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2013 (11) TMI 1784
Issues Involved:
1. Deduction u/s 10A for Siruseri unit.
2. Exclusion of foreign currency expenses from export turnover for deduction u/s 10A.
Summary:
Issue 1: Deduction u/s 10A for Siruseri unit
The Revenue challenged the eligibility of the Siruseri unit for deduction u/s 10A, arguing it was a split-up and reconstruction of the existing Adyar unit. The Assessing Officer (AO) contended that the entire manpower, contracts, and clientele were shifted from Adyar to Siruseri, indicating reconstruction. The Commissioner of Income Tax (Appeals) [CIT(A)] found that Siruseri unit was independently set up with new infrastructure and significant investment, and 40% of its manpower was independently recruited. The CIT(A) concluded that Siruseri unit was not a split-up but a new unit, thus eligible for deduction u/s 10A. The Tribunal upheld the CIT(A)'s decision, noting that even if Siruseri was considered part of Adyar, the entire income would still be eligible for deduction u/s 10A as both units were STPI registered.
Issue 2: Exclusion of foreign currency expenses from export turnover
The AO excluded foreign currency expenses from the export turnover for deduction u/s 10A. The CIT(A), relying on ITAT Chennai Special Bench's decision in Sak Soft Ltd. and the Karnataka High Court's decision in Tata Elxsi Ltd., held that such expenses should not be reduced from the export turnover, or if reduced, should also be deducted from the total turnover. The Tribunal upheld the CIT(A)'s decision, noting that the issue was already settled in favor of the assessee in earlier cases.
Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order on both issues, confirming the eligibility of the Siruseri unit for deduction u/s 10A and the proper treatment of foreign currency expenses in the computation of export turnover.
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2013 (11) TMI 1783
Issues involved:
Petitions filed for sanction of a Scheme of arrangement involving De-merger and Transfer of Undertaking u/s 391 and 394 of Companies Act, 1956.
Details of the Judgment:
De-merger and Transfer of Undertaking:
The petitions were filed by two companies, Quick Flight Limited and Shreno Limited, for the purpose of obtaining the sanction of the Court to a Scheme of arrangement involving De-merger and Transfer of the de-merged Aviation Undertaking of Quick Flight Limited to Shreno Limited, along with the Restructure of Share Capital of Quick Flight Limited. Quick Flight Limited is a wholly owned subsidiary of Shreno Limited, engaged in chartered aviation services, aircraft hiring, and other activities, while Shreno Limited is involved in glass manufacturing, engineering solutions, and real estate business. The de-merger was deemed necessary for operational efficiency and realignment of business operations due to different market segments and management requirements. The proposed Scheme outlined commercial advantages for both companies and stakeholders.
Restructure of Share Capital:
As part of the de-merger, the De-merged Company proposed to restructure its Share Capital by cancelling the Preference Share Capital and reducing the Equity Share Capital. Meetings of Equity Shareholders and Preference Shareholders were dispensed with due to written consent letters from all shareholders approving the scheme. The Court directed a meeting of Equity Shareholders of the Resulting Company for approval, which was duly convened and approved unanimously. The petitions for the sanction of the Scheme were admitted, and no objections were received post-publication.
Observations and Compliance:
The Regional Director, Ministry of Corporate Affairs, raised several observations related to unsecured creditors, licenses, tax liabilities, compliance with the Income Tax Act, transfer of Authorised Capital, and restructuring of share capital. Responses were provided addressing each concern, including assurances of compliance, payment of tax liabilities, and transfer of entitlements. The Court considered all contentions, submissions, and judgments, concluding that the Scheme was in the interest of shareholders, creditors, and the public, thus sanctioning the Scheme and granting the requested reductions and prayers.
Disposition and Directions:
The petitions were disposed of, costs to the Central Govt. Standing Counsel were quantified, and directions were given for stamp duty adjudication and filing with relevant authorities. Filing and issuance of drawn-up order were dispensed with, and concerned authorities were directed to act on the authenticated copy of the order promptly.
Conclusion:
The Court sanctioned the Scheme of arrangement involving De-merger and Transfer of Undertaking, restructure of Share Capital, and addressed observations raised by the Regional Director, ensuring compliance and shareholder interests were protected.
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2013 (11) TMI 1782
1. ISSUES PRESENTED and CONSIDERED The legal judgment revolves around the following core legal questions: - Whether the deletion of the addition of Rs. 32 crores by the Commissioner of Income-tax (Appeals) [CIT(A)] was justified.
- Whether the addition of Rs. 68,31,25,000 on account of consideration in kind was correctly sustained or deleted by the CIT(A).
- Whether the addition of Rs. 5 crores as profit from Sai Surya Realtors was correctly upheld by the CIT(A).
