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Showing 221 to 240 of 851 Records

• 2011 (6) TMI 823
  
  Issues involved: Appeal challenging CIT(A)'s order u/s 143(3) of the Income Tax Act, 1961 for the assessment year 2005-06 regarding the deletion of addition made u/s 145A on account of unutilized Cenvat credit.
  
  Summary:
  
  Issue 1: Correctness of CIT(A)'s order
  
  The Assessing Officer questioned the correctness of the CIT(A)'s order which deleted the addition made u/s 145A of the Income Tax Act, 1961 amounting to Rs. 16,27,533 on account of unutilized Cenvat credit. The AO contended that the amendment to section 145A of the IT Act required any tax or duty paid or incurred by the assessee to be included in inventories. The assessee argued that the balance with Central Excise Authorities was not includible in closing stock as purchases were already reduced from gross cost. The CIT(A) deleted the addition based on the Tribunal's decision in the assessee's own case for the assessment year 2000-2001. The Assessing Officer appealed this decision.
  
  Issue 2: Tribunal's Decision
  
  The Tribunal found that the issue was covered in favor of the assessee by previous decisions in the assessee's own case for earlier assessment years. The Tribunal noted that adjustments under section 145A of the Act should be made in respect of inventories, purchases, and sales, not only in closing stock. The Tribunal upheld the CIT(A)'s decision to delete the addition based on consistency with previous rulings for the assessment years 2000-2001 to 2004-05. The Tribunal dismissed the appeal and upheld the decision of the CIT(A).
  
  Conclusion
  
  The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 16,27,533 made u/s 145A of the IT Act on account of unutilized Cenvat credit. The Tribunal found the issue to be in favor of the assessee based on previous rulings and declined to interfere with the CIT(A)'s decision. The appeal was dismissed, and the decision was pronounced on 13th June 2011.

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• 2011 (6) TMI 822
  
  Issues involved: Appeal by revenue against CIT(A) order u/s 32 Mumbai for assessment years 2003-04, 04-05, and 05-06 regarding deletion of premium on transfer fees and TDR premium.
  
  Transfer Fees Issue:
  The revenue contended that transfer fees received by a Co-operative Housing Society were taxable income. However, the principle of mutuality was invoked by the assessee to argue against taxability. Previous Tribunal and High Court decisions supported the application of mutuality to such fees, emphasizing that as long as there was no commercial element, the fees were not liable to tax. The Court held that the transfer fees were not chargeable to tax based on the principle of mutuality.
  
  TDR Premium Issue:
  Regarding the TDR premium received by the society, it was argued that this amount was also covered by the principle of mutuality. The CIT(A) in a previous assessment year had ruled in favor of the assessee, stating that the TDR premium was non-taxable due to the concept of mutuality. The ITAT upheld this decision, citing a Special Bench ruling. The current CIT(A) also held that the TDR premium was not taxable income based on the principle of mutuality. The Tribunal rejected the revenue's claim, affirming that the TDR premium was not taxable.
  
  In conclusion, all three appeals by the revenue were dismissed based on the application of the principle of mutuality to both transfer fees and TDR premium.

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• 2011 (6) TMI 821
  
  Issues involved: Appeal against penalty u/s 271(1)(c) of the Income Tax Act for claiming excessive depreciation without reducing subsidy received on capital assets.
  
  Summary:
  The Appellate Tribunal ITAT Ahmedabad heard the Revenue's appeal against the penalty imposed on the assessee for claiming excessive depreciation without reducing the subsidy received on capital assets. The AO had levied the penalty under section 271(1)(c) based on the claim of excessive depreciation. However, the CIT(A) canceled the penalty stating that the incorrect depreciation claim did not amount to concealment of income. The Tribunal noted that the issue was covered by the decision of the Hon'ble Apex Court in CIT Vs. Reliance Petroproducts Pvt. Ltd. The Court held that making an incorrect claim does not constitute furnishing inaccurate particulars for penalty under section 271(1)(c). As all facts were disclosed during assessment and the dispute was regarding the depreciation claim, it did not amount to concealment of income. The Tribunal upheld the CIT(A)'s decision based on the Apex Court's ruling and dismissed the Revenue's appeal. The appeal was ultimately dismissed on 17th June 2011.

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• 2011 (6) TMI 820
  
  Issues Involved:
  1. Whether sum of Rs. 2,37,17,593/- should be treated as long term capital gain and not profit from speculation business.
  2. Whether loss on sale of debenture amounting to Rs. 35,84,558/- is outside the purview of explanation to section 73.
  3. Whether expenditure of Rs. 17,49,754/- on interest can be disallowed u/s 14A.
  
  Summary:
  
  Issue No. 1: Treatment of Rs. 2,37,17,593/- as Long Term Capital Gain or Speculation Business Profit
  The assessee declared long term capital gains from listed securities at Rs. 2,37,17,593/-, claiming it exempt u/s 10(36) of the Act. The AO treated this sum as speculative profit by invoking the explanation to section 73. The CIT(A) allowed the assessee's claim, stating that the explanation to section 73 applies only where the assessee suffers a loss in the sale and purchase of shares, and that the shares were held as investments, not as stock-in-trade. The Tribunal upheld the CIT(A)'s decision, emphasizing that the explanation to section 73 applies only to traders in shares, not investors. The Tribunal referenced the decision in CIT vs. Lokmat Newspapers (P) Ltd. (2010) 322 ITR 43 (Bom) and other relevant cases to support this view.
  
