provisions:
The second issue pertained to the disallowance of provisions for raw material and components purchased by the assessee. The A.O. disallowed an amount for excess provision made for open GRNS, which the CIT(A) reversed. The CIT(A) found that the liability was not false or fictitious and was identifiable to specific parties. The Tribunal noted conflicting interpretations and lack of clarity on whether the amount was an excess provision or a cessation of liabilities. Referring to the Supreme Court judgment in Bharat Earth Movers, the Tribunal set aside the issue for the A.O. to reexamine after considering relevant invoices and book entries. The appeal of the Revenue was partly allowed.
Separate Judgment:
The judgment was delivered by the Appellate Tribunal ITAT Pune, with Shri I.C. Sudhir and Shri D. Karunakara Rao presiding over the case. The issues involved detailed examination of the mercantile system of accounting for income recognition and the disallowance of provisions for raw material and components purchased by the assessee. The Tribunal's decision provided clarity on the application of accounting principles and the necessity for accurate income recognition and provision assessment.
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2011 (2) TMI 1408
Exemption u/s 11 - claim of depreciation in computing the income of trust - inclusion of cost of the assets as application of funds and allowing depreciation on the assessee - double taxation or not - HELD THAT:- Considering the material as well as case laws cited by the rival side, it is found that in the recent judgement of the Hon’ble High Court of Punjab & Haryana in the case of COMMISSIONER OF INCOME-TAX VERSUS. TINY TOTS EDUCATION SOCIETY [2010 (7) TMI 377 - PUNJAB AND HARYANA HIGH COURT] has concluded to decide the issue in favour of the assessee holding that it can not be held that double benefit is given in allowing claim for depreciation for computing income for purposes of Sec.11.
Since the issue is squarely covered in favour of the assessee and Department has not brought any contrary material or any higher Courts order in its favour, therefore, there are no infirmity or flaw in the orders of the CIT(A) in this regard as such while concurring with the conclusion as drawn by the CIT(A), the orders are upheld and the appeals of the Revenue are dismissed being devoid of any merits.
Appeal dismissed.
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2011 (2) TMI 1407
Issues involved: Appeal against cancellation of penalties u/s 271D and u/s 271E of the Income Tax Act, 1961 for the assessment year 2004-05.
ITA 1172/Mds/2010: The Revenue appealed against the cancellation of penalty u/s 271D. The assessee had borrowed cash loans exceeding prescribed limits, claiming business exigency for taking and repaying the loans. The CIT(A) cancelled the penalty citing lack of proof of business exigency. The authorized representative argued the loans were used to settle overdrafts and trade creditors, supported by account copies. The Tribunal upheld the CIT(A)'s decision, emphasizing the assessee's reasonable cause for the transactions and lack of evidence disproving business exigency.
C.O. No. 84/Mds/2010: The assessee's cross objection supported the CIT(A)'s order, which was upheld by the Tribunal, resulting in the dismissal of the cross objection.
ITA No. 2024/Mds/2010: The Revenue challenged the cancellation of penalty u/s 271E for cash repayment of loans. The Tribunal found the reasons provided by the assessee for cash transactions valid, supported by account copies. The Tribunal confirmed the CIT(A)'s decision based on the assessee's genuine reasons and cited a relevant High Court case in support. Consequently, the appeal by the Revenue was dismissed.
In conclusion, the appeals by the Revenue against the cancellation of penalties u/s 271D and u/s 271E, along with the cross objection by the assessee, were all dismissed by the Tribunal on 04/02/2011.
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2011 (2) TMI 1406
Issues Involved:
1. Depreciation on intangible assets for AY 2000-01.
2. Depreciation on intangible assets for AY 2005-06.
Summary:
Issue 1: Depreciation on intangible assets for AY 2000-01
The assessee acquired Compaq Computers (India) Ltd. as a going concern, with a significant portion of the purchase price attributed to intangible assets. The assessee initially claimed depreciation on these intangible assets, which was denied by the assessing authority and the first appellate authority. The case was remitted back to the AO by the earlier Bench to reconsider the claim in light of the Supreme Court ruling in Empire Jute Co. Ltd. v. CIT (124 ITR 1 (SC)). The AO, after detailed deliberation, denied the depreciation claim on the grounds that the amount paid was capital in nature and not eligible for depreciation.
Upon appeal, the CIT (A)-LTU allowed the depreciation, referencing the agreement and valuation certificate that classified the intangible assets as eligible for depreciation u/s 32(1)(iii) of the Act. The Revenue contested this decision, arguing that the intangible assets did not meet the criteria specified in s.32 and that the valuation was ad-hoc. The Tribunal, after considering various judicial precedents, including the cases of Bosch Ltd. and Skyline Caterers Pvt. Ltd., upheld the CIT (A)'s decision, confirming that the assessee was entitled to depreciation on the intangible assets u/s 32(1)(ii).
