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2011 (6) TMI 783
Issues involved: Appeal against order by CIT, Tiruchirapalli dated 30.03.2009. Grounds of appeal: 1) Order barred by limitation, 2) Order on merits of the case u/s 143(3) of the Income-tax Act, 1961.
Issue 1: Order Barred by Limitation
The appeal questions the limitation of the order passed by the ld. CIT on 30.3.2009. The original assessment was completed u/s 143(3) of the Act on 29.3.2004, with reassessment proceedings initiated u/s 148 for interest accrued on securities. The contention is that the issues revised by the ld. CIT u/s 263 were all from the original assessment and thus barred by limitation on 30.3.2009. The argument is that the reassessment order dated 29.12.2006 addressed the interest on securities issue, and the ld. CIT's order u/s 263 is beyond the limitation period.
Issue 2: Merits of the Case
The appeal also contests the merits of the case, specifically the ld. CIT's failure to appreciate the Assessing Officer's considerations u/s 143(3) and the relevance of decisions by higher courts. The ld. CIT's order u/s 263 is challenged as erroneous and prejudicial to the revenue's interest. The argument presented is that the ld. CIT's revision order was unjustified and beyond the scope of reassessment proceedings initiated by the Assessing Officer.
The Tribunal found that the ld. CIT's order u/s 263 was indeed barred by limitation as per the provisions of section 263(2) of the Act. The Tribunal emphasized that the Assessing Officer's jurisdiction in reassessment is limited to the escaped income and not all issues from the original assessment. Citing legal precedents, the Tribunal concluded that the ld. CIT's order revising the original assessment issues was time-barred and set aside the order. The appeal by the assessee was allowed, and the ld. CIT's order u/s 263 was deemed bad in law.
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2011 (6) TMI 782
Issues involved: Appeal by department against order of ld. CIT (A) relating to assessment year 2007-08 regarding deletion of trading addition of Rs. 15,57,160/- being 25% of unverifiable purchases of Rs. 62,28,642/-.
Details of the judgment:
Issue 1: Unverifiable purchases and rejection of books of account
The AO rejected the books of account due to unverifiable purchases of Rs. 62,28,642 from eight parties, noting discrepancies in stock inventory and involvement of bogus suppliers. Despite filing confirmations, sales tax numbers, and PAN numbers, the AO was not satisfied, leading to reliance on previous decisions. The AO made a 25% disallowance on unverifiable purchases, which was contested before ld. CIT (A) citing primary onus discharge and distinctions from previous cases.
Issue 2: Decision of ld. CIT (A)
After reviewing submissions and material, ld. CIT (A) found the AO unjustified in making a 25% addition on unverifiable purchases but upheld the rejection of books of account. Considering the past history and increased turnover, ld. CIT (A) deleted the entire addition based on the declared gross profit rate and relevant court decisions.
Issue 3: Tribunal's decision
The department appealed before the Tribunal, with the ld. D/R supporting the AO's order and referencing a recent court decision. The assessee's counsel relied on ld. CIT (A)'s order and cited various case laws. The Tribunal acknowledged the correctness of book rejection for unverifiable purchases but deemed the 25% addition unjustified. Considering the increased turnover and improved gross profit rate, the Tribunal sustained a trading addition of Rs. 1,50,000/- to address potential revenue leakage, allowing the department's appeal in part.
The judgment was pronounced on 24.06.2011 by the Appellate Tribunal ITAT Jaipur, with the department partially succeeding in its appeal.
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2011 (6) TMI 781
Issues Involved:
1. Justification of reducing the trading addition.
2. Rejection of books of account u/s 145(3).
3. Estimation of profit and application of GP rate.
Summary:
1. Justification of reducing the trading addition:
The department objected to the reduction of the trading addition from Rs. 1,05,58,554/- to Rs. 7,35,863/- by the CIT (A), despite upholding the rejection of books of account u/s 145(3). The AO had applied a 25% addition on unverifiable purchases of Rs. 4,22,34,219/- based on the decision of the Hon'ble Gujarat High Court in the case of M/s. Sanjay Oil Cake Industries.
2. Rejection of books of account u/s 145(3):
The assessee, dealing in jewellery and gem stones, failed to produce the books of accounts of M/s. K.M. Exports, from whom purchases were made. The AO rejected the books of account u/s 145(3) due to unverifiable purchases and made an addition of 25% of the unverifiable purchases. The CIT (A) upheld the rejection of books of account but reduced the addition, noting that the GP rate declared was lower than the previous year due to a shift from retail to wholesale sales.
