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2010 (3) TMI 1254
Issues: Company Law Board's order directing share sale at a fixed price, valuation of company shares, appointment of valuer, sharing of valuation expenses, timeline for valuation report submission.
Analysis:
The judgment by the High Court of Calcutta pertains to applications and proposed appeals related to a common order issued by the Company Law Board in separate proceedings under Sections 235, 397, and 398 of the Companies Act. The Company Law Board, while finding no grounds for investigation or cases of oppression or mismanagement, directed the aspiring appellants to sell their shares to the management at a fixed price of Rs. 500 per share to resolve internal conflicts. Additionally, the controlling shareholders were given the option to sell their shares to the appellants at the same price. Two independent appeals were filed by the controlling shareholders, which were admitted and numbered as ACO No. 55 of 2009 and ACO No. 56 of 2009.
The parties involved, including the controlling shareholders and the petitioners, agreed to value the company shares. However, the controlling shareholders contested the fixed price set by the Company Law Board, alleging it lacked a proper basis and was solely based on the petitioners' submissions. On the other hand, the petitioners argued that their valuation was grounded in the company's financial statements and accounts. To address this dispute, Mr. Sashi Agarwal, an empanelled auditor, was appointed to value the company shares as of March 31, 2003, and March 31, 2009.
To facilitate the valuation process, the company agreed to pay an initial amount to the chartered accountant for expenses related to travel and other incidental costs. It was further decided that the petitioners would bear one-third of the final valuation bill, with the company covering the remaining expenses. The High Court set a deadline for the completion of the valuer's report by April 23, 2010, with all related matters scheduled to appear in court on April 30, 2010. Additionally, the court authorized the provision of urgent certified copies of the order to the concerned parties upon request, subject to fulfilling necessary formalities.
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2010 (3) TMI 1253
Issues involved: Determination of court fee payable for a declaration that sale deeds were void and not binding on the co-parcenary, and for the consequential relief of joint possession and injunction.
Summary:
The appellant filed a suit seeking various reliefs, including a declaration that certain properties were co-parcenary, and challenging the validity of sale deeds and gift deeds. The appellant paid court fees as per Section 7(iv)(c) of the Court-fees Act, 1870. The trial court held that ad valorem court fee was payable on the sale consideration in the sale deeds, which was challenged by the appellant in revision. The High Court upheld the trial court's decision, leading to a series of applications and appeals. The main issue was the determination of court fee payable for the specific reliefs sought by the appellant.
In Punjab, court fees are governed by the Court Fees Act, 1870. The relevant provision for suits seeking a declaratory decree with consequential relief is Section 7(iv)(c) of the Act. The court fee payable is based on the value of the relief sought in the plaint. The Act specifies different valuation methods for different types of properties, such as agricultural lands and houses. The distinction between seeking cancellation and seeking a declaration for invalidity of a deed was explained, highlighting the difference in court fee requirements based on whether the plaintiff is the executant or a non-executant of the deed.
The Court clarified that in this case, the appellant was not seeking cancellation of the sale deeds but a declaration that they do not bind the co-parcenary, along with a claim for joint possession. As the appellant was not the executant of the sale deeds, the court fee was to be computed under Section 7(iv)(c) of the Act. The trial court and the High Court erred in requiring payment of court fee based on the sale consideration in the deeds. The appeals were allowed, setting aside the previous orders and directing the trial court to calculate the court fee in accordance with the relevant provisions of the Act based on the plaint averments.
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2010 (3) TMI 1252
Issues Involved:
1. Addition of Rs. 55 lakhs towards unexplained cash credits u/s 68.
2. Adoption of guidance value for sale of property u/s 50C.
Summary:
Issue 1: Addition of Rs. 55 lakhs towards unexplained cash credits u/s 68
The assessee company received Rs. 55 lakhs from M/s Bhuwania Brothers Pvt. Ltd. as an advance for a proposed contract for sale, which was later canceled, and the amount was repaid. The Assessing Officer (AO) treated this amount as unexplained cash credits u/s 68 due to lack of documentary evidence and non-compliance by M/s Bhuwania Brothers Pvt. Ltd. with summons. The CIT(A) deleted this addition, stating that the identity and genuineness of the transactions were established. However, the Tribunal found the explanations offered by the assessee to be self-serving and unsupported by documentary evidence, thus restoring the addition of Rs. 55 lakhs made by the AO.
