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Showing 41 to 60 of 934 Records
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2013 (2) TMI 907
Issues Involved:
1. Computation of income from house property.
2. Addition u/s 92 regarding purchase of raw materials.
3. Disallowance of Computer Software Expenses as Capital Expenditure.
4. Disallowance of depreciation on obsolete assets.
5. Determination of fair market value for long-term capital gain.
6. Disallowance of expenses u/s 14A related to tax-free income.
7. Addition on account of Modvat Credit u/s 145A.
8. Reduction of 90% of processing charges, sales tax refund, and set off from profit u/s 80HHC.
9. Attribution of Hyderabad sales office expenses to export of trading goods.
10. Disallowance of amalgamation expenses.
11. Inclusion of Excise Duty in total turnover for deduction u/s 80HHC.
12. Re-computation of indirect cost attributable to export of trading goods.
13. Adjustment u/s 145A.
Summary:
1. Computation of Income from House Property:
The assessee contested the computation of income from house property at Hoechst House. The Tribunal, following its earlier decisions, allowed the assessee's claim to adopt the Municipal Rateable Value as the annual value.
2. Addition u/s 92 Regarding Purchase of Raw Materials:
The AO's addition u/s 92 for inflated purchase prices of Cefotaxime Sodium and Roxithromycin was contested. The Tribunal, referencing its prior rulings, set aside the AO's decision, stating the transactions were not arranged and no excess price was paid.
3. Disallowance of Computer Software Expenses as Capital Expenditure:
The AO treated part of the software expenses as capital expenditure. The Tribunal, citing previous decisions and judgments, treated the expenditure as revenue in nature and allowed the assessee's claim.
4. Disallowance of Depreciation on Obsolete Assets:
The AO disallowed depreciation on obsolete assets. The Tribunal, following its earlier decision, allowed the depreciation on the block of assets, including obsolete ones.
5. Determination of Fair Market Value for Long-term Capital Gain:
The AO's adoption of Rs. 23.52 per Sq.Ft. as the fair market value for land as on 01.04.1981 was upheld by the Tribunal, following its decision in the previous year.
6. Disallowance of Expenses u/s 14A Related to Tax-free Income:
The Tribunal allowed the assessee's claim regarding disallowance of expenses u/s 14A for investments in shares, following its earlier decisions.
7. Addition on Account of Modvat Credit u/s 145A:
The Tribunal set aside the CIT(A)'s order and remanded the matter to the AO for fresh examination of adjustments on account of Modvat Credit u/s 145A.
8. Reduction of 90% of Processing Charges, Sales Tax Refund, and Set Off from Profit u/s 80HHC:
The Tribunal held that processing charges and sales tax refund should be reduced by 90% from the profit of business as per Explanation (baa) u/s 80HHC, following relevant judgments.
9. Attribution of Hyderabad Sales Office Expenses to Export of Trading Goods:
The Tribunal upheld the CIT(A)'s decision that expenses at the Hyderabad branch, not directly related to domestic sales, should be considered as part of indirect cost for computing deduction u/s 80HHC.
10. Disallowance of Amalgamation Expenses:
The Tribunal, following its earlier decision and relevant judgments, upheld the CIT(A)'s decision to allow the amalgamation expenses as revenue expenditure.
11. Inclusion of Excise Duty in Total Turnover for Deduction u/s 80HHC:
The Tribunal confirmed the CIT(A)'s decision to exclude excise duty from the total turnover for computing deduction u/s 80HHC, following the Supreme Court's judgment.
12. Re-computation of Indirect Cost Attributable to Export of Trading Goods:
The Tribunal directed the AO to compute the indirect cost in light of its decision in the previous year, favoring the revenue.
13. Adjustment u/s 145A:
The Tribunal remanded the issue of adjustment u/s 145A to the AO for fresh decision, following its earlier ruling.
Conclusion:
Both appeals were partly allowed, with several issues remanded for fresh examination by the AO. The Tribunal's decisions largely followed its earlier rulings and relevant judicial precedents.
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2013 (2) TMI 906
Issues involved: Appeal against orders of CIT(A) for assessment years 2004-05 and 2005-06, involving suppression of sales, foreign travel expenses, professional charges, excess claim of depreciation, and Keyman Insurance Premium.
Assessment Year 2004-05:
The assessee, a private limited company engaged in interior decoration and furniture manufacturing, faced assessment under section 143(3) and 147. The CIT(A) allowed the appeal, stating no suppression of sales and justifying foreign travel expenses related to machinery import. The Revenue challenged the CIT(A) order on suppressed turnover and foreign travel expenditure, but the Tribunal upheld the CIT(A) findings, dismissing the Revenue's appeal.
Assessment Year 2005-06:
The assessee's income return was challenged under sections 143(3) and 147, resulting in additions for depreciation, professional charges, and Keyman Insurance Premium. The CIT(A) allowed the appeal by deleting all additions. The Revenue contested the CIT(A) decision on professional receipts and Keyman Insurance Premium, but the Tribunal upheld the CIT(A) findings, dismissing the Revenue's appeal. The Cross Objections filed by the assessee were also dismissed as infructuous.
