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Showing 301 to 320 of 692 Records
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2010 (5) TMI 664
Issues Involved:
1. Justification of the Commissioner in exercising powers u/s 263.
2. Correctness of the computation of deduction u/s 80HHC.
3. Assumption of jurisdiction by the Commissioner u/s 263.
4. Quantum of adjustment for deduction u/s 80HHC.
Summary:
Issue 1: Justification of the Commissioner in exercising powers u/s 263
The sole issue requiring adjudication was whether the Commissioner was justified in exercising his powers u/s 263. The Commissioner exercised his revision powers on the grounds that the deduction was incorrectly computed as the loss incurred in export of goods was not set off against export incentives before allowing the deduction. The Commissioner noted that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the revenue as it allowed an excess deduction of Rs. 22,03,757.
Issue 2: Correctness of the computation of deduction u/s 80HHC
The Assessing Officer had accepted the income returned by the assessee, including the deduction claimed u/s 80HHC. However, the Commissioner observed that the Assessing Officer failed to apply the amended provisions of section 80HHC, which required adjusting 90% of incentives against the profits or losses of the assessee. The Commissioner directed an addition of Rs. 22,03,757.
Issue 3: Assumption of jurisdiction by the Commissioner u/s 263
The assessee contended that the Commissioner could not invoke his revision jurisdiction as the Assessing Officer had passed the assessment order after considering all relevant facts and legal provisions, including retrospective amendments. The Tribunal held that the view taken by the Assessing Officer was not a possible view of the matter as it did not apply the amended legal provisions correctly. Therefore, the Commissioner's assumption of powers u/s 263 was justified.
Issue 4: Quantum of adjustment for deduction u/s 80HHC
The assessee raised an additional ground of appeal regarding the reduction of 90% DEPB from profits of the business for the purpose of deduction u/s 80HHC. The Tribunal admitted this additional ground and decided it on merits, referring to the Special Bench decision in the case of Topman Exports v. ITO, which was in favor of the assessee. Consequently, the Tribunal modified the order of the Commissioner regarding the quantum of adjustment.
Conclusion:
In the result, the appeal of the assessee for the assessment year 2003-04 was partly allowed, approving the assumption of jurisdiction by the Commissioner u/s 263 but modifying the quantum of adjustment. The same outcome applied for the assessment year 2004-05. Both appeals were partly allowed in the terms and manner indicated above.
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2010 (5) TMI 663
Issues Involved:
1. Determination of the date of transfer of shares.
2. Applicability of Section 47(v) of the Income Tax Act.
3. Allegation of tax avoidance through colorable devices.
4. Binding nature of CBDT Circular No. 704.
Issue-wise Detailed Analysis:
1. Determination of the Date of Transfer of Shares:
The primary issue was whether the transfer of shares from the assessee to ATCL occurred on 3-1-1992, the date of the agreement, or on 22-12-1992, the date when the transfer was effected. The assessee argued that the sale was completed only when all conditions, including the approval from the Central Government under section 372 of the Companies Act, 1956, were fulfilled. The Tribunal agreed with the assessee, stating that the actual transfer took place on 22-12-1992, when the share certificates and transfer deeds were delivered, and the consideration was received. The Tribunal emphasized that shares are "Goods" under the Sale of Goods Act, 1930, and the transfer is complete only upon fulfillment of all conditions and actual delivery.
2. Applicability of Section 47(v) of the Income Tax Act:
Section 47(v) exempts transfers of capital assets between a subsidiary and its holding company from capital gains tax, provided the holding company holds the entire share capital of the subsidiary. The Tribunal found that on 22-12-1992, when the transfer of shares was effected, the assessee was a wholly-owned subsidiary of ATCL. Therefore, the transfer was not taxable under Section 47(v). The Tribunal rejected the revenue's argument that the transfer occurred on 3-1-1992, when ATCL did not hold the entire share capital of the assessee.
