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2010 (12) TMI 940
Residential status - assessee claimed his residential status as "non-resident" - Held that:- Going abroad for the purpose of employment, therefore, means going abroad to take up employment or any avocation as referred to in the circular, which takes in self-employment like business or profession, taking up own business by the assessee abroad satisfies the condition of going abroad for the purpose of employment covered by Explanation (a) to section 6(1)(c) of the Act, Tribunal has rightly held that for the purpose of the Explanation, employment includes self employment like business or profession taken up by the assessee abroad.
No controversy on the facts inasmuch as the assessee was in India for only 177 days in the previous year relevant for the assessment year 1989-90, and unless it is established that Explanation (a) to sub-clause (c) of section 6(1) of the Act is not available to the assessee, he cannot be treated as a resident in India for the purpose of assessing his global income including the business income earned abroad during the previous year - dismiss the appeal filed by the Revenue.
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2010 (12) TMI 933
Deferred payment of the sales tax - whether the circular No. 674, dated December 29, 1993 issued by the State of Bihar in relation to the scheme for deferred payment of the sales tax would be valid for the purposes of giving concession to the assessee? - Held that:- Language used in the circular, referred to hereinabove clearly, makes out a case where such concession was available to the assessees and as such, deferred payment of sales tax would be deemed to be a loan which was paid subsequently and in that view of the matter, the deduction was held permissible. The arguments of the learned counsel that there is no such law and no amendment in the Sales Tax Act of the State of Bihar has been made, is not acceptable because the Central Board of Direct Taxes itself, in the circular aforesaid, has accepted that by circular such concession can be allowed, no force in these appeals. These appeals are, therefore, held meritless and are dismissed.
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2010 (12) TMI 916
Advance tax - whether Levy of interest u/s 234B is mandatory or not? - assessee is a non-resident company incorporated under the laws of USA - Held that:- Where all payments made to non-resident are subject to deduction of tax at source under section 195 of the Income-tax Act, the interest under section 234B is not leviable on the non-resident - As per the decision of the High Court of Delhi in the case of DIT v. Jacabs Civil Incorporated/Mitsubishi Corporation [2010 (8) TMI 37 - DELHI HIGH COURT] appeal decided in favour of assessee.
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2010 (12) TMI 915
Addition invoking Provisions of section 41(1) - CIT(A) set aside the addition - Held that:- If there are payments made by the assessee to M/s. GFIL in the subsequent years and if it was accepted by the Assessing Officer in the subsequent years that may be one of the relevant factors to consider as to whether it was a bona fide trading liability which still continue to exist. However, the assessee has to furnish the details in respect of the issues highlighted by the AO i.e., what was the purpose sought to be achieved by the assessee by entering into the agreement with the sister concern with regard to the discounting transaction and if it can be projected then there would have been some benefit to the assessee out of it, it can well be treated as a trading liability as otherwise merely because it was considered as a trading liability in the first year, it cannot continue to remain as a trading liability atleast in the year in which it was noticed that it was a colourable transaction.
Since, the assessee had not been carrying on any business in the years under consideration and from the agreement entered into with the associate concern assessee appears to have not obtained any benefit from the time the agreement was entered into - It cannot be said that assessee was not aware of the activities of the sister concern and assessee cannot plead that it is naive to the fact that there are no chances of making fair profit - Therefore, it is for the assessee to highlight as to what prompted it to enter into such transaction and how it had benefited the assessee in any of these earlier years as well as in the years under consideration - The expression "cessation" or "remission" of liability was subject matter of consideration by various Courts and various principles were laid down which can act as guiding factors in order to consider as to what can be classified as remission or cessation of trading liability - order of the learned CIT(A) deserves to be set aside & restore the issue to the file of the Assessing Officer for fresh consideration - Thus, the appeal filed by the Revenue is treated as allowed for statistical purposes.