Issue 2: Depreciation on intangible assets for AY 2005-06
For AY 2005-06, the AO disallowed the depreciation claim on intangible assets, citing the same reasons as for AY 2000-01. The CIT (A) allowed the depreciation, referencing the earlier appellate order for AY 2000-01. The Revenue appealed, reiterating the arguments made for AY 2000-01. The Tribunal, finding the issue identical to that of AY 2000-01, upheld the CIT (A)'s decision, allowing the depreciation claim for AY 2005-06 as well.
Conclusion:
The Tribunal dismissed the Revenue's appeals for both assessment years, confirming the assessee's entitlement to depreciation on intangible assets u/s 32(1)(ii) of the Act.
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2011 (2) TMI 1405
Issues Involved:
1. Disallowance of interest and other expenditure u/s 14A.
2. Disallowance of depreciation claim on residential premises.
3. Disallowance of 'provision for outstanding repo transactions'.
Summary:
1. Disallowance of interest and other expenditure u/s 14A:
The assessee contested the CIT(A)'s decision to confirm the disallowance of Rs. 1,16,48,000/- u/s 14A and the directive to the Assessing Officer to recompute the disallowance as per Rule 8D of the IT Rules. The assessee argued that the investments were made from surplus funds, not borrowed money, and referenced previous assessment years where no interest was disallowed. The Tribunal noted that Rule 8D was not applicable for AY 2004-05 as per the Hon'ble Bombay High Court's decision in Godrej & Boyce Mfg P Ltd vs ACIT. The Tribunal directed the Assessing Officer to verify the claims and decide afresh, allowing the ground for statistical purposes.
2. Disallowance of depreciation claim on residential premises:
The assessee challenged the disallowance of Rs. 11,04,419/- on two vacant flats. The CIT(A) upheld the disallowance based on the previous year's order. The Tribunal, noting that the issue was restored to the Assessing Officer for fresh adjudication in the previous year, directed the Assessing Officer to re-examine the matter and decide in accordance with the law, allowing the ground for statistical purposes.
3. Disallowance of 'provision for outstanding repo transactions':
The revenue appealed against the CIT(A)'s decision to delete the addition of Rs. 1,09,69,000/- for 'provision for outstanding repo transactions'. The Assessing Officer had disallowed the amount, considering it provisional and not an actual expenditure. The CIT(A) found that the provision was in line with RBI guidelines and represented an actual loss. The Tribunal upheld the CIT(A)'s decision, noting that the assessee followed RBI guidelines and the provision was for an actual loss, dismissing the revenue's appeal.
Conclusion:
The appeal by the assessee was allowed for statistical purposes, and the appeal by the revenue was dismissed. The Tribunal directed the Assessing Officer to re-examine the disallowances afresh and in accordance with the law.
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2011 (2) TMI 1404
Issues involved: Appeals by Revenue for Assessment Years 2005-06 & 2006-07 regarding deletion of addition of development expenses.
Summary:
1. The appeals by the Revenue for the Assessment Years 2005-06 & 2006-07 were consolidated as they involved identical issues of deletion of addition of development expenses.
2. The A.O. disallowed development expenses following the order for the Assessment Year 2003-04, but Ld. CIT(A) deleted the addition in both years following the decision of ITAT for the Assessment Year 2002-03.
3. During the hearing, Ld. A.R. for the assessee argued that the issue is covered by the decision of ITAT Delhi Bench for the Assessment Year 2002-03, while Ld. Sr. DR supported the A.O.'s order.
4. ITAT Delhi Bench "C" in a previous case deleted the addition of development expenses, stating that the expenses were routine business expenses and allowable as revenue expenditure based on the unity and interconnection of various aspects of the business.
5. Referring to previous tribunal decisions, the current tribunal confirmed the order of Ld. CIT(A) for both years, as the issue was covered by earlier decisions in favor of the assessee.
6. Consequently, the appeals filed by the Revenue for both years were dismissed, and the order of Ld. CIT(A) was upheld based on the precedents set by previous tribunal decisions.
*Pronounced in the open court on 25th Feb., 2011.*
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2011 (2) TMI 1403
Issues involved: Assessment of income u/s 143(3) for AY 2006-07, application of Project Completion Method, disallowance of expenses and interest, appeal against CIT(A) order.
