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Showing 381 to 400 of 699 Records

• 2008 (5) TMI 338
  
  Issues Involved:
  1. Whether the order of AO passed u/s 143(3) r/w s. 254 is barred by limitation prescribed u/s 153(2A).
  2. Whether learned CIT(A) is right in not going into merits of the case.
  
  Summary:
  
  Issue 1: Limitation u/s 153(2A)

  The assessee contended that the AO's order was barred by limitation as per s. 153(2A) of the IT Act. The AO issued notices u/s 143(2) after the Tribunal upheld the CIT(A)'s order. The AO completed the assessment on 10th March 2004 and 12th March 2004 for the respective years, which the assessee argued was beyond the prescribed time limit. The learned Departmental Representative argued that the time limit under s. 153(3)(ii) applied, which does not prescribe a time limit for orders passed to give effect to Tribunal decisions. The Tribunal clarified that s. 153(2A) applies to fresh assessments required by orders setting aside or canceling assessments, while s. 153(3)(ii) applies to assessments made to give effect to findings or directions without a time limit, subject to s. 153(2A). The Tribunal concluded that the AO's orders for 1990-91 and 1991-92 were barred by limitation as they were not passed within the prescribed period.

  Issue 2: Merits of the Case

  The CIT(A) did not address the merits of the additions for the assessment year 1989-90, and for 1990-91, the assessment was completed at nil income. For 1991-92, the CIT(A) confirmed the additions made by the AO. The Tribunal noted that since the assessment orders were quashed on the ground of being barred by limitation, there was no need to go into the merits of the additions made.

  Conclusion:

  The appeals of the assessee for all three years were allowed, with the Tribunal quashing the assessment orders for being barred by limitation.

  ---

• 2008 (5) TMI 333
  

  Interpretation of Statutes - Eligibility of deduction u/s 80I - developing housing project - clubbed various plots of different sizes - show that land area was more than 1 acre - pro rata deduction in respect of dwelling units having built-up area less than 1,500 sq. ft. - each layout separately would not be adverse to claim deduction u/s. 80-IB(10) - non-fulfilment of conditions prescribed in s. 80-IB(10) - Whether the assessee has fulfilled the conditions prescribed by s. 80-IB(10)?

  Whether the project is on the size of a plot of land which has a minimum area of one acre? - HELD THAT:- As per the assessee, the project is developed on the area of 2.06 acres, while as per the AO, the project is developed in an area of below one acre. In the paper book, the assessee has furnished the certificate from the NIT which is the local authority entitled to approve the housing project.

  It is evident that the assessee has developed a housing project scheme. In respect of such housing scheme, the assessee got the approval from NIT on six different dates ranging between 11th Jan., 2002 to 15th May, 2002. The area of land covered under each approval was below 4,000 sq. mtrs. but the total area covered together in all the six approvals was 8,370 sq. mtrs. which is more than two acres.

  Whether by six different approvals, the assessee has developed six different housing projects or it was in pursuance to development of one housing project - From the letter of NIT, it is evident that there was only one housing project for which multiple sanctions were granted, as per the zoning of the plot and access road. This contention of the assessee is further fortified by the brochure circulated by the assessee for the sale of the plot. The copy of the brochure is placed at the assessee's paper book.

  From the brochure, it is evident that during the year under consideration the assessee developed only one housing project. Merely because for such one project, the approval was taken from NIT more than once, it cannot be said that the assessee developed six different housing projects. In view of totality of the facts, we agree with the finding of the CIT(A) that during the accounting year, relevant to assessment year under consideration, assessee developed one housing project, which was on the area exceeding one acre.

  Whether the built-up area of the residential unit constructed by the assessee exceeded 1,500 sq. ft. - Applying the ratio of the decision of the Hon'ble apex Court in the case of Virtual Soft Systems Ltd. vs. CIT [2007 (2) TMI 147 - SUPREME COURT], we find that sub-cl. (a) of s. 80-IB(14) has been made effective by the legislature from 1st April, 2005. There is no mention in the Act that the insertion of the definition of the built-up area as above is clarificatory or declaratory. Thus, relying up the decision of the Hon'ble apex Court hold that the definition would be applicable from 1st April, 2005 i.e., for the AY 2005-06 onwards.

  In our opinion. in the year under consideration, when there is no definition of the built-up area under the IT Act, the definition of the same in the Development Control Regulation, 2000, for Nagpur City would be applicable. However, we find that the relevant facts have not been examined in the light of the above Regulation.

  We, therefore, direct the AO to examine whether in view of Development Control Regulation, 2000 area of the balcony is to be included in built-up area or not. Thereafter, if the built-up area of any residential unit does not exceed 1,500 sq. ft., then the entire deduction claimed under s. 80-IB(10) would be allowed. However, if the area of the some of the residential units exceeds 1,500 sq. ft., the question would be whether the entire deduction under s. 80-IB is to be denied or proportionate deduction is to be allowed.

  It would be fair and reasonable to allow the deduction on proportionate basis i.e. on the profit derived from the construction of the residential unit which has a built-up area of less than 1,500 sq. ft. i.e. the limit prescribed under s. 80-IB(10). thus, we direct the AO that if he finds that the built-up area of some of the residential units is exceeding 1,500 sq. ft., he will allow the proportionate deduction under s. 80-IB(10). Accordingly, the appeal of the Revenue is dismissed and cross-objection of the assessee is deemed to be partly allowed as above.

  In the result, the appeal by the Revenue is dismissed and the cross-objection by the assessee is deemed to be partly allowed for statistical purposes.

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• 2008 (5) TMI 332
  
  Issues involved: The liability of the assessee to collect tax under section 206C(1C) of the Income-tax Act in relation to octroi collected by the agent appointed by the assessee, Municipal Corporation in the City of Akola.
  
  Summary:
  
  Issue 1: Stay Petition Dismissal
  The stay petition was dismissed as all appeals were disposed of on merit separately.
  
  Issue 2: Liability to Collect Tax under Section 206C(1C)
  The Income-tax Department concluded that the assessee was required to collect tax at source on octroi, akin to a "Toll Plaza" under section 206C(1C). However, the assessee argued that octroi collection is distinct from the concept of a toll plaza, citing relevant legal provisions and court decisions. The Tribunal analyzed the definitions of "toll" and "octroi" from various sources, including the Constitution, statutes, and judicial precedents. It was determined that octroi is a tax on goods entering local areas, while toll is a compensation for temporary land use or passage of vehicles. As the octroi collected was not for a parking lot, toll plaza, mining, or quarrying, the Tribunal held that the assessee was not liable to collect tax under section 206C(1C). Consequently, the orders of the CIT(A) and Assessing Officer were set aside, and the assessee's appeals were allowed.

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• 2008 (5) TMI 327
  
  Issues Involved:
  1. Entitlement for relief u/s 80-I to the extent of gross total income.
  2. Restriction of deduction u/s 80-I to gross total income including income from other sources.
  3. Examination of components of gross total income for limiting deduction u/s 80-I.
  4. Consideration of specific income items for computing deduction u/s 80-I.
  5. Rejection of AO's proposal for enhancement and withdrawal of entire deduction u/s 80-I due to business loss.
  