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2010 (12) TMI 914
Disallowance u/s 40A(2)(b) - as per AO there was a phenomenal increase in the expenses under this head compared to A.Y 2005-06 which was only Rs.50,000/- as against Rs.18,00,000 in the present A.Y., when all the factors for conducing the business in the present Assessment year also existed without any noteworthy change - Held that:- It was the claim of the Assessee that M/s. Kukreja Services Pvt. Ltd. incurred all the expenses relating to the building i.e. payment rent, electricity charges, security expenses, gardening expenses, computer expenses, accountant and all the other maintenance expenses and that the business centre charges was on account of office premises with all facilities provided by M/s. Kukreja Services Pvt. Ltd. The assessee did not provide any material by way of bills raised, correspondence, etc. to enable AO to verify whether any services were rendered by Kukreja Services Pvt. Ltd. to warrant the payments. In fact only the Profit and Loss account and Balance Sheet of M/s.Kukreja Services Pvt. Ltd. was been filed but no details of what services were rendered and how M/s. Kukreja Services Pvt. Ltd. has allocated the expenses to its sister concern/related parties have been filed. There is no consistency in the allocation of expenses by the said M/s. Kukreja Services Pvt. Ltd.
Even before the tribunal, the Assessee has not produced any evidence to substantiate the increase in payment of charges in this A.Y. compared to the earlier year. The submissions made before us are very general without any supporting evidence. In these circumstances it would be appropriate to set aside the order of CIT(A) on this issue and remit the issue to the AO for fresh consideration and affording the Assessee an opportunity of letting in evidence to substantiate the submissions made before us.
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2010 (12) TMI 913
Depreciation - The assessee has been operating JCB Earth Moving Machines for which it had claimed depreciation at the rate of 30% which was scaled down to 15% by the AO on the ground that the actual depreciation allowable in respect of those machines was only at 15% - Held that:- Mobile crane was registered as a heavy motor vehicle which was, therefore, enlisted to claim depreciation at a higher rate as in the case Gujco Carriers v. CIT [2002 (2) TMI 48 - GUJARAT High Court] being relied upon by assessee whereas in the present case even the JCB Earth Movers have not been registered as a heavy motor vehicles with the Regional Transport Authorities - JCB is coming in the category of excavator and its main function is removing the soil or earth at the same time, JCB's another function is to carry or transport the removed soil and dump it at another site to discharge the function like transshipment and loading into another vehicle - Since JCB does not fall under sub-item (2), (3) and (8) of Part-III, it has to be necessarily included in sub-item (1) for which the permissible rate of depreciation is 15% - Decided against the assessee
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2010 (12) TMI 912
Restricting the disallowance on account of earning exempt income to 1/3rd by CIT(A) - Held that:- Because of the merger of IIPL into the assessee company, the former came to an end as a result of which the shares of amalgamated company were allotted to the share holders of IIPL. Thus, it is clear that there is no change in the management of the Company which remained with the same family (set of persons) who was earlier exercising control. The assessee submitted a list of directors on the Board of the two companies prior to merger as well as the directors on the Board of merged company. It remained in the same hands. Thus, CIT (Appeals) is correct in holding that change in more than 51% was due to merger in two companies. There was no change in control and management. Thus find considerable cogency in the part of the CIT(Appeals)'s adjudication wherein he has referred the Circular No. 528 dated 16.12.88 and considered the case of the present merger as akin to death of share holder. Also in the case of death of a living person the shares held by him get transferred to his legal heirs. Similarly when existence of a company is legally finished, the benefit of assets held by it (including shares of other company) will pass on to its shares holders. Under the circumstances, it is fully agreeable with the view of the CIT(Appeals) and do not find any infirmity or illegality in his order. Against revenue.
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2010 (12) TMI 911
Amount received on account of Business Transfer Agreement and Assignment Agreement - Capital gain or revenue receipt - assessee-company is engaged in the business of manufacturing and dealing in Electroplating salts and Chemicals, Brighteners and Additives - CIT(A) partly allowed the appeal and treated the receipt of Rs.76,59,500/- as long term capital gain and Rs.40 lakh as short term capital gain - Held that:- As the reading of the covenants/articles supports the view expressed by the Assessing Officer that it is the appellant who has done the artificial bifurcation of the total consideration value of Rs.1,16,59,500/- into Rs.40 lakhs consideration for non-competition and rs.76,59,500/- for transfer of intangible assets. It is reiterated that there is nothing in the language of the contents of the agreement to even remotely suggests that a part of the consideration is for non-compete/non-disclosure clause. In this background, it is held that the talk of consideration of Rs.40,00,000/- for the non-compete clause is extraneous to the issue at hand since it is not germane to the Business Transfer Agreement - the appellant's claim with regard to the bifurcation of the composite consideration amount of Rs.1,16,59,500/- is rejected being unfounded, unreasonable and unrealistic.