  Issue No. 2: Applicability of Explanation to Section 73 to Loss on Sale of Debentures
  The AO treated the long term loss on sale of debentures amounting to Rs. 35,84,558/- as speculation loss. The CIT(A) allowed the assessee's claim, referencing the Supreme Court decision in Apollo Tyres Ltd. vs. CIT (2002) 255 ITR 273 (SC), which held that debentures are not equivalent to shares. The Tribunal agreed with the CIT(A), stating that debentures are debt instruments and not shares, and thus, the explanation to section 73 does not apply. The Tribunal also noted that the assessee held the debentures as investments, not as stock-in-trade.
  
  Issue No. 3: Disallowance of Interest Expenditure u/s 14A
  The AO disallowed interest expenditure of Rs. 17,49,754/- u/s 14A, relating it to the dividend income from mutual funds and shares, which is exempt from tax. The CIT(A) allowed the assessee's claim, noting that the assessee had substantial interest-free funds and that the borrowings had decreased. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court decision in Munjal Sales Corporation vs. CIT (2008) 298 ITR 298 (SC) and the Bombay High Court decision in CIT vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom), which established that if sufficient interest-free funds are available, it is presumed that investments are made from these funds.
  
  Conclusion:
  The appeal filed by the Revenue was dismissed, and the Tribunal upheld the CIT(A)'s decisions on all three issues. The order was pronounced in open Court on 17.06.2011.

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• 2011 (6) TMI 819
  
  Issues Involved:
  1. Sustenance of disallowance of expenses of Dabhol Power Project.
  2. Disallowance of Club Security Deposit and set-off of expenses against the settlement of income of Dabhol Power Project.
  3. Levy of interest u/s 234B and 234C of the Income Tax Act.
  4. Settlement of claims and the impact of the Government of India's Deed of Release.
  5. Disallowance of expenses of Dabhol Project Office for the assessment year 2005-06.
  
  Summary:
  
  1. Sustenance of Disallowance of Expenses of Dabhol Power Project:
  The assessee, a non-resident company, had its contract with Dabhol Power Company (DPC) terminated on 17.6.2001. The AO disallowed expenses of Rs. 1,52,87,952/- related to the Dabhol Project, stating that the business had ceased post-termination. The Commissioner of Income Tax (A) upheld this disallowance, noting that the assessee had no business in India except winding up the Dabhol Project. The Tribunal, however, found that the assessee had RBI permission to extend the project office and had entered into a new agreement in 2006 for the revival of the Dabhol Project. Citing various judicial precedents, the Tribunal concluded that temporary inactivity does not imply cessation of business and allowed the expenses, except for specific sales tax expenditures.
  
  2. Disallowance of Club Security Deposit and Set-off of Expenses:
  The assessee did not press these grounds during the hearing. Consequently, these grounds were rejected by the Tribunal.
  
  3. Levy of Interest u/s 234B and 234C:
  The assessee argued that as a non-resident, all payments made to it were subject to tax deduction at source u/s 195, and hence, it was not liable to pay advance tax. The Tribunal, following the decision in M/s NGC Network Asia LLC, held that no interest could be charged under sections 234B and 234C, as the duty to deduct tax was on the payer. The Tribunal deleted the interest charged.
  
  4. Settlement of Claims and Impact of Government of India's Deed of Release:
  The assessee raised a new issue regarding a Deed of Release executed by the Government of India, which limited the tax liability on the Dabhol Power Project to US$3 million. The Tribunal admitted this legal issue and, following its earlier decision in the assessee's own case, restored the matter to the AO for re-examination in light of the Deed of Release.
  
  5. Disallowance of Expenses of Dabhol Project Office for Assessment Year 2005-06:
  The facts of this issue were similar to those of the first issue. Following its findings, the Tribunal deleted the disallowance of expenses of Rs. 23,40,696/- made by the AO and sustained by the Commissioner of Income Tax (A).
  
  Conclusion:
  The appeals for the assessment years 2003-04 and 2005-06 were partly allowed for statistical purposes, with specific disallowances deleted and certain issues remanded back to the AO for re-examination.

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• 2011 (6) TMI 818
  
  Issues Involved:
  1. Disallowance of 15% out of payments made to vendors u/s 40A(2)(b) of the Income Tax Act.
  2. Disallowance u/s 40(a)(ia) of the Income Tax Act in conjunction with section 194C.
  