The Tribunal, after considering submissions and lower authorities' orders, upheld the CIT(A) findings for both assessment years, concluding that there was no suppression of receipts and justifying the expenses claimed by the assessee. The appeals of the Revenue and Cross Objections of the assessee were dismissed for both assessment years.
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2013 (2) TMI 905
Issues Involved:
1. Legally enforceable debt.
2. Time-barred debt.
3. Rebuttal of presumption u/s 138 of the Negotiable Instruments Act, 1881.
4. Misuse of cheques.
5. Procedural compliance and evidence evaluation.
Summary:
1. Legally enforceable debt:
The complainant alleged that the accused had issued eight cheques totaling Rs. 42 lakhs, which were dishonored due to "stop payment" and "insufficient funds". The learned Magistrate found that the complainant had not proven a legally enforceable debt, a requirement u/s 138 of the Negotiable Instruments Act, 1881.
2. Time-barred debt:
The amounts in question were paid between 1991 and 1997, making the debt time-barred by 2000. The cheques issued in 2002 were therefore in respect of a time-barred debt, which is not legally enforceable u/s 138 of the Act. The court referenced the Bombay High Court decision in Smt. Ashwini Santosh Bhatt v. Shri Jeevan Divakar, affirming that a time-barred debt does not attract the provisions of section 138.
3. Rebuttal of presumption u/s 138:
The accused successfully rebutted the presumption against him by showing that the cheques were not issued for any legally enforceable debt. The Supreme Court's decision in Krishna Janardhan Bhat v. Dattatraya G. Hegde was cited, emphasizing that the prosecution must prove a legally enforceable debt beyond reasonable doubt, while the accused's defense can be established on a preponderance of probabilities.
4. Misuse of cheques:
The accused claimed that the cheques were handed over in trust to the complainant for payment of society dues and were misused. The Magistrate found this defense more credible, noting the improbability of issuing multiple cheques of different amounts on the same day from different cheque books.
5. Procedural compliance and evidence evaluation:
The complainant failed to produce documentary evidence of the alleged payments or income to substantiate his claims. The court also disregarded certain receipts annexed with the appeal memo, as they were not presented during the trial or accompanied by an application for additional evidence.
Conclusion:
The court upheld the Magistrate's decision to acquit the accused, finding no perversity in the judgment. The appeal was dismissed, affirming that the charges were not proven beyond reasonable doubt.
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2013 (2) TMI 904
Prevention of Corruption Act - Allegations against Chief Minister - Vigilance Case - Prevention of Money Laundering Act (PMLA) - Transferring money through Hawala - Investigation done by CBI - Scheduled offences in terms of sub-section (x) of Section 2 are the offences specified either under Part (A), Part (B) or Part (C) of the schedule of the PMLA. A complaint was lodged against Chief Minister Shri Madhu Koda and other 2 members.
Whether the Special Court can proceed simultaneously with the trial of the scheduled offence as well as trial of the offence punishable u/s 4 of the PMLA.
HELD THAT:- That the Special Court may proceed with the trial for the scheduled offence as well as trial of the offence punishable under the PMLA simultaneously. the provision as is enshrined in Section 3 postulating therein that whoever is connected with the proceeds of the crime projecting it as untainted property would be committing offence of Money Laundering Act and further that the proceeds of crime must have been derived or obtained, directly or indirectly by any person as a result of criminal activity relating to scheduled offence in terms of sub-section (u) of Section 2 of the PMLA, there has been no doubt that unless one is held guilty for the scheduled offences, he cannot be held guilty of the offence punishable under Section 4 of the PMLA but hardly there appears to any embargo for the special court to proceed with the trial of the scheduled offences as well as offence under Section 4 of the PMLA simultaneously particularly when there has been nothing in the Act nor intention of the legislator seem to be there of taking of the trial of the offence punishable under Section 4 after one is found guilty for the scheduled offence.
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2013 (2) TMI 903
1. ISSUES PRESENTED and CONSIDERED The core legal issue in this judgment revolves around the reopening of the assessment for the assessment year 2002-03. The specific questions considered include: - Whether the reopening of assessment for the year 2002-03 was justified under the provisions of the Income Tax Act, particularly in light of the Tribunal's earlier findings.
- Whether the notice issued under Section 148 of the Income Tax Act was barred by limitation under Section 149, or if it was valid under Section 150 due to the Tribunal's findings.
- Whether the Assessing Officer could rely on the Tribunal's findings from earlier years to reopen the assessment for 2002-03.
2. ISSUE-WISE DETAILED ANALYSIS Reopening of Assessment for 2002-03 - Relevant Legal Framework and Precedents: The reopening of assessments is governed by Sections 147, 148, 149, 150, and 153 of the Income Tax Act. Section 147 allows for reassessment if income has escaped assessment. Section 148 provides for the issuance of notice for reassessment. Section 149 prescribes the time limits for issuing such notices, while Section 150 provides exceptions to these time limits if the reassessment is in consequence of or to give effect to a finding or direction from an appellate authority. Section 153 outlines the time limits for completing assessments and reassessments.
