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Showing 261 to 280 of 658 Records

• 2007 (11) TMI 453
  
  Issues Involved:
  1. Disallowance of Rs. 1,15,01,460 made by the Assessing Officer being the amount of premium paid by the assessee on redemption of debentures.
  2. Whether the assessee is entitled to deduction under section 37 of the Act for the premium paid on redemption of debentures.
  
  Issue-wise Detailed Analysis:
  
  1. Disallowance of Premium Paid on Redemption of Debentures:
  
  The primary issue in these cross appeals is the disallowance of Rs. 1,15,01,460 made by the Assessing Officer, which was the amount of premium paid by the assessee on the redemption of debentures. The assessee, a company engaged in the business of leasing plant and machinery and making long-term investments, issued zero percent interest debentures to raise funds. These debentures were redeemed by paying a premium, which the assessee claimed as a business expenditure. The Assessing Officer disallowed this claim on three grounds:
  1. The investment in debentures was not a business activity as the income from the sale of debentures was shown under 'Capital gains'.
  2. There was no actual payment at the time of redemption, only journal entries were passed.
  3. The transactions were considered a colorable device to reduce tax liability as all involved companies were promoted by the Essar Group.
  
  2. Entitlement to Deduction Under Section 37 of the Act:
  
  The CIT(A) allowed the deduction under section 37(1) but remitted the matter to the Assessing Officer for re-computation of the disallowance, directing verification of the appellant's claim regarding the redemption premium. The revenue challenged the allowability of the deduction under section 37, while the assessee contested the directions given by the CIT(A).
  
  The Tribunal examined whether the assessee is entitled to deduction under section 37 of the Act for the premium paid on redemption of debentures. The Tribunal referenced its decision in the assessee's own case for the assessment year 1997-98, where it was held that the assessee was engaged in the business of holding long-term investments. However, it was pointed out that income from such investments was considered under the head 'Capital gains' and not under 'Profits and gains from business or profession'.
  
  Legal Precedents and Tribunal's Rationale:
  
  The Tribunal relied on the decision in the case of Kankhal Investments & Trading Co. (P.) Ltd., which established that deductions under sections 30 to 43D cannot be claimed if the income from the business receipt is to be computed under a specific head other than 'Profits and gains from business or profession'. The Tribunal cited:
  - United Commercial Bank Ltd. v. CIT, where the Supreme Court held that income from 'interest on securities' falls under section 8 and not under section 10, even if held by a banker as part of trading assets.
  - East India Housing & Land Development Trust Ltd. v. CIT, which reinforced that distinct heads of income are mutually exclusive and income derived from different sources must be computed under the appropriate head.
  
  The Tribunal concluded that the assessee's receipts and the connected expenditure must be considered under one head. Since the income from the sale of investments was considered under 'Capital gains', the deduction under section 37 could not be allowed. The Tribunal further clarified that the commercial principles have always been applied by courts in computing business profits and losses, and the existence of receipts is a condition precedent for claiming deductions under section 37.
  
  Final Judgment:
  
  The Tribunal held that the assessee is not entitled to deduction under section 37 of the Act for the premium paid on redemption of debentures, as the income from the business receipts was considered under the head 'Capital gains'. The order of the CIT(A) was reversed, and the disallowance made by the Assessing Officer was restored. Consequently, the appeal of the assessee was dismissed, and the appeal of the revenue was allowed.

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• 2007 (11) TMI 452
  
  Issues:
  1. Accrual of liability for expatriate costs under mercantile system of accounting.
  2. Computation of deduction under section 80HHE and setting off brought forward business losses.
  3. Treatment of provision for doubtful debts/advances in computing book profits under section 115JA.
  
  Issue 1: Accrual of liability for expatriate costs under mercantile system of accounting:
  The appeal concerned the deletion of an addition of Rs. 4,03,31,726 for expatriate costs by the Assessing Officer. The dispute arose from the timing of liability accrual due to an agreement with EDS Global INC, USA. The Assessing Officer contended that since approval from RBI was obtained after the previous year, no valid liability existed. However, the CIT(A) ruled in favor of the taxpayer, stating that under the mercantile system, liabilities accrue when the agreement is made, regardless of payment timing. The Tribunal upheld this decision, emphasizing that the liability arose from the agreement, not RBI approval, aligning with the Supreme Court's stance in similar cases.
  
  Issue 2: Computation of deduction under section 80HHE and setting off brought forward business losses:
  The second issue revolved around the computation of deductions under section 80HHE and setting off brought forward business losses. The Assessing Officer required adjustment of brought forward losses before computing the deduction, citing section 80AB's control over section 80HHE. The CIT(A) disagreed, allowing the taxpayer's claim based on legal interpretations. The Tribunal referred to the Supreme Court's ruling in IPCA Laboratories Ltd., emphasizing section 80AB's overriding effect, requiring set off of losses against current income before calculating deductions under section 80HHE. Consequently, the Tribunal reversed the CIT(A)'s decision and upheld the Assessing Officer's order.
  
  Issue 3: Treatment of provision for doubtful debts/advances in computing book profits under section 115JA:
  The final issue concerned the deletion of an addition of Rs. 3,19,978 for provision of doubtful debts/advances in computing book profits under section 115JA. The Assessing Officer treated this provision as an unascertained liability, but the CIT(A) disagreed, citing precedents that such provisions do not constitute unascertained liabilities. The Tribunal concurred with the CIT(A), noting that the provision for bad and doubtful debts did not fall under the Explanation to section 115JA. Following established legal principles, the Tribunal upheld the CIT(A)'s decision, resulting in the partial allowance of the revenue's appeal.
  
  In conclusion, the Tribunal addressed the issues comprehensively, analyzing each aspect of the legal disputes and applying relevant legal precedents to deliver a detailed and well-reasoned judgment.

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• 2007 (11) TMI 451
  
  Issues Involved:
  1. Taxability of the sum received on settlement of a claim.
  2. Deductibility of interest and other expenditures incurred for earning the income.
  3. Taxability of interest on loans given to employees.
  
  Detailed Analysis:
  
  1. Taxability of the Sum Received on Settlement of a Claim:
  The key issue was whether the sum of Rs. 1.45 crores received by the assessee on settlement of its claim with Pure Drinks Ltd. (PDL) was a capital receipt to be set off against expenses incurred before the commencement of business. The assessee argued that the amount was linked with the business of real estate development and should be adjusted against various expenses incurred. The Assessing Officer (AO) held that the income should be taxed under the residuary head as the business had not commenced. The AO relied on the Supreme Court decision in Tuticorin Alkali Chemicals & Fertilizers Ltd., which stated that income earned on surplus funds kept with banks should be taxed under the residuary head.
  