Amount of Rs.1.16 crore received on account of transfer of intangible assets - whether represents a long term capital gain or a short term capital gain - Held that:- It goes without saying that the assessee would have certainly adopted some criterion to arrive at that figure in its own international calculation and in the absence of any better alternative and also in absence of any definite date of acquisition available from record it is most appropriate and practical to hold the view that this intellectual assets are in the nature of long term capital assets.
Whether out of Rs.1,16,59,500/- the balance amount of Rs.40 Lacs is in the nature of non-compete fee or not? - Held that:- As find from the valuation report that it clearly contents that this was for the purpose of proposed agreement, which clearly contains that the company will be restricted from entering into any competitive business, directly or indirectly, for the period of next five years from the date of agreement. The buyer being a foreign collaborator company not agreeable of any bifurcation of different intellectual property and instead insisted for a total and composite cost from the agreement it can be clearly brought out that there is a specific clause 5.7 of Article-V regarding non-competition and therefore Rs.40 lakh is really attributable to non-compete reason being the assessee lost its complete right and source of income of this business - As decided in Oberoi Hotel Pvt. Ltd. v CIT [1999 (3) TMI 2 - SUPREME Court] the amount received by the assessee was the consideration for giving up its right to purchase and/or to operate the property or for getting it on lease before it was transferred or let out to other persons. It was not for settlement of rights under a trading contract, but the injury was inflicted on the capital asset of the assessee and giving up the contractual right on the basis of the principal agreement had resulted in loss of source of the assessee's income. The receipt in the hands of the assessee was a capital receipt.
Part of the compensation attributable to the restrictive cogent - whether is a capital receipt or a revenue receipt?- Held that:- As answered by in Gillanders Arbuthnot and Co. Ltd. v. Commissioner of Income-tax [1964 (5) TMI 5 - SUPREME Court] the compensation paid for agreeing to refrain from carrying on competitive business in the commodities in respect of the agency terminated or for loss of goodwill was prima facie of the nature of a capital receipt. In the present case, the covenant was an independent obligation undertaken by the assessee not to compete with the new agents in the same field for a specified period. It came into operation only after the agency was terminated. It was wholly unconnected with the assessee's agency termination. Therefore, hold that part of the compensation attributable to the restrictive covenant was a capital receipt and hence not assessable to tax.
Whether the compensation paid is severable - Held that:- As the decision of the lower authorities in assessing this non-compete fee as short term capital gain rather this compensation is for loss of source of income and accordingly capital in nature not taxable. This issue of the assessee's appeal is allowed.
Disallowance being late payment of ESIC - Held that:- The amendments, though made applicable by Parliament only with effect from 1-4-2004, were curative in nature and would apply retrospectively w.e.f. 1-4-1988. Accordingly, following Apex Court in the case of Alom Extrusions Ltd. (2009 (11) TMI 27 - SUPREME COURT) and P.M. Electronics Ltd. (2008 (11) TMI 3 - DELHI HIGH COURT) allow the claim of the assessee.
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2010 (12) TMI 910
Re-assessment notice - Whether notice issued u/s148 of the Act was not invalid specially when the assessee had consciously and intentionally waived his right to object to the defect in the notice - Notice under Section 148 of the Act were issued in the name of Kesho Dass and the learned counsel for the assessee had admitted and made a statement that the returns already filed by the assessee be treated to have been filed in response to notices issued u/s 148 of the Act in the status of Hindu Undivided Family (HUF). According, once the assessee had filed returns in response to re-assessment notice under Section 148 in the status of HUF, he could not take a plea that the notice issued by the assessing officer did not disclose the status of the assessee and was, thus, invalid - Thus,answered in favour of the Revenue and against the assessee.