- Court's Interpretation and Reasoning: The Tribunal's earlier order indicated that the income in question accrued to the assessee in the assessment year 2002-03. The court reasoned that, due to the findings of the Tribunal, the provisions of Section 150(1) were applicable, allowing the reopening of the assessment beyond the normal time limits prescribed by Section 149.
- Key Evidence and Findings: The Tribunal had previously determined that the right to receive the amounts in question was established in the assessment year 2002-03, making it taxable in that year. This finding was crucial in justifying the reopening of the assessment.
- Application of Law to Facts: The court applied Section 150(1) in conjunction with Section 153(3), which allows for reassessment at any time to give effect to any finding or direction from an appellate authority. The court concluded that the reopening was valid as it was based on the Tribunal's finding that the income accrued in 2002-03.
- Treatment of Competing Arguments: The assessee argued that the reopening was barred by limitation and constituted a change of opinion. The court dismissed these arguments, emphasizing that the Tribunal's finding constituted a valid basis for reopening under Section 150(1).
- Conclusions: The court upheld the validity of the reopening of the assessment for the year 2002-03, finding that it was justified under the Income Tax Act due to the Tribunal's earlier findings.
3. SIGNIFICANT HOLDINGS - Preserve Verbatim Quotes of Crucial Legal Reasoning: "The Tribunal has categorically held that the receipts in question were to be taxed only in the assessment year when the right to receive was determined. These receipts are thus to be taxed in that year and not in the earlier years when they were received."
- Core Principles Established: The judgment reinforces the principle that income is taxable in the year in which the right to receive it is established. It also clarifies the applicability of Section 150(1) in extending the time limits for reopening assessments based on appellate findings.
- Final Determinations on Each Issue: The court determined that the reopening of the assessment for 2002-03 was valid and justified. The appeal by the assessee was dismissed, upholding the decision of the lower authorities.
In conclusion, the judgment underscores the importance of appellate findings in determining the timing of income accrual and the conditions under which assessments can be reopened beyond standard time limits. The court's decision affirms the Assessing Officer's authority to act on such findings to ensure accurate tax assessments.
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2013 (2) TMI 902
Issues involved: Determination of fair market value of property sold as on 01.04.1981 for assessment year 2006-07 u/s 143(3) of the Income Tax Act 1961.
The Appellate Tribunal ITAT Chennai heard cross appeals by the assessee and Revenue regarding the fair market value of a property sold as on 01.04.1981. The assessee argued for a higher value, while the Revenue contended that the Assessing Officer's value should be upheld.
The assessee, a company engaged in manufacturing and trading, had filed its return declaring a loss and had sold land and building in 2006. The Assessing Officer determined the fair market value lower than claimed by the assessee, leading to a dispute.
The CIT(A) sought a remand report and ultimately determined the fair market value based on a case law precedent, differing from both the assessee's and the Assessing Officer's values. Both parties appealed the decision.
After considering the arguments and documents, the Tribunal found the values presented by both parties to have limitations. Following a precedent case, the Tribunal decided to adopt an average value between the Sub-Registrar's value and the assessee's claimed value, as the fair market value of the property as on 01.04.1981.
Consequently, the appeal of the assessee was partly accepted, and the Revenue's appeal was dismissed.
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2013 (2) TMI 901
Issues Involved:
The judgment involves the interpretation of export turnover for the purpose of deduction u/s 10A of the Income Tax Act, 1961, and the exercise of powers u/s 263 of the Act by the Commissioner of Income-tax (CIT) regarding certain expenses incurred in foreign currency by the assessee.
Interpretation of Export Turnover:
The assessee, a software development company, filed a return of income for A.Y. 2005-06. The Assessing Officer (AO) considered the computation of export turnover for deduction u/s 10A of the Act. The AO excluded satellite link charges from export turnover, leading to an appeal by the assessee. The CIT, u/s 263, found the AO's order erroneous and prejudicial to revenue, directing exclusion of certain expenses incurred in foreign currency from export turnover. The assessee contended that as a software services provider, not engaged in providing technical services outside India, these expenses should not be excluded. The CIT held that providing software development services constituted providing technical services, thus the expenses were to be excluded.
Debatable Issue and Two Views:
The CIT's order was challenged before the Tribunal. The assessee argued that two views existed on the issue, citing decisions supporting their position. The Tribunal noted conflicting views and decisions, including a Special Bench ruling and a Bangalore Bench decision, supporting the assessee's stance. The Departmental Representative (DR) referred to a Karnataka High Court decision for exclusion of expenses from total turnover. The Tribunal observed that the AO's decision was based on a plausible view, as per Tribunal precedents, and when two views are possible, no action u/s 263 can be taken.
Quashing of CIT's Order:
The Tribunal quashed the CIT's order u/s 263, citing that the AO's decision was not erroneous or prejudicial to revenue. Referring to legal precedents, including Supreme Court and High Court decisions, the Tribunal emphasized that when two views are possible and the AO has taken one, jurisdiction u/s 263 cannot be exercised. The Tribunal upheld the AO's decision on the interpretation of export turnover, leading to the allowance of the assessee's appeal.
This judgment highlights the importance of considering different views on legal interpretations, especially in tax matters, and the significance of established legal principles in determining the validity of administrative actions.