  Summary:
  
  Issue 1: Disallowance of 15% out of payments made to vendors u/s 40A(2)(b)

  ITA No.1644/M/2010 is an appeal by the assessee against the order dated 22/1/2010 of CIT(A) XXXIII, Mumbai relating to assessment year 2006-07. The assessee, a joint venture between Hindustan Construction Company Ltd. and Larsen & Toubro Limited, challenged the disallowance of 15% out of payments made to vendors covered by the provisions of section 40A(2)(b) of the Income Tax Act. The Assessing Officer had disallowed 15% of the hire charges paid to related parties, following the precedent set in A.Y 2005-06. The CIT(A) confirmed this disallowance. However, the Tribunal noted that in A.Y. 2005-06, the identical issue was remanded to the Assessing Officer for fresh consideration. Consequently, the Tribunal set aside the order of the CIT(A) for the present assessment year and remanded the issue to the Assessing Officer for reconsideration in light of the decision for A.Y. 2005-06.

  Issue 2: Disallowance u/s 40(a)(ia) in conjunction with section 194C

  The assessee also contested the disallowance u/s 40(a)(ia) of the Income Tax Act for not deducting tax at source on payments made to sub-sub-contractors. The Assessing Officer and CIT(A) held that the assessee should have deducted tax at source on these payments. The assessee argued that the provisions of section 194C did not require deduction of TDS on payments made by a sub-contractor to a sub-sub-contractor, as the law prior to the amendment by Finance Act No.2, 2009 w.e.f. 1/10/2009 did not cover such payments. The Tribunal accepted the assessee's contention, noting that the provisions of section 194C(2) applied only to payments made by a contractor to a sub-contractor and not to payments made by a sub-contractor to a sub-sub-contractor. Therefore, the Tribunal directed the deletion of the disallowance made u/s 40(a)(ia).

  ITA NO.3041/MUM/2010:

  This appeal, relating to assessment year 2007-08, involved identical grounds as those in ITA No.1644/M/2010. The Tribunal set aside the order of CIT(A) regarding the disallowance u/s 40A(2)(b) and remanded the issue to the Assessing Officer for fresh consideration. The disallowance u/s 40(a)(ia) was decided in favor of the assessee.

  In conclusion, both appeals by the assessee were partly allowed.

  Order pronounced in the open court on the 24th day of June, 2011.

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• 2011 (6) TMI 817
  
  Issues Involved: The judgment involves the deletion of addition made on account of employees' share of provident fund and the interpretation of due date u/s. 36(1)(Va) of the Income Tax Act, 1961.
  
  Deletion of Addition for Provident Fund Contribution:
  The assessee-company was required u/s. 36(1)(va) to deduct and deposit employees' provident fund contributions within the prescribed period. The AO disallowed late deposits for the assessment years 2003-04 and 2004-05, adding them to the assessee's income u/s. 2(24)(x) of the Act. However, the CIT(A) allowed the claim, leading to the Revenue's appeals. The Tribunal noted that the issue was covered in favor of the assessee by the decision of the Hon'ble Delhi High Court in CIT Vs. P.M. Electronic Ltd. The High Court confirmed that payments made in accordance with the Act's provisions were allowable deductions. The Tribunal, following this precedent, dismissed the Revenue's appeals.
  
  Interpretation of Due Date u/s. 36(1)(Va):
  The Revenue contended that the due date mentioned in section 36(1)(Va) should be as defined u/s. 139(1) of the Income Tax Act, 1961, not as explained below sub-section (Va) of section 36. The Tribunal, relying on various High Court decisions and the Supreme Court's rulings, upheld the interpretation that payments made before the return filing date were eligible for deduction u/s. 43B. The Tribunal emphasized the significance of the Supreme Court's observations on the law pre-amendment to section 43B, dismissing the Revenue's contentions based on other High Court decisions. The Tribunal aligned with the Madras High Court's reasoning and concluded that no substantial question of law arose for consideration in the appeal, ultimately dismissing the Revenue's appeals.
  

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• 2011 (6) TMI 816
  

  Penalty Proceedings u/s 271(1)(c) - Assessee had understated the income by not deducting tax at source on certain payments made which attracts TDS and by not addition certain expenditure to total income on which TDS was made beyond due dates - Non deduction of TDS by the assessee was resulted in such disallowance of Expenditure u/s 40(a)(ia) - Penalty proceedings were initiated by AO

  HELD THAT - In our opinion, the mistake committed by the assessee was compensated by disallowing the expenditure. Further, the Revenue cannot penalise the assessee by levying penalty u/s 271(1)(c). In order to levy penalty u/s 271(1)(c), there has to be concealment of particulars of income of the assessee or the assessee must have furnished inaccurate particulars of its income. Present is not the case of concealment of income or it is not the case of Revenue that the assessee has furnished inaccurate particulars of income. The department has not found out that the assessee has furnished any factual incorrect information and the assessee is not guilty of furnishing of inaccurate particulars of income.

  In our opinion, the conditions laid down in section 271(1)(c) is not complied with. In our opinion, the conditions laid down in section 271(1) (c ) of the Act is not complied with. Being so, levy of penalty is not justified merely because the assessee has claimed certain expenditure that expenditure is not eligible in view of the provisions of section 40(a)(ia) and for that reason, expenditure is disallowed. Penalty cannot be levied for mere making of a claim of the expenditure which is not sustainable and deletion of penalty by the CIT(A) is justified. We place reliance on the judgement of the COMMISSIONER OF INCOME-TAX VERSUS RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT]. Accordingly the ground raised by the revenue holds no merit.