  Summary:
  
  1. Entitlement for Relief u/s 80-I:
  The CIT(A) erred in holding that the assessee is entitled for relief u/s 80-I to the extent of gross total income of Rs. 9.89 crores. The Tribunal found that the CIT(A) correctly allowed the deduction to the extent of the gross total income, confirming the order of the CIT(A).
  
  2. Restriction of Deduction u/s 80-I:
  The CIT(A) concluded that deduction u/s 80-I should be restricted not to the profits and gains of business but to the gross total income which includes income from other sources. The Tribunal upheld this view, stating that s. 80A(2) restricts the aggregate of all deductions to the gross total income.
  
  3. Examination of Components of Gross Total Income:
  The CIT(A) concluded that the components of the gross total income cannot be examined for limiting deduction u/s 80-I. The Tribunal agreed, noting that once the deduction is determined, the components of the gross total income cannot be re-examined at the stage of applying s. 80A(2).
  
  4. Consideration of Specific Income Items:
  The CIT(A) failed to appreciate that when a particular item of income cannot be considered for computing deduction u/s 80-I, the same cannot be considered for limiting the deduction under the said section. The Tribunal found that the AO had excluded dividend income and interest income from TNEB, which was correct as these were not derived from the industrial undertaking.
  
  5. Rejection of AO's Proposal for Enhancement:
  The CIT(A) erred in rejecting the proposal for enhancement made by the AO in the course of appeal proceedings for withdrawing the entire deduction u/s 80-I as there was a loss of business of Rs. 4.12 crores in the relevant year. The Tribunal found that the CIT(A) correctly held that the assessee was eligible for deduction u/s 80-I to the extent of the gross total income, confirming the order of the CIT(A).
  
  Reopening of Assessment:
  The Tribunal annulled the assessment proceedings, finding that the reopening was beyond four years and there was no failure on the part of the assessee to disclose any material facts. The Tribunal relied on the decisions of the Hon'ble Madras High Court in CIT vs. Elgi Finance Ltd. and CIT vs. Premier Mills Ltd., which held that reassessment beyond four years is not permissible without failure to disclose material facts.
  
  Conclusion:
  The Tribunal dismissed the appeal filed by the Revenue, confirming the order of the CIT(A) and holding that the assessee was entitled to the deduction u/s 80-I to the extent of the gross total income.

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• 2008 (5) TMI 325
  
  Issues:
  Deletion of additional income offered voluntarily during a survey and the validity of reassessment proceedings based on the same.
  
  Analysis:
  The appeal involved a single issue regarding the deletion of Rs. 9 lakhs, additional income voluntarily offered by the assessee during a survey, and the validity of reassessment proceedings. The survey was conducted under section 133A of the Income Tax Act, where the assessee agreed to offer additional income due to observations regarding the maintenance of accounts and understated receipts. The CIT(A) held the reassessment proceedings invalid, stating that the AO could not resort to section 147 based on the same material gathered during the survey, as it amounted to a change of opinion. However, the Tribunal disagreed, emphasizing that section 147 allows reassessment if income has escaped assessment, which was the case here. The AO correctly concluded that the income had escaped assessment as the agreed amount was not reflected in the return without any retraction or valid reason provided by the assessee.
  
  The Tribunal found no force in the argument of implied retraction and supported the AO's decision that the income had indeed escaped assessment. The AO satisfied the conditions for issuing a notice under section 148, and the Tribunal set aside the CIT(A)'s decision, restoring the AO's order. However, the Tribunal noted that the CIT(A) did not decide the issue on merits and referred to a High Court decision stating that statements made during a survey have no evidentiary value for additions. Therefore, the Tribunal set aside the order on this ground and directed the CIT(A) to decide the merits issue after providing the assessee with a fair opportunity to be heard. Ultimately, the appeal of the Revenue was allowed for statistical purposes, upholding the addition of the voluntarily offered income and validating the reassessment proceedings based on the escape of assessment criteria under section 147.

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• 2008 (5) TMI 322
  
  Issues Involved:
  1. Validity of notice under section 148 and subsequent reassessment.
  2. Addition of deemed dividend under section 2(22)(e) of the Income-tax Act, 1961.
  3. Whether the reassessment framed by the Assessing Officer is contrary to the provisions of law.
  
  Issue-wise Detailed Analysis:
  
  1. Validity of notice under section 148 and subsequent reassessment:
  
  The assessee challenged the reopening of the assessment on the ground that the original assessment was completed under section 143(1), and hence, the provisions of section 148 were not applicable. The Assessing Officer issued a notice under section 148 on 30-3-2005, based on the information gathered during the scrutiny assessment proceedings of assessment year 2002-03 in the case of M/s. Shivani Hospitals Pvt. Ltd., where it was noted that the company had given advances in the nature of loans over the years. The reassessment was upheld by the CIT(A) on the ground that the original assessment was completed under section 143(1), and therefore, the provisions of section 148 were applicable. The Tribunal upheld the reopening of the assessment, stating that the Assessing Officer is not required to identify and record failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for assessment when the original assessment was made under section 143(1). The Tribunal dismissed the assessee's ground on this issue.
  
  2. Addition of deemed dividend under section 2(22)(e) of the Income-tax Act, 1961:
  
  The assessee received an advance from M/s. Shivani Hospital (P.) Ltd., a company in which he and his wife were directors and held more than 10% shares. The Assessing Officer treated the advance of Rs. 2,23,574 as deemed dividend under section 2(22)(e) of the Act, as the company had accumulated profits and the advance was not returned. The CIT(A) upheld this addition, stating that the conditions laid down in the MOU were not fulfilled, and the advance made by the company fell within the purview of section 2(22)(e). The Tribunal examined the MOU and found that it lacked basic ingredients of a genuine and real commercial transaction. The MOU was not registered, there was no stipulation as to when the assessee would return the money or execute the lease deed, and no steps were taken by the company to recover the advance or the land. The Tribunal concluded that the MOU was a device to transfer money to the assessee for his benefit and confirmed the addition of Rs. 2,23,574 as deemed dividend.
  
  3. Whether the reassessment framed by the Assessing Officer is contrary to the provisions of law:
  
  The assessee argued that the reassessment framed by the Assessing Officer was contrary to the provisions of law. However, the Tribunal found that the MOU between the company and the assessee was a colourable device to transfer money to the assessee for his benefit. The Tribunal referred to various judicial authorities, including the Hon'ble Supreme Court's decision in CIT v. Mukundray K. Shah, which held that in a controlled group, the declaration of dividend is within the discretion of the controlling group, and they may adopt a device of advancing the profits by way of loan to its shareholders to avoid payment of tax on accumulated profits. The Tribunal held that the MOU was a device to transfer the money to the assessee for providing benefit to him for the purchase of land and house constructed thereupon for his benefit. Therefore, the reassessment framed by the Assessing Officer was not contrary to the provisions of law.
  