3. Estimation of profit and application of GP rate:
The CIT (A) directed the AO to apply a GP rate of 3% on the declared turnover, reducing the trading addition significantly. The Tribunal found no merit in the department's appeal but partially allowed the assessee's cross objection. The Tribunal upheld the rejection of books of account but sustained a smaller addition of Rs. 4,00,000/- for unverifiable purchases, considering the past history and current events of the case. In a similar case involving M/s. Mohan & Company, the Tribunal sustained a trading addition of Rs. 5,00,000/-.
Conclusion:
The appeals of the department were dismissed, and the cross objections of the assessees were allowed in part. The Tribunal emphasized the need to consider past history and current events when estimating profits and making additions for unverifiable purchases.
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2011 (6) TMI 780
Issues Involved:
The judgment involves issues related to deduction u/s 80IC on other income, eligibility of job work charges for deduction u/s 80IC, and deletion of addition made on account of capitalization of expenses.
Deduction u/s 80IC on Other Income:
The Appellate Tribunal ITAT Chandigarh heard cross appeals against the Commissioner of Income-tax(A)'s order for assessment year 2007-08 u/s 143(3) of the I.T. Act, 1961. The assessee contested the denial of deduction u/s 80IC for 'Other Income' of Rs. 14,36,998, arguing that it was not an independent source of income and should be eligible for the deduction. The Revenue challenged the deletion of additions made on account of coolant, PVC compound, and capitalization of expenses. The Tribunal considered whether the income derived from manufacturing activities was eligible for the deduction u/s 80IC, following precedents set by the Hon'ble Supreme Court and previous Tribunal decisions.
Eligibility of Job Work Charges for Deduction u/s 80IC:
In a separate issue, the Tribunal addressed the allowance of deduction u/s 80IC on job work charges. The Assessing Officer initially disallowed the claim, but the CIT(A) allowed it based on previous Tribunal decisions and Supreme Court rulings. The Tribunal noted that the issue had been previously decided in favor of the assessee, and upheld the CIT(A)'s decision based on consistency with earlier judgments.
Deletion of Addition on Capitalization of Expenses:
Regarding the deletion of an addition made on account of capitalization of expenses, the Tribunal examined an expenditure of Rs. 7,07,223 on building repairs, of which Rs. 6,41,303 was capitalized by the Assessing Officer. The CIT(A) accepted the assessee's explanation that the expenses were for current repairs and maintenance, not enduring in nature. The Tribunal upheld the CIT(A)'s decision, ruling that the expenditure qualified as current repairs under section 30(a)(ii) of the Act, and dismissed the Revenue's appeal on this ground.
This comprehensive summary outlines the key issues addressed in the judgment, detailing the arguments presented, legal interpretations applied, and final decisions made by the Appellate Tribunal ITAT Chandigarh.
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2011 (6) TMI 779
Issues involved: Appeal against disallowance of depreciation on goodwill u/s 32 of the IT Act for assessment year 2006-07.
Summary:
The appeal by the revenue challenged the disallowance of depreciation on goodwill, contending it was not an intangible asset. The assessee acquired business rights and goodwill of a firm, justifying it as an intangible asset covered u/s 32 of the IT Act. The AO disallowed the claim, citing the absence of the term "goodwill" in section 32(1)(ii) of the IT Act.
The assessee argued before the CIT(A) that the payment made for acquiring business rights constituted an intangible asset, similar to the decision in Skyline Caterers Pvt. Ltd. Vs ITO. The CIT(A) allowed the claim, noting the benefits derived from acquiring the business rights and goodwill.
The revenue relied on the AO's order, while the assessee cited the decision of the Kerala High Court in B. Raveendra Pillai Vs CIT, supporting the allowance of depreciation on goodwill. The ITAT found in favor of the assessee, referencing the decisions of the Kerala High Court and Delhi High Court, which recognized goodwill as an intangible asset eligible for depreciation u/s 32 of the IT Act.
In conclusion, the ITAT dismissed the departmental appeal, upholding the allowance of depreciation on goodwill as an intangible asset under section 32 of the IT Act.
Separate Judgement: None.