Issue 2: Adoption of guidance value for sale of property u/s 50C
The AO adopted the guidance value of Rs. 200/sft for the sale of properties, leading to an addition of Rs. 45,37,800/-. The CIT(A) modified this value to Rs. 150/sft. The Tribunal agreed with the assessee's argument that sec. 50C, which pertains to the computation of capital gains, does not apply to the computation of business income from the sale of stock-in-trade. The Tribunal found no material evidence to support the AO's higher sale value and directed the AO to compute the profits based on the actual sale consideration accounted by the assessee.
Conclusion:
The appeal filed by the assessee is allowed, and the appeal filed by the Revenue is partly allowed. The Tribunal restored the addition of Rs. 55 lakhs towards unexplained cash credits and directed the AO to compute the profits on the sale of plots based on the actual sale consideration.
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2010 (3) TMI 1250
Issues Involved:
1. Deletion of addition made on account of unsecured loans under Section 68 of the Income Tax Act, 1961.
2. Deletion of addition made on account of unsecured loans by admitting additional evidence in contravention of Rule 46A(3) of the Income Tax Rules, 1962.
3. Deletion of addition made on account of disallowance of interest expenses.
4. Deletion of addition made on account of disallowance of traveling expenses.
5. Deletion of addition made on account of disallowance of deduction of PF and ESI collected from employees paid after due dates.
6. Allowing deduction of payment of PF and ESI made after due date by not accepting the decision of the Hon'ble Madras High Court.
7. Whether the order of the Assessing Officer should be upheld.
8. Prayer to set aside the order of the Commissioner of Income Tax (Appeals) and restore that of the Assessing Officer.
Issue-wise Detailed Analysis:
1. Deletion of Addition Made on Account of Unsecured Loans under Section 68:
The assessing officer added Rs. 4,48,03,196/- under Section 68, claiming the appellant failed to substantiate its claim regarding unsecured loans. The appellant argued that the loans were procured in earlier years, not the current year, and provided detailed evidence, including audited accounts and confirmations from depositors. The Commissioner of Income Tax (Appeals) found that only Rs. 2 crores were received as a new loan from an associate concern, which was already assessed by the same officer. The rest of the loans were old, and thus, following the Karnataka High Court's decision in Sridev Enterprise (193 ITR 165), the addition under Section 68 was unjustified and deleted.
2. Deletion of Addition by Admitting Additional Evidence in Contravention of Rule 46A(3):
The Commissioner of Income Tax (Appeals) admitted additional evidence submitted by the appellant, which was not furnished during the assessment proceedings due to the illness of the Finance and Accounts Manager. The Tribunal noted that the Commissioner did not pass an order before accepting the additional evidence and did not confront the assessing officer with this evidence, violating Rule 46A. Consequently, the matter was remanded back to the Commissioner to re-adjudicate after allowing the assessing officer to review the additional evidence.
3. Deletion of Addition Made on Account of Disallowance of Interest Expenses:
The assessing officer disallowed Rs. 11,23,686/- under Section 36(1)(iii), stating the appellant advanced interest-free loans to its subsidiary while paying interest on borrowed funds. The appellant contended that the advances were for business purposes as the subsidiary was a distributor. The Commissioner of Income Tax (Appeals) agreed, citing the Supreme Court's decision in S. A. Builders vs. CIT (288 ITR 1), and deleted the disallowance.
4. Deletion of Addition Made on Account of Disallowance of Traveling Expenses:
The assessing officer disallowed Rs. 2,21,082/- for foreign traveling expenses, citing insufficient evidence to prove the expenses were for business purposes. The appellant provided invoices and other details during the appeal. The Commissioner found that while some expenses could be for business purposes, the evidence was not conclusive. Thus, 50% of the disallowance was retained, and Rs. 1,10,541/- was allowed as relief.
5. Deletion of Addition Made on Account of Disallowance of Deduction of PF and ESI Collected from Employees Paid After Due Dates:
The assessing officer disallowed Rs. 10,41,768/- for late payment of PF and ESI. The appellant argued that payments were made before the due date of filing the return, citing decisions from various courts. The Commissioner of Income Tax (Appeals) followed the decisions of the Supreme Court and the Gujarat High Court, allowing the payments based on actual payment during the relevant previous year, and directed the assessing officer to allow the deductions.
6. Allowing Deduction of Payment of PF and ESI Made After Due Date:
The Commissioner of Income Tax (Appeals) did not accept the decision of the Hon'ble Madras High Court in CJT Vs Madras Radiators and Pressings Limited (183 CTR 322), which disallowed deductions for late payments. Instead, the Commissioner followed the Supreme Court's decision in Allied Motors (P) Ltd. and other relevant judgments, allowing the deductions for payments made before the due date of filing the return.