  Conclusion:
  
  The Tribunal dismissed the appeals filed by the assessee for the assessment years 2000-01 and 2001-02, upholding the validity of the notice under section 148, the addition of deemed dividend under section 2(22)(e), and the reassessment framed by the Assessing Officer. The Tribunal found that the MOU was a device to transfer money to the assessee for his benefit and confirmed the orders of the authorities below.

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• 2008 (5) TMI 321
  
  Issues Involved:
  1. Validity of the assessment order annulled by CIT(A) due to the alleged improper service of notice u/s 143(2) of the IT Act, 1961.
  
  Summary:
  
  1. Validity of Service of Notice u/s 143(2):
  - The Revenue's appeal contested the CIT(A)'s annulment of the assessment order dated 30th Jan., 2004, passed by the AO under s. 143(3) of the IT Act, 1961.
  - The assessee filed a return of income on 29th Oct., 2001, and the AO issued a notice u/s 143(2) dated 28th Oct., 2002, which was served on 1st Nov., 2002.
  - The CIT(A) annulled the assessment on the ground that the notice u/s 143(2) was not served within twelve months from the end of the month in which the return was furnished, as required by the proviso to s. 143(2)(ii).
  - The AO argued that the notice was sent to the address provided in the return but was not served, leading to the notice being sent to an alternative address in Udaipur.
  - The CIT(A) found no evidence that the notice was served within the prescribed time and relied on the decision of the Hon'ble Delhi High Court in CIT vs. Lunar Diamonds Ltd., which emphasized the necessity of serving the notice within the stipulated period.
  
  2. Arguments and Evidence:
  - The Revenue argued that the notice sent by speed-post on 28th Oct., 2002, should be deemed served within the time limit.
  - The assessee contended that the notice was served on 1st Nov., 2002, beyond the prescribed period, and the burden of proof was on the Revenue to establish timely service.
  - The Tribunal examined the assessment records and found no evidence of the notice being served within the stipulated period.
  
  3. Legal Precedents and Tribunal's Decision:
  - The Tribunal referred to multiple judgments, including CIT vs. Lunar Diamonds Ltd., CIT vs. Vardhman Estate (P) Ltd., and Dy. CIT vs. Mahi Valley Hotels & Resorts, which supported the requirement of serving the notice within the prescribed period.
  - The Tribunal concluded that the Revenue failed to prove the timely service of the notice and upheld the CIT(A)'s decision to annul the assessment order.
  - The Tribunal dismissed the Revenue's appeal, affirming that the assessment order was not in accordance with the law due to the improper service of notice u/s 143(2).
  
  Conclusion:
  The Tribunal upheld the CIT(A)'s annulment of the assessment order, emphasizing the mandatory requirement of serving the notice u/s 143(2) within the prescribed period and the failure of the Revenue to establish such service.

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• 2008 (5) TMI 320
  
  Issues Involved:
  1. Applicability of Section 36(1)(viia) of the Income Tax Act to co-operative banks.
  2. Interpretation of the term 'non-scheduled bank' under Section 36(1)(viia).
  3. The relevance of Section 56 of the Banking Regulation Act, 1949.
  4. Opportunity for the assessee to present its case.
  
  Issue-wise Detailed Analysis:
  
  1. Applicability of Section 36(1)(viia) of the Income Tax Act to co-operative banks:
  The assessee, a co-operative society engaged in banking, claimed a deduction under Section 36(1)(viia) for bad and doubtful debts. The Assessing Officer (AO) disallowed the claim, limiting the deduction to 5% of total receipts, resulting in a disallowance of Rs. 93,44,884. The CIT(A) upheld the AO's decision, referencing a Tribunal decision which stated that Section 36(1)(viia) applies only to scheduled and non-scheduled banks, not co-operative banks. The CIT(A) also noted that the Finance Minister's speech during the 2007-08 Budget proposed the inclusion of co-operative banks under Section 36(1)(viia) from April 1, 2007, indicating that the provision was not applicable to co-operative banks prior to this date.
  
  2. Interpretation of the term 'non-scheduled bank' under Section 36(1)(viia):
  The main contention was whether a co-operative bank could be classified as a 'non-scheduled bank' under Section 36(1)(viia). The assessee argued that based on the definition in the Banking Regulation Act, a 'non-scheduled bank' includes any banking company, which should encompass co-operative banks. The Revenue countered that the definition of 'non-scheduled bank' in the Income Tax Act is exhaustive and does not include co-operative banks. The Tribunal agreed with the Revenue, stating that the definitions provided in the Income Tax Act are comprehensive and do not extend to co-operative banks. The Tribunal emphasized that the legislative intent was clear, as the benefit under Section 36(1)(viia) was explicitly extended to co-operative banks only from April 1, 2007.
  
  3. The relevance of Section 56 of the Banking Regulation Act, 1949:
  The assessee relied on Section 56 of the Banking Regulation Act, which applies the provisions of the Act to co-operative societies, arguing that this should extend the definition of 'non-scheduled bank' to include co-operative banks. The Revenue argued that Section 56 is intended to regulate the banking activities of co-operative banks, not to redefine terms in the Income Tax Act. The Tribunal agreed with the Revenue, stating that Section 56 does not override the specific definitions in the Income Tax Act. The Tribunal noted that Section 56 aims to bring co-operative banks under the regulatory framework of the Banking Regulation Act, not to alter the definitions used in the Income Tax Act.
  
  4. Opportunity for the assessee to present its case:
  The assessee claimed that the CIT(A) did not provide sufficient opportunity to present its case. The Tribunal did not find merit in this argument, as the CIT(A) had relied on existing legal interpretations and legislative amendments. The Tribunal concluded that the CIT(A)'s decision was based on a thorough understanding of the law and the legislative intent.
  
  Conclusion:
  The Tribunal upheld the CIT(A)'s order, confirming that the provisions of Section 36(1)(viia) did not apply to co-operative banks for the assessment year in question. The appeal filed by the assessee was dismissed.

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• 2008 (5) TMI 316
  
  Issues Involved:
  1. Jurisdiction of the Assessing Officer under section 154 of the Act.
  2. Consideration of DEPB sale proceeds as income for deduction under section 80HHC.
  3. Retrospective application of amendments by the Taxation Laws (Amendment) Act, 2005.
  4. Rectification of mistakes apparent from the record.
  
  Detailed Analysis:
  
  1. Jurisdiction of the Assessing Officer under section 154 of the Act:
  The assessee contended that the Assessing Officer erred in law and facts by invoking section 154 of the Act to rectify the assessment order, arguing that the issue was debatable and beyond the powers of section 154. The Tribunal examined whether the Assessing Officer had the jurisdiction to rectify the order under section 154, which allows rectification of any mistake apparent from the record. The Tribunal noted that the rectification was based on the retrospective amendment by the Taxation Laws (Amendment) Act, 2005, and found that the Assessing Officer had the jurisdiction to rectify the mistake as it was apparent from the record due to the retrospective amendment.
  