  The CIT(A) supported the AO's view, stating that the amount was received in the normal course of business and there was no impairment in the source of income. The Tribunal upheld this view, noting that the business had not commenced and the assessee did not acquire any vested right in developing the property. Thus, the income was properly assessable under the residuary head.
  
  2. Deductibility of Interest and Other Expenditures:
  The alternative question was whether the assessee was entitled to deduct interest and other expenditures incurred for earning this income. The assessee argued that if the income was to be taxed under the residuary head, the expenses should be allowed as deductions. The AO disallowed these expenses, stating that the business had not commenced and the expenses had to be capitalized. The Tribunal found that since the interest income was being taxed, all expenditures incurred for earning this income should be deductible under section 57(iii) of the Income-tax Act. The matter was restored to the AO for computation of net interest income after giving a fair hearing to the assessee.
  
  3. Taxability of Interest on Loans Given to Employees:
  The issue was whether interest on loans given to employees was chargeable to tax under the residuary head. The Tribunal referred to its earlier order, which held that the loans were given not for earning interest income but to grant a benefit to employees. Thus, the advances were made in the course of business, and the interest received was not taxable under the residuary head. The appeal was allowed on this ground.
  
  Conclusion:
  The Tribunal concluded that the sum of Rs. 1.45 crores was taxable under the residuary head, and the expenses incurred for earning this income should be deductible. The interest on loans given to employees was not taxable under the residuary head. The appeal was partly allowed, with the matter of computation of net interest income restored to the AO.

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• 2007 (11) TMI 450
  
  Issues:
  1. Addition of income from the sale of property.
  2. Determining if there was a valid transfer of property for taxation purposes.
  
  Issue 1: Addition of income from the sale of property:
  The case involved an appeal where the department contested the deletion of an addition of Rs. 1.7 crores made by the Assessing Officer regarding income from the sale of a property in New Delhi. The assessee, a limited company, initially declared a profit from the sale but later revised the return, excluding the profit, citing the cancellation of the agreement to sell. The Assessing Officer contended that there was a transfer of property under section 2(47)(v) of the Income-tax Act, emphasizing part performance of the sale contract and discrepancies in the execution of agreements. The department argued that the revised return was an attempt to conceal income, thus the profit was taxable as business profits.
  
  Issue 2: Determining if there was a valid transfer of property for taxation purposes:
  The CIT (Appeals) analyzed the genuineness of the agreements to sell and cancellation deeds, focusing on the dates of transactions and stamp paper purchases. It was found that the property transfer occurred before the cancellation, and the mere entries in the purchaser's accounts did not constitute a valid transfer. The CIT (Appeals) also considered the reversal of entries by the purchaser in subsequent years. The Assessing Officer's remand report suggested giving effect to the cancellation in the relevant year, but the CIT (Appeals) disagreed, emphasizing the need for income to accrue or be received for taxation. Ultimately, the CIT (Appeals) held that the amount was not taxable. The revenue appealed, arguing for taxability based on property transfer and profit accrual, supported by discrepancies in stamp paper dates and the mercantile system of accounting.
  
  The Appellate Tribunal noted the initial declaration of profit as business income and the subsequent revision, highlighting the distinction between business profits and capital gains. It was observed that a comprehensive analysis of facts was necessary to determine the validity of the transactions. The Tribunal emphasized the need to establish connections between the involved parties, verify property occupancy and rental details, and investigate the intentions behind the agreements and cancellations. The Tribunal found discrepancies in clauses of the agreements, indicating the need for a detailed examination through statements from involved parties. Consequently, the Tribunal set aside previous orders and remanded the case to the Assessing Officer for a thorough reevaluation in light of the observations, ensuring the assessee's opportunity to present their case. The appeal of the department was allowed for statistical purposes.

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• 2007 (11) TMI 449
  
  Issues Involved:
  1. Denial of exemption under section 54F of the Income-tax Act.
  2. Enhancement of capital gains by Rs. 46,16,129 by the CIT(A).
  3. Classification of the acquired property as commercial or residential.
  4. Validity of the investment in Sweety Builders (P.) Ltd. for acquiring a residential property.
  5. Consideration of the property's tenancy and its impact on the residential classification.
  6. Examination of the advance given to Sweety Builders (P.) Ltd. and its utilization.
  7. Compliance with the Capital Gains Account Scheme and the timing of the deposit.
  
  Detailed Analysis:
  
  1. Denial of Exemption under Section 54F:
  The assessee claimed exemption under section 54F of the Income-tax Act for long-term capital gains arising from the transfer of shares. The Assessing Officer (AO) denied the exemption, stating that the investment in Sweety Builders (P.) Ltd. (SBPL) was not for acquiring a residential house. The AO observed that the property acquired, known as 'Bait-Ul-Azeez,' was used for commercial purposes, housing shops and a bank, thus disqualifying it from being considered a residential property under section 54F.
  
  2. Enhancement of Capital Gains by Rs. 46,16,129:
  The CIT(A) enhanced the capital gains by Rs. 46,16,129, concluding that the total sale consideration received was Rs. 2,68,62,500, not Rs. 2,21,14,700 as claimed by the assessee. The CIT(A) found no evidence supporting the claim that Rs. 47,47,800 was an unsecured loan paid in earlier years. The CIT(A) also noted that the assessee confirmed in a counter affidavit before the Company Law Board (CLB) that the entire amount received was towards share allotment money, negating the existence of any unsecured loan.
  
  3. Classification of the Acquired Property:
  The AO and CIT(A) determined that the property acquired by the assessee was commercial, not residential. The AO highlighted that the property consisted of shops and a bank, and the main structure was later demolished to construct a commercial complex. The CIT(A) further observed that the property was being used for commercial purposes at the time of purchase and was not intended to be used as a residential house.
  
  4. Investment in Sweety Builders (P.) Ltd.:
  The assessee invested Rs. 1.16 crore in SBPL for acquiring a residential house. The AO and CIT(A) found that the amount given to SBPL was utilized for constructing a commercial complex, 'G.S. Plaza,' and not for a residential house. The CIT(A) noted that the construction of the commercial complex was in progress, and the amount received from the assessee was used for this purpose.
  
  5. Tenancy and Residential Classification:
  The property acquired included five shops under tenancy rights with a perpetual injunction, covering 1001.78 sq. feet. The AO and CIT(A) concluded that this portion of the property could not be considered residential, impacting the overall classification of the property as non-residential.
  