7. Whether the Order of the Assessing Officer Should be Upheld:
The Tribunal noted that the Commissioner of Income Tax (Appeals) accepted additional evidence without confronting the assessing officer, violating Rule 46A. Therefore, the Tribunal set aside the Commissioner's order and remanded the matter for re-adjudication, ensuring the assessing officer reviews the additional evidence.
8. Prayer to Set Aside the Order of the Commissioner of Income Tax (Appeals) and Restore that of the Assessing Officer:
The Tribunal allowed the appeal for statistical purposes, setting aside the Commissioner's order and remanding the matter back to the Commissioner to re-adjudicate after allowing the assessing officer to review the additional evidence within three months from the date of the Tribunal's order.
Conclusion:
The Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and remanded the matter for re-adjudication, ensuring compliance with Rule 46A and allowing the assessing officer to review the additional evidence submitted by the appellant. The appeal of the revenue was allowed for statistical purposes.
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2010 (3) TMI 1249
Issues involved:
The judgment involves appeals by the revenue and cross objections by the assessee against different orders of CIT(A)-III, Hyderabad for assessment years 2004-05 to 2006-07, addressing issues related to deduction u/s 80 IA on captive consumption of power generated by the assessee, and deduction towards prepayment premium paid to IDBI & ICICI Bank as revenue expenditure.
Deduction u/s 80 IA on captive consumption of power:
The common issue in the appeals filed by the revenue pertains to the allowability of deduction u/s 80 IA on captive consumption of power generated by the assessee. The Tribunal referred to a previous order in the case of West Coast Paper Mills Ltd., Vs. ACIT, where it was held that the claim for deduction u/s 80IA should be granted in cases of captive consumption of power. However, the Tribunal emphasized that deduction u/s 80IA must be computed after deduction of notional brought forward losses and depreciation of eligible business, as per the specific provisions of section 80IA(5) and the decision in the case of ACIT Vs. Gold Mines Shares & Finance (P) Ltd. Consequently, the assessing officer was directed to compute the deduction u/s 80IA in accordance with the provisions of the Income Tax Act, 1961.
Deduction towards prepayment premium:
In ITA No.311/Hyd/2009, the ground of appeal was related to the granting of deduction towards prepayment premium paid to IDBI & ICICI Bank as revenue expenditure. After hearing both parties and considering the facts, the Tribunal noted that this issue had been previously decided in favor of the assessee in the assessment year 2002-03. Accordingly, the Tribunal dismissed this ground of the Revenue, resulting in the partial allowance of all the appeals filed by the Revenue.
Cross objections - Allowability of depreciation on intangible assets:
The cross objections filed by the assessee raised common grounds regarding the allowability of depreciation on intangible assets (goodwill) acquired during the amalgamation of Coastal Papers Ltd. The Tribunal, after hearing both parties and considering previous decisions in the assessee's own case for assessment years 2002-03 and 2003-04, decided in favor of the assessee. Consequently, all the cross objections filed by the assessee were allowed in full, while the Revenue Appeals were partly allowed.
This consolidated order by the Appellate Tribunal ITAT Hyderabad, pronounced on 31.3.2010, addressed the aforementioned issues comprehensively, providing clarity on the allowability of deductions and expenditures in the context of the Income Tax Act, 1961.
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2010 (3) TMI 1248
Issues Involved:
1. Depreciation on Golf Course Infrastructure.
2. Depreciation on Temporary Erected Structures.
3. Disallowance of Interest Paid on Loans from Financial Institutions.
Summary:
1. Depreciation on Golf Course Infrastructure:
The issue raised by the revenue was that the CIT(A) erred in allowing depreciation of Golf Course infrastructure at 25%. The assessee, engaged in running an 18-hole golf course, claimed depreciation at 25%, arguing that the golf course is a specialized structure with technical requirements, thus qualifying as "Plant." The AO disagreed, treating the golf course akin to a hotel building and allowing 20% depreciation for A.Y. 2002-03 and 2003-04, and 10% for A.Y. 2005-06. The CIT(A) supported the assessee's claim, stating the golf course is a specialized structure and should be treated as "Plant." The Tribunal upheld the CIT(A)'s order, noting no material change in facts or law from A.Y. 2001-02, where 25% depreciation was allowed. Consequently, the revenue's appeals were dismissed.