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2013 (2) TMI 900
Issues involved:
The issues involved in this case are related to the deduction claimed by the assessee for doubtful debts for the assessment years 1996-97 and 1998-99. The main contention was whether the methodology followed by the assessee to write off the debts was in accordance with the provisions of section 36(1)(vii) of the Income Tax Act, 1961.
Judgment Details:
Issue 1: Deduction for Doubtful Debts
The Appellate Commissioner allowed the claim of bad debt by stating that writing off does not necessarily require crediting each debtor's account. The Commissioner held that if bad debts are debited in the profit and loss account and credited to another account like bad debt reserve account, the requirement of writing off is met. The Tribunal confirmed this order, emphasizing that the write-off should be made in the accounts, and in this case, the provision of section 36(1)(vii) was complied with. The Revenue's appeals were dismissed based on this interpretation.
Issue 2: Legal Precedent
Referring to the case of Vijaya Bank vs. COMMISSIONER OF INCOME TAX, the court highlighted the evolution of the law regarding bad debts. Before April 1, 1989, even a provision for bad debts could be treated as a write-off. However, post-April 1, 1989, a distinct dichotomy was introduced, requiring a specific manner of write-off. The court clarified that debiting doubtful debts to the profit and loss account and crediting the asset account constitutes an actual write-off, while a provision for doubtful debts does not entitle deduction post-April 1, 1989.
Issue 3: Interpretation of Section 36(1)(vii)
The court reiterated that section 36(1)(vii) applies to both banking and non-banking businesses. It emphasized that the assessing officer's insistence on closing individual debtor accounts as a precondition for claiming deduction was not supported by the law. The court noted that the assessing officer's apprehensions about potential double claims were unfounded, as there was no evidence of unauthorized claims. The court emphasized that decisions should not be based on apprehensions but on legal interpretations. It also highlighted the practical difficulties banks may face if individual accounts are closed, affecting recovery suits against debtors.
In conclusion, the court dismissed the appeals, ruling in favor of the assessee and against the Revenue, based on the interpretation of the law and legal precedents, particularly regarding the write-off of bad debts under section 36(1)(vii) of the Income Tax Act, 1961.
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2013 (2) TMI 899
Issues involved:
The judgment involves issues related to company petition before the Company Law Board seeking interim reliefs, refusal of interim reliefs by the Board, appeal filed under Section 10F of the Companies Act, 1956, arguments on oppression of company affairs, maintainability of the appeal based on questions of law, lack of reasons for refusal of interim reliefs, and the need for legal considerations in granting interim reliefs.
Company Petition and Interim Reliefs:
The appellants filed a company petition before the Company Law Board seeking interim reliefs to restrain certain actions by the respondents, including convening meetings without approval, holding General Meetings, making alterations to the Board of Directors, and acting upon resolutions passed at a Board Meeting.
Refusal of Interim Reliefs:
The Board passed an order refusing the interim reliefs sought by the appellants, stating that decisions in the General Meeting should be left to the shareholders, with a directive for a counter to be filed by the respondents within four weeks. The appellants, aggrieved by the refusal, filed an appeal under Section 10F of the Companies Act, 1956.
Appeal and Legal Arguments:
In the appeal, the appellants argued that the impugned order was unsustainable as per Section 397 of the Act, alleging oppression in the conduct of company affairs. They contended that the Board failed to consider crucial facts and legal rights, leading to an illegal order. The respondents argued against the maintainability of the appeal, stating no question of law was involved.
Legal Considerations and Reasons for Refusal:
The High Court emphasized the need for a question of law to arise from the impugned order for an appeal to be entertained. It criticized the lack of reasons for refusing the interim reliefs, stating that orders passed without reasons are against natural justice. The Court highlighted the importance of legal rights, evidence, and prima facie proof in granting interim reliefs.
Setting Aside the Impugned Order:
The Court set aside the impugned order and remitted the matter to the Board for fresh consideration within a month. It directed that decisions from the General Meeting be subject to the Board's order and mandated notice to all Directors for any meetings held by the respondents until the matter is disposed of. The appeal was allowed in favor of the appellants.
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2013 (2) TMI 898
Procedure for impleadment under Order 1 Rule 10 of Code of Civil Procedure - Suit for specific performance - Doctrine of lis pendens - Whether if the Appellant who is the transferee pendente lite having notice and knowledge about the pendency of the suit for specific performance and order of injunction can be impleaded as party under Order 1 Rule 10 on the basis of sale deeds executed in their favour by the Defendants Sawhneys' - HC dismissed the application on the ground that there was an injunction order passed way back on 04.11.1991 in the suit for specific performance restraining the Defendants-Sawhneys' from transferring or alienating the suit property passed, the purported sale deeds executed by the Defendants in favour of the Appellant was in violation of the undertaking given by the Respondents which was in the nature of injunction.
Division Bench affirmed the order of the Single Judge and held that in view of the injunction in the form of undertaking given by the Respondents-Sawhneys' and recorded in the suit proceedings, how the property could be purchased by the Appellants in the year 2008.