3. Allegation of Tax Avoidance through Colorable Devices:
The revenue alleged that the assessee and ATCL structured the transactions to evade capital gains tax. The Tribunal, however, found no evidence of colorable devices or fraudulent intent. Citing the Supreme Court's decision in Azadi Bachao Andolan, the Tribunal recognized legitimate tax planning and concluded that the transactions were genuine and executed in the normal course of business. The Tribunal noted that the sequence of events, including the agreement for sale, obtaining government approval, and the eventual transfer of shares, did not indicate any dubious or sham transactions.
4. Binding Nature of CBDT Circular No. 704:
The revenue relied on CBDT Circular No. 704, which states that the date of the broker's note is the date of transfer for shares transacted through stock exchanges. The Tribunal clarified that while Circulars can provide relief to taxpayers, they cannot impose additional burdens not contemplated by the statute. The Tribunal held that Circular No. 704, which aligns the date of transfer with the broker's note, is not binding if it contradicts the legal provisions regarding the completion of a sale. The Tribunal emphasized that the actual transfer of shares, involving delivery and payment, determines the date of transfer.
Conclusion:
The Tribunal concluded that the transfer of shares from the assessee to ATCL took place on 22-12-1992, during the assessment year 1993-94, and was exempt from capital gains tax under Section 47(v) as the assessee was a wholly-owned subsidiary of ATCL at that time. The Tribunal dismissed the revenue's allegations of tax avoidance and held that the CBDT Circular No. 704 was not binding in this context. Consequently, the appeals by the assessee were allowed, and the assessments for the years 1992-93 and 1993-94 were revised accordingly.
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2010 (5) TMI 662
Issues:
Rectification of mistakes apparent on record in a consolidated order for assessment years 1998-99, 1999-2000, and 2000-01 regarding the nature of business activity of owning and maintaining racehorses.
Analysis:
The judgment deals with three miscellaneous applications seeking rectification of mistakes in a consolidated order passed by the Tribunal for assessment years 1998-99, 1999-2000, and 2000-01. The mistake highlighted in all applications pertains to the Tribunal's observations regarding the nature of the business activity of the assessee owning and maintaining racehorses. The applicant contests the Tribunal's conclusion, arguing that the sale of foals and fillies, which were under training for races, does not align with the characterization of selling racing discards. The applicant relies on the Supreme Court judgment in Honda Siel Power Products Ltd. v. CIT [2007] 295 ITR 466 to support their claim.
The Tribunal notes that the primary finding was that the assessee's business activity is owning and maintaining racehorses, with other activities being incidental. The Tribunal inferred the predominant activity based on the lack of evidence showing the sale of horses with good race potential. Despite the applicant's argument that the sold foals and fillies were race-ready, the Tribunal emphasizes that the absence of evidence indicating their success on the racecourse is crucial. The Tribunal clarifies that selling foals and fillies of racing age does not automatically imply they have good potential for racing, reinforcing the initial finding that the business revolves around owning and maintaining racehorses.
The Tribunal underscores that the powers for rectification are limited to correcting glaring mistakes apparent on record with no room for differing interpretations. It highlights that the absence of irrefutable evidence supporting the sale of horses with significant racing potential upholds the original finding. The Tribunal concludes that the sale of foals and fillies does not alter the established nature of the business activity as owning and maintaining racehorses. Consequently, the Tribunal rejects the miscellaneous applications, finding no legal basis for rectification.
In conclusion, the Tribunal dismisses the applications seeking rectification, maintaining the original order's findings regarding the nature of the assessee's business activity centered on owning and maintaining racehorses.
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2010 (5) TMI 661
Issues Involved:
1. Legitimacy of the addition of Rs. 41,39,897 on account of the difference in the value of the investment in the construction of a bungalow.