2. Depreciation on Temporary Erected Structures:
The assessee claimed 100% depreciation on various temporary structures, which the AO disallowed, allowing only 10% depreciation, arguing these were concrete structures used regularly and not temporary. The CIT(A) agreed with the AO, noting the structures were concrete and used for more than five years, thus not qualifying as temporary. The Tribunal upheld the CIT(A)'s order, finding no infirmity in treating the structures as non-temporary and allowing only 10% depreciation. Consequently, the assessee's appeals for A.Y. 2002-03 and 2003-04 were dismissed.
3. Disallowance of Interest Paid on Loans from Financial Institutions:
For A.Y. 2005-06, the assessee raised the issue of disallowance of Rs. 1,03,10,776/- on account of interest paid on loans, which was not adjudicated by the CIT(A). The Tribunal remitted the issue to the CIT(A) for consideration and a finding, ensuring the assessee is given adequate opportunity of being heard. Consequently, the appeal for A.Y. 2005-06 was allowed for statistical purposes.
Conclusion:
All the revenue's appeals were dismissed. The assessee's appeals for A.Y. 2002-03 and 2003-04 were dismissed, while the appeal for A.Y. 2005-06 was allowed for statistical purposes.
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2010 (3) TMI 1247
Title: Supreme Court dismisses appeal under Article 136
Summary: The Supreme Court dismissed the appeal under Article 136 of the Constitution due to the peculiar facts and circumstances of the case, keeping the question of law open. (2010 (3) TMI 1247 - SC Order)
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2010 (3) TMI 1246
Issues Involved:
1. Addition of Rs. 1,81,38,000/- transferred to Reserve Fund.
2. Disallowance of Rs. 2,00,000/- contribution to Education Fund.
3. Disallowance of Rs. 1,43,15,579/- depreciation on Plant and Machinery.
4. Disallowance of Rs. 10,62,107/- depreciation on temporary structures.
5. Disallowance of Rs. 4,48,04,410/- u/s 80G for donation to Amul Relief Trust.
6. Treatment of costs not related to export as indirect costs u/s 80HHC.
7. Charging of interest u/s 234B and 234D.
Summary:
1. Addition of Rs. 1,81,38,000/- Transferred to Reserve Fund:
The Tribunal upheld the CIT(A)'s decision confirming the addition of Rs. 1,81,38,000/- transferred to the Reserve Fund u/s 67 of the Gujarat Co-operative Societies Act. This decision was based on the precedent set in the assessee's own case for A.Y. 2000-01 and earlier years, where similar additions were confirmed.
2. Disallowance of Rs. 2,00,000/- Contribution to Education Fund:
The Tribunal decided in favor of the assessee, allowing the deduction of Rs. 2,00,000/- contributed to the Education Fund. This decision followed the precedent set in the assessee's own case for A.Y. 1998-99, where such contributions were deemed allowable business expenditures as per the Gujarat High Court decision in Mehsana Dist. Co-op. Milk Producers Union Ltd. vs. CIT (203 ITR 601).
3. Disallowance of Rs. 1,43,15,579/- Depreciation on Plant and Machinery:
The Tribunal allowed the assessee's claim for depreciation on Plant and Machinery without reducing the grant from the cost. This decision followed the precedent set in the assessee's own case for A.Y. 2000-01, where it was held that the grant was for the entire project and not for specific assets, thus not affecting the actual cost for depreciation purposes.
4. Disallowance of Rs. 10,62,107/- Depreciation on Temporary Structures:
The Tribunal found that the A.O. had rectified the order u/s 154, allowing the claim of the assessee for 100% depreciation on temporary structures. Since the related ground was not pressed before the CIT(A), this issue was treated as dismissed and the ground became infructuous.
5. Disallowance of Rs. 4,48,04,410/- u/s 80G for Donation to Amul Relief Trust:
The Tribunal upheld the CIT(A)'s decision to disallow 100% deduction u/s 80G(2)(d) for the donation to Amul Relief Trust, allowing only 50% deduction. This was because the donee trust did not fulfill the conditions laid down in section 80G(5C), specifically regarding the utilization of funds and transfer of unutilized amounts to the Prime Minister's National Relief Fund by the stipulated date.
6. Treatment of Costs Not Related to Export as Indirect Costs u/s 80HHC:
The Tribunal restored the matter to the file of the A.O. to take a uniform decision, following the precedent set in the assessee's own case for A.Y. 2000-01, where similar issues were set aside for fresh consideration.
7. Charging of Interest u/s 234B and 234D:
The Tribunal noted that the charging of interest u/s 234B and 234D is consequential and must be allowed as per the assessed income. Interest u/s 234D is to be charged with effect from 1-6-2003, as per the law. The decision of the CIT(A) was confirmed.