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Deletion of Addition of Rs. 32 Crores - Relevant Legal Framework and Precedents: The case involved a search under Section 132 of the Income-tax Act, which allows for the presumption of evidence found during the search unless rebutted.
- Court's Interpretation and Reasoning: The CIT(A) found that the unsigned letter, which was the basis of the addition, was in the handwriting of a third party, not the assessee. The letter was deemed a "dumb document" with no evidentiary value.
- Key Evidence and Findings: The letter was written by Shri Srinivas, Vice President of DLF, at the dictation of his Executive Director, and not by the assessee.
- Application of Law to Facts: The CIT(A) concluded that without corroborative evidence linking the letter to the assessee, the addition could not be justified.
- Treatment of Competing Arguments: The Revenue's argument that the letter was sufficient evidence was rejected due to lack of corroboration.
- Conclusions: The deletion of the Rs. 32 crores addition was upheld.
Issue 2: Addition of Rs. 68,31,25,000 on Account of Consideration in Kind - Relevant Legal Framework and Precedents: The assessment involved the valuation of land transactions and the application of Section 2(24)(iv) concerning benefits received from a company.
- Court's Interpretation and Reasoning: The CIT(A) recalculated the benefit to the assessee, considering the market value and the role of the assessee in the transactions.
- Key Evidence and Findings: The CIT(A) found that the land was transferred without consideration to four individuals, including the assessee, for services rendered.
- Application of Law to Facts: The CIT(A) determined the benefit based on the market value of the land, sustaining an addition of Rs. 3,55,28,500.
- Treatment of Competing Arguments: The assessee's argument against the market value assessment was partially accepted, reducing the addition.
- Conclusions: The Tribunal rejected the application of Section 2(24)(iv) and deleted the sustained addition, finding no benefit derived from the company.
Issue 3: Addition of Rs. 5 Crores as Profit from Sai Surya Realtors - Relevant Legal Framework and Precedents: The case involved the timing of income recognition and the application of the accrual principle.
- Court's Interpretation and Reasoning: The CIT(A) upheld the addition based on the MOU and post-dated cheques, indicating a right to receive the profit.
- Key Evidence and Findings: The MOU stipulated a future profit of Rs. 5 crores, secured by post-dated cheques.
- Application of Law to Facts: The Tribunal found no evidence of actual receipt or crystallized right to receive the profit during the relevant year.
- Treatment of Competing Arguments: The Tribunal accepted the assessee's argument that the transaction had not materialized, and the cheques were not encashed.
- Conclusions: The addition of Rs. 5 crores was deleted, with the possibility of future taxation upon actual receipt or crystallization of the right.
3. SIGNIFICANT HOLDINGS - Preserve Verbatim Quotes of Crucial Legal Reasoning: "The presumption under section 132(4A) should point to the fact that the assessee had no connection whatsoever with the said letter."
- Core Principles Established: Unsigned and uncorroborated documents found during a search cannot form the basis for additions to income. The benefit derived from a company must be actual and not hypothetical for taxation under Section 2(24)(iv).
- Final Determinations on Each Issue: The deletion of the Rs. 32 crores addition was upheld; the addition of Rs. 68,31,25,000 was deleted; and the Rs. 5 crores addition was also deleted, with the possibility of future taxation.
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2013 (11) TMI 1781
Issues Involved:
The appeal filed by the Revenue is time-barred by 12 days. The main issue revolves around the claim of depreciation by a society registered as a Charitable Trust under section 12A of the Income Tax Act. The Assessing Officer disallowed the claim of depreciation based on a circular of CBDT and a judgment of the Hon'ble Kerala High Court. The appeal before the Tribunal concerns the allowance of depreciation as claimed by the assessee trust.
Delay Condonation Issue:
The appeal filed by the Revenue was time-barred by 12 days, and the Department filed a condonation petition to condone the delay of 09 days. The reason cited for the delay was the misplacement of miscellaneous records of the case. The delay was ultimately condoned, and the appeal was admitted for hearing with no objection from the counsel for the assessee.
Depreciation Claim Issue:
The case involved a Charitable Trust claiming depreciation on assets as part of income exemption under section 11 of the Income Tax Act. The Assessing Officer disallowed the claim based on a circular of CBDT and a judgment of the Hon'ble Kerala High Court. However, the CIT(Appeals) directed the Assessing Officer to allow the depreciation claim following decisions of the Chennai ITAT and other relevant case laws. The Tribunal upheld the CIT(Appeals) decision, citing precedents and legal principles supporting the allowance of depreciation for charitable trusts. The Revenue's appeal was dismissed based on the Tribunal's findings and acceptance of the decision by both parties.
Conclusion:
The Tribunal upheld the CIT(Appeals) decision to allow the depreciation claim of the Charitable Trust, dismissing the Revenue's appeal. The decision was based on legal precedents and interpretations supporting the deduction of depreciation for income calculation purposes in the context of charitable trusts. The order was pronounced in an open court session in Chennai on November 20, 2013.