2. Validity of the valuation report used by the Assessing Officer (AO) for determining the cost of construction.
3. Applicability of Section 69 of the Income-tax Act, 1961, in the given circumstances.
Issue-wise Detailed Analysis:
1. Legitimacy of the Addition of Rs. 41,39,897:
The core issue revolves around the addition of Rs. 41,39,897 made by the AO, which was based on a valuation report found during a search under Section 132 of the Income-tax Act, 1961. The AO argued that the cost of construction recorded in the books was significantly lower than the value determined by the valuer, leading to the conclusion that there was an unexplained investment. The assessees contended that the valuation report was for bank loan purposes and not an accurate reflection of the construction cost. The CIT (Appeals) concluded that no incriminating material was found during the search to substantiate the claim of extra expenditure on construction, and thus, the addition was unwarranted.
2. Validity of the Valuation Report:
The AO relied heavily on the valuation report dated 20-8-2001, which valued the property at Rs. 1,01,80,000. The assessees argued that this report was intended for obtaining a bank loan and not for determining the actual cost of construction. The CIT (Appeals) supported this view, citing the Supreme Court decision in Smt. Amiya Bala Paul v. CIT [2003] 262 ITR 407, which held that an AO cannot use a valuation report to determine the cost of construction for making additions. Additionally, another valuation report from 1999 supported the construction cost recorded in the books, further weakening the AO's position.
3. Applicability of Section 69 of the Income-tax Act, 1961:
The assessees argued that the construction was completed in December 1997, which is outside the block period under consideration. They provided documentary evidence, including municipal tax records and purchase invoices, to substantiate their claim. The CIT (Appeals) and the Tribunal agreed that since the construction was completed in 1997, the AO could not invoke Section 69 for the assessment year 2002-03. The Tribunal noted that no material evidence was found during the search to indicate that the construction occurred during the financial year relevant to the assessment year 2002-03.
Conclusion:
The Tribunal affirmed the CIT (Appeals)'s decision to delete the addition of Rs. 41,39,897, stating that the AO's reliance on the valuation report was misplaced and that no evidence suggested unexplained investment during the relevant financial year. The appeals by the revenue were dismissed, reinforcing that the addition was not justified under the circumstances.
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2010 (5) TMI 660
Petition seeking reference of the disputes to an independent and impartial sole Arbitrator - Respondent contested that as per `General Terms and Conditions of the Purchase Order (Foreign) Clause 10 arbitration in case of dispute arising from the interpretation or from any matter relating to the rights and obligations of the parties calls to the appointment of the `Managing Director or his nominee' of the respondent as the arbitrator - Held that:- As respondent admitted their liability towards the Purchase Orders, refuse to settle the amounts due only on the ground as prohibited from making any payments to the petitioner by the Ministry of Defence, Government of India - the petitioner genuinely apprehends that it may not get any justice in the hands of the Managing Director, since he cannot go against the directions issued by the Ministry of Defence, Government of India and, therefore, it would be appropriate to appoint independent sole arbitrator - the Managing Director may not be in a position to independently decide the dispute between the parties as the respondent in the reply to the notice accepted liablity to pay the amount but is not in a position to settle the dues only because of the directions issued by Ministry of Defence, Government of India - it would be in the interest of both parties and to do complete justice, an arbitrator other than the Managing Director of the Respondent requires to be appointed to settle the dispute - in favour of petitioner
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2010 (5) TMI 659
Whether the writ petition is not maintainable for want of clearance from the Committee On Disputes - prayer of the petitioners in this writ petition is to quash the impugned order – Held that:- Final outcome in this writ petition will not have any bearing on the second respondent. There is no prayer against the second respondent - lis is not between petitioners and the second respondent - Writ petition is maintainable.
Immunity from penalty and prosecution - Order of the Assessing Officer bringing the concealed income to tax, disallowing depreciation claimed, correcting certain anomalies in the accounting procedure, after levying penalty – Held that:- Burden is on the first respondent to prove that concealment did not arise from any fraud or any gross or willful neglect on their part - No such evidence placed by the first respondent before the Settlement Commission - It is necessary that the Settlement Commission shall record a finding whether there is deliberate concealment or not. There is no such finding in the impugned order - Order in so far as it relates to granting immunity from penalty and prosecution is liable to be quashed.