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2011 (6) TMI 778
Exemption u/s 54F - Bank manager wrongly deposited the assessee's investment of the long term capital gain in the flexi deposit scheme instead of capital gain scheme. Assessee pleaded for claiming the exemption u/s 54F
HELD THAT:- The assessee was always under the bonafide belief that the amount has been invested in the capital gain scheme account only. The copy of letter written by the assessee to the branch manager for forwarding the cheques shows that the intention of the assessee was to invest in capital gain scheme account. The request made to the bank manager was to open a capital gain scheme account. This intention of assessee was always to reinvest in the scheme which qualify for the exception of capital gain tax.
The ITAT, Bangalore relying on the case of NIPUN MEHROTRA. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 14 (2), BANGALORE. [2007 (3) TMI 283 - ITAT BANGALORE-B] and judgements of COMMISSIONER OF INCOME-TAX VERSUS RAJESH KUMAR JALAN. [2006 (8) TMI 126 - GAUHATI HIGH COURT] and FATHIMA BAI VERSUS INCOME TAX OFFICER [2008 (10) TMI 563 - KARNATAKA HIGH COURT], held that assessee was entitled to exemption of the entire investment upto the date of filing the return u/s 139(4) of the Act.
The assessee’s case is squarely covered by the above judgements, therefore, this ground of assessee’s appeal is allowed.
Benefit of the cost incurred for developing the Agricultural Land - Assesee submitted that such amount was received in lieu of residual things available on the land sold - Therefore, no addition should be made - HELD THAT:- Assessee has also not furnished reliable evidence in respect of the claim of compensation on certain things, therefore such claim is unsustainable claim. In absence of any evidence and with the fact that the amount was received at and around the time of sale of the land from the same person, we are of the view that this was the sale consideration received towards the sale of the land. The surrounding circumstances also show that this amount received towards the sale consideration of land.
For holding so, we get the support from the decision of Hon'ble Allahabad High Court in the case of DINESH KUMAR MITTAL VERSUS INCOME-TAX OFFICER AND OTHERS [1991 (3) TMI 78 - ALLAHABAD HIGH COURT],where the Hon'ble High Court has held that there is no rule of law to the effect that the value determined for the purpose of stamp duty is the actual consideration passing between the parties to a sale. The actual consideration may be more or may be less. What is the actual consideration that passed between the parties is a question of fact to be determined in each case, having regard to the facts and circumstances of the case.
As we have stated above, the facts and circumstances of the case show that the amount in question was received towards the sale consideration in addition to the amount declared in the sale deed. The revenue records show that the rice was being grown in 2006 when the sale was negotiated. Therefore, a deduction regarding such amount shall be allowed towards the compensation for the standing crops at the land sold out.
In the interest of justice and equity, we hold that the assessee shall be at liberty to claim the benefit of the cost incurred for developing the agricultural land by way of making Dera, hand-pump, pucca drains, flooring, fencing and compensation for labourers, etc., if necessary evidences are filed before the assessing authority.
Interest u/s 234B - CIT(A) upholded the levy of interest u/s 243B - HELD THAT:- We hold that levying of interest is mandatory in view of the decision of Hon'ble Supreme Court in COMMISSIONER OF INCOME TAX VERSUS ANJUM MH GHASWALA AND OTHERS [2001 (10) TMI 4 - SUPREME COURT], Therefore, the same stands dismissed.
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2011 (6) TMI 777
Issues Involved:
1. Applicability of Section 172 vs. Section 194C of the Income-tax Act.
2. Requirement of Tax Deducted at Source (TDS) on payments made to non-resident shipping companies or their agents.
3. Disallowance of expenses under Section 40(a)(ia) of the Income-tax Act.
Detailed Analysis:
Issue 1: Applicability of Section 172 vs. Section 194C of the Income-tax Act
The primary issue revolves around whether the payments made by the assessee to various parties are covered under Section 172 or Section 194C of the Income-tax Act. The assessee argued that the payments made to non-resident shipping companies or their agents fall under Section 172, which deals with the shipping business of non-residents and overrides other provisions of the Act, including Section 194C, which pertains to work contracts and requires TDS.
The CIT(A) supported the assessee's position, referencing CBDT Circular No. 723 dated September 19, 1995, which clarifies that payments to non-resident shipping companies or their agents are covered under Section 172, and thus, Sections 194C and 195 do not apply. The Tribunal upheld this view, stating that Section 172 is a self-contained code for the levy and recovery of tax on shipping activities of non-residents, and it overrides other provisions of the Act.
Issue 2: Requirement of TDS on Payments Made to Non-Resident Shipping Companies or Their Agents
The Revenue contended that the payments made by the assessee to various parties should be subject to TDS under Section 194C. However, the assessee argued that since the payments were made to non-resident shipping companies or their agents, they were not liable for TDS under Section 194C, but rather under Section 172.