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2013 (11) TMI 1780
Issues involved: Appeal against order passed by CIT(A) for A.Y. 2004-05, disallowance of interest payable on loans borrowed from family brokerage firms for investment in shares and securities.
Summary:
The appeal was filed by the assessee against the order passed by the CIT(A) for A.Y. 2004-05. The assessee had raised five grounds initially, but during the hearing, it was clarified that only ground No. 4 was pressed for consideration, while grounds No. 1, 2, 3, and 5 were not pressed. The main issue revolved around the disallowance of interest payable on loans borrowed from family brokerage firms for investment in shares and securities prior to 08.06.1992. The AO rejected the claim for interest deduction, which was upheld by the CIT(A) citing a similar decision in another case. The assessee, being aggrieved, appealed to the ITAT.
During the hearing, the assessee's counsel presented orders from previous cases to demonstrate that similar issues had been set aside for fresh adjudication. The ITAT noted that the issue in question was identical to those in the previous orders and directed the CIT(A) to re-examine the matter in accordance with the law and the directions provided in the earlier orders.
Additionally, the assessee had filed an additional ground contending that the income assessed by the AO should have been taxed in the hands of another individual, but this ground was later admitted to be without substance by the counsel. Consequently, the additional ground was rejected.
Ultimately, the appeal filed by the assessee company was treated as partly allowed by the ITAT, with the order being pronounced in open court on 6th November 2013.
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2013 (11) TMI 1779
Issues Involved:
Assessment of unaccounted investment in the form of jewellery u/s 69B for the assessment year 2008-09.
Application of Telescoping of unexplained investment against the income of the appellant group.
Assessment of Unaccounted Investment:
The appeal was filed against the CIT(A)'s order adding the value of jewellery seized during a search operation as unaccounted investment u/s 69B. The Assessing Officer valued the gold jewellery at Rs. 1100 per gram, totaling Rs. 16,76,180. The CIT(A) considered 500 grams as gifts received on marriage and other occasions, treating the balance as purchases from undisclosed sources. The appellant contended that the jewellery belonged to all family members, not just the individual, and cited CBDT Instruction No. 1916 to support the claim. The Tribunal allowed 1300 grams of gold for the family members, directing the Assessing Officer to apply the principle of telescoping for the remaining 223.8 grams.
Application of Telescoping Principle:
The appellant raised the issue of applying the principle of Telescoping of unexplained investment against the income of the appellant group. The Tribunal, after considering the arguments presented, allowed 1300 grams of gold for the family members and directed the Assessing Officer to determine the taxable income by applying the principle of telescoping for the remaining jewellery. The appeal was partly allowed for statistical purposes.
Separate Judgement:
No separate judgment was delivered by the judges in this case.
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2013 (11) TMI 1778
Issues involved:
The judgment involves the issue of allowing depreciation on assets claimed as application of income by an educational trust registered u/s 12A of the Income Tax Act.
Summary:
The Revenue filed an appeal against the order of the Commissioner of Income Tax(A) allowing depreciation on assets already claimed as application of income by the trust. The Assessing Officer treated the depreciation claimed as income not applied for charitable purpose. However, the CIT(A) allowed the claim of depreciation citing precedents from Punjab and Haryana High Court and ITAT Chennai. The Tribunal considered various judicial pronouncements and upheld the CIT(A)'s decision, emphasizing that depreciation on trust assets is deductible for computing income under Section 11. The Tribunal confirmed the order of the CIT(A) based on the precedent set by the Chennai Bench of the Tribunal.
In conclusion, the appeal of the Revenue was dismissed, and the order of the CIT(A) allowing the claim of depreciation by the educational trust was upheld.
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2013 (11) TMI 1777
Issues involved: Taxability of proceeds generated on sale of DEPB/DFRC u/s 147 r/w 143(3) for assessment year 2004-05.
The appeal filed by the assessee challenged the order of the Commissioner of Income-tax(Appeals)-IX at Chennai dated 28.3.2013, relating to the assessment year 2004-05 completed u/s 143(3), read with sec.147 of the Income-tax Act, 1961.
1. Jurisdiction and Merits of Reassessment:
The assessee contended that the re-assessment u/s 147 r/w 143(3) was erroneous as the notice u/s 148 was issued beyond the four-year time limit, and the Assessing Officer's action was without jurisdiction. The appellant argued that the re-opening was a mere change of opinion and not based on any omission of material facts. The appellant also cited relevant case laws to support their argument against the validity of the reassessment.