Assessment of income u/s 143(3) for AY 2006-07:
The Revenue appealed against the CIT(A)'s order for the Assessment Year 2006-07, challenging the computation of income based on Project Completion Method and the deletion of disallowed expenses and interest. The Assessing Officer disallowed brought forward expenses and interest, adding them back to the total income. The CIT(A) directed the income computation based on Project Completion Method.
Application of Project Completion Method:
The assessee claimed expenses under Administration and Other Expenses and brought forward expenses against the sale proceeds of land, stating adherence to Project Completion Method. However, no evidence of construction on the land was found, leading to the conclusion that the Project Completion Method was not applicable. The Revenue's grounds were allowed in this regard.
Disallowance of expenses and interest:
The Assessing Officer disallowed brought forward expenses and a portion of interest on an estimate basis. The matter of interest deduction was referred back to the Assessing Officer for reevaluation, considering business purposes and legal precedents. The Revenue's appeal was partly allowed for statistical purposes.
This judgment highlights the importance of substantiating claims with evidence, especially in the context of accounting methods and expense deductions. The decision emphasizes the need for a thorough examination of facts and adherence to legal principles in income assessment proceedings.
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2011 (2) TMI 1402
Issues Involved:
1. Allowability of business expenditure of Rs. 1,47,223/-
2. Diminution in the value of investment in 1% cumulative redeemable shares in Super Shock Absorbers Ltd.
3. Taxation of bad debt recovery of Rs. 5,02,45,000/- from Omayal Agro Industries Ltd.
4. Addition of Rs. 7,22,89,000/- for the purpose of section 115JB in respect of diminution in the value of assets.
Detailed Analysis:
1. Allowability of Business Expenditure of Rs. 1,47,223/-
The assessee-company claimed a total expenditure of Rs. 1,47,223/- in the Profit & Loss Account, despite no business activities during the period. The Assessing Officer (AO) disallowed this expenditure, treating it as income from undisclosed sources due to the absence of business activity. However, the CIT(A) deleted this addition, observing that the business was not discontinued but temporarily suspended due to recurring losses. The Tribunal upheld the CIT(A)'s decision, referencing the Hon'ble Madras High Court's ruling in L. Ve. Vairavan Chettiar vs CIT, 72 ITR 114, which allows such expenditure if the business is temporarily inactive but not closed.
2. Diminution in the Value of Investment in 1% Cumulative Redeemable Shares in Super Shock Absorbers Ltd.
The assessee claimed a diminution in the value of investments amounting to Rs. 7,22,89,000/-. The AO disallowed this claim, arguing it was capital in nature. The CIT(A) deleted this addition, relying on the Tribunal's earlier decision in the assessee's case for assessment year 2000-01. The Tribunal confirmed this, noting that the assessee's activity of promoting business through investments in sick companies was recognized as a business activity. The Tribunal dismissed the Revenue's reliance on the Kerala High Court's decision in Kerala Small Industries Development Corporation Ltd vs CIT, 270 ITR 452, as the facts were distinguishable.
3. Taxation of Bad Debt Recovery of Rs. 5,02,45,000/- from Omayal Agro Industries Ltd.
The assessee recovered Rs. 5,02,45,000/- from Omayal Agro Industries Ltd, which had been written off as bad debt in the assessment year 2004-05. The AO taxed this recovery in the current year, arguing that the assessee was not entitled to file a revised return for the earlier year. However, the CIT(A) deleted this addition, and the Tribunal upheld this decision. The Tribunal noted that the revised return for the assessment year 2004-05, which withdrew the bad debt claim, was accepted by the AO. Therefore, taxing the recovery again in the current year would result in double taxation, which is not permissible.
4. Addition of Rs. 7,22,89,000/- for the Purpose of Section 115JB in Respect of Diminution in the Value of Assets
The AO added Rs. 7,22,89,000/- to the book profit under section 115JB, treating it as a contingent liability. The CIT(A) deleted this addition, and the Tribunal upheld this decision. The Tribunal observed that the assessee had actually written off the value of the shares, and it was not a provision for diminution in the value of assets. The Tribunal referenced the Hon'ble Supreme Court's decision in Apollo Tyres 122 Taxman 562, which restricts the AO's power to make adjustments to the book profit beyond those specified in the Explanation to section 115JB(2). The Tribunal concluded that the write-off did not fall under any of the specified adjustments.
Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s deletions of the additions made by the AO. The Tribunal's decision was based on established legal principles and precedents, ensuring that the assessee's claims were correctly treated in accordance with the law.