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• 2011 (6) TMI 815
  

  Revision Powers of Commissioner u/s 263 on Grounds other than the grounds of Revision Proceedings set out in the show cause notice - Assesse claim u/s 80IA was allowed in the course of the scrutiny assessment proceedings u/s 143(3) in 2001, learned Commissioner, in 2010, required the assesse to show cause as to why the assessment order so allowing the claim not be subjected to revision u/s 263

  HELD THAT:- We find that the impugned revision order is indeed not sustainable in law. A plain reading of the impugned revision order clearly shows that the conclusion drawn in the revision proceedings are different from the reasons for revision proceedings set out in the show cause notice extracts from which are set out in the revision order itself. It is important to note the shifting stand of the Commissioner so far as reasons for subjecting the assessment order to revision proceedings.

  In the show cause notice, the learned Commissioner was of the view that deduction under section 80IA was “ not allowable since steam is a transient product does not have any shelf life”. This plea about lack of shelf life of steam did not find mention in the revision order, but in the impugned revision order, learned Commissioner notes that that “as the cost of production of steam equals the sales value, no profit can be attributed to the transaction” and that “thus the deduction under section 80IA resulted in the assessment being erroneous and prejudicial to the interest of the revenue”.

  However, by the time, learned Commissioner reached the operative portion of the revision order, he entirely abandoned these grounds about inadmissibility of claim of deduction under section 80IA on merits, and set aside the assessment order on the ground that AO had not made proper enquiries “in the present case, the Assessing Officer failed to make proper enquiries for making such deduction.

  It is thus clear that there has been a shift in the stand of the Commissioner on whether it was a fit case for revision on the ground that the assessee was not eligible for deduction under section 80IA in respect of notional sale of steam or whether it was a case for revision on the ground that the Assessing Officer did not make necessary verifications about the claim made by the assessee. The reason given in the show cause notice is former, while the reason for which revision powers are finally exercised in the impugned order are latter. Even with regard to the reasons of ineligibility of deduction under section 80IA in respect of notional sale of steam, the reasons are different at the notice stage and at the time of the impugned order, but all that ceases to be relevant because the ground on which the assessment is finally set aside is that “the Assessing Officer failed to make proper enquiries”. The reasons for which impugned assessment is set aside is thus entirely different from the reasons which were set out in the show cause notice.

  In the case of Synergy Enterprises Solutions Pvt Ltd Vs DCIT (ITA No 2076/Mum/2010), identical issues were dealt with where following the decision in the judgement of MAXPAK INVESTMENT LIMITED. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX. [2006 (4) TMI 199 - ITAT DELHI-F] was followed, it was held that "CIT has not mentioned the ground on which action is proposed to be taken under section 263 in the show-cause notice, it is deemed that he was not satisfied that it was a fit ground for taking action under the section, with the result that the final order, if based on the ground which he had earlier considered not fit for taking action under the section, will have to be set aside as not based on any ground which may justify his belief that the order passed by the Assessing Officer was erroneous insofar as it is prejudicial to the interests of the Revenue."

  It is therefore, held that, Once we come to the conclusion that the impugned order is null and void, it is not for us to advise the Commissioner as to what should he do. He is always at liberty to do whatever action he can take in accordance with the law, but we cannot give life to a null and void order by remitting it back to the learned Commissioner for giving an opportunity of passing the fresh order after giving the assessee an opportunity of hearing.

  In case, it is possible for the Commissioner to pass a fresh order at this stage, in accordance with the scheme of the Act, he can very well do so, but in case the time limit for passing such order has already expired, we cannot extend the same by directing him to pass the order afresh after giving an opportunity of hearing to the assessee.

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• 2011 (6) TMI 814
  

  Disallowance of Proportionate Interest on Investment u/s. 36(1)(iii) - Investment made for Advancement of Business Purposes - Assessee failed to substantiate its claim that the investment was made for advancement of business purposes - CIT(A) disallowed the proportionate interest on investment made - HELD THAT:- We are in opinion that similar issue was considered in assessee’s own case of 2008, where the matter was restored back to AO to verify the nexus between the borrowed funds and investments made and thereafter decide the issue in accordance with law after giving reasonable opportunity of being heard.

  In view of the above, we direct the AO to examine whether the assessee had borrowed certain funds on which liability to pay tax is being incurred and on other hand, certain amounts had been advanced/invested in sister concern/others without any business purposes that is also without interest and in such circumstances, the interest to the extent the advance/investment had been made without carrying any interest cannot be allowed u/s. 36(1)(iii) - Matter Restored Back.

  Disallowance of Credit for TDS claimed - TDS certificates were issued in the name of JV. As TDS certificates were not standing in the name of the assessee company, CIT(A) upeld the disallowance of credit for TDS claimed - HELD THAT:- Identical issue was addressed by Tribunal in INCOME TAX OFFICER & OTHERS VERSUS LIMAK-SOMA JV., M/S. CSCHK-SOMA (JV) & M/S. SOMA-PATEL ASI (JV) [2010 (9) TMI 695 - ITAT, HYDERABAD] where it was held that unless the assessee offers the income for taxation, the TDS cannot be given credit.