2. Taxability of DEPB/DFRC Sale Proceeds:
The assessing authority reopened the assessment based on the amended law brought in by the Taxation Laws (Amendment) Act, 2005, regarding the taxability of DEPB/DFRC sale proceeds. However, the appellant had originally furnished all details during the initial assessment u/s 143(3). The Hon'ble Bombay High Court's decision emphasized that retrospective amendments do not imply failure to disclose material facts by the assessee. The reassessment made after the expiry of four years from the relevant previous year was deemed unsustainable in law. The Hon'ble Gujarat High Court's ruling further supported that retrospective amendments are not valid in law, leading to the setting aside of lower authorities' orders on the taxability issue.
In conclusion, the Appellate Tribunal ITAT Chennai allowed the appeal filed by the assessee, pronouncing the order in open court on Monday, the 18th of November, 2013, at Chennai.
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2013 (11) TMI 1776
Issues Involved:
1. Whether the income entered in the books of accounts, which was detected in search, and disclosed in the return filed u/s 139(4) after search, would constitute undisclosed income?
Summary:
Issue 1: Whether the income entered in the books of accounts, which was detected in search, and disclosed in the return filed u/s 139(4) after search, would constitute undisclosed income?
The High Court of Karnataka addressed the appeals filed by two assessees against a common order passed by the Tribunal. The primary issue was whether the income entered in the books of accounts, detected during a search, and disclosed in a return filed u/s 139(4) after the search, constitutes undisclosed income.
The court noted that the first search was conducted on 13-3-2000, and the block assessment order for the period from 1-4-1990 to 31-3-2000 was passed on 27-3-2002. The assessing officer computed undisclosed income but did not include it in the block assessment as the due date for filing a return u/s 139(1) had not expired. A second search on 27-4-2001 led to the assessment of the same income as undisclosed since the return was not filed u/s 139(1).
The assessees argued that the amounts were reflected in the books of accounts and disclosed in the return filed u/s 139(4), thus not constituting undisclosed income. The Tribunal agreed, stating that the income was already noted in the books during the first search and the second block assessment order contradicted the first.
The court elaborated on the provisions of Section 158BB, which deals with the computation of undisclosed income, and Section 139, which outlines the due dates for filing returns. It emphasized that undisclosed income is defined as income not disclosed in the return filed u/s 139(1) or 139(4). The court concluded that if the income is reflected in the books of accounts before the first search and disclosed in a return filed u/s 139(4) before the second search, it cannot be considered undisclosed income.
The court upheld the Tribunal's decision, stating that the assessing authority's stance was contrary to statutory provisions. The appeals were dismissed, and the substantial question of law was answered in favor of the assessee and against the Revenue.
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2013 (11) TMI 1775
Issues Involved:1. Deletion of addition on account of short-term capital gain. 2. Allowance of expenses towards levelling and developing cost. 3. Sharing ratio in the surplus on sale of capital asset. 4. Application of section 50C in property sale. 5. Deletion of addition on account of undisclosed investment. Summary:1. Deletion of Addition on Account of Short-Term Capital Gain:Ground Nos. 1 to 4 relate to the issue as to whether the CIT (A) was justified in deleting the addition made on account of short-term capital gain amounting to Rs. 68,80,076/-. The Assessing Officer treated the land as a capital asset u/s 2(14)(iii) because it fell within the Hyderabad Airport Development Authority (HADA) area. However, the CIT (A) held that the land was agricultural and not a capital asset as per section 2(14)(iii). The ITAT upheld the CIT (A)'s decision, referencing the jurisdictional High Court's ruling that HADA is not a local authority or municipality as defined u/s 2(14)(iii). 2. Allowance of Expenses Towards Levelling and Developing Cost:The next issue as raised in ground Nos. 5 and 6 relates to the CIT (A) allowing 40% out of the total expenses claimed by the assessee towards levelling and developing cost. The Assessing Officer disallowed the claim, but the CIT (A) allowed 40% of the total cost claimed. The ITAT upheld the CIT (A)'s decision, noting that the department had accepted a similar allowance in the case of the assessee's husband. 3. Sharing Ratio in the Surplus on Sale of Capital Asset:In ground No.2, the assessee has challenged the order passed by the CIT (A) confirming the Assessing Officer's view with regard to sharing ratio in the surplus on sale of capital asset. The CIT (A) upheld the Assessing Officer's finding that the assessee was a 2/3rd owner and his wife a 1/3rd owner, based on the values shown in their balance sheets. The ITAT dismissed the assessee's appeal, noting that the CIT (A)'s decision in the case of the assessee's wife had attained finality. 4. Application of Section 50C in Property Sale:The CIT (A) confirmed the Assessing Officer's application of section 50C, which mandates that the value adopted by the Stamp Valuation Authority for stamp duty purposes should be considered for computing capital gains if it exceeds the sale consideration. The ITAT upheld this decision, rejecting the assessee's argument that the sale should be considered as having occurred on the date of an earlier agreement of sale cum GPA, which predated the introduction of section 50C. 5. Deletion of Addition on Account of Undisclosed Investment:The only issue in the present appeal of the department is with regard to CIT (A) deleting an amount of Rs. 14,20,000/- out of the total addition of Rs. 51,35,000/- made by the Assessing Officer. The Assessing Officer treated the differential amount as undisclosed investment based on a loose sheet found during a search. The CIT (A) restricted the addition to Rs. 14,20,000/-, considering the assessee had already declared additional income of Rs. 37,15,000/- and paid tax on it. The ITAT upheld the CIT (A)'s decision. Conclusion:In the result, all the appeals of the department and the assessee were dismissed.