HELD THAT:- Sub-rule(2) of Rule 10 of Order 1 provides that the Court may either upon or without an application of either party, add any party whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all questions involved in the suit. Since the Respondent is not a party to the agreement of sale, it cannot be said that without his presence the dispute as to specific performance cannot be determined. Therefore, he is not a necessary party.
It is well settled that the doctrine of lis pendens is a doctrine based on the ground that it is necessary for the administration of justice that the decision of a court in a suit should be binding not only on the litigating parties but on those who derive title pendente lite. The provision of this Section does not indeed annul the conveyance or the transfer otherwise, but to render it subservient to the rights of the parties to a litigation.
As noticed above, even before the institution of suit for specific performance when the Plaintiff came to know about the activities of the Sawhneys' to deal with the property, a public notice was published at the instance of the Plaintiff in a newspaper "The Hindustan Times" dated 12.02.1990 (Delhi Edn.) informing the public in general about the agreement with the Plaintiff s. In response to the said notice the sister concern of the Appellant M/s Living Media India Limited served a legal notice on the Defendants- Sawhneys' dated 24.06.1990 whereby he has referred the 'agreement to sell' entered into between the Plaintiff s and the Defendants- Sawhneys'.
Even after the institution of the suit, the counsel who appeared for the Defendants-Sawhneys' gave an undertaking not to transfer and alienate the suit property. Notwithstanding the order passed by the Court regarding the undertaking given on behalf of the Defendants- Sawhneys', and having full notice and knowledge of all these facts, the sister concern of the Appellant namely Living Media India Ltd. entered into series of transaction and finally the Appellant M/s. Thomson Press got a sale deed executed in their favour by Sawhneys' in respect of suit property.
Therefore, we have no hesitation in holding that the Appellant entered into a clandestine transaction with the Defendants-Sawhneys' and got the property transferred in their favour. Hence the Appellant - M/s Thomson Press cannot be held to be a bonafide purchaser, without notice.
This Court again in the case of Dwarka Prasad Singh and Ors. v. Harikant Prasad Singh and Ors.[1972 (11) TMI 96 - SUPREME COURT] subscribed its earlier view and held that in a suit for specific performance against a person with notice of a prior agreement of sale is a necessary party.
For the ends of justice the Appellant is to be added as party-Defendant in the suit. The appeal is, accordingly, allowed and the impugned orders passed by the High Court are set aside.
T.S. THAKUR, J. - I entirely agree with the conclusion that the Appellant ought to be added as a party-Defendant to the suit, I wish to add a few lines of my own.
It is true that the application which the Appellant made was only under Order I Rule 10 Code of Civil Procedure but the enabling provision of Order XXII Rule 10 Code of Civil Procedure could always be invoked if the fact situation so demanded. It was in any case not urged by counsel for the Respondents that Order XXII Rule 10 could not be called in aid with a view to justifying addition of the Appellant as a party-Defendant. Such being the position all that is required to be examined is whether a transferee pendente lite could in a suit for specific performance be added as a party Defendant and, if so, on what terms.
To sum up:
(1) The Appellant is not a bona fide purchaser and is, therefore, not protected against specific performance of the contract between the Plaintiff's and the owner Defendants in the suit.
(2) The transfer in favour of the Appellant pendente lite is effective in transferring title to the Appellant but such title shall remain subservient to the rights of the Plaintiff in the suit and subject to any direction which the Court may eventually pass therein.
(3) Since the Appellant has purchased the entire estate that forms the subject matter of the suit, the Appellant is entitled to be added as a party Defendant to the suit.
(4) The Appellant shall as a result of his addition raise and pursue only such defenses as were available and taken by the original Defendants and none other.
With the above additions, I agree with the order proposed by my Esteemed Brother, M.Y. Eqbal, J. that this appeal be allowed and the Appellant added as party Defendant to the suit in question.
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2013 (2) TMI 897
Issues involved: Challenge to the order of the Income Tax Appellate Tribunal regarding disallowance of expenses u/s 35D of the Act and public issue expenses.
Regarding disallowance u/s 35D of the Act: The High Court had previously decided a similar question in favor of the revenue in a previous case involving the same assessee. The Tribunal was directed to reexamine the issue on merit and provide a decision accordingly.
Regarding public issue expenses: The Tribunal had directed the Assessing Officer to follow its order from a previous assessment year, which was challenged in the Court and not entertained. Since no new grounds were presented, the Court did not find it necessary to further consider the matter. The Tax appeal was disposed of, remanding the first question back to the Tribunal for a decision after proper consideration and hearing both sides.
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2013 (2) TMI 896
Issues Involved:
1. Deletion of penalty levied u/s 271(1)(c) of the Act by CIT(A).
Summary:
Issue 1: Deletion of Penalty Levied u/s 271(1)(c) of the Act by CIT(A):
The appeals filed by the Revenue challenge the order of CIT(A) that deleted the penalty levied u/s 271(1)(c) of the Act for Assessment Years 2006-07 and 2007-08. The Revenue contended that the CIT(A) erred in deleting the penalty as the assessee furnished inaccurate particulars of income concerning the Double Income Tax Relief (DITR) claimed for the Hong Kong branch. The Assessing Officer (AO) had disallowed the DITR claim and initiated penalty proceedings for furnishing inaccurate particulars of income. The CIT(A) observed that the assessee's claim was based on a bona fide belief that the DTA provisions between India and China applied to Hong Kong, which later turned out to be incorrect. The CIT(A) held that the penalty u/s 271(1)(c) is not warranted as the claim was made based on prevailing circumstances and legal precedents, and the particulars of income were not found to be inaccurate.
