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Showing 241 to 260 of 1235 Records
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2012 (8) TMI 1000
Issues involved: Disallowance u/s.40(a)(ia) of the Act for short deduction of TDS on equipment hiring charges; Disallowance of expenses wrongly capitalized as revenue in nature.
Dispute on disallowance u/s.40(a)(ia) of the Act: The appellant disputed the order confirming the action of the Assessing Officer (AO) to disallow Rs. 23,42,011 u/s.40(a)(ia) of the Act. The AO disallowed the expenditure due to short deduction of TDS on equipment hiring charges covered under section 194-I of the Act, stating a shortfall of Rs. 23,42,011. The appellant contended that the provisions of section 194-C were applicable, not section 194-I. The Commissioner of Income Tax (Appeals) upheld the AO's decision, leading to the appeal before the Tribunal.
Arguments and Precedents: The appellant argued that the disallowance was unjustified as the TDS was deducted under section 194-C, not 194-I, and thus, the provisions of section 40(a)(ia) could not be invoked. The appellant cited precedents from ITAT Mumbai and Kolkata benches where similar issues were considered, emphasizing that the disallowance cannot be made for a shortfall in TDS deduction due to differences in interpretation of TDS provisions.
Tribunal's Decision: The Tribunal, after considering the submissions and precedents, held that the disallowance u/s.40(a)(ia) was not justified. It noted that the appellant could be declared an assessee in default under section 201, but the disallowance under section 40(a)(ia) was unwarranted. The Tribunal allowed the appeal by deleting the disallowance made u/s.40(a)(ia) of the Act, in line with the decisions of co-ordinate benches.
Other Grounds: Ground Nos. 5 & 6 regarding the capitalization of computer expenses and applicability of CBDT circulars were not pressed during the hearing and were dismissed as such.
In conclusion, the appeal filed by the assessee was allowed in part, with the disallowance u/s.40(a)(ia) being deleted, and the decision was pronounced on 10th August 2012.
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2012 (8) TMI 999
Issues involved: Stay petition for waiver of pre-deposit of Service Tax, Penalty, and Interest amounts confirmed by adjudicating authority.
Service Tax Liability Issue:
The appellant was charged with service tax liability for providing business auxiliary services and stock broker services without discharging the tax on amounts received from the sale of forms for public issues and terminal charges from investors. The show cause notice was for banking and financial services, but the adjudicating authority confirmed the demand under business auxiliary services without issuing a corrigendum. The appellant cited a precedent where unconditional stay was granted for a similar issue.
Legal Arguments:
The appellant's counsel argued that the adjudicating authority deviated from the show cause notice by confirming the demand under a different service category. They also highlighted the non-inclusion of terminal charges in taxable value, referencing a favorable decision from a coordinate bench. The Departmental Representative reiterated the authority's findings.
Judgment:
After considering submissions and records, the Tribunal found merit in the appellant's contentions. The show cause notice intended for banking and financial services was misapplied to business auxiliary services without proper notice. Additionally, the issue of terminal charges was resolved in the appellant's favor based on precedent. Consequently, the Tribunal allowed the waiver of pre-deposit for the disputed amounts and stayed recovery pending appeal disposal.
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2012 (8) TMI 998
Issues involved: Appeal against order of CIT(A)-XVIII, New Delhi dated 20th April, 2011 for AY 2008-09 regarding deletion of addition made u/s 14A and application of Rule 8D for disallowance.
Issue 1: Deletion of addition u/s 14A
The Revenue appealed against the deletion of addition of Rs. 14,43,248/- u/s 14A out of total addition of Rs. 1,62,73,596/-. The CIT(A) allowed relief of Rs. 14,43,248/- and confirmed the addition of Rs. 1,44,80,996/- under Section 14A. However, the CIT(A) found that the disallowance of Rs. 17,19,600/- for administrative expenses exceeded the total expenditure of Rs. 2,76,352/- incurred by the assessee. The CIT(A) held that any disallowance exceeding the actual expenditure incurred is not warranted under the law. Therefore, the disallowance in respect of administrative expenses was restricted to Rs. 2,76,352/- and the balance of Rs. 14,43,248/- was deleted.