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2010 (5) TMI 658
Penalty under section 271(1)(c) of the Act – assessee wrongly claimed deduction under section 80-IA - Prior to issue of said notice, assessee had already filed a revised return of income under section 139(5) wherein no claim under section 80-IA was made – Held that:- assessee had bona fide made a claim for deduction under section 80-IA of the Act, which came to be rectified by filing a revised return withdrawing the claim and that as such there was no concealment or furnishing of inaccurate particulars of income on the part of the assessee – In favor of assessee.
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2010 (5) TMI 657
Brought forward and set off of losses - Rectification of order u/s 154 - held that:- When original assessment is completed without reference to the statutory provision and in clear violation of the same, such assessment happens to be a mistake, that could be rectified under section 154 of the Act.
when business loss carried forward is set off against profit for the year 1995-96, the asses- see is not entitled to limit set off of loss brought forward up to 1993-94. It is pertinent to note that even if profit was set off only against brought forward depreciation, then under the head of unabsorbed depreciation, there would have been nothing left entitling the assessee for deduction in terms of clause (b) of Explanation (iii) of section 115JA(2) of the Act. Since nothing is left after setting off brought forward business loss up to 1994-95 against profit, the assessee is not entitled to any relief under clause (b) of Explanation (iii) to section 115JA of the Act. - Decided in favor of revenue.
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2010 (5) TMI 656
Whether Commissioner of Income-tax (Appeals) has erred in law in holding that the interest paid by the appellant is capital expenditure and erred in law in holding that the legal expenses are capital expenditure – Held that:- interest on borrowed funds and legal and professional charges are incurred in relation to a project which is yet to be completed and other expenditure are being grouped under work-in-progress. these two expenses incurred by the assessee on account of interest on borrowed funds and legal and professional charges, should also be grouped under work-in-progress. As a result, the value of the closing stock of work-in-progress will go up. The assessee will not get any deduction on account of these two expenses in the present year. order of the learned Commissioner of Income-tax (Appeals) is modified. appeal of the assessee is partly allowed for statistical purposes
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2010 (5) TMI 655
Scheme of arrangement between the company and its creditors for its nourishment and rehabilitation - irreparable loss – application for grant of stay of general nature staying all proceedings pending in various tribunals and forums for winding up, recoveries of debts and other proceedings regarding non-payment of amounts by the company, commencement or continuation of any suit or proceeding against the applicant-company or its directors, employees, officers and ex-employees in connection with the affairs of the applicant-company. - Held that:- application does not contain any foundation so as to establish that the balance of convenience is in favour of the applicant-company and that it would suffer irreparable loss in the event interim stay of the proceedings is not granted. It may be true to some extent that as the proposal of the applicant-company for its rehabilitation has been carried out in the two meetings it may be justified in saying that it had succeeded in establishing a prima facie case. However, with regard to the balance of convenience and irreparable loss, the manner in which the above referred pending proceedings of the civil nature or those likely to be commenced are going to affect the cause of the applicant-company vis-a-vis proposed scheme is not clear, application is accordingly rejected
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2010 (5) TMI 654
Whether Tribunal is right in holding that the confiscation of respondent’s vehicle for non production of type approval certificate is untenable – Held that:- type approval certificate is mainly required to ensure that the vehicle is safe and road worthy for public use and it is to be considered by the registering authority while registering the vehicle and not by the Customs authority when it is imported, assumption of the department that the importer has imported the vehicle which is unfit for use on road is also absurd, Delhi High Court has upheld the view of the Tribunal because the importer cannot be expected to get what is not possible to obtain, appeal is dismissed
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2010 (5) TMI 653
TDS - penalty under section 271(1)(c) on the disallowance - assessee had made payment of royalty, advertisement and publicity, audit fee and recruitment expenses on which tax at source has not been deducted - auditors of the assessee had itself quantified these payments as inadmissible under section 40(a)(ia) of the Income-tax Act - books of account were finalised on October 29, 2005 and these liabilities were provided for, tax has been deducted in October, 2005 and paid in November, 2005. These should have been added to this year's taxable income and allowed in the next year's taxable income - Assessing Officer disallowed the payment for the current year and remarked that the amount will be allowed in the next assessment year – Held that:- if the contention of the Revenue is accepted then in case of every return where the claim is not accepted by the Assessing Officer for any reason, the assessee, will invite the penalty under section 271(1)(c). This is clearly not the intendment of the Legislature, orders set aside and delete the levy of penalty, appeal filed by the assessee is allowed.