  Respectfully following the order of the Tribunal, we set aside the issue to the file of the Assessing Officer to examine whether the assessee offered the income for taxation, and if the assessee offered the inacome for taxation for the assessment year under consideration, credit to the TDS is to be given accordingly to the assessee.

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• 2011 (6) TMI 813
  
  Issues Involved:
  The judgment involves the following issues:
  1. Whether exemption should be allowed to interest income and rental income on the basis of the principle of mutuality or should it be assessed as income from other sources.
  2. Whether the objection to the applicability of the principle of mutuality has been addressed by the amendment in the constitution of the Federation.
  
  Issue 1: Exemption of Interest and Rental Income
  The Revenue appealed against the CIT(A)'s decision to allow the assessee exemption based on the principle of mutuality for interest income and rental income. The CIT(A) had allowed interest income of Rs. 7,75,813 and rental income of Rs. 2,41,414 as business income instead of income from other sources. The assessee, in the Cross Objection, challenged the addition of Rs. 38,200 from the total rental income arising from the rest house. The CIT(A) also disallowed the provision made for research and development expenses. The Tribunal directed the AO to reconsider the applicability of the principle of mutuality and the exemption of various income items.
  
  Issue 2: Applicability of Principle of Mutuality
  The assessee claimed to be a mutual association with cooperative societies as members. An amendment in the Federation's constitution was made in March 2011, allowing distribution of surplus assets among institutional members in case of liquidation. The Tribunal directed the AO to reconsider the issues afresh in light of this amendment to determine if the principle of mutuality applies. The AO was instructed to pass a reasoned order after considering the new development and giving the assessee a fair opportunity to be heard.
  
  The Revenue contended that the amendment in the constitution should only be applied prospectively, citing a Madras High Court decision. They argued that mutuality does not automatically exempt all activities, as seen in a Bombay High Court case. The Karnataka High Court's judgment on taxing income from deposits in mutual concerns was also referenced. The Tribunal decided to keep all issues open for the AO to decide after determining the applicability of the principle of mutuality to the assessee. Consequently, both the Revenue's appeal and the assessee's Cross Objection were allowed for statistical purposes.
  
  The judgment addressed the issues of exemption of interest and rental income based on the principle of mutuality, as well as the applicability of the principle of mutuality to the assessee's status as a mutual association. The Tribunal directed the AO to reconsider these matters in light of an amendment in the Federation's constitution, allowing for the distribution of surplus assets among institutional members in case of liquidation. The decision highlighted the need for a fresh assessment by the AO to determine the exemption status of various income items claimed by the assessee.

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• 2011 (6) TMI 812
  

  Interest Accrued but Not Due on Securities - Added to Total Income or not? - CIT(A) confirmed some amount representing accrued interest on securities, but not falling due for payment. Such interest, which is in the process of accrual, is at the incipient and inchoate stage, maturing into taxable income only when it becomes due and payable in terms of issue of such security.

  HELD THAT:- Tribunal in own case followed the decision of DCIT VERSUS BANK OF BAHRAIN & KUWAIT [2010 (8) TMI 578 - ITAT, MUMBAI], where following the decision of UNITED COMMERCIAL BANK VERSUS COMMISSIONER OF INCOME-TAX [1999 (9) TMI 4 - SUPREME COURT], where it was held that the "Bank cannot be prevented from urging in the return that the interest on govt. securities accrued only on the specified coupon dates notwithstanding that credit has been taken in the profit & loss account for the interest on day to day basis." Thus, the issue has been decided in favour of the view that the interest accrues only on the specified coupon dates and not on day to day basis - Decision in Favour of Assessee.

  Disallowance of Loss on Unmatured Forward Contracts - HELD THAT:- We find that this issue is also squarely covered by the Special Bench decision in the case of DCIT VERSUS BANK OF BAHRAIN & KUWAIT [2010 (8) TMI 578 - ITAT, MUMBAI] in assessee’s favour, wherein, it was held that "where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period i.e. before the date of maturity of the forward contract.” Respectfully following the aforesaid decision of the Tribunal we hold that loss on unmatured foreign exchange contract have to be allowed as deduction - Decision in Favour of Assessee.

  Change in Valuation of Securities as per RBI guidelines - Statutory Compulsion u/s 145A - Assessee made changes in valuation policy as per RBI guidelines which was not accepted by AO - CIT(A) held that the change in valuation policy was bonafide but it cannot be applied retrospectively and asked assessee to revalue the security as at the beginning of the year

  HELD THAT:- We find that the change in the method of accounting became necessary because of the RBI guidelines and therefore it cannot be said that the change in the method of valuation was not bonafide. The direction to change the value of opening stock will result in distortion of profits and no real effect being given to the changed method of valuation.