Issue 2: Application of Rule 8D
The Revenue contended that the CIT(A) erred in not appreciating that the disallowance was made by applying Rule 8D, which was mandatory for the Assessing Officer. However, the ITAT upheld the CIT(A)'s decision, stating that the total administrative expenses claimed by the assessee were only Rs. 2,76,352/-, and any disallowance cannot exceed the actual expenditure claimed. Therefore, the reduction of disallowance from Rs. 17,19,600/- to Rs. 2,76,352/- by the CIT(A) was deemed appropriate.
In conclusion, the ITAT dismissed the appeal of the Revenue, upholding the CIT(A)'s order regarding the deletion of the addition made u/s 14A and the application of Rule 8D for disallowance. The decision was pronounced in the open Court on 9th August, 2012.
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2012 (8) TMI 997
Allowable expenses under Section 40(a)(ia) - Held that:- Commissioner of Income Tax (Appeals) has not erred in allowing relief on account of allowable expenses under Section 40(a)(ia) as Assessing Officer had restrain on power to entertain a claim made otherwise than by filing of a revised return of income.
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2012 (8) TMI 996
Issues involved:
The judgment involves the disallowance of sundry balances written off, late payment of employees' Provident Fund contribution, and disallowance of prior period expenses.
Sundry Balances Written Off:
The Assessing Officer (AO) disallowed the claim of advances written off by the assessee amounting to Rs. 2,35,40,186/-, as the assessee failed to provide complete details and evidence. The AO contended that these advances could not be treated as bad debts written off and disallowed the entire claim. The assessee argued that the write-offs were for unrecoverable amounts made exclusively for business purposes. The Tribunal directed further verification by the AO to establish the nature of the advances and their business purpose for potential allowance as business loss under Section 28 or 37(1) of the Income Tax Act.
Late Payment of Provident Fund Contribution:
The AO added Rs. 2,97,034/- to the assessee's income for delayed payment of employees' Provident Fund contribution. The assessee relied on a previous ITAT decision, but the AO rejected the submission, leading to the disallowance. However, the Tribunal allowed the claim as a deduction following a similar case precedent, reversing the Ld. CIT(A)'s decision.
Prior Period Expenses:
The AO disallowed prior period expenses of Rs. 2,33,864/- as the assessee failed to provide sufficient explanation. The assessee claimed these were petty expenses written off during the year, but the Tribunal found no substantiation for the claim and dismissed it. The appeal was partly allowed for statistical purposes.
This judgment highlights the importance of providing complete details and evidence to support claims, the need for timely payments to statutory funds, and the requirement to substantiate expenses for deductions.
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2012 (8) TMI 995
Issues Involved:1. Deletion of addition made u/s 2(22)(e) of the Income Tax Act. 2. Restriction of disallowance of expenses. Summary:Issue 1: Deletion of Addition Made u/s 2(22)(e) of the Income Tax ActThe Revenue's appeal contested the deletion of an addition of Rs. 6,50,000/- made u/s 2(22)(e) of the Act, which was treated as deemed dividend. The AO noted that the assessee company received an unsecured loan from M/s Giriraj Developers Pvt. Ltd., where common directors held substantial shares in both companies. The AO added Rs. 6,50,000/- to the income of the assessee company, citing the provisions of section 2(22)(e). However, the CIT(A) deleted this addition, relying on the decision of the Special Bench in Bhaumik Colour Pvt. Ltd., which held that deemed dividend can only be assessed in the hands of a person who is both a beneficial and registered shareholder of the lender company. Since the assessee company was not a shareholder in GDPL, the provisions of sec 2(22)(e) were not applicable. The Tribunal upheld the CIT(A)'s decision, referencing the Gujarat High Court's ruling in CIT vs. Daisy Packers Pvt. Ltd., which supported the non-applicability of sec 2(22)(e) when the recipient is not a shareholder in the lender company. Issue 2: Restriction of Disallowance of ExpensesThe AO disallowed 20% of mess expenses, labour charges, and leveling & loading expenses, totaling Rs. 1,03,908/-, due to the inability to verify these expenses as exclusively for business purposes. The CIT(A) restricted this disallowance to 10%, reducing the disallowed amount to Rs. 50,000/-, considering that the accounts were audited and some expenses were supported by self-generated vouchers. The Tribunal found no infirmity in the CIT(A)'s decision and upheld the restriction of the disallowance to Rs. 50,000/-, dismissing the Revenue's appeal on this ground. Conclusion:In both appeals, the Tribunal upheld the orders of the CIT(A), confirming the deletion of the addition made u/s 2(22)(e) and the restriction of the disallowance of expenses. Consequently, both appeals filed by the Revenue were dismissed. Order pronounced in open Court on 08.08.2012.