  2. Consideration of DEPB sale proceeds as income for deduction under section 80HHC:
  The assessee argued that only the profit element of DEPB sale proceeds should be considered for deduction under section 80HHC, not the entire sale proceeds. The Tribunal analyzed the amendment which introduced clause (iiid) to section 28, stating that "any profit on the transfer of the DEPB Scheme" should be considered as income. The Tribunal found that the entire sale proceeds of DEPB, which the assessee initially treated as profit, should be considered for the purpose of deduction under section 80HHC. The Tribunal rejected the assessee's contention that only the profit element should be considered, as the amendment clearly included the entire sale proceeds as income.
  
  3. Retrospective application of amendments by the Taxation Laws (Amendment) Act, 2005:
  The Tribunal noted that the amendments to section 80HHC and section 28 by the Taxation Laws (Amendment) Act, 2005, were made with retrospective effect from 1-4-1998. The Tribunal held that the retrospective amendments were applicable to the assessment year in question and that the Assessing Officer was correct in applying the amended provisions to rectify the assessment order. The Tribunal cited several Supreme Court judgments supporting the application of retrospective amendments to rectify mistakes apparent from the record.
  
  4. Rectification of mistakes apparent from the record:
  The Tribunal examined whether the issue was debatable and thus outside the scope of section 154. The Tribunal found that the issue was not debatable as the retrospective amendment clearly defined the treatment of DEPB sale proceeds. The Tribunal held that the Assessing Officer correctly identified and rectified the mistake apparent from the record by applying the retrospective amendment. The Tribunal concluded that the Assessing Officer's action under section 154 was justified and within the legal framework.
  
  Conclusion:
  The Tribunal allowed the assessee's appeal, setting aside the order of the learned CIT(A) and holding that the Assessing Officer's rectification under section 154 was within jurisdiction and justified based on the retrospective amendments. The entire sale proceeds of DEPB were to be considered as income for the purpose of deduction under section 80HHC, and the retrospective amendments were applicable to the assessment year in question.

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• 2008 (5) TMI 314
  
  Issues involved: Initiation of assessment proceedings u/s 147, reference to DVO u/s 142A, addition on account of unexplained investment.
  
  For the assessment year 2001-02, the assessee challenged the initiation of reassessment proceedings u/s 147 and the reference to the DVO u/s 142A. The AO initiated proceedings based on a survey revealing discrepancies in the cost of construction of a property. The DVO's report valued the property higher than the assessee's declaration, leading to an addition of Rs. 25,07,483. The CIT(A) upheld the AO's decision. The assessee argued that the Inspector's report and DVO's valuation were not valid grounds for reassessment. The Tribunal agreed, stating that the AO lacked concrete evidence to believe income had escaped assessment. The reference to the DVO was deemed invalid as complete accounts were maintained, and the AO did not have valid reasons for suspicion. The Tribunal allowed the assessee's appeal on these grounds.
  
  Regarding the merit of the addition, the AO rejected the books of account and made the addition based on the DVO's report. However, the Tribunal found that the registered valuer's report, valuing the property lower than the DVO, was not contested by the AO. As no defects were found in the valuer's report, the Tribunal reversed the CIT(A)'s decision and allowed the assessee's appeal on this ground.
  
  For the assessment year 2002-03, similar issues arose as in the previous year. The Tribunal applied the decision from the 2001-02 assessment year to allow the assessee's appeals on the grounds related to initiation of assessment proceedings u/s 147, reference to DVO u/s 142A, and addition on account of unexplained investment. The general ground raised by the assessee was not adjudicated upon.
  
  In conclusion, the Tribunal allowed the appeals of the assessee for both assessment years, finding in favor of the assessee on the issues related to reassessment proceedings, reference to the DVO, and addition on account of unexplained investment.

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• 2008 (5) TMI 312
  
  Issues Involved:
  1. Deletion of addition of Rs. 75,000 as agricultural income.
  2. Deletion of addition of Rs. 1.50 lacs as credit from Shri Bhagwandas.
  
  Issue-wise Detailed Analysis:
  
  1. Deletion of Addition of Rs. 75,000 as Agricultural Income:
  
  The Revenue appealed against the CIT(A)'s order, which deleted an addition of Rs. 75,000 made by the AO. The AO had estimated the agricultural income at Rs. 1,79,414, treating Rs. 75,000 as income from other sources, while the assessee had shown agricultural income of Rs. 2,54,414. The CIT(A) observed that the AO's estimate lacked basis and cited the Andhra Pradesh High Court's decision in S. Sarabhaiah Shetty & Sons v. CIT, which held that an estimate without a stated basis is untenable. The Tribunal agreed with the CIT(A), noting that the assessee had shown consistent agricultural income in previous years and found no infirmity in the CIT(A)'s deletion of the Rs. 75,000 addition.
  
  2. Deletion of Addition of Rs. 1.50 Lacs as Credit from Shri Bhagwandas:
  
  The AO added Rs. 1.50 lacs to the assessee's income, which was shown as a credit from Shri Bhagwandas. The AO accepted that Rs. 1.50 lacs was taken from Satbhaiya Agro Industries but questioned the source of another Rs. 1.50 lacs, which Bhagwandas claimed as his savings. The CIT(A) deleted the addition, relying on the Madhya Pradesh High Court's decision in CIT v. Metachem Industries, which held that if the creditor accepts having advanced the money, no addition should be made in the assessee's hands.
  
  The Tribunal was divided on this issue. The Accountant Member (AM) agreed with the CIT(A), noting that the amount was advanced through an account payee cheque, confirmed by an affidavit from Bhagwandas, and the immediate source was covered by withdrawals from Patel Motors. The Judicial Member (JM) disagreed, emphasizing that the assessee failed to satisfactorily explain the source of Rs. 1.50 lacs. The JM highlighted discrepancies in Bhagwandas' statements and financial capacity, suggesting the amount might belong to the assessee.
  
  Due to the disagreement, the matter was referred to a Third Member. The Third Member supported the AM's view, stating that the source of the money borrowed by the assessee was properly explained, and the assessee is not required to prove the source of the source. The Third Member cited decisions from the Allahabad and Gujarat High Courts, which support the principle that the assessee cannot be asked to prove the source of the source. Consequently, the majority view upheld the CIT(A)'s deletion of the Rs. 1.50 lacs addition.
  
  Conclusion:
  
  The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s orders on both issues. The deletion of Rs. 75,000 as agricultural income and Rs. 1.50 lacs as credit from Shri Bhagwandas was upheld based on the lack of a basis for the AO's estimates and the satisfactory explanation provided by the assessee, respectively.