  We agree with the contention of the learned counsel for the Assessee that provisions of section 145A, is a statutory compulsion with regard to valuation of inventory, which would necessarily include the opening stock also. As far as the case of the assessee is concerned, the change in method of accounting falls within the ambit of section 145 according to which the method of accounting and the change in the method of accounting, if it is bonafide, and if it is regularly followed thereafter has to be accepted as it is.

  The revenue in such circumstances cannot place any condition that the opening value of securities should also be changed. If securities as on the beginning of the year is also revalued the then changed method of accounting will become meaningless. We, therefore, hold that in a case of voluntary change in the method of accounting followed by the assesse, all that has to be seen is as to whether the change is bona fide and regularly followed thereafter. If the above condition is satisfied, then the changed method of accounting has to be accepted. In such an even there is no need to revalue the securities as on the beginning of the year.

  We are therefore, of the view that the direction of the CIT(A) to revalue the security as at the beginning of the year should be deleted and we direct accordingly.

  Interest for Broken Period - Allowed or Not as Deduction? - AO held, claim for exclusion of broken period interest in respect of various purchases of securities during the year represented interest accrued upto the date of purchase of securities is part of the purchase consideration and the broken period interest cannot be allowed as deduction - HELD THAT:- Issue has been considered by the Hon’ble Bombay High Court in the case of AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION VERSUS COMMISSIONER OF INCOME-TAX. [2002 (9) TMI 96 - BOMBAY HIGH COURT], wherein it was held that purchase price of the securities should be bifurcated into (1) interest accrued upto the date of purchase and (2) balance of the price and interest should be allowed as revenue expenditure in the year of purchase provided the bank follow such a practice. In view of the above, we do not find any infirmity in the order of the CIT(A).

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• 2011 (6) TMI 811
  
  Issues Involved:
  The judgment involves the issue of whether the CIT(A) was justified in directing the AO to allow deduction u/s 80P(2)(a)(i) of the Act for interest income earned from Non-SLR investments.
  
  Comprehensive Details:
  
  Issue 1: Deduction u/s 80P(2)(a)(i) for interest income from Non-SLR investments
  The assessee, a cooperative bank, filed a return of income for the asst. year 2005-06 claiming deduction u/s 80P. The AO restricted the deduction due to interest income earned from Non-SLR entities. The CIT(A) allowed the appeal based on relevant judgments. The revenue contended that recent Supreme Court judgment held such income taxable u/s 56. The assessee argued the distinction between a cooperative bank and society. The Tribunal noted the legislative intent of section 80P(2)(a)(i) and the necessity of Non-SLR funds for banking activities. Referring to precedents, the Tribunal upheld the CIT(A)'s decision, stating the interest income was attributable to banking activities.
  
  Conclusion:
  The Tribunal dismissed the department's appeal, affirming the CIT(A)'s decision to allow deduction u/s 80P(2)(a)(i) for interest income from Non-SLR investments.

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• 2011 (6) TMI 810
  
  Issues involved: Appeal against deletion of penalty u/s 271(1)(c) by tribunal.
  
  Summary:
  The case involved an appeal by the Revenue against the tribunal's decision to delete a penalty of Rs. 6,64,730 imposed by the Assessing Officer and confirmed by CIT(Appeals). The main question raised was whether the Appellate Tribunal was correct in reversing the order and deleting the penalty u/s 271(1)(c). The assessee had claimed to have received a gift from a foreign donor during the assessment year, but the department did not accept this claim and taxed the gift amount in the hands of the assessee. Penalty proceedings were initiated under section 271(1)(c), and both the Assessing Officer and CIT(Appeals) imposed the penalty, which was later deleted by the tribunal.
  
  Upon reviewing the orders and considering the arguments presented, the High Court found no reason to interfere with the tribunal's decision. The tribunal noted that the gift was received through a normal banking channel, the identity of the donor was disclosed and established, and the assessee had provided complete details of the gift. The tribunal also observed that none of the departmental authorities had attempted to prove the assessee's explanation as false. The High Court agreed with the tribunal's reasoning and cited a previous decision where it was held that an unproved explanation does not necessarily mean the assessee's case is false.
  
  Furthermore, the High Court referred to another case where it was stated that the failure to prove a gift in the manner required by the department does not automatically imply that the assessee concealed income. Based on these considerations, the tribunal had deleted the penalty as there was no substantial question of law arising. Therefore, the Tax Appeal was dismissed in favor of the assessee.

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• 2011 (6) TMI 809
  
  Issues Involved:
  1. Eligibility for deduction u/s 10A for the assessment year 2006-07.
  2. Eligibility for deduction u/s 10A for the assessment year 2007-08.
  
  Summary:
  
  Issue 1: Eligibility for deduction u/s 10A for the assessment year 2006-07
  
  The appeal of the Revenue challenges the allowance of deduction u/s 10A amounting to Rs. 86,86,131/- on the grounds that the assessee's undertaking started production in the financial year 1999-2000 but was not registered with STPI at that time. The assessee got registered with STPI on 27.03.2002 and continued using old machinery. The Assessing Officer denied the exemption u/s 10A due to the lack of STPI registration at the commencement of production. The assessee argued that the dates in section 10A(2)(i)(a), 10A(2)(i)(b), and 10A(2)(i)(c) pertain to the year of manufacture for the purpose of a 10-year exemption period and that compliance with all conditions makes them eligible for the deduction. The CIT(A) directed the Assessing Officer to allow the exemption, citing the decision of the Punjab & Haryana High Court in Mahavir Spinning Mills and CBDT Circulars 764 of 2000 and 1 of 2005.
  