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2012 (8) TMI 994
Issues involved: Revenue's appeal against CIT(A)'s order dated 1-3-2012 for assessment year 2009-10, involving deletion of disallowance u/s 40A(3) and u/s 43B.
Disallowance u/s 40A(3):
The assessee company, engaged in consultancy and project work, reimbursed expenses in cash and cheques during meetings/workshops. The cash payments did not exceed &8377; 20,000 to a single person. CIT(A) directed deletion of the disallowance as payments were within the limit. Tribunal upheld CIT(A)'s decision based on factual findings and records, confirming no single payment exceeded &8377; 20,000, thus not violating sec. 40A(3).
Disallowance u/s 43B:
Regarding unpaid service tax, CIT(A) found sec. 43B not applicable as service tax was not claimed in P&L A/c and not collected from service recipient. Citing precedents, CIT(A) deleted the addition. Tribunal concurred, stating non-deposit of service tax cannot be added to income u/s 43B if not debited in P&L A/c. Upheld CIT(A)'s decision based on similar case laws and factual alignment, dismissing the department's appeal.
Conclusion:
The Tribunal dismissed the department's appeal, upholding CIT(A)'s orders on both issues, emphasizing compliance with sec. 40A(3) and inapplicability of sec. 43B to service tax based on legal precedents and factual evidence.
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2012 (8) TMI 993
Penalty levied u/s. 271(1)(c) - omission or commission on part of the assessee-company - Held that:- In the case under consideration, assessee-company was cheated by its employees and the AO has admitted the said fact by allowing defalcation in subsequent AY. In these peculiar circumstances, if the assessee could not support the claim made by it, during the assessment proceedings, it cannot be held that it had filed inaccurate particulars. Return of income, for the A.Y.under consideration had been filed before the fraud was be detected. So, if wrong claims were made by the assessee-company, on the basis of the material supplied by the employee-CA, penal provisions should not have been invoked. Lodging of a police complaint and subsequent arrest of the ex-employee of the company prove that assessee company had no role in filing inaccurate particulars rather it was a victim of a fraud. Penalties under the Act are imposed for some omissions and commissions. In our opinion, in the case under consideration it cannot held that there was any omission or commission on part of the assessee-company for which it should have been visited by penalty u/s. 271(1)(c) of the Act.
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2012 (8) TMI 992
Issues Involved:
1. Reopening of Assessment u/s 147.
2. Reference to Special Audit u/s 142(2A).
3. Calculation of Written Down Value (WDV) of assets and depreciation.
Summary:
Reopening of Assessment u/s 147:
The Assessee objected to the reopening of the assessment, arguing that the issue had already been addressed in the original assessment, and no new tangible material was presented. The CIT(A) upheld the reopening, relying on the Supreme Court decision in CIT Vs. PVS Beedies P. Ltd., which validates reopening based on an Internal Audit Party's report. The Tribunal confirmed the CIT(A)'s decision, citing the Supreme Court's ruling in ACIT Vs. Rajesh Jhaveri Stockbrokers Pvt. Ltd., which allows reopening if excessive relief or deduction is claimed.