The CIT(A) found that the payments were indeed made to non-resident shipping companies or their agents, thereby falling under the purview of Section 172. The Tribunal agreed with the CIT(A)'s findings, noting that the payments were made under various heads such as Air/Sea Freight charges, government charges, documentation, CFC/CWC charges, custom duty, D.O. charges, THC charges, B.L. charges, which are covered under Section 172 and the Double Taxation Avoidance Agreements (DTAA).
Issue 3: Disallowance of Expenses under Section 40(a)(ia) of the Income-tax Act
The AO had disallowed expenses amounting to Rs. 1,22,19,047/- under Section 40(a)(ia) due to non-deduction of TDS under Section 194C. The CIT(A) allowed the claim of Rs. 88,77,337/- on the grounds that the payments were made to non-resident shipping companies or their agents, and thus, Section 172 applied.
The Tribunal upheld the CIT(A)'s decision, stating that the Revenue failed to provide any material evidence to counter the CIT(A)'s findings. Consequently, the Tribunal dismissed the Revenue's appeal and confirmed that the disallowance under Section 40(a)(ia) was not applicable to the payments made to non-resident shipping companies or their agents.
Conclusion:
The Tribunal concluded that the payments made by the assessee to non-resident shipping companies or their agents are covered under Section 172 of the Income-tax Act, and not under Section 194C. Therefore, the requirement of TDS under Section 194C does not apply, and the disallowance of expenses under Section 40(a)(ia) is not warranted. The appeal of the Revenue was dismissed, and the cross-objection by the assessee became infructuous.
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2011 (6) TMI 776
Issues involved: Appeal filed by Revenue regarding deduction claimed by assessee u/s.80-IA of Income Tax Act, 1961 and disallowance made by Assessing Officer u/s.40(a)(i) of the Act.
Deduction u/s.80-IA:
The Revenue contested the direction of the Commissioner of Income Tax(A) to rework the deduction claimed by assessee u/s.80-IA without setting off losses on a notional basis. The jurisdictional High Court's decision in Velayudhaswamy Spinning Mills Ltd. was cited, emphasizing the provisions of sub-sections (1), (2), and (5) of Section 80-IA. The Tribunal concluded that the deduction is allowed for eligible businesses for ten consecutive assessment years, and losses set off against other income cannot be brought forward notionally. The Tribunal upheld the CIT(A)'s decision, dismissing Revenue's appeal on this ground.
Disallowance u/s.40(a)(i):
The Revenue challenged the deletion of disallowance made by the Assessing Officer u/s.40(a)(i) of the Act concerning non-deduction of tax at source on agency commission paid to non-residents. The amendment to Sec.9(1) of the Act was highlighted, but the Tribunal noted that the overseas agents had no permanent establishment in India and the payments were for services rendered outside India. The Tribunal found that the assessee's failure to deduct tax was based on a bona fide belief that the non-residents' income was not taxable in India. Referring to the decision in GE India Technology Centre Pvt Ltd case, the Tribunal upheld the CIT(A)'s decision to delete the disallowance, dismissing Revenue's appeal on this ground.
In conclusion, the Tribunal dismissed the Revenue's appeal on both grounds, affirming the decisions of the lower authorities.
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2011 (6) TMI 775
Issues involved: Dispute regarding measurement of distance for agricultural land u/s 2(14)(iii)(b) of the Income-tax Act.
Details of the judgment:
- The dispute in the appeal was about the measurement of distance for determining if the land is agricultural or a capital asset.
- The Assessing Officer considered the Arial distance, while the assessee argued for measuring distance through the approach road.
- The CIT(A) referred to a decision of the Punjab & Haryana High Court and directed the AO to consider the case accordingly.
- The ITAT considered various case laws and upheld the CIT(A)'s decision based on the Punjab & Haryana High Court's ruling.
- The ITAT set aside the AO's order and directed to determine the distance from municipal limits by adopting the method as per previous Tribunal orders.
- The ITAT confirmed the CIT(A)'s order and dismissed the Revenue's appeal based on the co-ordinate Bench's decision and the Punjab & Haryana High Court's ruling.
Conclusion: The ITAT upheld the CIT(A)'s decision regarding the measurement of distance for agricultural land, dismissing the Revenue's appeal.