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2010 (5) TMI 651
Rebate under the provisions of s. 88E in respect of Securities Transaction Tax – assessee contended that once the AO noted that the STT was paid on share trading operations of the appellant and income from these transactions was assessed under the head 'Profits and gains of business' and the appellant furnished evidence in prescribed Form 10DB, then the AO should not have disallowed the claim for rebate which was statutorily granted under s. 88E - Held that:- in the case Berger Paints (India) Ltd. (2002 -TMI - 12957 - CALCUTTA High Court) , ratio laid down in the decision is squarely applicable to the Present case as well, Since in the present case the appellant had furnished evidence in support of payment of STT in prescribed Form 10DB in the course of assessment, there was sufficient compliance to provisions of s. 88E, AO is directed to allow the rebate as Prescribed in s. 88E in respect of STT paid in respect of the share trading income, which has been assessed under the head 'Profits and gains of business', no infirmity in the aforesaid order of the learned CIT(A) and the same is hereby upheld, appeal of the Revenue is dismissed
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2010 (5) TMI 649
Disallowance of business expenditure - Held that:- Western India Vegetable Products Ltd. v. CIT [1954 (3) TMI 59 - BOMBAY HIGH COURT] wherein observed that when a business is established and is ready to commence business then it can be said of that business that it is set up. But before it is ready to commence business it is not set up. But there may be interregnum, there may be a interval between a business which is set up and a business which is commenced and all expenses incurred after the setup of the business and before commencement of the business all expenses during the interregnum would be permissible deduction under section 10(2) of the Income-tax Act - assessee in the present case entered into agreements of sale of the gases with other parties in the assessment year in question or before. Since the assessee has been able to satisfy that it started securing orders for sale of gases, therefore, the assessee had commenced its business accordingly - no infirmity in the order of the CIT(Appeals) in allowing deduction of the expenditure in this case, the Departmental appeal stands dismissed.
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2010 (5) TMI 648
Block assessment - undisclosed income - Held that:- No evidence found as a result of search - undisclosed income has been computed merely on the basis of the surrender made by the assessee in the course of the block assessment proceedings. De hors the surrender, there is no evidence which could have been said to have been found as a result of the search and, therefore, the 'computation' of undisclosed income by the Assessing Officer in the block assessment proceedings cannot be construed as a 'determination' of undisclosed income contemplated under section 158BC(c) or 158BB, addition is not made on the basis of any evidence found in the course of search, the penalty imposed by the Assessing Officer under section 158BFA(2) is not sustainable - appeal of the assessee is allowed.
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2010 (5) TMI 645
Validity of reassessment proceedings initiated by issue of notice u/s 148 - assessment reopened on ground that expenses incurred for development of initial computer software technology known as "Vision Software" is a capital in nature, the same cannot be allowed as revenue expenditure as claimed by assessee - assessee challenged reopening of the assessment on the ground that no new facts had been brought on record and therefore, assessment could not be reopened merely on the basis of change of opinion - Held that:- When AO had enquired into a point or an issue while completing the assessment proceedings u/s 143(3), he is presumed to have applied his mind to the same and formed an opinion about its allowability even though no specific reference to the point or the enquiry made by him is made in the assessment order and even if no reasons were given in the assessment order as to how he formed the opinion about the allowability of the assessee's claim.