  6. Advance to Sweety Builders (P.) Ltd.:
  The assessee claimed that the advance given to SBPL was for acquiring a residential house. However, the AO and CIT(A) found that the amount was used for constructing a commercial complex. The CIT(A) observed that the assessee failed to substantiate the claim with independent documentary evidence.
  
  7. Compliance with Capital Gains Account Scheme:
  The AO noted that the assessee deposited Rs. 1 crore under the Capital Gains Account Scheme after the due date for filing the return under section 139(1). The CIT(A) upheld this observation, further noting discrepancies in the timing and utilization of the deposited amount.
  
  Conclusion:
  The Tribunal found several issues requiring further examination, including the exact date of transfer of shares, the nature of the shares (investment or stock in trade), and the classification of the acquired property. The Tribunal set aside the orders of the AO and CIT(A) and remanded the case back to the AO for a fresh examination, considering the observations and providing a reasonable opportunity for the assessee to present evidence. The appeal was allowed for statistical purposes, and the AO was directed to re-evaluate the case in light of the Tribunal's observations and applicable legal provisions.

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• 2007 (11) TMI 448
  
  Issues Involved:
  1. Whether initiation of reassessment proceedings is justified.
  2. Whether the assessee was served notice under section 148 of the Income-tax Act.
  3. Whether the assessee used the Mumbai Flat for business or professional purposes and whether the assessee is entitled to deduction on account of depreciation and maintenance charges.
  4. Whether notional rent is chargeable under sections 22 and 23 of the Income-tax Act.
  
  Detailed Analysis:
  
  Issue No. 1: Whether initiation of reassessment proceedings is justified.
  
  The reassessment proceedings were initiated based on findings from the assessment year 2001-02, where the Assessing Officer (AO) disallowed depreciation and maintenance charges for a flat claimed to be used for business purposes. The AO's decision was based on an Inspector's report indicating the flat was locked and not used for business. The Tribunal had previously deleted these disallowances, indicating no basis for the AO's action. The Tribunal held that the AO's belief that income had escaped assessment was not based on any material evidence and was thus unjustified. Therefore, the Tribunal quashed the reassessment proceedings for the years under appeal.
  
  Issue No. 2: Whether the assessee was served notice under section 148 of the Income-tax Act.
  
  The assessee contended that they were not served notice under section 148. However, the Tribunal noted that the assessee had written to the AO stating that the returns already filed should be treated as returns filed in response to the notice under section 148. This amounted to acceptance of the notice, thus validating the reassessment proceedings. The Tribunal found no merit in the assessee's contention and decided this issue in favor of the Revenue.
  
  Issue No. 3: Whether the assessee used the Mumbai Flat for business or professional purposes and whether the assessee is entitled to deduction on account of depreciation and maintenance charges.
  
  The Tribunal examined whether the flat was used for business purposes, which would exempt it from being taxed under section 22 of the Income-tax Act and section 2(ea)(3) of the Wealth-tax Act. The AO's disallowance was based on a report from the housing society's secretary and an Inspector's visit, which did not provide conclusive evidence about the flat's use in earlier years. The assessee provided evidence, including books of account, bank details, and customer certificates, showing the flat was used for business. The Tribunal concluded that the flat was indeed used for business purposes, allowing the deduction for depreciation and maintenance charges, and exempting it from wealth tax.
  
  Issue No. 4: Whether notional rent is chargeable under sections 22 and 23 of the Income-tax Act.
  
  Since the Tribunal found that the flat was used for business purposes, no notional rent could be charged under sections 22 and 23. However, for the assessment year 2003-04, the assessee admitted that the flat was not used for business from October 2002 to March 2003. The Tribunal directed that a fair rental value of Rs. 30,000 be included in the total income for this period, based on the Municipal Rateable Value.
  
  Conclusion:
  
  - The reassessment proceedings were quashed for the relevant assessment years.
  - The Tribunal found the notice under section 148 was effectively served.
  - The assessee was entitled to deductions for depreciation and maintenance charges, and the flat was exempt from wealth tax.
  - Notional rent was only chargeable for the period the flat was not used for business in the assessment year 2003-04.
  
  The appeals in ITA No. 3960, ITA No. 3961/2006 & WTA No. 157/06, WTA No. 158/06, and WTA No. 159/2006 were allowed, while ITA No. 3962 of 2006 was partly allowed.

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• 2007 (11) TMI 447
  
  Issues Involved:
  1. Inclusion of the value of immovable assets in the net wealth of the owner/assessee or the lessee under section 4(8)(b) of the Wealth-tax Act read with section 269UA(f) of the Income-tax Act.
  2. Interpretation of the parenthetical exclusion in section 4(8)(b) of the Wealth-tax Act.
  3. Applicability of section 4(8)(b) of the Wealth-tax Act and section 269UA(f) of the Income-tax Act to lease agreements with extension clauses, typically leave and license agreements.
  
  Detailed Analysis:
  
  Issue 1: Inclusion of the Value of Immovable Assets
  The Tribunal was tasked with determining whether the value of an immovable asset should be included in the net wealth of the owner/assessee or the lessee. The Tribunal clarified that:
  - The legal owner (the assessee) is liable to wealth-tax on the value of assets leased for a term of less than twelve years.
  - If the lease term is not less than twelve years, the lessee, acquiring rights under such a lease, is deemed to be the owner under section 4(8)(b) of the Wealth-tax Act.
  - The Tribunal emphasized that section 4(8)(b) is a deeming provision and must be strictly construed. The lessee cannot be deemed the owner unless the lease term meets the twelve-year threshold.
  
  Issue 2: Interpretation of Parenthetical Exclusion
  The Tribunal examined the parenthetical exclusion in section 4(8)(b) of the Wealth-tax Act, which states "(excluding any rights by way of lease from month to month or for a period not exceeding one year)." The Tribunal concluded:
  - The words in parenthesis clearly exclude any rights acquired by a lease from month to month or for a period not exceeding one year from the scope of section 4(8)(b).
  - The legal owner remains liable for wealth-tax if the lease term is less than twelve years, as per section 269UA(f) of the Income-tax Act.
  - The Tribunal emphasized the plain and unambiguous language of the statute, rejecting the need for interpretative processes to ascertain legislative intent.
  
  Issue 3: Applicability to Leave and License Agreements
  The Tribunal addressed whether lease agreements with extension clauses, typically leave and license agreements, fall under section 4(8)(b) of the Wealth-tax Act and section 269UA(f) of the Income-tax Act. The Tribunal held:
  - Leave and license agreements are distinct from leases and do not transfer any interest in the property to the licensee.
  - Such agreements are outside the scope of section 4(8)(b) of the Wealth-tax Act.
  - In leave and license arrangements, the legal owner retains ownership and is assessable to wealth-tax.
  