The CIT(A) noted that penalty proceedings are distinct from assessment proceedings and must be strictly construed. The CIT(A) cited the Supreme Court decision in Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC), which held that merely making an unsustainable claim does not amount to furnishing inaccurate particulars of income. The CIT(A) also referenced the Supreme Court's clarification in Union of India v. Dharmendra Textiles and subsequent cases, emphasizing that penalty is not automatically leviable and must be independently established.
The Tribunal upheld the CIT(A)'s decision, confirming that the assessee had disclosed all particulars of income, and the error was in the computation of tax liability, not in the concealment of income. Consequently, the Tribunal dismissed the Revenue's appeals, affirming that no penalty u/s 271(1)(c) is legally leviable in this case.
Conclusion:
The appeals of the Revenue were dismissed, and the deletion of the penalty by CIT(A) was upheld, as the assessee's claim was based on a bona fide belief and all particulars of income were correctly disclosed.
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2013 (2) TMI 895
Issues Involved:
1. Legality and arbitrariness of the order passed by the Income Tax Settlement Commission.
2. Violation of principles of natural justice.
3. Scope of judicial review of the Settlement Commission's order.
Summary:
1. Legality and arbitrariness of the order passed by the Income Tax Settlement Commission:
The petitioner challenged the order dated 1st September 2003 by the Income Tax Settlement Commission, Mumbai, u/s 226 of the Constitution of India, alleging it to be illegal and contrary to law. The petitioner contended that the Settlement Commission arbitrarily added Rs. 47.34 lakhs to the disclosed income without providing valid reasons, thus determining the undisclosed income at Rs. 87,34,280 against the Rs. 40,00,000 offered. The petitioner argued that the method adopted by the Commission lacked a plausible basis and was financially burdensome. The Court examined the powers of the Settlement Commission u/s 245C and 245D of the Income Tax Act, 1961, noting that the Commission's order must be based on the records, the Commissioner's report, and any further evidence. The Court held that the Settlement Commission provided sufficiently cogent reasons based on the material available, and the addition was not arbitrary but a fair and equitable sum derived from the evidence.
2. Violation of principles of natural justice:
The petitioner claimed that the order was passed in gross violation of the principles of natural justice, as no proper opportunity for hearing was provided. The Court, however, found that the Settlement Commission had availed the fullest opportunities of hearing to the parties, and the process of decision-making was unimpeachable. The Court emphasized that the Settlement Commission's proceedings are not equivalent to assessment proceedings and that the Commission's order should not be questioned as if it were an assessment order.
3. Scope of judicial review of the Settlement Commission's order:
The Court referred to the scope of judicial review under Articles 32, 136, and 226 of the Constitution, as discussed in the case of Jyotendrasinhji v. S.I Tripathi, where it was held that the only ground for interference is if the order is contrary to the provisions of the Act and has prejudiced the appellant. The Court reiterated that it cannot re-appreciate findings of fact by the Settlement Commission and that judicial review is concerned with the decision-making process, not the decision itself. The Court concluded that the petitioner failed to demonstrate any breach of provisions or serious prejudice caused by the Commission's decision-making process, thus warranting no judicial review.
Conclusion:
The petition was dismissed with no order as to costs, affirming that the Settlement Commission acted within its powers and provided valid reasons for the additional income determination.
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2013 (2) TMI 894
Issues involved:
The issues involved in the judgment are:
1. Whether the Appellate Tribunal was right in confirming the deletion of addition of Rs. 1,42,00,000/- u/s 260A of the Income-tax Act, 1961, on account of unexplained investment in purchase of land?
2. Whether the Appellate Tribunal was right in confirming the deletion of the addition of Rs. 36,52,656/- made by the Assessing Officer being unaccounted profit on sale of the land, without considering the provisions of Section 53A of the Transfer of Property Act?
Issue 1:
The first question pertains to the deletion of addition of Rs. 1,42,00,000/-. A search conducted at the premises revealed an agreement to sale for the purchase of land. The Assessing Officer added the amount towards unexplained investment. The CIT(A) partly allowed the appeal challenging this order. The Tribunal confirmed the findings that the payment made by the assessee-respondent was from the sale consideration received from M/s. Trimurti Associates. The Tribunal concluded that the assessee had successfully established the nexus between the amounts received and the payments made for land purchase. The Tribunal found no reason to interfere with the factual findings of the CIT(A) and thus deleted the addition. The Tribunal's decision was based on material evidence presented, confirming the connection between the sale and purchase transactions.