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• 2008 (5) TMI 311
  

  Failure to deduct TDS u/s 194-I - Interest under s. 201(1A) - licence fees paid/payable to M/s Ramco Ind. Ltd. for utilization of its production facilities - whether in the nature of rent - Assessee In Default - Assessee contented that as per agreement, the company used its production facilities and charges are billed on the basis of actual production obtained by assessee company from its unit and hiring of equipments, plant and machinery and production facilities are not covered u/s 194-I - essence of the agreement was not to take on rent the premises -

  Ld DR submitted no evidence has been furnished to substantiate that tax on the related income covered by s. 194-I has been paid by M/s Ramco Ind. Ltd. - HELD THAT:- It is settled law that when the tax due had been paid by the deductee, the same could not be recovered again from the assessee. Hon'ble Delhi High Court in the case of CIT vs. Eli Lilly & Co. (I) (P) Ltd. [2006 (11) TMI 107 - HIGH COURT , DELHI] held "that while some salary might have accrued to these four executives outside India, the vital incidence of the payment of the salaries to them abroad had not actually been made by the assessee. The assessee was not liable to deduct tax at source. Since the four executives had paid the interest, there was no justification for claiming interest from the assessee."

  Hon'ble Delhi High Court in the case of CIT vs. Majestic Hotel Ltd.[2006 (6) TMI 104 - DELHI HIGH COURT] held allowing the appeals, that the assessee was in default on account of its failure to make the deduction at source. That default would render it liable to pay the tax amount as also interest on the same after taking credit for the payments, if any, already made by the deductee.

  Learned CIT(A), on the basis of material produced before him found that appropriate taxes on such income apparently have been paid by the recipient/licensor M/s Ramco Ind. Ltd. and, directed the AO to allow such deduction subject to verification and confirmation by AO. Learned CIT(A) also noted that since the taxes have been paid by the licensor, the same would amount to double collection of tax on the same income.

  We do not find any infirmity in the order of the learned CIT(A) because the assessee has filed complete details before learned CIT(A) in respect of taxes paid by M/s Ramco Ind. Ltd. on whole of its income including the income received on account of licence fees. The same details are also filed with the paper book including certificate from M/s Ramco Ind. Ltd. and copy of the computation of their income and acknowledgement of filing of return. All taxes are paid quarterly.

  Therefore, we do not find any merit in the Departmental appeals. Even otherwise, the learned CIT(A) allowed the claim of, assessee subject to verification by the AO therefore, there should not have been any grievance against the order of the learned CIT(A). The Departmental appeals fall and are accordingly dismissed.

  Applicability of s. 194-I on licence fees paid/payable to M/s Ramco Ind. Ltd. for utilization of its production facilities -Assessee has not clarified as to how it can use effectively the plant and machinery without using the factory building. The details of gross block of fixed assets on 31st March, 2003 as filed at paper book-A/13 show that the total gross value of land. building and plant and machinery out of which, the value of plant and machinery. It would therefore, prove that the value of land and building, furniture, fittings, including factory building was also having substantial value which cannot be given to the assessee without any consideration for use and occupation. Schedule A attached with the agreement also prescribed that entire factory building of pipe plant excluding warehouse has been handed over by M/s RIL to M/s KSGML.

  Since entire factory building is given to the assessee and the licensor had no control over the factory building, therefore, it cannot be believed that it, was a case of licence agreement. In the case of lease, the creation of interest in the rented property is there, which we find in this case because the right to enjoyment in the entire property has been created in favour of the assessee therefore, it falls within a definition of rent as prescribed in Expln. (i) to s. 194-I of the IT Act. The assessee has not made out any case that it was getting the goods manufactured from the licensor on job basis.

  We are of the view that the agreement in question is a composite agreement for renting out the entire factory building including plant and machinery, tools, and residential quarters subject to minimum payment of Rs. 40 lakhs. Merely, because the name of agreement is given as licence agreement is not enough to thwart the provisions of s. 194-I of the IT Act. In this view of the matter, we do not find any infirmity in the orders of authorities below. Provisions of s. 194-I are applicable to this case. We therefore, confirm the orders of authorities below and dismiss ground No. 1 in all the appeals of the assessee.

  Interest under s. 201(1A) - charging interest upto the terminal date - Assessee has filed all the relevant details before learned CIT(A) which are noted in the appellate order with regard to total income of the recipient including the licence fees paid by assessee, TDS/advance tax paid and self-assessment tax paid. The assessee in the paper book also filed certificate from M/s Ramco Ind. Ltd., acknowledgment of filing of return, in which it was explained that licence fee is included in the total income and quarterly taxes have been paid.

  The decision in the case of Rajasthan Rajya Vidyut Prasaran Nigam Ltd. [2005 (8) TMI 83 - RAJASTHAN HIGH COURT] is clearly applicable to support the contention of the assessee. However, we find that neither the AO nor the learned CIT(A) has given any finding as to when the taxes have been paid by M/s Ramco Ind. Ltd. therefore, it would be appropriate to restore the matter to the AO to verify the dates of payments before charging or calculating any interest in the matter because it is definite that the recipient has already paid tax.

  We accordingly set aside the orders of authorities below and restore this issue to the file of AO with direction to verify the dates of payments of taxes and pass appropriate reasoned order in the light of the findings given in this order. The AO shall give reasonable sufficient opportunity of being heard to the assessee. As a result, this ground of appeals of the assessee is allowed for statistical purposes.

  As a result, all the appeals of assessee are allowed partly for statistical purposes.

  As a result, Departmental appeals are dismissed and assessee's appeals are partly allowed for statistical purposes.

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• 2008 (5) TMI 310
  
  Issues Involved:
  1. Deletion of addition made by the Assessing Officer on account of compensation and interest received by the assessee from the US Government.
  2. Validity of reassessment proceedings initiated under section 147.
  3. Taxability of compensation and interest received as capital or revenue receipt.
  4. Addition of Rs. 76,38,650 over and above what the assessee received from the USA towards compensation and post-judgment interest.
  5. Application of Article 18(4) of the Constitution of India.
  
  Issue-wise Detailed Analysis:
  
  1. Deletion of Addition by Assessing Officer:
  The revenue was aggrieved by the deletion of the addition made by the Assessing Officer, who had treated the compensation and interest received by the assessee from the US Government as taxable income under the head 'Income from salary.' The CIT(A) observed that there was no employer-employee relationship, which is crucial for taxing a receipt under the salary head. The compensation was awarded for the injury caused by denying employment due to discriminatory practices, thus making it a capital receipt. The CIT(A) concluded that the compensation and pre-judgment interest were capital receipts and not taxable.
  
  2. Validity of Reassessment Proceedings:
  The assessee challenged the initiation of reassessment proceedings under section 147, arguing that the reasons recorded for issuing the notice were merely a reproduction of the information already provided in the income tax return. The CIT(A) upheld the validity of the reassessment, stating that there was adequate information to create a belief that income chargeable to tax had escaped assessment. The expression "reason to believe" was interpreted as requiring a bona fide belief based on reasonable grounds, not conclusive evidence at the stage of issuing the notice.
  