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2011 (6) TMI 774
Disallowance u/s 014A - deduction of interest earned on tax free bonds/dividend income - HELD THAT:- In the case in hand, undisputedly, the assessee's own funds and non- interest bearing funds are more than the investment in the tax free securities then there is no basis for deeming that the assessee has used the borrowed funds for investment in tax free securities. Accordingly, on this factual aspect, we do not find any merit in the contention of the ld DR. Further, it is to be noted that it is not the case of investment in tax free securities every year; but the investment in the earlier years has been carried forward as it is evident from the particulars where the balance at the end of the year shows that the investment is appearing in all the earlier years. Therefore, we do not find any error or illegibility in the order of the CIT(A), qua, the issue of disallowance of interest u/s 14A.
disallowance of administrative expenditure u/s 014A - that the assessee is maintaining the treasury department which looks after the day to day investment portfolio of the bank including tax free investments. Having regard to the said factual proposition, the administrative expenses relatable to the income not forming part of the total income can be attributable to the expenditure of special treasury department maintained by the assessee; but it seems the assessee has not filed the exact detail of the operating expenses. Therefore, the CIT(A) is justified in restricting the said disallowance to 1%. Accordingly, the ground raised by the revenue as well as the assessee in the respective appeal and cross objection are liable to be dismissed.
deleting the disallowance of the claim for payment of broken period interest - this issue is covered in favour of the assessee and against the revenue by the decision of the Jurisdiction High Court in the case of American Express International Banking Corpn Ltd vs CIT [2002 (9) TMI 96 - BOMBAY HIGH COURT].
disallowance of deduction claimed u/s 036(1)(viia) - the sub-clause (a) of clause (viia) of sub-section (1) of section 036 and proviso to said clause, it is clear that under sub-clause (a), while computing the business income of a Scheduled Bank (not being a foreign bank) or a non Scheduled Bank, deduction is allowable in respect of any provision for bad and doubtful debts to the extent of an aggregate amount not exceeding 7.5% of the total income and 10% of the aggregate average advances made by its rural branches. Thus, the option under the proviso is only an alternative to sub-clause (a). Therefore, the proviso does not provide a deduction in addition to deduction allowable under sub-clause (a) of clause (viia).
disallowance is u/s 040(a)(ia) - that the income received or accrued to an individual being a Sikkimese on account of dividend or interest is exempted then no disallowance can be made u/s 040(a)(ia) for non deduction of TDS. We further find that for invoking the provisions of sec. 040(a)(ia), it is necessary precondition that tax is deductible at source under Chapter XIIB in relation to the payment of interest, commission or brokerage and such tax has not been deducted or after deduction has not been paid before the due date. Therefore, when the income of interest in the hands of the recipient is exempted then no tax is deductible under Chapter XVII-B and consequently no disallowance is called for u/s 040(a)(ia).
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2011 (6) TMI 773
Issues involved:
The only issue in this case pertains to the addition of undisclosed stock found during a survey conducted under section 133-A of the Income Tax Act, 1961.
Summary:
Issue 1: Valuation of Undisclosed Stock
The appeal concerned the addition of Rs. 38,56,474/- on account of undisclosed stock found during a survey under section 133-A of the Income Tax Act, 1961. The Assessing Officer (AO) had made this addition based on the difference between the total stock value found during the survey and the stock value recorded in the books of accounts. The appellant contested this addition, arguing that the valuation of the stock by an approved valuer was done at market rates and should not result in an increase in profits. The Commissioner of Income Tax (Appeals) upheld the addition, but the Tribunal disagreed. It was held that under the mercantile system of accounting, the closing stock should be valued at cost price if lower than the market price, and no profit can be earned until goods are sold. Therefore, the Tribunal directed the AO to delete the addition as the valuation of the closing stock in the books of accounts should not be based on market rates at the time of the survey.
Conclusion:
The Tribunal allowed the appeal filed by the assessee, setting aside the addition made on account of the difference in valuation of stock between the books of accounts and market rates of gold, diamonds, and silver items found during the survey.
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2011 (6) TMI 772
Issues Involved:
1. Validity of the order passed u/s 263 of the Act.
2. Limitation period for issuing notice u/s 263 of the Act.
3. Doctrine of merger in the context of reassessment proceedings.
Summary:
Validity of the order passed u/s 263 of the Act:
The appeal arises from an order passed u/s 263 of the Act by the Commissioner of Income Tax (Central-1), Kolkata, which set aside the order passed u/s 147/143 of the Act dated 05.12.2008. The Commissioner found the order to be erroneous and prejudicial to the interest of revenue, directing the Assessing Officer to complete it as per law after affording proper opportunity of being heard to the assessee.