  Conclusion:
  The Tribunal provided clear answers to the issues:
  1. The value of immovable assets leased for less than twelve years is includible in the net wealth of the legal owner, not the lessee.
  2. The parenthetical exclusion in section 4(8)(b) ensures that leases from month to month or for a period not exceeding one year do not affect the legal ownership for wealth-tax purposes.
  3. Leave and license agreements are not covered by section 4(8)(b) of the Wealth-tax Act, and the legal owner remains liable for wealth-tax.
  
  The matter was remanded to the Division Bench for further proceedings.

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• 2007 (11) TMI 446
  
  Issues Involved:
  1. Allowance for employees' participation in entertainment expenditure.
  2. Nature of technical know-how fees (capital or revenue).
  3. Exclusion of commission, excise duty, and molasses storage fund from total turnover for section 80HHC deduction.
  4. Set-off of unabsorbed depreciation from the amalgamated company.
  5. Deduction of issue expenses on non-convertible debentures.
  6. Deduction of payments under the Voluntary Retirement Scheme (VRS).
  7. Inclusion of molasses storage fund in business income.
  
  Issue-wise Detailed Analysis:
  
  1. Allowance for Employees' Participation in Entertainment Expenditure:
  The Tribunal upheld the orders of the departmental authorities, restricting the allowance to 25% of the total expenditure, following the precedent set in the earlier assessment year 1994-95.
  
  2. Nature of Technical Know-How Fees:
  The Tribunal examined the technical collaboration agreement between the assessee and the Austrian company, Plansee Tizit. The agreement granted the assessee an "exclusive licence" to use the technical know-how and Industrial Property Rights (IPRs) for manufacturing hard metal tools. The Tribunal concluded that the assessee only obtained the right to use the technical know-how without acquiring ownership rights. The payment was for the use of know-how during the agreement period, and no enduring benefit was obtained. Therefore, the technical know-how fees were considered revenue expenditure, and the disallowance of Rs. 2,71,55,312 was deleted.
  
  3. Exclusion of Commission, Excise Duty, and Molasses Storage Fund from Total Turnover for Section 80HHC Deduction:
  - Commission: The Tribunal found no reason to exclude the commission from the total turnover.
  - Excise Duty: Following the Supreme Court judgment in CIT v. Lakshmi Machine Works, the Tribunal directed the Assessing Officer not to include excise duty in the total turnover.
  - Molasses Storage Fund: The Tribunal referred to the Madras High Court's judgment in CIT v. Salem Co-operative Sugar Mills Ltd. and concluded that the amount collected for the molasses storage fund was diverted by an overriding title and did not form part of the assessee's income or turnover. Therefore, it was directed to be excluded from the total turnover.
  
  4. Set-Off of Unabsorbed Depreciation from the Amalgamated Company:
  The Tribunal noted that the assessee did not furnish the required certificate from the specified authority along with the return of income for the assessment year 1995-96, as mandated by section 72A(2) of the Income-tax Act. Consequently, the set-off of unabsorbed depreciation of Rs. 1,26,79,125 was not allowed, and the ground was dismissed.
  
  5. Deduction of Issue Expenses on Non-Convertible Debentures:
  The Tribunal upheld the CIT (Appeals) decision, allowing the deduction of Rs. 2,13,71,410 incurred on non-convertible debentures. The Tribunal relied on the Supreme Court judgment in India Cements Ltd. v. CIT, which held that expenses incurred for borrowing through debentures are allowable as revenue expenditure. The Tribunal also noted that the manner of accounting entries does not affect the allowability of the claim.
  
  6. Deduction of Payments under the Voluntary Retirement Scheme (VRS):
  The Tribunal upheld the CIT (Appeals) decision, allowing the deduction of Rs. 2,75,32,254 paid under the VRS. The Tribunal referred to the Supreme Court judgment in Sassoon J. David & Co. Ltd. v. CIT, which held that payments made for retrenchment or termination of service are allowable business expenditure. The Tribunal emphasized that the payment under VRS was to save future expenses and did not result in an enduring benefit.
  
  7. Inclusion of Molasses Storage Fund in Business Income:
  The Tribunal affirmed the CIT (Appeals) decision, holding that the molasses storage fund collected under the U.P. Sheera Niyantran Act, 1964, was diverted by an overriding title and did not form part of the assessee's business income. The ground was dismissed.
  
  Conclusion:
  The assessee's appeal was partly allowed, and the department's appeal was dismissed. The Tribunal provided a detailed analysis of each issue, applying relevant legal principles and precedents to reach its conclusions.

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• 2007 (11) TMI 445
  
  Issues:
  The appeal involves the issue of disallowance of set-off of unabsorbed depreciation of earlier years against income from "house property" for the assessment year 1999-2000.
  
  Issue 1: Disallowance of set-off of unabsorbed depreciation
  
  The Assessing Officer denied setting-off unabsorbed depreciation of earlier years against income from house property, citing the absence of provision for such set-off under section 72 of the Income-tax Act when the business has been permanently discontinued. The CIT (Appeals) upheld this decision, emphasizing the necessity for the business to be carried on by the assessee in the relevant previous year for set-off under the amended section 32(2) from the assessment year 1997-98 onwards. The appellant challenged this, arguing that the amendment was prospective and relied on various ITAT decisions supporting the applicability of the old provision to unabsorbed depreciation brought forward up to the assessment year 1996-97.
  
  Issue 2: Interpretation of section 32(2) pre and post-amendment
  
  The pre-amended section allowed unabsorbed depreciation to be carried forward and set-off against assessable income of subsequent years, irrespective of the existence of the business for which depreciation was allowable. However, the post-amendment provision from the assessment year 1997-98 required the business to be continued in the previous year relevant to the assessment year for set-off. The ITAT held that unabsorbed depreciation up to and inclusive of the assessment year 1996-97 could be set-off against taxable business profit or income under any other head for the assessment year 1997-98 and subsequent years, based on the Finance Minister's speech clarifying the prospective nature of the amendment.
  
  Decision:
  The ITAT reversed the lower authorities' decision and directed the Assessing Officer to allow setting off of unabsorbed depreciation brought forward up to the assessment year 1996-97 against income from house property for the assessment year 1999-2000. The appeal of the assessee was allowed based on the interpretation of the pre-amended section 32(2) and the prospective nature of the amendment introduced by the Finance (No. 2) Act, 1996.

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• 2007 (11) TMI 444
  

  Computation of export turnover u/s 10A - newly established undertakings in free trade zone - expenses incurred towards link charges - Uplinking charges reduced from the export turnover -Loss of one STP unit - Computation of arm's length.