  Issue 2: Eligibility for deduction u/s 10A for the assessment year 2007-08
  
  Both sides agreed that the facts and issues for the assessment year 2007-08 are identical to those for 2006-07. The Tribunal, applying the same reasoning as for the assessment year 2006-07, upheld the order of the CIT(A) and dismissed the appeal of the Revenue.
  
  Conclusion:
  
  The Tribunal found that the issue raised by the Revenue is covered in favor of the assessee by various decisions, including the Hon'ble Karnataka High Court in ITA No. 323 of 2010. The Tribunal upheld the CIT(A)'s order allowing the deduction u/s 10A for both assessment years 2006-07 and 2007-08, dismissing the appeals of the Revenue and the Cross Objection of the assessee. The order was pronounced soon after the conclusion of the hearing on 01.06.2011.

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• 2011 (6) TMI 808
  
  Issues involved:
  The judgment deals with the issue of levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 on the assessee for furnishing inaccurate particulars of income and concealment of income in Assessment Year 2005-06.
  
  Comprehensive Details:
  
  1. Background:
  The appeal arose from the order of CIT(A) confirming the penalty imposed by the Assessing Officer u/s 271(1)(c) of the Act. The assessee had sold two plots of land and claimed exemption u/s 54F by depositing the sale proceeds in a Capital Gains Accounts Scheme. However, the assessee later withdrew the amount due to financial crisis.
  
  2. Assessee's Argument:
  The assessee contended that as per proviso 1 to section 54F(4) of the Act, if the capital gain withdrawn in a year is not taxable in that year, then no penalty should be levied. The assessee argued that since the capital gain was to be assessed in AY 2008-09, penalty for AY 2005-06 was not justified.
  
  3. Legal Provisions and Analysis:
  The Tribunal examined the proviso to section 54F(4) which specifies the treatment of unutilized amounts deposited under the scheme. It was noted that the capital gain on the sale consideration of the properties should be assessed in AY 2008-09, not in AY 2005-06 as done by the AO. Referring to a Bombay High Court case, it was established that penalty cannot be levied in an assessment year where the income is not assessable.
  
  4. Decision:
  Based on the legal provisions and precedents, the Tribunal ruled in favor of the assessee, stating that penalty u/s 271(1)(c) cannot be levied for AY 2005-06 as the capital gain was not assessable in that year. Therefore, the penalty imposed was deleted, and the appeal of the assessee was allowed.
  
  Conclusion:
  The Tribunal's decision highlighted the importance of aligning the assessment of income with the relevant assessment year and emphasized that penalties cannot be levied when income is not assessable in a particular year.

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• 2011 (6) TMI 807
  
  Issues involved: The issue involves whether the activities conducted by the Institute of Chartered Accountants of India (ICAI) fall within the purview of "Education" under section 2(15) of the IT Act, specifically regarding income from coaching classes and the applicability of exemptions u/s 11 and u/s 12A.
  
  Summary:
  The Assessing Officer had held that the income from coaching classes was taxable as the assessee was not registered u/s 12A and had not produced evidence of registration. Consequently, the benefit of section 11 of the IT Act was denied, and the income was assessed at a specific amount after disallowing the exemption u/s 11 on the grounds that coaching income was considered a business activity and that proper books of accounts were not maintained.
  
  Upon appeal, the Ld. Commissioner of Income Tax (Appeals) referred to previous appellate orders and emphasized that the income from coaching classes was not a business activity but an ancillary activity aligned with the main objectives of the Institute. The Ld. Commissioner noted that the income was exempt u/s 10(23C)(iv) and u/s 11 as it fell within the definition of charitable purpose under section 2(15) of the Act.
  
  The Tribunal upheld the decision of the Ld. Commissioner of Income Tax (Appeals) based on the precedent set in previous tribunal orders, where it was established that the income from coaching classes was educational in nature and exempt under sections 10(23C)(iv) and 11 of the IT Act. The Revenue's appeal was dismissed, affirming the order of the Ld. Commissioner of Income Tax (Appeals).
  
  In conclusion, the Tribunal found no infirmity in the Ld. Commissioner's order and upheld the decision, resulting in the dismissal of the Revenue's appeal.

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• 2011 (6) TMI 806
  
  Issues involved: Appeal by Revenue against order of Commissioner (Appeals) regarding disallowance of expenditure and application of section 14A for assessment year 1999-2000.
  