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2013 (11) TMI 1774
Claim of carry forward of additional depreciation can be allowed under the provision income tax act - Allow carry forward of un-absorbed additional depreciation in the next year? - HELD THAT- Claim of the assessee for carry forward of additional depreciation cannot be allowed as there is no provision in the act to allow carry forward of un-absorbed additional depreciation in the next year. The Tribunal in [2012 (3) TMI 31 - ITAT, CHENNAI] held that additional depreciation is allowable on the Plant & Machinery only for the year in which the capacity expansion has taken place which has resulted in the substantial increase in the installed capacity. Decision against assessee.
Payment at net present value of the future liability of sales tax treated as ‘Income from Other Sources’? - HELD THAT - The difference does not amount to remission of liability u/s.41(1) of the Act. The Tribunal in [2010 (11) TMI 728 - ITAT, MUMBAI] has held that payment of net present value of the future liability cannot be classified as remission or cessation of the liability, therefore, provisions of section 41(1)(a) of the Act are not attracted. Decision in favor of assessee.
Revenue submitted that the CIT(Appeals) has erred in restricting the dis-allowance u/s.14A to 2% of exempt income - The Hon’ble Bombay High Court in [2010 (8) TMI 77 - BOMBAY HIGH COURT] held that the provisions of rule 8D are applicable w.e.f. AY. 2008-09. In the period prior to AY.2008-09, estimation has to be made for making dis-allowance u/s.14A - HELD THAT- Keeping in view the extent of investment made in shares ₹ 3.42 Crores earning dividend income, we deem it appropriate to increase disallowance to 3% of the exempt income. This ground of appeal of the Revenue is partly allowed.
Issue of loss on forward contracts - AO dis-allowed the loss on account of unrealised foreign exchange fluctuation on derivatives - AO had erroneously considered the loss on revaluation of forward contracts to be reduction in loss of derivatives - HELD THAT- In respect of the loss on revaluation of forward contracts, these represent loss incurred by the appellant in the ordinary course of business and have to be allowed as deduction. Decision in favor of assessee.
Deleting Dis-allowance u/s 40(a)(ia) in respect of legal charges paid to M/s. Reed Smith, LLP, USA without deduction of tax at source - It is a well settled law that, if the payments are made for professional services rendered abroad and the party does not have any permanent establishment in India, the tax is not to be deducted at sources. HELD THAT - The foreign party do not have any permanent establishment in India nor it is a case where they stay in India is more than ninety days as aforesaid. Accordingly, for the services rendered by the foreign law firm outside India there is no question of deduction of tax on the payments made. Decision in favor of assessee.
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2013 (11) TMI 1773
Issues Involved:
1. Deletion of trading addition of Rs. 23,02,170/- made by the AO by applying the provisions of section 145(3) of the I.T. Act.
2. Justification of treating surrendered income as income from other sources.
3. Justification of trading addition based on estimated turnover.
Summary:
Issue 1: Deletion of Trading Addition
The department appealed against the deletion of a trading addition of Rs. 23,02,170/- made by the AO by applying the provisions of section 145(3) of the I.T. Act. The AO noticed discrepancies during a survey u/s 133A and invoked section 145(3) due to the assessee's failure to explain these discrepancies. The AO applied a GP rate of 15.46% on the disclosed turnover and estimated undisclosed turnover based on excess stock found during the survey. The CIT(A) upheld the rejection of books of accounts but deleted the trading additions, noting that the surrendered income should be included in the GP, resulting in a GP rate of 19.11%, higher than the AO's average GP rate of 15.46%.
Issue 2: Surrendered Income as Income from Other Sources
The AO treated the surrendered income as income from other sources, excluding it from the GP calculation. The CIT(A) disagreed, stating that the surrendered income related to the business and should be included in the GP. The Tribunal concurred, noting that the surrendered income was definitely the profit of the business and should be included in the GP for calculating the GP rate.
Issue 3: Trading Addition Based on Estimated Turnover
The AO made another trading addition based on an estimated turnover of Rs. 54,94,905/- derived from the undisclosed stock of finished goods. The CIT(A) found no material evidence to support that the assessee had effected such turnover outside the books. The Tribunal agreed, noting that no sale bills were found during the survey to substantiate sales outside the books and that the excess stock had already been surrendered and taxed. Therefore, the estimated turnover and the resulting trading addition were not justified.
Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the trading additions and treat the surrendered income as part of the business profit, dismissing the department's appeals in both I.T.A.No. 389/Jodh/2013 and I.T.A.No. 390/Jodh/2013.
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2013 (11) TMI 1772
Issues Involved:
1. Validity of notice u/s 148 vs. u/s 153C.
2. Quantum of addition on account of unaccounted consideration.
Summary:
Issue 1: Validity of notice u/s 148 vs. u/s 153C
The assessee contended that the Assessing Officer (AO) was not competent to issue notice u/s 148 of the Income-tax Act, 1961, arguing that the case fell within the exclusive jurisdiction of assessment u/s 153C. The assessee's counsel emphasized that sections 148 and 153C operate in different fields, citing the Hon'ble Madhya Pradesh High Court's decision in Ramballabh Gupta vs. ACIT. The CIT(DR) countered that the seized documents belonged to M/s Motta Construction Pvt. Ltd. and not the assessee, justifying the notice u/s 148. The Tribunal held that the necessary ingredients prescribed in section 148 were satisfied, and the initiation of re-assessment proceedings by issuance of notice u/s 148 was valid. The Tribunal distinguished the present case from Ramballabh Gupta, noting that the assessee was not subjected to a search, and thus, section 153C was not applicable.
Issue 2: Quantum of addition on account of unaccounted consideration
The assessee argued that the statement by Shri Kiran H. Shah, Director of M/s Motta Construction Pvt. Ltd., was retracted and that the corresponding expenditure in the buyer's assessment was less than the amount considered in the assessee's hands. The Tribunal found merit in the assessee's plea, stating that the addition in the assessee's hands should correspond to what is considered in the buyer's hands. The Tribunal set aside this aspect back to the AO to re-compute the income from the sale of the Matunga property in conformity with the amount considered in the buyer's assessment, allowing the assessee a reasonable opportunity of being heard.
Conclusion:
The appeal was partly allowed, with the Tribunal validating the notice u/s 148 and directing the AO to re-compute the income from the sale of the Matunga property in line with the buyer's assessment.
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2013 (11) TMI 1771
Issues Involved: Appeal against the order of CIT (A) regarding addition of deemed dividend u/s 2(22)(e) for assessment year 2009-2010.
Summary:
1. Background: The Revenue filed an appeal against the CIT (A)'s decision to delete the addition of deemed dividend of Rs. 76,00,000 u/s 2(22)(e) for the assessment year 2009-2010.
2. Assessment and Addition: The assessee, engaged in import and export of Bio-Products, declared total income of Rs. 26,05,248. The AO assessed income at Rs. 102,05,248 and added Rs. 76,00,000 as deemed dividend u/s 2(22)(e).
3. First Appellate Authority: CIT (A) allowed the appeal and deleted the addition, citing precedents like ACIT vs. Bhaumik Colour (P) Ltd. and CIT vs. Universal Medicare P. Ltd. Revenue appealed to the Tribunal.
4. Tribunal Proceedings: The Revenue heavily relied on the AO's order, while the assessee's counsel referred to the CIT (A)'s decision and a previous Tribunal order in favor of the assessee.
5. Tribunal Decision: The Tribunal noted that the assessee was a shareholder of the lender companies, and as per legal interpretation, provisions of section 2(22)(e) apply to shareholders, not beneficial shareholders like the assessee. The Tribunal found no distinction from the Special Bench decision and upheld the CIT (A)'s order, dismissing the Revenue's appeal.
6. Conclusion: The Tribunal confirmed the CIT (A)'s decision to delete the addition of deemed dividend, as the legal position supported the assessee's case. The appeal of the Revenue was dismissed on 4th November 2013.
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2013 (11) TMI 1770
Issues involved:
1. Addition of unexplained investment of Rs. 7,00,000 in construction/renovation of the house.
2. Addition of cash of Rs. 1,95,000 found from the bank locker in the joint name of the appellant and his wife.
Issue 1: Addition of unexplained investment of Rs. 7,00,000 in construction/renovation of the house:
- The AO observed unexplained expenses for construction/renovation of the house during a search, which the assessee admitted to being Rs. 7,00,000 sourced from unaccounted income offered for taxation by his brother.
- The assessee requested telescoping this unaccounted income against the expenses, but the AO rejected it due to lack of evidence.
- The Ld. CIT(A) also did not accept the submission without corroborative evidence.
- The ITAT upheld the decision, stating that the appellant failed to prove the source of the unaccounted expenditure and the utilization of the undisclosed income, thus confirming the addition of Rs. 7,00,000.
Issue 2: Addition of cash of Rs. 1,95,000 found from the bank locker in the joint name of the appellant and his wife:
- Cash of Rs. 1,95,000 was found in the locker of the assessee, with the explanation that it belonged to his wife received upon her mother's death.