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2010 (12) TMI 903
Deduction u/s. 80IB(10) - A detailed block plan showed that assessee wanted to construct four wings known as wings A, B, C and D and these were supposed to be independent wings - It was submitted that there is no requirement under the section that assessee should be owner of the land - Since assessee had not completed D wing and had also not sold any of the flats in the D wing, and deduction was claimed only in respect of A, B and C wings, same were allowable - assessee had fulfilled all these conditions because the project was approved on 8-1-2004 and completed before 31-3-2008 which means that the project was approved by the local authority before 31-3-2007 it becomes clear that the Ld. CIT[A] was satisfied that each unit of the residential flat in all the three wings was less than 1000 sq.ft. and since Revenue has not filed any cross objection against this finding, the same has become final and binding on the Revenue - It really makes no difference whether M/s Conwood Agencies had applied for or the assessee had applied to the municipal corporation to make any difference in deciding the assessee’s claim for deduction under s. 80-IB(10) of the Act - Held that: Revenue was not right in holding that assessee is not entitled to deduction u/s. 80-IB(10) because the housing project was not completed as D wing was never completed before the specified date the first condition is met because the project is commenced after 1-10-1998 and the same has been completed before 31-03-2008 because of the relevant Occupation Certificates for A, B and C wings have been obtained before 31-03-2008 - AO has not given any specific defect in respect of any particular expenditure - In the result, all the appeals are partly allowed
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2010 (12) TMI 900
Waiver of pre-deposit and stay of recovery - GTA service eligible for the benefit of Notification No. 34/2004-S.T., dated 3-12-2004 - In the present appeal, the assessee submits that they are eligible for exemption inasmuch as the gross amount charged on each consignment of husk transported to the factory did not exceed Rs. 1500/- - CDR submits that exemption is admissible only where the gross amount charged on each consignment of husk transported did not exceed Rs. 750/-. condition was not satisfied and, therefore, the benefit of the Notification is not admissible to the appellant – Held that:- only goods transport agencies and not individual goods transport operators are covered by the aforesaid definition and, therefore, no service tax was leviable on the freight involved in transportation of goods by individual goods transport operators, issues is pending with the Hon’ble High Court, which means the issue is highly debatable. The admissibility of Notification No. 32/2004-S.T. is not in dispute, but this benefit was not allowed by the Commissioner. Therefore there will be waiver of pre-deposit and stay of recovery in respect of service tax, education cess and penalties
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2010 (12) TMI 898
Whether the services of business auxiliary service received by the respondent from the commission agents appointed abroad can be treated as their input service - service received by the respondent is of commission agent appointed by them abroad who secure the export orders from them - Held that:- service of commission agent is a service of the sale promotion and would be covered by the definition of ‘input service’. In any case, the activities relating to business are also covered by the definition of ‘input service’ and the service received from the agents for securing export orders would certainly cover by the term activity relating to business, there is no infirmity in the impugned order, stay application is dismissed.
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2010 (12) TMI 897
Waiver of pre-deposit - classification - application software was intended to operate the hardware incorporating the operating software and this combination was intended to operate the Relieving Lathe Machine. - The first item was classified under Heading 84.58 and the other two items under Heading 84.71 of the First Schedule to the Customs Tariff Act. The assessing authority wanted to classify items (ii) and (iii) also under 84.58 as part of Relieving Lathe Machine. - held that:- Conspicuously, the description of these goods is prefixed with “CNC”. Both sides have expanded this term into 'Computer Numerically Controlled'. - Prima facie, the Relieving Lathe Machine, whose description is prefixed as above is not capable of being manually operated. Apparently, it could be operated only with the accompaniments. The classification proposed by the assessing authority is, prima facie, correct - Considering the plea of financial hardships raised by the learned counsel, appellant directed to pre-deposit only a part of the duty amount
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2010 (12) TMI 894
Reopening - Revenue or capital expenditure - Validity of notice - It is not in dispute that in the case of the Assessee all investment is stock in trade which is accepting by the department since long - The interest earned in the case of the Bank, on all share and security assets are stock in trade and whatever the loss/profit are not in the nature of capital - The entire interest income of securities under whatever category had been and is being assessed in all these years as business income - Since the claim of the assessee is as per RBI guidelines and CBDT has also issued directions to allow premium to be amortized remaining with the maturity, therefore, the Assessing Officer is directed to allow the claim of the assessee amounting to Rs.65,51,826 - Decided in favor of the assessee Regarding deduction u/s. 36(1)(viia) - Held that: The bare reading of section 36(1)(viia) mades it clear that the advance made by the rural branches are exempt under this section, irrespective of the facts that these are made to persons(s) involved in the rural activities or otherwise - this has been the Assessing Officer has misconceived the provisions that only advances which were for rural purposes has to be considered for the purpose of computing deduction u/s. 36(1)(viia) - Decided in favor of the assessee
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2010 (12) TMI 892
Penalty under Section 271 (1)(c) - deduction claimed under Section 80IB on export incentives - disallowance of deduction by holding that there was no deliberate furnishing of inaccurate particulars by the assessee, - Revenue does not dispute that the matter is covered against the revenue by order of this Court in CIT v. M/s Raj Overseas (2010 -TMI - 204320 - PUNJAB AND HARYANA HIGH COURT). appeals are dismissed.