  Deduction u/s 10A - newly established undertakings in free trade zone - expenses incurred towards link charges - Uplinking charges reduced from the export turnover - HELD THAT:- The details of expenses incurred towards link charges are available with the assessee company. It would not have been difficult for the assessee company to have asked the services provider to give the details of expenses incurred in transmitting information from India. The assessee could have obtained the details of expenses of outward transmission of data. When a specific information is available with the assessee and if the same is not produced, then adverse inference can be drawn. The assessee in the course of proceedings before the learned CIT(A) estimated such expenditure for transmission of data at 50 per cent of the expenditure on link charges. The learned CIT(A) discussed the software development with a number of representatives of various companies. Facts as mentioned by the learned CIT(A) in his order have not been controverted by the ld AR.

  Therefore, we decline to interfere with the finding of the learned CIT(A) in estimating that 80 per cent of uplinking charges are to be reduced from the export turnover. Such finding is upheld for both the assessment years.

  Uplinking charges reduced from the export turnover - Following the decision in the case of Tata Elxsi Ltd. v. Asstt. CIT [2007 (10) TMI 630 - ITAT BANGLORE] and CIT v. Infosys Technologies Ltd.[2007 (10) TMI 627 - ITAT BANGALORE] held that the components entering into export turnover and the total turnover should be the same. Thus, This ground of appeal is common for both the assessment years and, therefore, the decisions mentioned will be applicable for both the assessment years.

  Determining profits of the business for the purposes of section 10A/10B - Loss of one STP unit - set off from profits of other STP units - HELD THAT:- In absence of the facts, it is not possible to say that Pune unit was an independent undertaking engaged in the business of software development, which was in no way related to the software development done at Bangalore or Chennai unit. In case, the Pune unit is found to be independent, then loss from such unit is to be independently calculated. In case such unit is associated with the activities, which are carried out at Bangalore or Chennai unit, then Pune unit will -be considered as part of that undertaking.

  Hence, the issue of ascertaining as to whether Pune unit was an independent unit or a unit associated with activities of other two units is restored back on the file of the Assessing Officer. In case it is found that it is part of the other two units and is associated with the activities done in other two units, then it will be considered as part of the same undertaking and loss will be adjusted. However, in case, if it is found, it is an independent unit, then it will be treated as independent undertaking and the assessee cannot be forced to have exemption in respect of such independent undertaking. In that case the loss will (not) be adjusted against other income.

  Computation of arm's length - HELD THAT:- In the instant case, the assessee himself has computed the arm's length prices and has disclosed the income on the basis of arm's length prices. It is not a case, where there is an enhancement of income due to determination of arm's length price. Hence, it is held that assessee was entitled to deduction under section 10A in respect of income declared in the return of income on the basis of computation of arm's length price.

  In the result, both appeals are partly allowed.

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• 2007 (11) TMI 443
  

  Jurisdiction of Assessing Officer - Proceedings Initiated u/s 153A r/w section 153C - Undisclosed income - Search and seizure - receipt of huge cash loans found - HELD THAT:- It is nowhere stated that these books of account or documents showed that all the transactions belonging to the assessee. The books of account or documents seized during the course of search have a close association with the group concern of Shri Reddy. It records the transaction carried out by that group. It does not record the transaction carried out by the assessee.

  In the instant case, documents or books of account found during the course of search and seized cannot be termed, to be indicating any limited interest of the ownership of the assessee in such books of account or documents. The language used in section 153C is materially different from the language used under section 158BD. As per section 158BD, if any undisclosed income relates to other person, then action against such other person can be taken provided such undisclosed income is referable to the document seized during the course of search. However, section 153C says that if valuable or books of account or documents belonging to other persons are seized then action under section 153C can be taken against that person. In the instant case, we are satisfied that books of account or documents do not belong to the assessee and, therefore, the Assessing Officer was not justified in initiating action under section 153A read with section 153C of the Income-tax Act. The Assessing Officer is free to take proper remedial measure as per law.

  In the result, the appeals filed by the assessee are allowed. Since, we are holding that Assessing Officer was not having jurisdiction to assess under section 153A read with section 153C, therefore, we are not deciding the issue on merits, so as to preempt any finding on merits in respect of the issues to be taken by the Assessing Officer in case recourse is taken for remedial measure if any.

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• 2007 (11) TMI 442
  
  Issues Involved:
  1. Computation of tax perquisite after reducing hypothetical tax.
  2. Computation of accommodation perquisite.
  3. Addition of telephone expenses as personal expenses.
  4. Addition of food, beverages, laundry, and miscellaneous expenses as perquisite.
  5. Computation of interest under section 234B.
  
  Detailed Analysis:
  
  1. Computation of Tax Perquisite After Reducing Hypothetical Tax:
  The revenue contended that the CIT(A) erred in holding that the assessee is entitled to compute the value of tax perquisite after reducing the component of hypothetical tax from the tax liability borne by the employer. The assessee's employer had withheld a sum towards hypothetical tax from the salary payable. The CIT(A) deleted the addition made by the Assessing Officer, following the Tribunal's decision in Jaydev H. Raja v. Dy. CIT. The Tribunal upheld the CIT(A)'s decision, noting that similar cases had been decided in favor of the assessee, and dismissed the revenue's appeal.
  
  2. Computation of Accommodation Perquisite:
  The assessee's appeal involved the computation of accommodation perquisite. The assessee stayed in a hotel for the first half of the year and in leased accommodation for the second half. The Assessing Officer computed the perquisite value for the entire year, leading to an addition. The CIT(A) upheld this computation. The Tribunal, however, found merit in the assessee's contention that the perquisite value should be computed separately for each period, as per rule 3(a)(iii)(A) of the Income-tax Rules. The Tribunal directed the Assessing Officer to recompute the perquisite value accordingly.
  
  3. Addition of Telephone Expenses as Personal Expenses:
  The assessee contested the addition of 50% of telephone expenses as personal in nature. The Assessing Officer made this addition based on the assessee's admission. The CIT(A) confirmed the addition, considering it reasonable. The Tribunal upheld the revenue authorities' decision, deeming the disallowance reasonable given the assessee's status and duration of stay.
  
  4. Addition of Food, Beverages, Laundry, and Miscellaneous Expenses as Perquisite:
  The assessee argued that these expenses, incurred during his stay in a hotel, should not be treated as perquisites. The Assessing Officer added these expenses to the total income, and the CIT(A) confirmed the addition. The Tribunal upheld the revenue authorities' decision, finding the valuation of perquisites reasonable.
  