- The AO added this amount to the total income of the assessee, stating that the source of the cash was not proven.
- The Ld. CIT(A) did not accept the explanation provided by the assessee, as no evidence was presented to support the claim.
- The ITAT upheld the decision, noting the absence of evidence to prove that the cash was received by the wife at the time of her mother's death, thus confirming the addition of Rs. 1,95,000.
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2013 (11) TMI 1769
Issues involved:
The judgment addresses the following substantial questions of law:
1) Addition of undisclosed income u/s 158B(b) for AY 2003-04.
2) Source of accumulated cash u/s 132 A for AY 1997-98 to 2002-03.
3) Evidentiary value of spontaneous statement and gold trading claim.
4) Treatment of seized cash as loss incidental to gold trading business.
Issue 1:
The case involves the addition of Rs. 58 lakhs as "undisclosed income" u/s 158B(b) for AY 2003-04. The Tribunal upheld this addition, considering the circumstances and reasons provided in the grounds. The appellant contested this addition, questioning the legality of sustaining it under the Income Tax Act.
Issue 2:
Regarding the accumulated cash found with Mr. K.K. Azeez and others, the Tribunal had to determine if this cash, amounting to Rs. 65 lakhs, could be considered as the source of income for the appellant for the assessment years 1997-98 to 2002-03. The Tribunal analyzed the contradictory stands taken by the appellant and the evidentiary value of Mr. Azeez's statement.
Issue 3:
The Tribunal also examined the evidentiary value of Mr. Azeez's statement and the appellant's claim of trading in gold. It questioned the credibility of the appellant's explanations and the lack of substantiating evidence regarding the gold trading activities, leading to a dispute over the truthfulness of the appellant's claims.
Issue 4:
In light of the assessment of the seized cash as the appellant's undisclosed income for AY 2003-04, the Tribunal considered whether this amount should have been allowed as a loss incidental to the appellant's gold trading business. The Tribunal analyzed the appellant's financial transactions and explanations to determine the legitimacy of treating the seized cash as a loss incidental to the gold trading business.
In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decisions on the issues raised by the appellant. The judgment provides detailed reasoning for each issue, emphasizing the importance of evidence, consistency in statements, and the credibility of the appellant's claims in determining the undisclosed income and source of funds in question.
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2013 (11) TMI 1768
Issues Involved:
1. Deduction u/s 80IA on interest income and miscellaneous receipts.
2. Eligibility for deduction u/s 80IA(4) for infrastructure development.
3. Penalty u/s 271(1)(c) for disallowance of deduction u/s 80IA.
Summary:
1. Deduction u/s 80IA on Interest Income and Miscellaneous Receipts:
The assessee contended that the learned CIT(A) erred in law and on facts by holding that deduction u/s 80IA cannot be allowed on interest income and miscellaneous receipts as they are not derived from industrial undertaking. The assessee argued that interest income should be netted off against interest payment, resulting in a net debit of Rs. 2,19,764/-. The Tribunal directed the AO to reassess whether the interest income and miscellaneous receipts are attributable to the infrastructure project, and if so, allow the deduction u/s 80IA.
2. Eligibility for Deduction u/s 80IA(4) for Infrastructure Development:
The Revenue challenged the CIT(A)'s decision that the assessee is eligible for deduction u/s 80IA(4). The AO had disallowed the deduction on the grounds that the assessee acted only as a contractor and did not "own" any infrastructural project. The Tribunal noted that the AO failed to properly analyze whether the conditions prescribed u/s 80IA(4) were met. The Tribunal emphasized that the term "developer" includes entities that develop infrastructure facilities, not just those that operate and maintain them. The Tribunal directed the AO to reassess whether the assessee qualifies as a "developer" and meets the conditions of section 80IA(4), including whether the project falls under BOT, BOOT, or BOLT schemes.
3. Penalty u/s 271(1)(c) for Disallowance of Deduction u/s 80IA:
The Revenue appealed against the CIT(A)'s decision to delete the penalty levied u/s 271(1)(c) amounting to Rs. 34,63,503/-. The CIT(A) held that the penalty was not justified as the disallowance was based on material facts already on record and did not indicate concealment of income or furnishing of inaccurate particulars. The Tribunal upheld the CIT(A)'s decision, stating that the disallowance was a subject of controversy and did not warrant a penalty.
Conclusion:
The Tribunal partly allowed the appeals for statistical purposes, directing the AO to reassess the eligibility for deduction u/s 80IA and the nature of interest income and miscellaneous receipts. The penalty appeal filed by the Revenue was dismissed.