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2011 (2) TMI 1401
Assessment of trust - Deduction of depreciation in computing the income - Amounts to double deduction or not? - proper deduction in computing income of a charitable institution or not - HELD THAT:- As relying on TINY TOTS EDUCATION SOCIETY [2010 (7) TMI 377 - PUNJAB AND HARYANA HIGH COURT] where it was held that the income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Appeals of the assessee are allowed.
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2011 (2) TMI 1400
Disallowance u/s 14A on account of expenditure incurred to earn exempt dividend income, by applying the provision of Rule 8D - HELD THAT:- On perusal of learned CIT(A)’s order, it is found that the CIT(A) has confirmed the Assessing Officer’s action by applying the decision of ITAT, Special Bench Mumbai in the case of INCOME-TAX OFFICER, WARD 6 (2) (2) , MUMBAI VERSUS DAGA CAPITAL MANAGEMENT (P.) LTD. [2008 (10) TMI 383 - ITAT MUMBAI] and, has thus, applied the method provided under Rule 8D of the Income-tax Rules. At this stage, it is pertinent to note that the decision of Special Bench of Tribunal in the case of Daga Capital Management Pvt. Ltd. holding that Rule 8D is retrospective in nature, has been over-ruled by the Hon’ble Bombay High Court in the case of GODREJ AND BOYCE MFG. CO. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT], where it has been held that Rule 8D would be applicable only on and from assessment year 2008-09 onwards and not prior to assessment year 2008-09 - the AO shall be at liberty to identify actual expenditure which had been incurred for the purpose of making and earning dividend income from the investment in shares and mutual funds as so observed by the Hon’ble High Court in the case of Godrej Boyce vs. DCIT. Matter restored back to the file of the Assessing Officer for his fresh adjudication.
MAT - Addition being expenditure incurred to earn exempt income while computing book profit under sec. 115JB of the Act - HELD THAT:- Both the authorities have applied Rule 8D of the Income-tax Rules while computing the amount of expenditure disallowable u/s 14A of the Act. As already held above, the provisions of Rule 8D are not applicable to the present assessment year under consideration. Therefore, disallowance of expenditure by applying Rule 8D is not justified.
No actual expenditure was debited in the profit & loss account relating to the earning of exempt income. Therefore, the provision of section 14A cannot be imported into while computing the book profit u/s 115JB of the Act inasmuch as clause (f) of Explanation to sec. 115JB refers to the amount debited to the profit & loss account which can be added back to the book profit while computing book profit u/s 115JB of the Act - the disallowance of expenses confirmed by the CIT(A), is deleted while computing book profit under sec. 115JB of the Act.
Non-quantification of unabsorbed depreciation to be carried forward to subsequent years - HELD THAT:- Issue being restored back to the file of the AO to quantify the unabsorbed depreciation of the current year to be carry forward to the next assessment year as per provisions of sec. 32(2) The AO shall provide reasonable opportunity of being heard to the assessee. The assessee shall produce all the details of depreciation before the AO so as to enable him to decide the issue in its right and correct perspective and as per the provisions of law.
The appeal filed by the assessee is partly allowed.
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2011 (2) TMI 1399
Provisions of section 44AB - penalty proceedings u/s 271B - In present case, AO from the search operation and the statement recorded u/s 132(4), noted that the modus operandi adopted by the assessee was that he first received cash from entry seekers which were deposited in the bank account of one of the group companies and after depositing the cash in the bank accounts, a cheque was issued and the equal amount in favour of entry seekers. The assessee thus returned the cash of the entry seekers in the guise of cheque after retaining commission. Since the assessee had failed to get its accounts audited and furnish a copy of the same before the specified date the AO initiated penalty proceedings u/s 271B by issuing the show-cause notice. He therefore levied the penalty.
HELD THAT:- In case of the assessee he had himself received the money through the concerns in his control and in exchange thereof had issued cheques. Therefore the transaction was principle to principle basis and not as agent. Therefore in our view in case of the assessee gross amounts received in connection with entry business have to be considered for the purposes of ceiling of ₹ 40 lacs u/s 44AB. The circular No.452 of the CBDT relied upon by the assessee is also distinguishable as the same related to kachha arithia. The decision of the tribunal in case of R.Wadiwala & Co. Vs ACIT [2000 (11) TMI 277 - ITAT AHMEDABAD-B] is obviously distinguishable as the same related to share transactions and not accommodation bills. It may also be pointed out that the assessee has not raised any ground that he was not liable for audit u/s 44AB. Therefore, the case of the assessee was covered u/s 44AB and the accounts were required to be audited and audit reports were required to furnished within the prescribed date which had not been done. Penalties were therefore leviable and the same had been rightly levied by the authorities. The order of CIT(A) is accordingly upheld. all the appeals of the assessee stand dismissed.