  5. Computation of Interest Under Section 234B:
  The assessee's ground regarding the computation of interest under section 234B was noted as consequential. The Tribunal directed the Assessing Officer to give due relief in consequence to the Tribunal's order.
  
  Conclusion:
  The revenue's appeal was dismissed, and the assessee's appeal was partly allowed for statistical purposes. The Tribunal directed the Assessing Officer to recompute the accommodation perquisite value and give due relief in the computation of interest under section 234B.

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• 2007 (11) TMI 441
  

  Denial of deduction u/s 80-IB - Manufacturing or production of perfumery components is "Manufacturing or Production activities or not"? - Consumption of electricity is very small amount - Assessee did not employ ten or more workers in the manufacturing process - scope of term workers "Manager and the Assistant could be categorized as workers?" - Addition u/s 69C - Unexplained expenditure.

  Engaged in manufacturing or production - HELD THAT:- We find that the finished products are chemically and commercially different from the raw materials used in the making of such finished products, hence, as settled by various judicial decisions, the assessee can be said to be engaged in the manufacture and, thus, it qualifies on this account. Even otherwise, the section has also used the term "production" and the term "production" is certainly wider than the term "manufacture". The Three Judge Bench of Hon’ble Apex Court in the case of CIT v. Sesa Goa Ltd.[2004 (11) TMI 14 - SUPREME COURT] held that where human efforts were involved in the making of a product, then, such product fell within the term production and even it was not necessary that such product should be commercially different and, therefore, the assessee was entitled for exemption under section 80-I of the Act. Thus, assessee’s claim for deduction u/s 80-IB cannot be rejected as there is a production of a thing and human efforts along with mechanical process are also involved.

  Consumption of electricity - Assessee has submitted the bill of the meter installed in connection with the machinery used for manufacturing, hence, if the consumption is low due to the involvement of machinery in the processing activity, the same cannot be a valid ground for denying the deduction u/s 80-IB of the Act and for holding that the assessee is carrying manufacturing activities without aid of power, hence, required to employ 20 or more workers particularly when the Legislature has not prescribed any minimum criteria for consumption of electricity in the manufacturing process.

  Employment of workers in the manufacturing process - We find that both the term ‘workers’ and ‘manufacturing process’, as used in section 80-IB(2)(iv) of the Act, have not been defined in the Act. We also find that it is one of the four conditions which are required to be complied with by the assessee for claiming deduction u/s 80-IB of the Act. We also find that the principal object of this section is to encourage the setting up of industrial undertaking by offering tax incentives so as to attain the objective of economic development which, as such, comprises of investment, economic size and employment generation and if all the conditions are read together then, these all the above three parameters would be found implied, as a result of these conditions, in section 80-IB(2) of the Act.

  It is also true that it is an incentive provision, hence, it should be interpreted in a manner so as to advance the objective of the provision and not to frustrate it. In this background, we shall firstly look at the aspect of manufacturing process. Manufacturing process has got two words "manufacturing" and "process".

  Thus, we are of the considered opinion that Factory Manager and Assistant looking after various activities of a unit should be considered as workers, employed in the manufacturing process. Thus, the assessee also fulfils the condition regarding employment of minimum number of workers. Accordingly, we hold that the assessee is entitled for deduction u/s 80-IB of the Act and we direct the Assessing Officer to accept the claim of the assessee in this regard. Thus, ground Nos. 2, 3 and 4 of the assessee stand allowed.

  Addition u/s 69-C - Unexplained expenditure - HELD THAT:- From the perusal of the cash/factory book, we find that it contain entries relating only to cash inflow by way of transfer from head office or withdrawal from HDFC Bank. It is also noted that employees’ wages have been paid mostly at the end of the each month except in the case of the month of June, 2003 and there is a corresponding withdrawal of cash from bank on that date. It is also noted that assessee is a Pvt. Ltd. Co. and managed by independent persons other than owners, hence, normally, there cannot be a situation where the wages being a regular payment, which has been duly recorded in the books of account would be disbursed through unaccounted cash. We also find that there is no dispute regarding the quantum of wages nor any statements have been obtained from the workers in this regard. Thus, taking into account the entire facts, it appears to be a case of accounting mistake only, hence, in our opinion, no addition is warranted. Accordingly, we accept this ground of assessee.

  In the result, appeal filed by the assessee stands allowed.

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• 2007 (11) TMI 440
  
  Issues Involved:
  1. Confirmation of the addition of Rs. 7,00,000 as income from other sources.
  2. Addition of Rs. 22,15,116 being remittances from abroad.
  3. Requirement for the appellant to prove the source of remittances from abroad.
  4. Rejection of evidence produced by the appellant to prove the foreign remittances.
  5. Status of the appellant as a resident or non-resident during the assessment year.
  
  Issue-wise Detailed Analysis:
  
  1. Confirmation of the Addition of Rs. 7,00,000 as Income from Other Sources:
  The first issue concerns whether the CIT(A) was justified in confirming the addition of Rs. 7 lakhs made by the Assessing Officer. The facts reveal that the assessee filed his return of income for the assessment year 1995-96 declaring a total income of Rs. 13,840, which was initially accepted. During scrutiny, it was noticed that substantial cash deposits were made in the SB Account No. 3536 in the name of the assessee's wife. The assessee admitted that these deposits were out of his own funds and provided various explanations, including remittances from abroad, borrowings from an NRE friend, and sale proceeds from 12 gold bars brought from Muscat. The Assessing Officer recorded statements from five individuals who purportedly bought the gold bars but found discrepancies and contradictions in their statements. The CIT(A) upheld the addition, noting that the assessee failed to furnish satisfactory explanations and there were discrepancies in the statements of the individuals.
  
  2. Addition of Rs. 22,15,116 Being Remittances from Abroad:
  The CIT(A) enhanced the assessment by including Rs. 22,15,116 as income from abroad, arguing that since the assessee had declared his status as a resident in the income tax return, his global income should be taxable in India. The CIT(A) issued a notice of enhancement under section 251(1)(i) of the Act. The assessee contended that this income was earned abroad and should not be taxed in India, especially considering his status as a non-resident in the wealth tax return.
  
  3. Requirement for the Appellant to Prove the Source of Remittances from Abroad:
  The CIT(A) required the assessee to prove the source of the remittances from abroad, which the assessee argued was not a statutory requirement. The CIT(A) rejected this contention, insisting that the assessee must provide evidence for the source of the income claimed to be earned abroad.
  