  3. Taxability of Compensation and Interest:
  The CIT(A) held that the compensation received was for the wrongful act of denying employment and was thus a capital receipt. The CIT(A) also treated the pre-judgment interest as part of the compensation, making it a capital receipt and not taxable. However, post-judgment interest and interest on refund by IRS USA were considered taxable as income from other sources. The ITAT agreed with this view, emphasizing that if the pre-judgment interest was part of the $508 million settlement fund, it retained the character of the principal amount of compensation and was not taxable.
  
  4. Addition of Rs. 76,38,650:
  The assessee contended that the income tax authorities had added Rs. 76,38,650 over and above what was actually received from the USA towards compensation and post-judgment interest. The CIT(A) did not pass any specific order on this issue. The ITAT restored this ground to the file of CIT(A) for a decision as per law after affording a reasonable opportunity of being heard to the assessee.
  
  5. Application of Article 18(4) of the Constitution of India:
  The assessee argued that the income tax authorities overlooked the provisions of Article 18(4) of the Constitution of India. The ITAT found this ground unsustainable, noting that the Assessing Officer had considered all relevant provisions of the Income-tax Act, 1961, and the CIT(A) had provided appropriate relief regarding the compensation received.
  
  Conclusion:
  The ITAT allowed the revenue's appeals in part for statistical purposes, restoring the issue of pre-judgment interest to the Assessing Officer for a fresh decision. The cross-objections for the assessment year 2003-04 were dismissed, while those for the assessment year 2004-05 were allowed in part, directing the CIT(A) to decide on the addition of Rs. 76,38,650 as per law. The reassessment proceedings were upheld as valid.

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• 2008 (5) TMI 309
  
  Issues Involved:
  1. Validity of reopening the assessment.
  2. Non-deduction of license fees of Rs. 1,42,623.
  3. Non-deletion of interest levied under s. 234A.
  
  Detailed Analysis:
  
  1. Validity of Reopening the Assessment:
  The assessee had initially raised grounds regarding the validity of reopening the assessment. However, these grounds were not argued by the learned counsel during the hearing. Consequently, the tribunal held that the assessee did not wish to pursue these grounds, and they were dismissed.
  
  2. Non-Deduction of License Fees of Rs. 1,42,623:
  - Assessment Order Context: The assessee claimed a deduction of Rs. 1,42,623 under "Income from house property" for interest paid to DLF Universal Ltd. (DLF). The AO required an explanation for this deduction. The assessee explained that the amount represented interest on loan installments for property purchase, thus deductible as interest on borrowed capital under s. 24.
  - AO's Decision: The AO pointed out that the agreement with DLF termed the payment as a license fee, not interest on borrowed capital. The AO distinguished this case from CIT vs. Sunil Kumar Sharma, concluding that the payment was part of the property cost and not deductible under s. 24(1)(vi).
  - CIT(A) Appeal: The CIT(A) upheld the AO's decision, stating that the license fee was penal interest for delayed installment payments and not interest on a loan from DLF.
  - Tribunal's Analysis: The tribunal examined the agreement and noted that the assessee was termed a licensee under a 10-year payment plan, and the fee was calculated at 18% per annum on outstanding installments. The tribunal referenced the case of Sunil Kumar Sharma, which allowed deduction of interest on unpaid purchase price treated as borrowed capital. The tribunal concluded that the unpaid purchase price constitutes a debt, and any payment related to it is interest deductible under s. 24(1)(vi). Thus, the tribunal allowed the deduction of Rs. 1,42,623.
  
  3. Non-Deletion of Interest Levied Under s. 234A:
  This ground was not argued by the learned counsel and was considered consequential. The tribunal directed the AO to recalculate the interest after giving effect to the tribunal's order.
  
  Conclusion:
  The appeal was partly allowed, with the tribunal permitting the deduction of Rs. 1,42,623 under s. 24(1)(vi) and directing the AO to recalculate interest under s. 234A. The grounds regarding the validity of reopening the assessment were dismissed as they were not pursued by the assessee.

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• 2008 (5) TMI 308
  
  Issues Involved:
  1. Disallowance of depreciation on assets discarded by the assessee.
  2. Disallowance of interest on advances given to related parties.
  
  Summary:
  
  Issue 1: Disallowance of Depreciation on Discarded Assets

  In these appeals, the only ground raised by the assessee is with regard to disallowance of Rs. 58,01,785 towards depreciation in respect of the assets discarded by the assessee during the year under consideration.

  The AO reopened the assessment u/s 147 and issued notice u/s 148, disallowing the depreciation claimed on assets written off, arguing that the assets were not used for business purposes during the year. The CIT(A) confirmed the AO's action, holding that the assessee was not entitled to depreciation on discarded assets.

  The learned counsel for the assessee argued that the depreciation should be allowed on the WDV of the entire block of assets as per s. 32(1) r/w s. 43(6) of the Act, even if some assets were discarded. The learned Departmental Representative supported the orders of the authorities below, contending that the WDV of discarded assets should be reduced from the block of assets.

  The Tribunal held that the scheme of depreciation effective from 1st April, 1988, introduced block depreciation, and the WDV of the block of assets should be adjusted only as per s. 43(6). The AO's action of reducing the WDV by the individual WDV of discarded assets was not justified. The AO was directed to recompute the depreciation after ascertaining the scrap value of the discarded assets.

  Issue 2: Disallowance of Interest on Advances to Related Parties

  Ground No. 2 for asst. yr. 2001-02 is directed against disallowance of Rs. 15,210 towards interest on advances given to related parties.

  The AO disallowed the interest on the ground that advances were given to related parties, and the assessee incurred interest expenses on the same. The learned counsel for the assessee argued that the advances were for bona fide business transactions with related parties and not interest-free advances without commercial considerations.

  The Tribunal found that the AO did not verify the facts and rejected the assessee's explanation without proper examination. The payments to related parties were for business considerations and expediency. Therefore, the proportionate interest paid on borrowed capital could not be disallowed, and the disallowance was deleted.

  Conclusion:

  In the result, the appeals filed by the assessee for asst. yrs. 2000-01 and 2001-02 are partly allowed in the manner indicated above.

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• 2008 (5) TMI 307
  
  Issues Involved:
  1. Disallowance of brokerage paid against rental income.
  2. Deduction of brokerage related to maintenance and furnishing charges.
  3. Disallowance of interest paid to parties.
  
  Summary:
  
  Issue 1: Disallowance of Brokerage Paid Against Rental Income
  The primary dispute concerns the disallowance of brokerage of Rs. 7,79,502 paid by the assessee while computing income from house property. The assessee, engaged in the real estate business, claimed this brokerage as a deduction u/s 24(1)(iv) of the Income-tax Act. The Assessing Officer (AO) disallowed the claim, stating that the brokerage was a one-time expenditure and not an annual charge on the property. The CIT(A) upheld this view, referencing the judgment in AV.R.A. Veerappa Chattiar v. CIT [1959] 35 ITR 322, and further noting that the brokerage did not qualify as a deduction under section 23 or section 24. The Tribunal agreed, emphasizing that only specified expenditures under section 24 are deductible and brokerage does not fall under these categories, citing the case of CIT v. H.G. Gupta & Sons [1984] 149 ITR 253.
  