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2010 (12) TMI 890
Reopening - Capital gain and profit u/s 41(2) - Validity of notice - It is stated by the learned counsel that the assessment year under consideration is 1986-87 and notice under section 148 for reopening of the assessment was issued on 27-3-1997 - it is evident that in the reasons recorded for reopening of the assessment, the Assessing Officer has referred to the order of the CIT(A) in the case of "ILBPL" dated 4-3-1994 for assessment year 1988-89 - it is abundantly clear that the assessee has duly disclosed the fact of revaluation of the assets, creation of self-generated assets viz., goodwill and also that the difference between the cost and the revalued amount of the assets is transferred to the partners' capital account - Moreover, during the original assessment proceedings, the Assessing Officer made enquiry on this point and in reply to such query also the assessee stated about revaluation of the assets as well as creation of the self-generating assets - Held that: There was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment - Decided in favor of the assessee
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2010 (12) TMI 888
Penalty u/s 271(1) - Undisclose cash - search was conducted and unaccounted cash belonging to the assessee was found during the course of search, the assessee later on made a surrender of cash of Rs. 20,00,000 which cannot be said to be bona fide action on the part of the assessee because the assessee despite having ample opportunity from the date of search in July, 2004 till the date of filing of the original return on 14-10-2005 had been claiming it to be accounted cash for which no evidence was filed at any stage - For what purpose the assessee was waiting for making a surrender on 3-1-2007 is not clear - Therefore, would show that the learned CIT(A) was not justified in deleting the penalty - Decided against the assessee.
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2010 (12) TMI 886
Rejection of book of accounts - Addition - Estimation of gross profit @10% - since the books of account, bills and vouchers are not available, the book result stand rejected u/s 145(3) and he therefore, went ahead for estimating the income - assessee replied that the bills are prepared when each process is completed as on the date of balance sheet and the revenue is booked for total process wise work carried out by the assessee and therefore, there is no work in progress - The assessee claimed before the authorities below that bills are prepared at the end of the financial year and there was no work in progress and there was no stock of raw material which is supported by TDS certificates - it is clear that addition made and sustained by the authorities below is still excessive and unreasonable. The authorities below in the absence of books of accounts, bills, vouches and other details rightly rejected the book results of the assessee - there is no basis to compute the addition on account of work in progress which has no basis at all. The separate addition made on account of work in progress/closing stock is accordingly deleted Regarding disallowance of staff salary - Since the profit of the assessee is estimated by applying GP rate of 10% and the details of books of accounts have not been produced before the authorities below, no further addition is required to be made as per findings given above - appeal of the assessee is partly allowed
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2010 (12) TMI 885
Reassessment - Deduction u/s 80IB - The net profit of Banther Unit is declared at Rs.20,75,158/- which includes the amount of duty draw back of Rs.25,43,130 - held that:-In the present case also the notice under section 148 for making the re-assessment under section 147 of the Act was not based merely on change of opinion but also on the judgments of the Hon'ble Madras and Hon'ble Delhi High Courts, therefore, the re-opening under section 148 of the Act was valid. Claim of duty drawback as deduction u/s 80IB - in the case of Liberty India v. CIT [2009 -TMI - 34471 - SUPREME COURT] the Supreme Court considered the scheme of the duty drawback and held that the duty drawback received from the Central Government under the scheme does not fall within the purview of income derived from the business of the industrial undertaking so as to entitle the assessee to deduction under section 80-IB of the Act - Decided against the assessee
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2010 (12) TMI 884
Stay of demand - Transfer pricing adjustments - The assessee had classified its activities in two categories i.e. manufacturing and trading - The TPO made detailed analysis of trading business and noted that it mainly consisted of the indenting commission business which had turnover of Rs. 734.83 crore whereas the trading sales were only Rs. 42.71 crores - TPO therefore separated the indenting business and noted that the profit margin shown was only 0.04% whereas in respect of trading business margin shown was 9.63% - AO therefore considered indenting business as a separate segment - TPO asked the assessee to file comparable cases which were doing the same business. The assessee failed to do so. Thereupon the TPO himself collected three comparable and computed the transfer pricing adjustments on that basis using CUP method - TNMM method had been rejected and CUP method followed in view of new facts gathered showing that indenting business was a separate segment - Prima facie no case has been made in favour of the assessee on the merit of adjustments - find no case for stay of demand.
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