Reference to Special Audit u/s 142(2A):
The Assessee contended that the reference to a special audit was invalid as it violated the provisions of the IT Act by recalculating the WDV from 01/04/1989. The CIT(A) rejected this argument, stating that the correct WDV needed to be recalculated from the inception of the Board. The Tribunal noted that the CIT(A) did not examine whether the grants received were used for acquiring assets and did not consider the retrospective application of Explanation 6 to section 43(6)(c), which applies to entities not taxable before AY 2003-04.
Calculation of WDV and Depreciation:
The Assessee argued that the AO incorrectly reduced the grants from the cost of assets to calculate the WDV, without proving that the grants were used for asset acquisition. The CIT(A) upheld the AO's calculation based on the special audit report, which found the Assessee's books incorrect. The Tribunal restored the issue to the CIT(A) for re-examination, emphasizing the need to analyze the receipt of grants and the implications of Explanation 6 to section 43(6)(c).
Conclusion:
The Tribunal partly allowed the Assessee's appeal for statistical purposes, directing the CIT(A) to re-examine the issues concerning the receipt of grants and the correct application of Explanation 6 to section 43(6)(c) with a reasonable opportunity for the Assessee to be heard. The decision was pronounced on 6th August 2012.
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2012 (8) TMI 991
The Bombay High Court dismissed the appeals in favor of the assessee, citing a previous decision in the case of Commissioner of Income Tax Vs. Bramha Associates. No costs were awarded.
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2012 (8) TMI 990
Exemption under section 11 - Income Tax Officer is not justified in refusing benefits under section 11 of the Act - it is not the case of the Assessing Officer that there was a bar in the trust deed or in the objects for taking unsecured loans
Allowability of depreciation on assets as application of income under section 11
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2012 (8) TMI 989
Expenditure incurred towards legal and professional charges - revenue or capital - Disallowance u/s 43B- Interest on cess I duty/rent/tax - Disallowance u/s 43B - Royalty and interest thereon - "Contribution to State Govt - Interest received from Income Tax Department - Deduction u/s 800 - Deduction u/s 80 HHC - Interest on securities - Deduction u/s 801A - Debenture Redemption Premium - interest under section 244-A on the refund out of self-assessment tax on the date of payment - disallowance of project expenses - depreciation on Intake Well, Telphers, Storage Tank, Lagoon Tank, Effluent Tankt - depreciation on shops at Bhiwani - depreciation on false ceiling - proportionate premium payable on redemption of bonds - remuneration paid to Lady Employees - foreign travelling expenses - legal charges in connection with land matter - disallowance u/s 43B (b)(c) and (d) - expenditure on rural development and medical help - exclusion of excise duty and sales tax from total turnover for the purpose of deduction u/s 80HHC - disallowance of profits of the USA branch of M/s Birla consultancy and software services - disallowance u/s 80I/80IA - disallowance of interest u/s 36(1) - disallowance u/s 40A(3) - development allowance on the increased cost of PandM due to exchange fluctuation - exchange fluctuation loss
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2012 (8) TMI 988
Deduction u/s 154 - deduction allowable to the assessee u/s 80HHC - Held that:- There is apparent mistake in the impugned tribunal order as the claim of the assessee regarding deduction u/s 80HHC in respect of DEPB entitlement/DEPB income was decided against the assessee for the whole amount but as per the judgment in the case of Topman Exports (2012 (2) TMI 100 - SUPREME COURT OF INDIA), only profit on sale of DEPB should be considered for the purpose of exclusion form business profit for computing deduction allowable to the assessee u/s 80HHC and or the computation of profit on sale of DEPB, face value of DEPB is to be considered as costs of DEPB. We, therefore, rectify this apparent mistake in the impugned tribunal order and hold that this issue should go back to the file of the A.O. for a fresh decision as per this judgement of Hon’ble Apex Court rendered in the case of Topman Exports (supra).