  Issue 2: Deduction of Brokerage Related to Maintenance and Furnishing Charges
  The alternative plea raised by the assessee was for the deduction of Rs. 2,79,879 out of the total brokerage, which related to maintenance and furnishing charges, assessed as business income. The CIT(A) rejected this claim, stating no material evidence was provided to show that the brokerage was linked to securing maintenance contracts. However, the Tribunal found that since the income from maintenance and furnishing was assessed as business income, the brokerage paid for securing tenants who paid these charges should be allowed as a deduction u/s 37(1). The Tribunal distinguished this case from Piccadily Hotels (P.) Ltd., where the brokerage was not linked to business income.
  
  Issue 3: Disallowance of Interest Paid to Parties
  The AO disallowed Rs. 20,129, considering the interest rate of 21.5% paid by the assessee to flat owners as excessive, reducing it to 18%. The CIT(A) upheld this, noting no evidence of an agreement for the higher rate. The assessee presented a letter dated 1-3-2000 indicating the revised interest rate, which was not considered by the lower authorities. The Tribunal restored this matter to the AO for reconsideration, allowing the assessee to present this new evidence.
  
  Conclusion:
  The appeal is partly allowed, with the brokerage related to maintenance and furnishing charges being deductible as business expenditure, and the issue of interest disallowance remanded for further consideration.

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• 2008 (5) TMI 306
  
  Issues Involved:
  1. Disallowance of Rs. 2,00,000 for job work expenses.
  2. Disallowance of Rs. 14,04,483 for damages claimed.
  3. Disallowance of Rs. 17,122 for foreign travel expenses.
  4. Disallowance of Rs. 80,000 under Section 69 of the Income Tax Act.
  5. Condonation of delay in filing rectification applications under Section 254(2) of the Income Tax Act.
  
  Detailed Analysis:
  
  1. Disallowance of Rs. 2,00,000 for Job Work Expenses:
  The Tribunal upheld the disallowance of Rs. 2,00,000 incurred for job work carried out through a contractor, as the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] did not find the claim genuine. The Tribunal's decision was based on the appraisal of evidence and findings of fact, confirming the lower authorities' stance.
  
  2. Disallowance of Rs. 14,04,483 for Damages Claimed:
  The AO rejected the claim of Rs. 14,04,483 on the grounds that the liability to pay damages to a foreign party did not crystallize in the year under consideration. The Tribunal upheld this decision, noting that the liability did not accrue or crystallize during the relevant period. The Tribunal found no material evidence to show that the contractual liability was accepted or enforceable as a debt against the assessee.
  
  3. Disallowance of Rs. 17,122 for Foreign Travel Expenses:
  The Tribunal confirmed the disallowance of Rs. 17,122 for foreign travel expenses incurred by Shri Pawan Goel. The Tribunal held that merely undertaking travel does not automatically conclude that it was related to the settlement of the claim preferred by the assessee.
  
  4. Disallowance of Rs. 80,000 under Section 69:
  The Tribunal deleted the addition of Rs. 80,000 made by the AO under Section 69 of the Income Tax Act, indicating that the AO's addition was not justified.
  
  5. Condonation of Delay in Filing Rectification Applications under Section 254(2):
  The assessee filed multiple applications for rectification under Section 254(2) of the Income Tax Act, which were rejected due to being time-barred.
  
  - First Rectification Application: The Tribunal rejected the application for rectification filed on 28th July 1992, noting that there was no mistake apparent from the record.
  - Second Rectification Application: The Tribunal rejected the second application filed on 10th March 2006, reiterating that the Tribunal does not have the power to review its own order and that the application was not maintainable.
  - Third Rectification Application: Filed on 15th October 2006, this application was delayed by 16 years. The Tribunal dismissed the application, emphasizing that Section 254(2) does not provide for condonation of delay beyond four years from the date of the order. The Tribunal cited various judicial precedents, including decisions from the Hon'ble Supreme Court and High Courts, to support that it cannot condone the delay beyond the statutory period.
  
  The Tribunal also noted that the provisions of the Limitation Act, 1963, do not apply to quasi-judicial bodies like the Tribunal. The Tribunal emphasized the importance of finality in proceedings and rejected the argument that the delay should be condoned due to the Tribunal's own delay in deciding the rectification application.
  
  Conclusion:
  Both miscellaneous applications filed by the assessee were dismissed as barred by limitation. The Tribunal reiterated that it has no power to condone delays beyond the statutory period prescribed under Section 254(2) of the Income Tax Act. The Tribunal also emphasized the principle of finality in judicial proceedings, rejecting the argument that the assessee should not suffer due to the Tribunal's delay in deciding the rectification application.

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• 2008 (5) TMI 305
  
  Issues Involved:
  1. Directions by CIT(A) not necessary for deciding the appeal.
  2. Treatment of rental income as "Income from house property."
  3. Applicability of section 154 for rectification.
  4. Powers of CIT(A) to issue directions.
  
  Summary:
  
  1. Directions by CIT(A) not necessary for deciding the appeal:
  The assessee contended that the CIT(A) erred in giving directions that were not necessary for deciding the appeal, contrary to Supreme Court judgments. The CIT(A) had directed the Assessing Officer (AO) to reopen the case u/s 147 or u/s 143(3) if there was an escapement of income, which the assessee argued was beyond the scope of the appeal.
  
  2. Treatment of rental income as "Income from house property":
  The AO initially framed the assessment u/s 143(1) and later issued a notice u/s 154, treating the rental income of Rs. 10,80,000 as "Income from house property." The assessee argued that this income was commission and not rent, and thus should not be treated as "Income from house property." The CIT(A) agreed that the addition was beyond the scope of section 154 but directed the AO to reopen the case u/s 147 or u/s 143(3).
  
  3. Applicability of section 154 for rectification:
  The CIT(A) held that the scope of section 154 is limited to rectifying obvious and patent mistakes, and not those requiring a long-drawn reasoning process. The assessee's application for rectification was dismissed on these grounds, and the CIT(A)'s original order was upheld.
  
  4. Powers of CIT(A) to issue directions:
  The CIT(A) has plenary powers to dispose of an appeal, which are coterminous with those of the AO. The CIT(A) can direct the AO to take actions that the AO failed to do. The Tribunal upheld the CIT(A)'s power to issue directions, citing the Supreme Court's decisions in cases like Kanpur Coal Syndicate and Jute Corpn. of India Ltd. The Tribunal also noted that the assessee did not challenge the original order of the CIT(A) before the Tribunal, and thus it attained finality.
  
  Conclusion:
  The appeal filed by the assessee was dismissed, and the order of the CIT(A) was upheld. The Tribunal found no infirmity in the CIT(A)'s findings and confirmed that the directions given were within the powers of the CIT(A).