  4. Rejection of Evidence Produced by the Appellant to Prove the Foreign Remittances:
  The CIT(A) rejected the evidence produced by the assessee to prove the foreign remittances, citing various discrepancies in the statements of the individuals who purportedly bought the gold bars. The CIT(A) noted that these individuals were of small means and had already incurred heavy expenditures, making their purchase of gold from the assessee unconvincing.
  
  5. Status of the Appellant as a Resident or Non-Resident During the Assessment Year:
  The assessee claimed non-resident status, arguing that he was out of India since 1980 and working abroad. The CIT(A), however, held that the assessee was a resident during the year based on the income tax return filed. The CIT(A) rejected the assessee's contention that the status was mistakenly shown as resident in the income tax return but correctly shown as non-resident in the wealth tax return.
  
  Judgment Summary:
  
  1. Addition of Rs. 7,00,000:
  The Tribunal found that the assessee had discharged the primary burden of proving the identity, source, and genuineness of the transactions by providing confirmation letters and statements from individuals. The Tribunal noted that the contradictions in the statements were minor and did not warrant the addition. Therefore, the Tribunal deleted the addition of Rs. 5 lakhs made by the Assessing Officer.
  
  2. Addition of Rs. 22,15,116:
  The Tribunal held that the CIT(A) was not justified in enhancing the assessment by including the income from abroad. The Tribunal emphasized that the CIT(A) cannot travel outside the subject matter of the assessment order to discover new sources of income. The Tribunal noted that the status of the assessee as a non-resident was accepted in the wealth tax and gift tax assessments. Consequently, the Tribunal deleted the enhancement of Rs. 22,15,116 made by the CIT(A).
  
  3. Requirement to Prove Source of Remittances:
  The Tribunal agreed with the assessee's contention that there was no statutory requirement to prove the source of remittances from abroad. The Tribunal found that the assessee had provided sufficient evidence to explain the source of the remittances.
  
  4. Rejection of Evidence:
  The Tribunal found that the CIT(A) erred in rejecting the evidence produced by the assessee. The Tribunal noted that the minor discrepancies in the statements of individuals did not justify the rejection of the evidence.
  
  5. Status as Resident or Non-Resident:
  The Tribunal held that the assessee was a non-resident during the assessment year, as evidenced by the wealth tax return and other documents. The Tribunal found that the CIT(A) erred in holding the assessee as a resident based on the income tax return alone.
  
  Conclusion:
  The Tribunal allowed the assessee's appeal partly, deleting the additions of Rs. 7 lakhs and Rs. 22,15,116 made by the CIT(A) and confirming the addition of Rs. 2 lakhs made by the Assessing Officer.

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• 2007 (11) TMI 439
  
  Issues Involved:
  1. Deduction of interest paid u/s 36(1)(iii) vs. u/s 57(iii) of the Income-tax Act.
  2. Taxability of income from the sale of shares as capital gains vs. business income.
  3. Application of section 263 of the Income-tax Act.
  
  Summary:
  
  Issue 1: Deduction of Interest Paid u/s 36(1)(iii) vs. u/s 57(iii)

  In ITA No. 4331/Mum./2000 for AY 1995-96, the assessee contested the CIT's decision that interest paid should be allowed as a deduction u/s 57(iii) and not u/s 36(1)(iii). The CIT had issued a notice u/s 263, arguing that the interest expenses incurred for purchasing shares, shown as investments, should be deducted u/s 57(iii). The CIT also opined that income from the sale of shares should be taxed as capital gains, not business income. The Tribunal found that the Assessing Officer (AO) had considered all relevant details and allowed the interest deduction u/s 36(1)(iii). The Tribunal held that the AO's view was one of the possible views in law and not erroneous, thus quashing the CIT's order u/s 263.

  In ITA No. 3069/Mum./2001 for AY 1997-98, the issue was identical. The AO had allowed interest expenditure u/s 57(iii), but the Tribunal reiterated that the assessee's dominant intention was to deal in shares as a trader. Therefore, interest on borrowed capital was allowable u/s 36(1)(iii), not u/s 57(iii).

  Issue 2: Taxability of Income from Sale of Shares as Capital Gains vs. Business Income

  The Tribunal noted that the assessee had consistently offered income from the sale of shares as business income, which had been accepted by the department in other years. The Tribunal emphasized that the presentation of shares as investments in the balance sheet was not conclusive. The Tribunal held that the profit from the sale of shares should be treated as business income, considering the assessee's intention and activities.

  Issue 3: Application of Section 263 of the Income-tax Act

  The Tribunal found that the AO had made proper inquiries and considered all relevant details while passing the assessment order. The Tribunal held that the CIT's action u/s 263 was not justified as the AO's order was neither erroneous nor prejudicial to the interests of the revenue. The Tribunal quashed the CIT's order u/s 263, allowing the assessee's appeal.

  Conclusion:

  Assessee's appeals in ITA No. 4331/Mum./2000 and ITA No. 3069/Mum./2001 were allowed, and the revenue's appeal in ITA No. 7754/Mum./2003 was dismissed. The Tribunal held that interest on borrowed capital for purchasing shares should be allowed u/s 36(1)(iii), and income from the sale of shares should be treated as business income.

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• 2007 (11) TMI 438
  
  Issues Involved:
  1. Deletion of broken period interest.
  2. Exclusion of interest accrued after the coupon date.
  3. Allowance of entrance fees and annual subscription of the club.
  4. Deletion of expenses incurred on staff get-together.
  5. Taxability of interest received from overseas branches.
  6. Taxability of interest credited to suspense account.
  7. Disallowance of interest paid on amounts received under Portfolio Management Scheme (PMS).
  
  Issue-wise Detailed Analysis:
  
  1. Deletion of Broken Period Interest:
  The revenue's appeal on the deletion of broken period interest was rejected. The Tribunal upheld the decision of the CIT(A), following the precedent set by the Jurisdictional High Court in the case of American Express International Banking Corpn. v. CIT and the Co-ordinate Bench in the assessee's own case for the assessment year 1989-90. The Tribunal found that the securities were held as investments and not stock-in-trade, thus supporting the deletion of broken period interest.
  
  2. Exclusion of Interest Accrued After the Coupon Date:
  The assessee conceded that the interest accrued after the coupon date should be included in taxable income. Consequently, the Tribunal reversed the CIT(A)'s decision and restored the Assessing Officer's inclusion of this interest. This ground of appeal was allowed in favor of the revenue.
  
  3. Allowance of Entrance Fees and Annual Subscription of the Club:
  The Tribunal found this issue in favor of the assessee, citing the Jurisdictional High Court's decision in Otis Elevator Co. (India) Ltd. v. CIT and the Co-ordinate Bench's decision in the assessee's own case for the assessment year 1989-90. The expenses on entrance fees and annual subscription were deemed allowable, and the revenue's ground was rejected.
  