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2013 (11) TMI 1767
Issues Involved:
1. Legality of the suspension order.
2. Compliance with the Tribunal's directions.
3. Judicial review of administrative decisions.
4. Validity of reliance on file notings.
5. Application of the doctrine of res judicata.
Summary:
1. Legality of the Suspension Order:
The Respondent, an Indian Revenue Service officer, was suspended on 28.12.1999 due to pending criminal cases investigated by the CBI. The suspension was periodically reviewed and extended by the disciplinary authority u/s Rule 10 of the Central Civil Services (Classification, Control and Appeal) Rules, 1965. The Tribunal quashed the suspension order on 1.6.2012, and this decision was upheld by the High Court on 17.9.2012.
2. Compliance with the Tribunal's Directions:
The Tribunal's order dated 16.12.2011 directed the Appellants to reconsider the suspension, taking into account various factors, including the quashing of the chargesheet and the stage of the criminal trial. Despite this, the Appellants continued the suspension through orders dated 12.1.2012 and 3.2.2012, which were found to be non-compliant with the Tribunal's directions.
3. Judicial Review of Administrative Decisions:
The Supreme Court reiterated that the scope of judicial review in suspension cases is limited. Suspension is an administrative measure, not a punishment, and courts should not function as appellate authorities over such decisions unless they are arbitrary, mala fide, or without prima facie evidence.
4. Validity of Reliance on File Notings:
The Tribunal erred in relying on file notings, which are not considered decisions of the government unless they are sanctioned and acted upon in accordance with Articles 77(2) and 166(2) of the Constitution. Notings are internal opinions and do not constitute executable orders.
5. Application of the Doctrine of Res Judicata:
The Tribunal's order dated 1.6.2012 attained finality as it was not challenged by the Appellants. Consequently, any subsequent order of suspension without challenging the Tribunal's decision was deemed null and void, invoking the doctrine of res judicata. The Appellants' actions were also found to be in contempt of court and arbitrary.
Conclusion:
The Supreme Court dismissed the appeal, holding that the Appellants acted in contravention of the Tribunal's final order and the statutory rules. The continuation of the Respondent's suspension was not justified, and the appeal lacked merit.
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2013 (11) TMI 1766
Issues involved: Appeal against Tribunal's order for assessment years 1998-99 and 1999-2000.
Summary:
Assessment Years 1998-99 and 1999-2000:
The High Court considered two appeals against the Tribunal's order for the same assessee for the assessment years 1998-99 and 1999-2000. The questions of law were admitted for consideration based on the memorandum of appeals. The appeals were of the year 2006, and similar questions of law had previously been addressed in the assessee's appeal for the period before these appeals. In a batch of appeals, the Court had already considered and answered all substantial questions of law framed in this case, relying on judgments from the Apex Court and other High Courts. As all questions of law had been previously answered, the Court disposed of the appeals by adopting the findings from the assessee's appeals in other connected cases where the questions had been resolved in favor of the assessee's sister concern and against the Revenue. The Court found no substance in the present appeals and accordingly disposed of them.
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2013 (11) TMI 1765
Issues Involved:
1. Application of net profit percentage on gross receipts.
2. Allowance of excess payment of laser expenses u/s 40A(2)(b).
3. Deletion of addition made on account of unverifiable and inflated labour charges.
Summary:
Issue 1: Application of Net Profit Percentage on Gross Receipts
The Revenue challenged the ITAT's decision to apply a net profit of 7.5% on gross receipts instead of 8% as determined by the CIT(A). The High Court upheld the ITAT's decision, noting that the ITAT had not committed any error in restricting the net profit to 7.5%. The ITAT's decision was based on the fact that the assessee had maintained regular books of accounts, which were audited and supported by a tax audit report u/s 44AB. The AO had not detected any defects or discrepancies in the accounts.
Issue 2: Allowance of Excess Payment of Laser Expenses u/s 40A(2)(b)
The Revenue contended that the ITAT erred in allowing excess payment of laser expenses amounting to Rs. 10,00,000/- to persons covered u/s 40A(2)(b). The High Court found that the CIT(A) had observed that the payments were reflected in the regular books of account and supported by proper bills. The AO had not brought any comparable cases to show that excessive payments were made. The ITAT confirmed the deletion of the disallowance, and the High Court found no error in this decision.
Issue 3: Deletion of Addition Made on Account of Unverifiable and Inflated Labour Charges
The Revenue argued that the ITAT erred in deleting the addition of Rs. 4,22,95,871/- made by the AO on account of unverifiable and inflated labour charges. The High Court noted that the assessee had submitted voluminous records relating to job work receipts, labour expenses, labour registers, and bank statements. The CIT(A) and ITAT found that the AO had not detected any defects or discrepancies in the accounts. The High Court upheld the ITAT's decision to delete the disallowance and compute the income at 7.5% on gross receipts, stating that no substantial question of law arose in the present appeals.
Conclusion:
The High Court dismissed both tax appeals, affirming the ITAT's decisions on all issues.
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