Limitation period for issuing notice u/s 263 of the Act:
The assessee argued that the notice issued u/s 263 was barred by limitation as per section 263(2) of the Act. The original assessment was made u/s 143(3) on 20.03.2006, and the reassessment order was passed u/s 148/143(3) on 05.12.2008. The assessee contended that the issues raised in the notice u/s 263 were not part of the reassessment proceedings and thus, the limitation period should be considered from the date of the original assessment order.
Doctrine of merger in the context of reassessment proceedings:
The Tribunal observed that the reassessment order dated 05.12.2008 did not pertain to the issues mentioned in the notice issued u/s 263. The doctrine of merger does not apply when the subject matter of reassessment is distinct and different from the original assessment. The Tribunal relied on the decision of the Hon'ble Apex Court in the case of CIT vs. Alagendran Finance Ltd. [293 ITR 1], which held that the period of limitation commenced from the dates of the original assessments and not from the reassessments since the latter had not anything to do with the distinct issues.
Conclusion:
The Tribunal concluded that the original assessment order dated 20.03.2006 did not merge with the reassessment order dated 05.12.2008 for the issues mentioned in the notice u/s 263. Therefore, the notice issued u/s 263 dated 08.09.2010 was barred by limitation. Consequently, the impugned order of the Commissioner was quashed, and the appeal of the assessee was allowed.
ORDER PRONOUNCED IN THE OPEN COURT ON 24.06.2011.
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2011 (6) TMI 771
Income from Letting out of Studio - Complex Commercial Activities - Profits and Gains of Business or Profession or Income from House Property? - Assessee lets out the property on hourly basis for use as shooting location - AO considered income derived as income as Income From House Property by following the decision of SULTAN BROTHERS PRIVATE LIMITED VERSUS COMMISSIONER OF INCOME-TAX, BOMBAY CITY II [1963 (12) TMI 4 - SUPREME COURT]
HELD THAT:- We find that in SHAMBHU INVESTMENT P. LTD. VERSUS COMMISSIONER OF INCOME-TAX [2003 (1) TMI 99 - SC ORDER], which is approved by Hon’ble Supreme Court, it was held that "merely because income is attached to any immovable property cannot be the sole factor for assessment of such income as income from property; what has to be seen is what was the primary object of the assessee while exploiting the property. If it is found, applying such test, that main intention is for letting out the property, or any part thereof, the same must be considered as rental income or income from property. In case, it is found that the main intention is to exploit the immovable property by way of complex commercial activities, in that event, it must be held as business income."
It is thus clear that when a property is exploited by way of “complex commercial activities”, income so earned by exploiting the property is to be taxed as business income. Viewed in this perspective, and having regard to the fact that it is not a case of significant value addition to premises by providing all incidental and support services to facilitate cine shooting and related activities, the income is earned by complex commercial activities which can only be taxed under the head business income. The fact that it is clearly a commercial adventure, involving marketing and promotions as also appropriate improvisations on a case to cases basis, takes these receipts out of the ambit of income under the head property income.
Hon’ble Calcutta High Court’s judgment in the case of Shambhu Investments Ltd., has duly taken into account Hon’ble Supreme Court’s judgment in the case of Sultan Brothers and yet reached the conclusion that where complex commercial activities are involved in exploiting a property, income can only be taxed as business income. Also, hon'ble Supreme court's case upon which AO relied have different facts from the present case, thus have no relevence in present context.
The conclusions arrived at by the Ld. CIT (A) i.e such income comes under the head PGBP, thus do no call for any interferene - Decision in favour of Assesee.
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2011 (6) TMI 770
The High Court of Bombay held that a reassessment order under section 143(3) r/w 147 of the Income Tax Act, 1961 was invalid because the assessing officer did not issue notice under section 143(2) after issuing notice under section 148. Referring to a previous case, the court stated that without notice under section 143(2), the reassessment order cannot be upheld. The appeal was dismissed with no costs.
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2011 (6) TMI 769
Issues involved: Interpretation of Section 10A of the Income Tax Act, 1961 regarding exclusion of expenditure from export turnover and total turnover.