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2012 (8) TMI 987
Issues involved:
The appeal is regarding the exemption claimed by the assessee u/s 10(10C) of the Income Tax Act, 1961 for an ex gratia amount received upon voluntary retirement.
Summary:
Issue 1: Exemption u/s 10(10C) of the Act
The assessee, a former employee of State Bank of India, received an ex gratia payment of Rs. 5 lakhs upon voluntary retirement. The Assessing Officer disallowed the exemption claimed u/s 10(10C) citing non-compliance with Rule 2B of Income Tax Rules, 1962. The assessee's appeal before the CIT(A) was rejected, leading to the current appeal. The Tribunal noted a similar case where the High Court ruled in favor of the employee's entitlement to exemption u/s 10(10C) even if the payment is spread over years. Relying on this precedent, the Tribunal allowed the assessee's appeal, stating that the ex gratia amount was eligible for exemption u/s 10(10C) of the Act.
Decision:
The appeal filed by the assessee is allowed, and the compensation amount of Rs. 5 lakhs is deemed eligible for exemption u/s 10(10C) of the Act.
Note:
Separate judgment was not delivered by the judges.
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2012 (8) TMI 986
Issues:
The issues involved in this case are the denial of rebate claim by the adjudicating authority based on the amendment in Notification No. 43/2001, the violation of conditions of bond by exporting goods on payment of duty under rebate claim, and the retrospective applicability of the amending provision introduced in Notification No. 43/2001.
Denial of Rebate Claim:
The respondent had procured inputs without duty payment under Notification No. 43/2001 for manufacturing final products, which were then exported after paying duty. The rebate claim of the applicant was rejected as the goods were exported under a different notification. The Commissioner (Appeals) allowed the appeal, stating that the goods were deemed exported before the amendment. However, the applicant argued that the goods were exported after the amendment, making them ineligible for rebate.
Violation of Bond Conditions:
The applicant had executed a General Bond undertaking to export goods without duty payment, but they exported the goods on payment of duty under rebate claim. This action was deemed a violation of the conditions of the bond and the notification under which duty-free inputs were procured.
Retrospective Applicability of Amendment:
The amendment in Notification No. 43/2001 introduced an Explanation-II clarifying that goods manufactured using duty-free inputs must be exported under specific rules. The applicant contended that the goods were exported before the amendment, while the department provided evidence that the goods were actually exported after the effective date of the amendment. The government analyzed the relevant legal provisions and previous judgments to determine the date of export and upheld the denial of rebate claims under the amended notification.
Conclusion:
The Central Government reviewed the case records and concluded that the goods were exported after the amendment in the notification, making the rebate claims ineligible. The impugned orders-in-appeal were set aside, and the original orders-in-original were restored, thereby succeeding the revision applications.
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2012 (8) TMI 985
Assessment u/s 153A - Held that:- The addition in such a case can only be made on the basis of incriminating material found in the course of search and in the instant case, from the perusal of the assessment order as well as the order of CIT(A), it is seen that the disallowance on interest, which has been made, is not based on any seized material or documents found during the course of search and seizure. Therefore, such a disallowance be deleted.
Disallowance of interest - Held that:- No reason to deviate from the findings given by the CIT(A) as admittedly the borrowed funds cannot be held to be utilised wholly and exclusively for the business purpose. The investment in the company, wherein the assessee is a Director, will result only in dividend income which undoubtedly, would be hit by Section 14A. Nothing has been brought on record that by lending the money to the company by the assessee, from his own borrowed funds, has any direct or indirect nexus for the business purpose of the assessee. Therefore, in our opinion, there is no merit in the contention raised by the assessee and accordingly, we uphold the order of the CIT(A) and dismiss both the appeals filed by the assessee for the assessment years 2005-06 & 2006-2007, respectively.
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2012 (8) TMI 984
Issues involved: Appeals filed by Revenue against orders of ld.CIT(A) for AYs 2004-05 and 2007-08 regarding addition of expenses.