Conclusion:
The appeal filed by the assessee was partly allowed for statistical purposes. The order was pronounced in Open Court on 22-03-2010.
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2010 (3) TMI 1245
Issues involved: Appeal against order confirming addition of Rs. 3,50,000 u/s 68 of the Income-tax Act, 1961 for assessment year 2002-03.
Issue 1: Addition u/s 68 of the Act
The assessee, a trust registered u/s 12A of the Income-tax Act, running an educational institution, contested the addition of Rs. 3,50,000 received from a donor. The AO reopened assessment based on information about accommodation entry of Rs. 40,05,000. Assessee explained donations received, except the disputed amount, stating it was voluntary and utilized for charitable purposes. Citing a High Court decision, assessee argued against double taxation. The DR argued lack of explanation on donation source and denied benefit under sections 11 and 12. Tribunal noted the trust's registration, substantial donations received, and satisfactory details provided except for the disputed donation. Referring to a similar case, the Tribunal found in favor of the assessee, following the High Court's ruling that voluntary donations, even if details are incomplete, do not imply unaccounted money introduction. Consequently, the addition of Rs. 3,50,000 was deleted.
Decision:
The Tribunal allowed the appeal, deleting the addition of Rs. 3,50,000 u/s 68 of the Income-tax Act, 1961 for the assessment year 2002-03.
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2010 (3) TMI 1244
The Supreme Court allowed the petitioner to sell cigarettes and tobacco products in the departure terminal, subject to fulfilling the conditions of the Cigarettes and Other Tobacco Products Act, 2003. The Respondent-Department was directed to release the stock upon fulfillment of the conditions. The special leave petition was disposed of accordingly.
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2010 (3) TMI 1243
Issues Involved:1. Condonation of delay in filing appeals. 2. Assessment for the year 2003-04. 3. Penalty u/s 271(1)(c) for the year 2003-04. 4. Order u/s 263 for the year 2000-01. 5. Penalty u/s 271(1)(c) for the year 1999-2000. Summary:Condonation of Delay in Filing Appeals:Out of four appeals by the assessee, three appeals are against orders of the CIT(A) relating to assessment years 1998-99, 2003-04 and one appeal against the order passed u/s.263, which is relating to assessment year 2000-01. Appeals in ITA No.2499/Mum/09, ITA No.6830/Mum/08 and ITA No.2500/Mum/09 are time barred for 838 days. The affidavit filed by Shri Chander Mohan Sethi, one of the directors of the assessee company, explained the reasons for the delay in filing the appeals. The Tribunal found that there was a reasonable cause in filing the appeal late before the Tribunal. The Hon'ble Supreme Court in the case of Mst. Katiji and Others vs. Collector, Land Acquisition (167 ITR 471) observed that substantial justice deserves to be preferred over technical considerations. In view of these facts and circumstances, the delay in filing the appeals was condoned. Assessment for the Year 2003-04:The assessment in this case was completed u/s.144 as none could appear before the Assessing Officer. The CIT(A) confirmed the order of the Assessing Officer due to non-cooperation from the assessee. The Tribunal, considering the facts, remanded the matter back to the file of the Assessing Officer to pass a fresh order after affording reasonable opportunity of being heard to the assessee. Penalty u/s 271(1)(c) for the Year 2003-04:Since the quantum matter was restored to the file of the Assessing Officer, the penalty order was also liable to be restored to the file of the Assessing Officer to pass a fresh order after completing reassessment as directed. Order u/s 263 for the Year 2000-01:The CIT found that the Assessing Officer had not made proper inquiries/verification of claims made in the accounts/return/computation. The CIT set aside the order of the Assessing Officer by holding it as prejudicial to the interest of Revenue and directed the Assessing Officer to tax the value of 1737.45 MT of goods less 5% on account of brokerage as unaccounted investment in purchases. The Tribunal found that the CIT had travelled beyond his jurisdiction and that the Assessing Officer had made proper inquiries. The Tribunal held that the order of the CIT was not sustainable in law and quashed it. Penalty u/s 271(1)(c) for the Year 1999-2000:The Assessing Officer levied penalty based on the order of the CIT(A), which was confirmed ex-parte. The Tribunal condoned the delay in filing the appeal and remanded the matter back to the file of the Assessing Officer for passing a fresh order after giving reasonable opportunity of being heard to the assessee. Conclusion:In the result, the appeal in ITA No.2500/Mum/09 for Assessment Year 2000-2001 is allowed and the other appeals of the assessee are allowed for statistical purposes.