Summary:
Issue 1: Exclusion of expenditure from export turnover and total turnover under Section 10A
The respondent-assessee, engaged in software export business, claimed deduction under Section 10A for four STP units. The assessing officer excluded certain expenditure from both export turnover and total turnover. The CIT disagreed, stating that only expenditure related to foreign exchange for software delivery outside India should be excluded from export turnover, not total turnover. The CIT invoked Section 263 and directed reassessment. The ITAT, however, set aside the CIT's order.
Issue 2: Justification of ITAT's decision
The High Court considered whether the ITAT was correct in holding that expenditure excluded from export turnover should also be excluded from total turnover under Section 10A. Referring to a previous case, the Court emphasized that the term 'export turnover' should have a consistent meaning when part of the total turnover calculation. Without a specific definition of 'total turnover' to the contrary, what is excluded from export turnover must also be excluded from total turnover. Consequently, the Court found no error in the ITAT's decision and dismissed the appeal.
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2011 (6) TMI 768
Issues Involved: Whether the Ld. CIT(A) was justified in upholding the addition of Rs. 2,30,924 as 'income from undisclosed sources' in the hands of the assessee for the assessment year 2005-06 u/s.143(3) of the Income Tax Act, 1961.
Adjudication of the Issue:
1. The assessee received Rs. 2,30,924 from Capt. R. K. Behram as a gift but could not provide documentary evidence. The Assessing Officer added this amount as income from undisclosed sources. The Ld. CIT(A) declined to admit additional evidence and upheld the AO's decision. The Tribunal noted that the Ld. CIT(A) erred in not considering the evidence submitted by the elderly assessee, especially as the information was to be obtained from abroad. The Tribunal cited legal precedents emphasizing the authority's obligation to consider necessary evidence. Therefore, the Tribunal did not approve the Ld. CIT(A)'s stand.
2. Despite the usual practice of remitting the matter to the Ld. CIT(A) for further adjudication, the Tribunal decided to address the submissions on merits due to the senior citizen status of the assessee, the non-business nature of the assessee, the narrow compass of the issue, and the small amount involved.
3. The assessee provided evidence supporting Capt. Behram's identity through his affidavit, detailing their long-standing relationship and the gift transaction. The Tribunal found no reason to doubt the genuineness of the gift, considering the long-term acquaintance between the parties, the passive income nature of the assessee, and the absence of inconsistencies in the explanations provided.
4. The Assessing Officer noted a discrepancy in the source of the amount received, initially stated as from the husband but later revealed to be from the husband's friend. However, the Tribunal found a plausible explanation for the remittance to the assessee, which was not of an income nature, leading to the decision to delete the impugned additions.
In conclusion, the Appellate Tribunal ITAT MUMBAI allowed the appeal and directed the Assessing Officer to delete the addition of Rs. 2,30,924 as income from undisclosed sources in the hands of the assessee for the assessment year 2005-06.
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2011 (6) TMI 767
Issues Involved: Complaint regarding delay in decision on imposing antidumping duty by the Union of India.
Summary:
The petition was filed by an industry regarding the Union of India's delay in deciding on the imposition of antidumping duty. The designated authority had submitted its final findings to the government under Section 9A of the Customs Tariff Act and Rule 18 of the Customs Tariff (Identification, Assessment and Collection of Antidumping duty on Dumped Article and for Determination of Injury) Rules 1995. The petitioner sought a writ of mandamus directing the Ministry of Finance to accept the designated authority's order and recommendations for imposing antidumping duty. Despite the passage of more than three months, the government had not made a final decision, causing financial loss to the petitioner.
On the next hearing date, the Union of India informed the court through an affidavit that it did not find it necessary to impose any antidumping duty. Consequently, the court decided not to delve further into the matter as the prime grievance of the petitioner regarding the delay in decision-making no longer existed. Although the petitioner argued that no formal order was passed by the Union of India and the reasons for not imposing antidumping duty were not communicated, the court held that these issues were not relevant to the present petition. The court disposed of the petition, allowing the petitioner to pursue other legal remedies available.
In conclusion, the court acknowledged the Union of India's decision not to impose antidumping duty and closed the case, leaving the petitioner with the option to seek further legal recourse if needed.
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2011 (6) TMI 766
Issues Involved:
1. Nature of Landholdings
2. Taxability of Gain on Sale of Land
3. Assessment of Income as Business Profits or Long-Term Capital Gains
Summary:
Nature of Landholdings:
The primary issue was whether the land sold by the assessees was agricultural land. The assessees, co-owners of land in village Karoran, Mohali, claimed the land was agricultural and not liable to capital gains tax. The Assessing Officer (AO) obtained a notification from the Principal Secretary to Govt. of Punjab, which declared Karoran village as land for urban usage/non-agricultural activities. The AO also recorded the statement of the Patwari, who confirmed that the land was within the jurisdiction of the Notified Area Committee and was used for residential purposes. However, the CIT(A) concluded that the land was agricultural based on the Girdhawari records and the fact that it was part of a notified forest area where only agricultural activities were permissible.