  4. Deletion of Expenses Incurred on Staff Get-Together:
  The Tribunal upheld the CIT(A)'s decision to allow the expenses incurred on staff get-together, referencing the Co-ordinate Bench's decision in the assessee's own case for the assessment year 1989-90. The expenses were considered incurred exclusively for the employees, and the revenue's ground was rejected.
  
  5. Taxability of Interest Received from Overseas Branches:
  The Tribunal restored the addition of Rs. 3,99,686, which was deleted by the CIT(A). The Tribunal followed the Co-ordinate Bench's decision in Dresdner Bank AG v. Asstt. CIT and the Supreme Court's approval in CIT v. Hyundai Heavy Industries Co. Ltd. The Tribunal held that the interest income from overseas branches must be taxed in India, treating the Indian branch as a separate profit center.
  
  6. Taxability of Interest Credited to Suspense Account:
  The Tribunal upheld the CIT(A)'s decision to tax the interest credited to the suspense account, following the Supreme Court's decision in State Bank of Travancore v. CIT. The Tribunal directed that such amounts should not be taxed again in the year of actual receipt to avoid double taxation.
  
  7. Disallowance of Interest Paid on Amounts Received Under Portfolio Management Scheme (PMS):
  The Tribunal confirmed the disallowance of Rs. 8,74,321. The Assessing Officer found that the bank had violated RBI guidelines by offering a fixed rate of return under PMS, which was not permissible. The Tribunal agreed with the CIT(A) that the excess interest paid was rightly disallowed, as the assessee failed to provide sufficient evidence that the amounts were given under PMS.
  
  Conclusion:
  The revenue's appeal was partly allowed, and the assessee's cross objection and appeal were dismissed. The Tribunal's decisions were based on precedents, statutory guidelines, and the principle of treating the Indian branch as a separate profit center for tax purposes.

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• 2007 (11) TMI 437
  
  Issues Involved:
  1. Disallowance of hedging expenses as speculative loss.
  2. Admission of additional ground and deduction u/s 80HHC.
  3. Addition of loans and admission of additional evidence.
  
  Summary:
  
  1. Disallowance of Hedging Expenses as Speculative Loss:
  The assessee, an exporter and dealer of spice, claimed hedging expenses of Rs. 66,28,672 to mitigate price fluctuation risks in the pepper market. The Assessing Officer (AO) treated these expenses as speculative loss, disallowing them. The AO's decision was based on a response from the Indian Pepper & Sales Trade Association (IPSTA), which did not distinguish between hedging and speculative transactions. The CIT(A) upheld the AO's decision, stating that the assessee did not fall under the exceptions in clauses (a), (b), and (c) of section 43(5) of the Income-tax Act, 1961. However, the Tribunal found that the assessee's transactions fell within the purview of clause (c) of the proviso to section 43(5), as they were in the nature of jobbing and arbitrage to guard against loss in the ordinary course of business. Therefore, the loss incurred by the assessee was not speculative and the appeal on this ground was allowed.
  
  2. Admission of Additional Ground and Deduction u/s 80HHC:
  The assessee contended that the CIT(A) should have admitted an additional ground regarding the allowability of deduction u/s 80HHC. The Tribunal noted that the deduction u/s 80HHC should be allowed on the profit finally assessed by the AO, and any additions or disallowances made should be considered in recomputing the deduction. The Tribunal directed that the claim for deduction u/s 80HHC be recomputed with reference to the finally assessed income, allowing this ground of appeal.
  
  3. Addition of Loans and Admission of Additional Evidence:
  The assessee challenged the addition of Rs. 13,21,090 on account of loans from Jagdish Trading Co. and Singhal Oversears Agencies, which were proprietorship concerns of partners in the assessee-firm. The CIT(A) did not admit additional evidence submitted by the assessee to prove the genuineness of the loans. The Tribunal found that the CIT(A) had not provided plausible reasons for not admitting the additional evidence and that adequate opportunity of hearing was not granted. Consequently, the issue was set aside and restored to the AO for reconsideration, allowing the appeal on this ground.
  
  Conclusion:
  The appeal of the assessee was partly allowed, with the Tribunal ruling in favor of the assessee on the issues of hedging expenses and deduction u/s 80HHC, and remanding the issue of loan addition back to the AO for further examination.

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• 2007 (11) TMI 436
  

  Deduction of tax at source u/s 194C instead 194J - ''Assessee in Default'' u/s 201(1)/201(1A) - nature of payments is "Professional services or fees for technical services or Not" - maintenance support agreement, fabrication of chilled water line, work order for thermal insulation/erection, conversion of partially oriented yarn (POY) into polyester textured yarn and twisted yarn - HELD THAT:- In the present case, it is seen that there may be use of services of technically qualified persons to render the services but that itself do not bring the amount paid as ‘fees for technical services’ within the meaning of Explanation 2 to section 9(1)(vii). The amounts paid are towards annual maintenance contract of certain machinery or for converting POY into textured/twisted yarn. The technology or the technical knowledge of the persons is not made available to the assessee but only by using such technical knowledge services are rendered to the assessee. In such a case, it cannot be said that the amount is paid as ‘fees for technical services’. Rendering services by using technical knowledge or skill is different than charging fees for technical services. In a latter case, the technical services are made available due to which the assessee acquired certain right which can be further used. In the present case, it is not so.

  The persons rendering certain services has only maintained machinery or converted yarn but that knowledge is not now vested with the assessee by which itself it can do research work. Thus, the amount paid cannot be considered as fees for technical services within the meaning of section 194J of the Act.

  In the result, the appeal is dismissed.

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• 2007 (11) TMI 435
  

  Subsequent to order of the Tribunal, Circular No. 58/1/2002-CX. issued by the Central Board of Excise & Customs, - Counsel for the parties agree that keeping in view the said circular the impugned order be set aside and the matter be remanded to the Tribunal for a fresh decision - impugned order is set aside and the matter is remitted to the Tribunal for a fresh decision. All contentions are left open. appeals are allowed accordingly with no order as to costs.

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• 2007 (11) TMI 434
  

  Classification - whether the criss-cross patches of vulcanized rubber manufactured by the appellant is classifiable under sub-heading 4008.21 of the Central Excise Tariff Act, 1985, as claimed by the Revenue or under sub-heading 4016.99 as claimed by the assessee appellant - Held that:- Order set aside and remanded matter back to the Commissioner (Appeals) for considering whether the process being followed by the manufactures, appeals are allowed accordingly with no order as to costs.

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