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• 2008 (5) TMI 304
  
  Issues Involved:
  1. Application of the Supreme Court decision in Transmission Corporation of A.P. Ltd. vs. CIT.
  2. Obligation to deduct tax at source under Section 195 of the IT Act.
  3. Taxability of reimbursement of mobilization/demobilization charges to non-residents.
  4. Non-consideration of case law and material facts by the Tribunal.
  5. Applicability of provisions of Section 40(a)(i) of the IT Act in view of the Indo-Netherlands Double Taxation Avoidance Treaty.
  
  Issue-wise Detailed Analysis:
  
  1. Application of the Supreme Court Decision in Transmission Corporation of A.P. Ltd. vs. CIT:
  The Tribunal referenced the Supreme Court decision in Transmission Corporation of A.P. Ltd. vs. CIT to support its conclusion that the requirement to deduct tax at source under Section 195 is absolute. The assessee contended that the Tribunal misapplied this decision, arguing that tax deduction at source is required only for sums chargeable to tax in India. The Tribunal, however, maintained that the assessee should have obtained a certificate under Section 195(2) to determine taxability, thus justifying the disallowance under Section 40(a)(i).
  
  2. Obligation to Deduct Tax at Source under Section 195 of the IT Act:
  The assessee argued that there is no obligation to deduct tax at source under Section 195 if the payment is not chargeable to tax in the hands of the non-resident recipient. The Tribunal noted that the assessee cited multiple judgments to support this contention but did not consider these cases in its decision. The Tribunal emphasized the statutory requirement to deduct tax at source and the consequences of non-compliance under Section 40(a)(i), irrespective of the nature of the payment.
  
  3. Taxability of Reimbursement of Mobilization/Demobilization Charges to Non-Residents:
  The assessee argued that the reimbursement to VOAMC was not chargeable to tax in India, and thus, no tax was required to be deducted at source. The Tribunal did not examine the taxability of the reimbursement in the hands of VOAMC, stating that the issue was beyond the scope of Section 40(a)(i). The Tribunal focused on the compliance with Section 195 and concluded that the failure to deduct tax warranted the disallowance under Section 40(a)(i).
  
  4. Non-Consideration of Case Law and Material Facts by the Tribunal:
  The assessee claimed that the Tribunal failed to consider relevant case law and material facts, constituting a mistake apparent from the record. The Tribunal acknowledged the case law cited by the assessee but reasoned that it was not relevant to the decision. The Tribunal referred to the Supreme Court decision in Honda Siel Power Products Ltd. vs. CIT, which allows rectification of mistakes if non-consideration of precedent causes prejudice. However, the Tribunal concluded that the alleged oversight did not constitute a mistake apparent from the record.
  
  5. Applicability of Provisions of Section 40(a)(i) of the IT Act in View of the Indo-Netherlands Double Taxation Avoidance Treaty:
  The assessee contended that the non-discrimination provision in the Indo-Netherlands Double Taxation Avoidance Treaty overrides the provisions of the IT Act, thus negating the disallowance under Section 40(a)(i). The Tribunal did not address this argument in its order, which the assessee claimed as a mistake. The Tribunal reiterated its focus on the statutory requirement to deduct tax at source and the consequences of non-compliance under Section 40(a)(i).
  
  Conclusion:
  The Tribunal concluded that the scope of its powers under Section 254(2) is limited to rectifying mistakes apparent from the record and does not extend to reviewing or recalling the order. The Tribunal found that the assessee's contentions did not constitute mistakes apparent from the record and thus did not warrant rectification. The Tribunal partially allowed the miscellaneous application by correcting a serial numbering error in its order but upheld its original decision regarding the disallowance under Section 40(a)(i).

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• 2008 (5) TMI 303
  

  Payment of processing charges - disallowance on interest - unsecured loans to relatives - sustaining the disallowance of the ESI and PF payments not paid in time - Delay in deposit of employees contributions towards CPF, GPF and ESI u/s 36(1)(va) - interest advances to the relatives and the sister concern.

  Disallowance on Payment of processing charges - genuineness of the expenditure and the payments to M/s Vibgyor Colour Graphics - HELD THAT:- Considering the fact that learned CIT(A) has given a finding that genuineness of the transaction between the assessee and Vibgyor Colour Graphics is genuine and the same having not been challenged by the Revenue and the fact that without the payment of the said processing charges, the assessee could not have generated the said receipts as also the reason that if average of the percentage of the processing charges paid in relation to the job work/sales done by the assessee is considered for 5 years, the average of the same would come to 4.58 per cent which would translate into sum, we are of the view that no portion of the processing charges paid by the assessee to M/s Vibgyor Colour Graphics is liable to be disallowed - Therefore, the order of the learned CIT(A) on this issue is modified to this extent and this issue is decided in favour of the assessee.

  Disallowance on Interest - HELD THAT:- Hon'ble Delhi High Court in the case of Orissa Cement Ltd.[2001 (5) TMI 31 - DELHI HIGH COURT] is found to be more applicable insofar as it is found that the loans had been advanced out of the sale proceeds and not out of the borrowings as is evident from the paper book. The law only bars an assessee from claiming an interest expenditure when the assessee has diverted interest-bearing loans for non-interest-bearing advances. It is further noticed that the AO has not been able to point out any specific instance where interest-bearing borrowed funds had been diverted by the assessee for giving the non-interest-bearing advances to the relatives and the sister concern.

  Thus, we are of the view that no interest is liable to be disallowed in the hands of the assessee. In the circumstances, the finding of the learned CIT(A) and the AO on this issue stands reversed - As identical issue has been raised in the assessee's appeal for the AY 2001-02, the finding as given above in this issue would apply to the other appeal and the appeal of the assessee stands allowed.

  Disallowance of the ESI and PF payments made belatedly by invoking the provisions of s. 43B - Since it is seen that the payments were made before the due date of filing the return of income, the payment by assessee is allowable as such. We accordingly delete the disallowance of the sum for both the years - Undisputedly, in the instant case both the employer's and employees' contributions were not paid in some of the cases before the statutory dates defined under the respective Acts. but the actual payment was made before the last date of filing the return under s. 139(1) of the Act. In the circumstances, respectfully following the decision of the Hon'ble Karnataka High Court in the case of Sabari Enterprises [2007 (7) TMI 169 - KARNATAKA HIGH COURT] in the case of Kuber Hinges (P) Ltd.[2008 (3) TMI 364 - ITAT DELHI-G], the AO is directed to allow the claim of deduction of the PF and ESI as made by the assessee. It may be mentioned here that no decision to the contrary has been brought to our attention on this issue. In the circumstances, the appeal of the assessee is allowed.

  In the result, the appeal filed by the assessee for the AY 2000-01 is allowed. Appeal filed by the Revenue for the AY 2000-01 is dismissed and appeal filed by the assessee for the AY 2001-02 is allowed.

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