Issue 2:
Regarding the second question, concerning the deletion of Rs. 36,52,656/- made by the Assessing Officer as unaccounted profit on the sale of land, the Tribunal noted that the possession of the land was handed over after a civil suit was filed and later compromised. The compromise indicated that the land was transferred only after the settlement. As no transfer took place during the block period, the profit was not taxable. The Tribunal upheld the CIT(A)'s decision, stating that the profit was declared in the assessment year 2003-2004, in line with the legal provisions. The Tribunal dismissed the Revenue's grounds, emphasizing that the profit was rightly deleted as there was no transfer within the meaning of the law. The decision was based on the available material and interpretation in accordance with the law.
In conclusion, the Tax Appeal was dismissed as the Tribunal found no further consideration necessary based on the discussions and findings presented in the judgment.
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2013 (2) TMI 893
Issues involved: Appeal for Assessment Year 2000-01 by the Revenue regarding exclusion of accrued interest from total income of the Assessee Company.
Summary:
The High Court of Bombay, in an appeal for the Assessment Year 2000-01 by the Revenue, considered the question of whether the Tribunal was correct in excluding from the total income of the Assessee Company the amount of interest of Rs. 29,36,03,288 which had accrued but not fallen due or received. The Counsel for the parties referred to a previous decision of the Court in the case of The Director of Income Tax (International Taxation) v/s. Bank of Bahrain & Kuwait, BSC, where a similar issue was decided in favor of the Respondent-Assessee. The Court, based on this precedent, declined to entertain the proposed question of law and subsequently dismissed the appeal with no order as to costs.
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2013 (2) TMI 892
Issues Involved:
1. Deletion of addition to share capital by CIT(A).
2. Verification of evidence and documents submitted by the assessee.
3. Applicability of legal precedents and judgments.
Summary:
Issue 1: Deletion of Addition to Share Capital by CIT(A)
The Revenue appealed against the CIT(A)'s order which deleted the addition of Rs. 50,00,000/- made by the Assessing Officer (AO) on account of share capital from seven companies. The AO had added this amount u/s 68 of the Income Tax Act, 1961, citing that the assessee failed to provide a satisfactory explanation for the addition to the share capital.
Issue 2: Verification of Evidence and Documents Submitted by the Assessee
The AO issued notices u/s 133(6) to the seven companies, but four notices were returned unserved, and the remaining three companies did not respond. Despite this, the assessee submitted confirmations from all seven companies. The AO, however, did not verify these confirmations and other documents submitted by the assessee, including PAN numbers and bank statements, and proceeded to add Rs. 50 lakh to the income of the assessee.
Issue 3: Applicability of Legal Precedents and Judgments
The CIT(A) found that the AO did not provide any basis for his observation regarding accommodation entries and relied on the judgments in CIT vs. Stellar Investment Ltd. 251 ITR 263 (SC) and CIT vs. Value Capital Services Pvt. Ltd 307 ITR 334 (Delhi). The Tribunal observed that the AO failed to conduct any meaningful inquiry or verification of the evidence submitted by the assessee, thus falling into the category where the AO "sits back with folded hands" as described in the judgment of Gangeshwari Metal Pvt. Ltd. The Tribunal also noted that the share application money was routed through banking channels and that the AO's action was not sustainable in light of the recent judgment in Commissioner of Income Tax vs Gangeshwari Metal Pvt. Ltd.
Conclusion:
The Tribunal upheld the CIT(A)'s order, stating that the assessee had discharged its burden to prove the genuineness of the transaction, and the AO had not brought any material on record to show that the share capital was represented by undisclosed income of the assessee. The appeal of the Revenue was dismissed.
Order:
The appeal of the Revenue is dismissed. Order pronounced in the open court on 22.2.2013.
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2013 (2) TMI 891
Issues involved: Appeal against penalty u/s 271(1)(c) of the Income Tax Act, 1961 relating to assessment year 2007-08.
Penalty u/s 271(1)(c) - Disallowance of interest on diversion of interest bearing fund to sister concern:
The Assessing Officer made additions for disallowance of interest under section 36(1)(iii) of the Act on interest-free advances and restricted deduction under section 80IC. A penalty of &8377; 4,65,544 was levied u/s 271(1)(c) on these additions. The CIT (Appeals) deleted the penalty on interest disallowance under section 36(1)(iii) but upheld it on deduction disallowance under section 80IC. The Revenue appealed against the deletion of penalty on interest disallowance related to diversion of funds to a sister concern. Despite the absence of the assessee, the Tribunal found that complete particulars of income and expenditure were provided, and the Revenue failed to prove inaccurate particulars. The Tribunal agreed with the assessee that mere disallowance of interest does not justify penalty u/s 271(1)(c). Consequently, the appeal of the Revenue was dismissed.
Judges' Names: Shri T.R. Sood, Accountant Member and Ms. Sushma Chowla, Judicial Member
Decision: The appeal of the Revenue against the penalty u/s 271(1)(c) was dismissed by the Tribunal on the grounds that the assessee had provided complete particulars of income and expenditure, and the disallowance of interest did not warrant the imposition of the penalty.