Summary:
The appeals were heard together as the issues were common. The main ground of appeal was the deletion of an addition made by the Assessing Officer on account of warranty and other expenses. The Tribunal considered the submissions and facts on record. The ld.CIT(A) had previously deleted a similar addition in the appellant's case for AY 2000-01, which was upheld by the Tribunal. The Tribunal held that the liability was accrued and reasonable, and any balance amount offered for taxation would be deductible expenditure. The issue of notice under Section 148 and subsequent assessment under Section 147 was not adjudicated as the appeal was decided on its merits. Both parties agreed that the issue was in favor of the assessee based on previous decisions. Therefore, the appeals of the Revenue were dismissed in favor of the assessee.
Judgment: The Tribunal dismissed the appeals of the Revenue based on the previous decision in favor of the assessee regarding the deletion of expenses made by the Assessing Officer, as the liability was deemed accrued and reasonable. The issue of notice under Section 148 was not adjudicated as the appeal was decided on its merits.
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2012 (8) TMI 983
Issues Involved:
1. Disallowance of provision for costs on completed contracts and provision for loss on incomplete contracts.
2. Withdrawal of credit for TDS.
3. Disallowance of software expenses as capital in nature.
4. Disallowance of deduction u/s 80HHB.
5. Levy of interest u/s 234D.
Summary:
1. Disallowance of Provision for Costs on Completed Contracts and Provision for Loss on Incomplete Contracts:
The assessee contested the disallowance of provisions for costs on completed contracts (Rs. 49,978,935) and loss on incomplete contracts (Rs. 6,216,974), totaling Rs. 56,195,909. The Tribunal examined each provision to determine if they were ascertained liabilities. Provisions for Uhde GmbH (Rs. 7,253,588), Larsen & Toubro Ltd. (Rs. 2,220,433 and Rs. 1,255,690), Kanoria Chemicals & Industries Ltd. (Rs. 232,501), Uhde GmbH (Rs. 23,548,956), and Asean Bintulu Fertilizer Sdn. BHD (Rs. 2,581,462) were allowed as they were ascertained. Provisions for Sanjana Cryogenic Storages Ltd. (Rs. 10,158,338 and Rs. 2,332,406), The Andhra Sugars Ltd. (Rs. 543,695), Kirloskar Pneumatic Co. Ltd. (Rs. 146,211), VVF Limited (Rs. 2,694,733), and ISCO-KNPC (Rs. 1,103,204) were disallowed as they were based on estimates.
2. Withdrawal of Credit for TDS:
The assessee challenged the withdrawal of TDS credit amounting to Rs. 3,384,649. The Tribunal upheld the revenue authorities' decision, stating that the TDS did not pertain to the current year, following the precedent set in the assessee's own case in the preceding year.
3. Disallowance of Software Expenses as Capital in Nature:
The Tribunal found that the software expenses of Rs. 5,926,204 were for maintenance, upgradation, and installation of antivirus, which are not capital in nature but necessary for the smooth running of computers. Thus, these expenses were allowed.
4. Disallowance of Deduction u/s 80HHB:
The assessee's claim for deduction u/s 80HHB of Rs. 3,405,207 was disallowed by the CIT(A) on the grounds that interest income and miscellaneous receipts were not derived from business. The Tribunal restored the issue to the AO for fresh examination, directing the assessee to provide necessary details to substantiate the claim.
5. Levy of Interest u/s 234D:
The issue of interest levy of Rs. 1,631,798 u/s 234D was deemed consequential. The AO was directed to give consequential effect in accordance with the law.
Conclusion:
The appeal was partly allowed, with specific directions for the AO to re-examine certain issues and allow or disallow provisions based on the Tribunal's findings.
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2012 (8) TMI 982
Issues involved:
The appeal challenges the penalty imposed under section 271(1)(c) of the Income-tax Act on the grounds of inadequate investment in Capital Gain Bonds u/s 54EC, reliance on advice of Chartered Accountant, alleged concealment of income, and the applicability of penalty for furnishing inaccurate particulars.