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2010 (3) TMI 1242
Issues Involved:
1. Legality of re-assessment proceedings initiated u/s 147 of the Income Tax Act.
2. Classification of expenditure paid to Madhya Pradesh Electricity Board (MPEB) as capital or revenue expenditure.
3. Charging of interest u/s 234B of the Income Tax Act.
Summary:
Issue 1: Legality of Re-assessment Proceedings u/s 147
The assessee challenged the re-assessment proceedings initiated by the Assessing Officer (AO) u/s 147 of the Income Tax Act, arguing it was illegal and without jurisdiction. The AO had issued a notice u/s 148 based on the belief that the expenditure of Rs. 6,01,69,818/- paid to MPEB for bay lines was capital in nature and not allowable as revenue expenditure. The CIT(A) upheld the reopening of the assessment, noting that the AO had reopened the assessment within four years and had valid reasons. However, the Tribunal found that the AO had no new tangible material to justify reopening the assessment, as the issue had already been adjudicated in previous years and allowed. The Tribunal cited the Supreme Court's ruling in CIT Vs. Kelvinator of India Ltd, emphasizing that reopening based on a mere change of opinion is not permissible. Consequently, the Tribunal quashed the AO's order invoking jurisdiction u/s 147.
Issue 2: Classification of Expenditure
The assessee claimed the expenditure paid to MPEB for bay lines as revenue expenditure, arguing that the ownership of the asset vested with MPEB and the expenditure was incurred out of commercial expediency. The AO disallowed the claim, treating it as capital expenditure. The CIT(A) upheld the AO's decision, stating that the assessee had exclusive rights over the bay lines and referred to Explanation I to section 32 regarding depreciation on leased buildings. The Tribunal, however, did not address the merits of this issue, as the re-assessment proceedings were quashed.
Issue 3: Charging of Interest u/s 234B
The assessee contested the CIT(A)'s decision to charge interest u/s 234B on the difference between the tax liability determined on re-assessment and the amount of taxes pre-paid. As the Tribunal quashed the re-assessment proceedings, this issue was rendered moot and was not addressed further.
Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the re-assessment proceedings initiated u/s 147 of the Income Tax Act due to the absence of new tangible material and the improper exercise of jurisdiction by the AO. The merits of the expenditure classification and the charging of interest u/s 234B were not addressed due to the quashing of the re-assessment.
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2010 (3) TMI 1241
Issues involved: Assessment proceedings u/s 147 of the Income Tax Act, 1961 beyond the period of limitation, failure to disclose material facts for assessment, invoking provisions of Section 148 for reassessment based on change of opinion.
Assessment proceedings u/s 147: The appeal was filed against the order of the Income Tax Appellate Tribunal regarding the assessment year 1998-99. The original assessment was made u/s 143(3) of the Act, and the period for reopening the assessment had expired. The Tribunal found that the proviso to Section 147 applied, stating that no action shall be taken after four years from the end of the relevant assessment year unless there was a failure to disclose fully and truly all material facts necessary for assessment. The Tribunal concluded that there was no such failure by the assessee.
Failure to disclose material facts: The Tribunal examined whether the assessee had failed to disclose all material facts necessary for assessment in the original assessment u/s 143(3) of the Act. It was found that the assessee had provided full details regarding export earnings and incentives during the assessment proceedings. The Tribunal held that since all relevant documents were produced and details were submitted, there was no failure to disclose material facts.
Invoking Section 148 for reassessment: The Court noted that the Assessing Officer initiated reassessment proceedings u/s 148 of the Act based on a change of opinion, citing judgements related to deductions under Section 80 HHC. The Court observed that there was no concealment or suppression by the assessee, and the reassessment was not warranted. It was deemed a case of change of opinion, which cannot be the basis for invoking Sections 147/148 of the Act. The appeal was dismissed as there was no substantive question of law arising for determination.
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2010 (3) TMI 1240
Issues involved:
The issues involved in this case are the classification of goods under different chapters of the Central Excise Tariff Act, 1985, the eligibility of availing cenvat credit on capital goods, burden of proof regarding admissibility of cenvat credit, and the impact of supplier's classification on the recipient's credit.
Classification of Goods:
The revenue contended that the respondent received items falling under Chapter 72 but claimed cenvat credit under Chapter 84. The Commissioner (Appeals) allowed the credit, stating that once items are cleared under Chapter 84 by the supplier, the recipient's eligibility for credit cannot be denied.