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2013 (2) TMI 890
Issues involved: The judgment addresses the following substantial questions of law:
a) Whether interest payable by the Indian Permanent Establishment of a foreign bank to its Head Office and overseas branches is deductible in computing the total income?
b) Whether the interest income payable by the Indian Permanent Establishment of a foreign bank to its Head Office and branch Offices abroad can be taken into account for the purpose of accounting the income of the Head Office liable to be taxed in India?
Summary:
Issue a): The Tribunal's decision on the deductibility of interest payable by the Indian Permanent Establishment of the foreign bank to its Head Office and overseas branches was challenged. The High Court examined the facts and circumstances of the case along with the relevant legal provisions. The Tribunal's justification for holding the interest as deductible in computing the total income was a key point of contention.
Issue b): The High Court also considered whether the Tribunal erred in holding that the interest income payable by the Indian Permanent Establishment of a foreign bank to its Head Office and branch Offices abroad cannot be considered for accounting the income of the Head Office subject to taxation in India. The implications of this decision on the taxation of the foreign bank's income in India were thoroughly analyzed.
The counsel for the revenue emphasized the significance of the issues raised in the impugned order, affecting a large number of matters in dispute before the authorities. Consequently, an early date for the final hearing of the appeal was requested and agreed upon by consent, scheduling the appeal for hearing on 15/4/2013.
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2013 (2) TMI 889
Issues Involved:
1. Validity of re-opening of assessment u/s 148
2. Authentication and admissibility of evidence
3. Addition of unexplained investment u/s 69
4. Opportunity to examine and verify documents
5. Assessment barred by limitation
6. Addition based on agreement
Summary:
1. Validity of Re-opening of Assessment u/s 148:
The assessee contended that the re-opening of assessment was not valid in law. The CIT(Appeals) rejected this ground, noting that the re-opening was based on information received from the Central Board of Direct Taxes (CBDT), which indicated that the assessee had made a declaration of endowment in favor of M/s. Webster Foundation, transferring Euro 123,000 to the Foundation's account. The Tribunal upheld the CIT(Appeals)' decision, confirming the validity of the re-opening u/s 148.
2. Authentication and Admissibility of Evidence:
The assessee argued that the documents relied upon by the Assessing Officer were not authenticated and lacked evidentiary value. The CIT(Appeals) and the Tribunal held that the information received from the CBDT was deemed authenticated as it was obtained on a Government-to-Government basis. The Tribunal noted that the documents, including the declaration of endowment and bank statements, were on the letterhead of LGT Bank in Liechtenstein and were initialed, thus holding them to be valid evidence.
3. Addition of Unexplained Investment u/s 69:
The Assessing Officer added the unexplained investment of CHF 770,796.60 (equivalent to Rs. 2,26,38,373) as income for the assessment year 2002-03. The assessee contended that the amount could not be added for this assessment year as it was available from March 2000. The Tribunal upheld the addition, stating that the balance as on 31.12.2001 was relevant for the assessment year 2002-03. The Tribunal also noted that the onus was on the assessee to explain the source of the amount, which he failed to do.
4. Opportunity to Examine and Verify Documents:
The assessee claimed that he was not given sufficient opportunity to examine and verify the documents. The Tribunal observed that the Assessing Officer had issued summons u/s 131 and provided the assessee with all relevant documents, giving him ample opportunity to respond. The Tribunal found that the assessee had failed to discharge the onus of proving the source of the investment.
5. Assessment Barred by Limitation:
The assessee argued that the assessment proceedings were barred by limitation. The Tribunal dismissed this contention, noting that the re-opening of the assessment was within the permissible time limits and based on valid information received from the CBDT.
6. Addition Based on Agreement:
The assessee contended that the addition was made solely based on his agreement to pay taxes. The Tribunal found that the addition was not solely based on the assessee's agreement but was supported by substantial evidence, including the declaration of endowment and bank statements. The Tribunal noted that the assessee had agreed to pay taxes to avoid litigation and maintain his reputation, but this did not invalidate the addition made by the Assessing Officer.
Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the re-opening of the assessment u/s 148, the authenticity and admissibility of the evidence, and the addition of unexplained investment u/s 69. The Tribunal confirmed that sufficient opportunity was given to the assessee to examine and verify the documents and that the assessment was not barred by limitation. The addition was not solely based on the assessee's agreement but was supported by substantial evidence.
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2013 (2) TMI 888
Issues involved: Application for recalling order related to disallowance of employees' contribution to ESI and EPF u/s Assessment Year 2002-03.
Summary:
The applicant filed a Miscellaneous Application to recall the order dated 30.10.2009 in ITA No.915/Chd/2009 regarding the disallowance of employees' contribution to ESI and EPF. The application was dismissed initially due to multiple adjournments already granted to the assessee and the issue being settled by the Hon'ble Apex Court. The Revenue's representative highlighted that the issue had been addressed by the Hon'ble Supreme Court in CIT Vs. Alom Extrusions Ltd. On review, the Tribunal decided to recall the order to address the ground raised by the assessee regarding the disallowance of late deposit of employees' contribution to ESI and EPF. The ground was fixed for hearing on a specified date. Consequently, the Miscellaneous Application filed by the assessee was allowed as per the terms mentioned.
Order pronounced in the open court on the 13th day of February, 2013.
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