Issue 1: Penalty for inadequate investment in Capital Gain Bonds u/s 54EC
The appellant contested the penalty of Rs. 88,337 levied by the Assessing Officer (AO) under section 271(1)(c) of the Act due to investing less than the required amount in Capital Gain Bonds u/s 54EC. The AO found that out of the claimed Rs. 71.5 lakhs investment, only Rs. 67.15 lakhs were actually invested, leading to a restriction of the exemption amount. The appellant did not appeal this disallowance.
Issue 2: Reliance on advice of Chartered Accountant
The appellant argued that they believed, based on the advice of their Chartered Accountant, that the investment made was sufficient to claim exemption u/s 54EC. They contended that had they been properly advised, the entire Long Term Capital Gain amount would have been invested within the stipulated time frame, resulting in full exemption.
Issue 3: Alleged concealment of income
The AO initiated penalty proceedings u/s 271(1)(c) for the excess claim made by the appellant u/s 54EC, citing reasons such as claiming an unavailable exemption, delayed investment, and furnishing inaccurate particulars of income. The First Appellate Authority upheld the decision, noting the lack of explanation for the erroneous claim and the untimely investment.
Issue 4: Applicability of penalty for furnishing inaccurate particulars
During the appeal, the Authorized Representative argued that the claim under section 54EC was a mistake, investments were made albeit delayed, and all details were provided to the authorities. The appellant rectified the error by paying taxes on the delayed amount. The Tribunal opined that the penalty for furnishing inaccurate particulars was not justified, considering the bonafide mistake made by the appellant.
Conclusion:
The Appellate Tribunal, after considering the submissions, concluded that the penalty under section 271(1)(c) should not have been imposed as it was a case of a bonafide mistake. The Tribunal emphasized that disallowance or addition during assessment proceedings is not sufficient grounds for levying a penalty. Consequently, the penalty for furnishing inaccurate particulars was deleted, and the appeal filed by the appellant was allowed.
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2012 (8) TMI 981
Issues Involved:
1. Disallowance of rent payment u/s 40(a)(ia) for non-deduction of tax at source.
2. Disallowance of payment to M/s Surya Graphics u/s 40(a)(ia) for non-deduction of tax at source.
Issue 1: Disallowance of Rent Payment u/s 40(a)(ia):
The AO disallowed the expenditure u/s 40(a)(ia) as tax was not deducted at source on rent paid to Smt. B. Poorna. The CIT(A) directed the AO to verify the payable amount as on a specific date and restrict the disallowance accordingly.
Issue 2: Disallowance of Payment to M/s Surya Graphics u/s 40(a)(ia):
The AO disallowed the amount paid to M/s Surya Graphics u/s 40(a)(ia) for 'contract work' due to non-deduction of tax at source u/s 194C. The CIT(A) analyzed the nature of the transaction and held that it was a purchase transaction, not a contract for work, based on the principal to principal relationship and the passing of property upon delivery. Citing the decision of the Bombay High Court, the CIT(A) deleted the disallowance.
In the appeal before the ITAT Hyderabad, the revenue challenged the CIT(A)'s decision on both issues. After considering the arguments and examining the orders of the lower authorities, the ITAT upheld the CIT(A)'s decision. It was noted that in the case of printing educational material, the printer procured materials independently, worked in their establishment, and collected sales tax, indicating a sale of goods transaction. Referring to the Glenmark Pharmaceuticals case, it was established that the transaction was a sale, not a contract for work, as property passed upon delivery and materials were sourced independently. Therefore, the provisions of section 194C were deemed inapplicable. The ITAT dismissed the revenue's appeal, confirming the CIT(A)'s order based on the principles laid down by the Bombay High Court.
Conclusion:
The ITAT Hyderabad upheld the CIT(A)'s decision, dismissing the revenue's appeal regarding the disallowance of rent payment and payment to M/s Surya Graphics, based on the nature of the transactions and the applicability of tax deduction provisions.
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9911796707