In the absence of any tangible material which could persuade the AO to form the belief that income chargeable to tax had escaped assessment by reason of the allowance of the expenses, he cannot issue notice u/s 148, even though the notice has been issued on 7-10-2002, which is within the period of four years from the end of the AY 1998-99. Therefore, initiation of reassessment proceedings u/s 147 was void ab initio - Decided in favor of assessee.
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2010 (5) TMI 643
Revision u/s 263 - AO dropped the penalty proposed to be imposed u/s 271(1)(c) - Assessee contended that Commissioner has no jurisdiction to initiate a proceeding under section 263 of the Act as the Assessing Officer had only dropped the penalty proceeding whereas section 263 of the Act covers in its ambit only those orders which pertain to the orders of assessment which are erroneous and prejudicial to the interests of the Revenue. - held that:- The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax - the dropping of the penalty proceeding, as is manifest from the impugned order, is definitely erroneous and prejudicial to the interests of the Revenue. The Commissioner of Income-tax has passed a detailed order holding, inter-alia, that loss of revenue has been caused as it is an erroneous order. Against assessee.
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2010 (5) TMI 641
Exemption under section 10B - jurisdiction income escaped assessment - notice u/s 147/148- Deduction under section 10B - exemption had also been granted, Section 10B was thereafter amended - claimed exemption under section 10B contending that the same was not in respect of the same unit but in respect of a new unit - held that:- neither annexure A, nor enclosure I disclosed the fact that admittedly the exemption claimed by the ferromet concentrates division under section 10B had been granted and availed of by the petitioner. It is a moot point as to whether in view of the failure to mention the same, the disclosure can be said to be a true disclosure even assuming that all the facts pertaining to the setting up of the alleged new unit were disclosed. - Writ petition dismissed.
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2010 (5) TMI 639
Exemption under section 54F of the Income-tax Act - assessee claimed deduction for purchasing two residential units - Held that:- in the case of Narendra Mohan Uniyal assessee had sold a piece of land and had earned capital gains. Thereafter, the assessee purchased a piece of land for Rs. 30 lakhs. Later yet, the assessee purchased a plot of land contiguous to the land purchased earlier. A residential house was constructed only on one piece of land purchased. The other piece was kept vacant. On denial of benefit under section 54F of the Act to the assessee, when the matter reached the Tribunal, it was held that section 54F of the Act contains no rider that no deduction will be allowed in respect of investment of capital gains made in acquisition of land appurtenant to a building or an investment in land on which the building is to be constructed. Reliance by the learned Commissioner of Income-tax (Appeals) on [ITO v. Ms. Sushila M. Jhaveri (2007 -TMI - 59614 - ITAT BOMBAY-I)] is by holding and, rightly so, that the assessee's case was still better, since the assessee had purchased the two floors of the same building within a short span of two days, no error whatsoever in the order passed by the learned Commissioner of Income-tax (Appeals), the same is hereby confirmed, appeal filed by the Department is dismissed.
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2010 (5) TMI 638
Business income - receipts treated as business income as against the treatment given by the Assessing Officer as salary income - distinction between a servant or an agent - Assessing Officer is trying to treat these contractual receipts as salary only for his endeavour to sit in judgment as to how much expenses the assessee should incur for the receipts in this regard - Held that:- assessee's receipts are contractual business receipts and in disallowing the part of the expenditure incurred to earn the said income by holding that the assessee is in receipt of the salary, the Assessing Officer has only tried to sit in the shoes of the businessman, which is not sustainable. Accordingly, no illegality or infirmity in the order of the learned Commissioner of Income-tax (Appeals), hence, upheld, Revenue's appeal is dismissed.
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