Taxability of Gain on Sale of Land:
The second issue was whether the gain from the sale of the land was taxable. The AO assessed the gain as business income, treating the transaction as an adventure in the nature of trade. The CIT(A), however, held that the land was agricultural and the gain should be assessed as long-term capital gains. The Tribunal upheld the CIT(A)'s decision, stating that the land was agricultural and not a business asset. However, it also held that the gain was taxable as long-term capital gains since the land fell within the definition of a capital asset u/s 2(14) of the Income Tax Act, being within one kilometer of PGIMER, Sector 12, Chandigarh, and the urban usage notification was announced before the sale.
Assessment of Income as Business Profits or Long-Term Capital Gains:
The AO treated the income from the sale of land as business profits, while the CIT(A) treated it as long-term capital gains. The Tribunal upheld the CIT(A)'s decision, stating that the land was agricultural and the gain should be assessed as long-term capital gains. The Tribunal also noted that in the case of one co-owner, Ms. Leena Sandhu, the gain was returned as long-term capital gains and accepted by the AO.
Conclusion:
The appeals filed by the Revenue were dismissed, and the Cross Objections filed by the assessees were also dismissed. The appeals filed by the assessees were partly allowed, directing the AO to assess the gain as long-term capital gains. The Tribunal's decision applied mutatis mutandis to all co-owners involved in the case.
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2011 (6) TMI 765
Issues involved: Registration u/s 12AA of the Income-tax Act denied due to doubt on genuineness of trust and lack of documentary evidence for charitable activities.
Summary:
The appeal was filed by the assessee-trust against the order rejecting the registration u/s 12AA of the Act by the ld. CIT-I, Madurai. The ld. CIT doubted the genuineness of the trust due to the inclusion of religious activities alongside charitable activities without proper documentary evidence. The grounds raised in the appeal included misinterpretation of section 2(15) of the Act, failure to consider produced details, and disregarding relevant assurances and circulars. The trust's objects were found to be both charitable and religious, which was deemed permissible for registration u/s 12AA. Consequently, the ITAT Chennai directed the ld. CIT to grant registration u/s 12AA to the assessee-trust, allowing the appeal.
The ld. CIT's refusal to grant registration u/s 12AA was based on doubts regarding the genuineness of the trust due to the inclusion of religious activities alongside charitable activities without sufficient documentary evidence. The appeal raised concerns over misinterpretation of statutory provisions, failure to consider produced details, and disregard of relevant assurances and circulars. The trust's objects were found to be both charitable and religious, which was considered acceptable for registration u/s 12AA. Consequently, the ITAT Chennai directed the ld. CIT to grant registration u/s 12AA to the assessee-trust, allowing the appeal.
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2011 (6) TMI 764
Issues involved: Appeal against order of Commissioner of Income Tax cancelling registration under section 12AA for a trust engaged in publication and sale of literature related to Gandhian and Sarvodaya ideologies.
Summary:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax cancelling the registration under section 12AA. The assessee, a trust engaged in the publication and sale of Sarvodaya literature and Gandhian ideologies, argued that the activities were in line with the objects of the trust and genuine. The Commissioner had found that selling books was not a charitable activity, but there was no evidence that the trust was not genuine or deviating from its approved objects. The Income Tax Appellate Tribunal (ITAT) noted that the trust was solely involved in activities related to Gandhian and Sarvodaya ideologies, for which it was granted registration under section 12A in 1989. As there was no specific violation found, the ITAT held that the trust was entitled to continue its registration under section 12AA, reversing the Commissioner's order. Therefore, the appeal of the assessee was allowed, and the registration granted in 1989 was upheld.
The ITAT emphasized that under section 12AA(3) of the Income Tax Act, registration can be revoked if activities are not genuine or not in line with the trust's objects. Since there was no evidence of such violations and the trust was solely focused on spreading Gandhian and Sarvodaya ideologies, the cancellation of registration was deemed unjustified. The ITAT's decision reinstated the trust's registration under section 12AA, ensuring its continuation as per the order issued in 1989. The order in favor of the assessee was pronounced on 30/06/2011.
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