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2011 (2) TMI 1398
Issues:
- Interpretation of additional amount under Section 23(1A) of the Land Acquisition Act, 1894 regarding its applicability on solatium under Section 23(2).
Analysis:
1. The case involved a question of whether the additional amount under Section 23(1A) of the Land Acquisition Act, 1894 is payable on the solatium under Section 23(2) of the Act. The respondents claimed an additional amount of 12% per annum on the market value of the land and the solatium amount, which was accepted by the Executing Court and upheld by the High Court. The issue was challenged in the Supreme Court.
2. Section 23 of the Act outlines the factors to be considered in determining compensation for acquired land. The market value of the land at the date of notification under Section 4(1) is a crucial component. Compensation includes factors such as damage to standing crops, severance of land, injurious effects on other property, relocation expenses, and loss of profits. Additionally, Section 23(1A) mandates an additional amount of 12% per annum on the market value from the date of notification to the award date. Solatium at 30% is also awarded on the market value.
3. The Supreme Court clarified that the additional amount under Section 23(1A) is payable only on the market value determined under Section 23(1) and not on any other amount. Solatium under Section 23(2) is not payable on the additional amount, and vice versa. The Court emphasized that these statutory benefits are automatically payable at specified rates, and no reasons need to be given for their grant.
4. Previous judgments, such as Mathapathi Basavannewwa and L. Krishnan, highlighted the purpose of the additional amount under Section 23(1A) to compensate for delays and inflation during the acquisition process. The Court in P. Ram Reddy v. Land Acquisition Officer clarified that the additional amount is only payable on the market value determined under Section 23(1). The ruling in Sunder v. Union of India established that interest calculations include compensation, additional amount, and solatium awarded under Section 23.
5. The Court held that the additional amounts payable to a landowner under the Act include compensation under Section 23(1), solatium under Section 23(2), and the additional amount under Section 23(1A. Interest is also awarded on the aggregate of these amounts for the period between possession and payment. The Court's decision in Gurpreet Singh v. Union of India provides guidance on adjusting and accounting for these payments.
6. Ultimately, the Supreme Court allowed the appeal, setting aside the lower courts' decisions that the additional amount under Section 23(1A) is payable on solatium. It clarified that the additional amount is only awardable on the market value determined under Section 23(1) and cannot be calculated on the solatium payable under Section 23(2) of the Act.
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2011 (2) TMI 1397
Issues Involved:
1. Validity of notice issued u/s 158BD.
2. Deletion of addition of Rs. 29,04,350/- as undisclosed income.
Summary:
1. Validity of Notice Issued u/s 158BD:
The Revenue questioned the first appellate order where Ld CIT(A) held that the notice issued u/s 158BD to the assessee was unjustified. The A.O. issued the notice based on entries regarding cash payments found during the block assessment proceedings of M/s. Rishiraj Builders & Developers. The Ld CIT(A) concluded that the Development Agreement of Plot No. 42 and 33 was between M/s. Rishiraj Builders & Developers and Shri Paraji Abaji Karanjkar, and thus the assessee did not fall under the purview of the word "other" as per the Act. Consequently, the addition of Rs. 29,04,350/- as undisclosed income was deleted. The Tribunal affirmed this action, noting that the A.O. took a contradictory stand in respect of the person searched and the "other person" on the same set of facts and evidence, which does not amount to proper satisfaction to initiate proceedings u/s 158BD.
2. Deletion of Addition of Rs. 29,04,350/- as Undisclosed Income:
The A.O. determined the undisclosed income based on entries in seized documents found during the search of M/s. Rishiraj Builders & Developers and statements of Shri Y.P. Trivedi. The assessee denied the contents of the seized documents and the receipt of any cash amount. The Ld CIT(A) directed the A.O. to grant the opportunity of cross-examination of Shri Y.P. Trivedi to the assessee, which revealed that the entries in the seized diary were based on unconfirmed information supplied by Shri Amulya Shastri. The Tribunal found that there was no valid reason for M/s. Rishiraj Builders & Developers to make any payment to the assessee against the property transactions of Plot No. 33 or 42. The Tribunal agreed with the Ld CIT(A) that mere reliance on the seized documents alone was not enough for making an addition of undisclosed income in the hands of the assessee. The Tribunal upheld the first appellate order, rejecting the grounds questioning the action of Ld CIT(A) and dismissing the appeal.
Conclusion:
The Tribunal upheld the first appellate order, holding the notice issued u/s 158BD against the assessee as unjustified and confirming the deletion of the addition of Rs. 29,04,350/- as undisclosed income. The appeal was dismissed.
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