  Disposal of Appeal:
  - The appeal was ex-parte as the assessee did not appear despite notice.
  - The sole issue was disallowance u/s 14A of the Income Tax Act, 1961.
  - The first appellate authority allowed the appeal based on availability of surplus funds.
  - The Tribunal upheld the decision citing the increase in non-interest bearing funds compared to investments in shares.
  - The Tribunal referred to previous decisions regarding the applicability of the Special Bench decision in ITO v/s Daga Capital Management Pvt. Ltd.
  - The Tribunal also mentioned the reversal of the Mumbai Special Bench decision by the Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT.
  - The Bombay High Court's decision in CIT v/s Reliance Utilities & Power Ltd. was cited regarding the presumption of investments made from interest-free funds.
  - Consequently, the appeal by Revenue was dismissed.
  
  Conclusion:
  - The Tribunal upheld the order of the Commissioner (Appeals) that no expenditure by way of interest is disallowable under section 14A of the Act.
  - The grounds raised by Revenue were dismissed.

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• 2011 (6) TMI 805
  
  Issues Involved:
  1. Validity of addition under section 68 of the Income Tax Act, 1961, based on the sale proceeds of shares.
  2. Classification of income from sale of shares as long-term capital gain or business income.
  3. Denial of exemption under section 54F of the Act.
  4. Addition under section 69A of the Act for unexplained cash.
  5. Addition for unexplained investment in jewelry.
  6. Levy of interest under section 234B of the Act.
  
  Detailed Analysis:
  
  1. Validity of Addition under Section 68:
  The primary issue was whether the addition of ` 50,42,775 made under section 68 of the Act, based on the sale proceeds of shares of Bolton Properties Ltd., was justified. The Assessing Officer (AO) based the addition on the abnormal rise in the share price and the inability of the assessee to produce Mr. Prakash Nahata for cross-verification. The assessee retracted his statement, claiming it was made under duress during a late-night search. The Tribunal found that the retraction was valid and supported by documentary evidence, including contract notes, demat account statements, and bank statements. The Tribunal held that the AO's addition was based on suspicion and conjecture without corroborative evidence, and thus, the addition under section 68 was deleted.
  
  2. Classification of Income from Sale of Shares:
  The issue was whether the income from the sale of shares should be classified as long-term capital gain or business income. The AO argued that the assessee was engaged in trading of shares, while the assessee contended that he was an investor. The Tribunal noted that the AO had accepted the assessee as an investor in earlier years and found no substantial change in the assessee's activities during the year in question. The Tribunal held that the assessee was an investor, and the income should be classified as long-term capital gain.
  
  3. Denial of Exemption under Section 54F:
  The AO denied the exemption under section 54F on the ground that the income was from undisclosed sources. Since the Tribunal held that the income was from long-term capital gains, it allowed the exemption under section 54F.
  
  4. Addition under Section 69A for Unexplained Cash:
  During the search, cash amounting to ` 9,28,900 was found, and ` 6,00,000 was seized. The assessee explained that the cash was received from M/s. KOI Benz International, supported by an affidavit and ledger account. The AO rejected the explanation, but the Tribunal found that the AO's rejection was based on conjecture and surmises. The Tribunal accepted the assessee's explanation and deleted the addition under section 69A.
  
  5. Addition for Unexplained Investment in Jewelry:
  The AO added ` 1,76,470 as unexplained investment in jewelry. The assessee did not seriously contest this addition before the Tribunal. Consequently, the Tribunal confirmed the addition.
  
  6. Levy of Interest under Section 234B:
  The levy of interest under section 234B was held to be mandatory and consequential. The Tribunal dismissed the ground challenging the levy of interest.
  
  Conclusion:
  The Tribunal allowed the appeals in part, deleting the additions under sections 68 and 69A, classifying the income as long-term capital gains, and granting the exemption under section 54F. The addition for unexplained investment in jewelry was confirmed, and the levy of interest under section 234B was upheld.

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• 2011 (6) TMI 804
  
  Issues involved: Appeal against order of CIT(A) for assessment year 2005-06 regarding deletion of additions made in assessment order.
  
  Issue 1: Provision for discount
  
  The assessee, engaged in manufacturing, declared total income in return filed on 31.10.2005. The Assessing Officer disallowed a provision for discount of Rs. 18,38,40,583, considering it an unascertained liability. The assessee contended that only Rs. 3,85,17,201 was a provision for discount, while the rest was an accrued liability. The provision was based on turnover discounts linked to performance targets for channel partners. The CIT(A) accepted the assessee's version, citing compliance with Accounting Standards. The Revenue argued that the provision was contingent and relied on legal precedents. The Tribunal held that for a provision to be allowed, there must be a present obligation, probable outflow of resources, and a reliable estimate. As the provision was adhoc and arbitrary, not quantifiable during the year, it was disallowed. The Revenue's grounds were allowed.
  
  Issue 2: Treatment of travel expenditure
  
  The second issue concerned whether travel expenditure in foreign currency, when reduced from export turnover, should also be excluded from total turnover. The Tribunal noted that this issue was covered by a previous decision of the Chennai Bench, which favored the assessee. As the Revenue did not dispute this fact, the issue was decided in favor of the assessee.
  
  In conclusion, the Tribunal partly allowed the Revenue's appeal, upholding the disallowance of the provision for discount while ruling in favor of the assessee regarding the treatment of travel expenditure.

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