Burden of Proof for Cenvat Credit:
The revenue argued that the burden of proof regarding the admissibility of cenvat credit lies with the manufacturer or service provider. They claimed that the respondent should not have taken credit on goods mis-declared by suppliers.
Impact of Supplier's Classification:
The respondent received items for a boiler under Chapter 84 as per supplier's documents. The Tribunal referenced a Supreme Court decision, stating that the recipient cannot dispute the classification determined by the manufacturer. The Tribunal upheld the Commissioner (Appeals) decision, confirming the legality of allowing the credit.
In conclusion, the Appellate Tribunal CESTAT, Bangalore upheld the decision of the Commissioner (Appeals) regarding the eligibility of cenvat credit on capital goods based on the supplier's classification. The burden of proof for admissibility of credit lies with the manufacturer or service provider, and the recipient cannot dispute the classification determined by the supplier. The appeal filed by the revenue was rejected, affirming the legality of allowing the credit to the respondent.
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2010 (3) TMI 1239
Issues involved: Challenge to seizure of products by Customs Authorities meant for duty-free shops at airport departure terminal; Petitioner seeking interim relief denied by High Court; Petitioner permitted by Supreme Court to carry on sale of Cigarettes and Tobacco products at departure terminal.
The Petitioner approached the High Court challenging the seizure of their products by Customs Authorities, contending that the products were intended for display, distribution, and sale at duty-free shops in the departure terminal of the airport. The Petitioner sought interim relief, which was initially declined by the High Court.
Subsequently, the Petitioner appealed to the Supreme Court, where it was ruled that the Petitioner could continue the sale of Cigarettes and other Tobacco products at the departure terminal, subject to compliance with the conditions specified under Section 32 of the Cigarettes and other Tobacco Products Act, 2003. The Respondent Department was directed to release the stock upon the Petitioner fulfilling the mentioned conditions.
In light of the Supreme Court's decision permitting the Petitioner to conduct the sale of Cigarettes at the departure terminal, the High Court concluded that final relief could be granted to the Petitioner as per the Supreme Court's order. Consequently, the petition was disposed of accordingly, in favor of the Petitioner.
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2010 (3) TMI 1238
Issues involved:
The judgment involves the question of whether interest income from fixed deposits made in banks can be treated as business income for an assessee engaged in export business, and whether such interest income can be considered for deduction under section 80HHC of the Income Tax Act.
Facts and Decision:
The respondent-assessee, engaged in the export business of silk waste and polished granites, received interest income from fixed deposits made in banks. The Assessing Officer treated this income as from other sources, not business income, and disallowed deduction under sec. 80HHC. The Commissioner of Income Tax (Appeals) upheld this decision, but the Income Tax Appellate Tribunal allowed the deduction, citing a Calcutta High Court decision. The High Court found that the fixed deposits were pledged as security for business loans, and the interest earned should be considered business income, not income from other sources. Relying on previous court decisions, the High Court dismissed the revenue's appeal.
Arguments and Analysis:
The revenue contended that the interest income should not be treated as business income since the assessee's primary business was export, not banking. They cited a Supreme Court decision in support. The respondent argued that the interest income was directly related to business activities, as the fixed deposits were used as collateral for business loans. They referenced court decisions to support their stance. The High Court noted that the fixed deposits were essential for obtaining credit facilities for the export business, and the interest paid on these deposits should be considered a business expenditure. As the assessee had no other business, the interest income was rightly treated as business income for the purpose of deduction under section 80HHC.
Precedents and Conclusion:
The High Court referred to previous decisions where interest income on fixed deposits related to business activities was considered business income. They distinguished a Supreme Court decision cited by the revenue, stating it was not applicable to the present case. Ultimately, the High Court upheld the Tribunal's decision, granting the deduction under section 80HHC and dismissing the revenue's appeal.
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2010 (3) TMI 1237
Issues Involved:
1. Validity of the auction sale due to non-compliance with Rule 57 of the Second Schedule to the Income Tax Act, 1961.
2. Whether the petitioners are bona fide purchasers.
3. Applicability of the Limitation Act regarding the petitioners' claim for possession.
Detailed Analysis:
1. Validity of the Auction Sale Due to Non-Compliance with Rule 57 of the Second Schedule to the Income Tax Act, 1961:
The primary issue revolved around whether the auction sale was valid under Rule 57 of the Second Schedule to the Income Tax Act, 1961. The rule mandates that the purchaser must deposit 25% of the purchase money immediately after the auction and the remaining balance within 15 days. The petitioners claimed they complied with this rule by making a partial deposit through cheques and drafts. However, the court found that payment by cheque does not constitute a valid tender under Rule 57, which requires a cash deposit. The court cited the Supreme Court's decision in Rao Mahmood Ahmed Khan v. Sh. Ranbir Singh and Ors. which held that a cheque is not a valid deposit under similar rules. Additionally, the petitioners failed to deposit the balance within the stipulated 15 days, making the sale a nullity. The court emphasized that non-compliance with these mandatory provisions renders the sale invalid, as established in Manilal Mohanlal Shah and Ors. v. Sardar Sayed Ahmed Sayed Mahmad and Anr. and Balram Son of Bhasa Ram v. Ilam Singh and Ors..
2. Whether the Petitioners are Bona Fide Purchasers:
The petitioners argued that they were bona fide purchasers who were unaware of the pending litigation at the time of the auction. However, the court found that the petitioners were not bona fide purchasers as they were aware of the ongoing litigation between the decree holder and the judgment debtors. The court noted that the petitioners participated in the auction with the knowledge of the legal disputes, which disqualifies them from being considered bona fide purchasers. The Debts Recovery Appellate Tribunal's finding that the petitioners were not bona fide purchasers was upheld.
3. Applicability of the Limitation Act Regarding the Petitioners' Claim for Possession:
The respondents contended that the petitioners' application for possession was filed beyond the one-year limitation period prescribed under Article 134 of the Limitation Act. The court, however, did not delve deeply into this issue since it had already concluded that the auction sale was invalid due to non-compliance with Rule 57. Therefore, the question of limitation was rendered moot.
Conclusion:
The court dismissed the writ petition, affirming the Debts Recovery Appellate Tribunal's decision to set aside the auction sale. The court concluded that the auction sale was invalid due to non-compliance with the mandatory provisions of Rule 57 of the Second Schedule to the Income Tax Act, 1961. Consequently, the petitioners, having failed to comply with the mandatory deposit requirements, forfeited all claims to the property, and their status as bona fide purchasers was not recognized. The writ petition was dismissed with no order as to costs, and the connected miscellaneous petitions were closed.
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2010 (3) TMI 1236
Issues Involved:
1. Deduction under section 80IA(4) of the Income-tax Act, 1961.
2. Disallowance under section 40A(2)(a) of the Income-tax Act, 1961.
3. Disallowance of sales promotion expenses.
4. General grounds and additional grounds.
Issue-wise Detailed Analysis:
1. Deduction under Section 80IA(4) of the Income-tax Act, 1961:
The assessees claimed deductions under section 80IA(4) for profits derived from electricity generation via windmills. The Assessing Officer (AO) noticed discrepancies in sales and profit figures between the Profit & Loss Account and form 10CCB, and questioned the sales tax incentive claimed. Consequently, the AO denied the deduction, inferring that the figures were inconsistent and the sales tax incentive was improperly claimed as revenue receipt.
On appeal, the assessees argued that the AO had denied their claim without proper notice and that the income from the sale of sales tax exemption entitlement was correctly reported. However, the CIT(A) upheld the disallowance on different grounds, including the unabsorbed depreciation from previous years and the incidental nature of the sales tax exemption income. The CIT(A) concluded that the assessees were not entitled to the deduction under section 80IA.
The Tribunal found that the CIT(A) had upheld the disallowance on a different ground without providing sufficient opportunity for the assessees to present their case. Citing principles of natural justice, the Tribunal set aside the impugned orders and remitted the appeals back to the CIT(A) for fresh disposal after giving the assessees a reasonable opportunity to be heard.
2. Disallowance under Section 40A(2)(a) of the Income-tax Act, 1961:
The AO disallowed certain expenses under section 40A(2)(a), concluding that the assessees had made purchases from related parties at higher rates than from non-related parties, without commercial justification. The AO calculated the excessive payments and disallowed them as unreasonable.
On appeal, the assessees contended that the quality of tea purchased from related and non-related parties was different, justifying the price difference. They also argued that the provisions of section 40A(2)(a) were not applicable as the related parties were assessed at maximum rates, and there was no tax evasion motive.
The CIT(A) upheld the disallowance, agreeing with the AO's findings that the quality differences were not verifiable and that the related parties had made nominal third-party sales, indicating an artificial enhancement of input prices.
The Tribunal disagreed with the CIT(A), noting that the AO had not established that the expenditure was excessive or unreasonable based on fair market value. The Tribunal emphasized that the onus was on the AO to prove the excessive nature of the payments and found no material evidence to support the disallowance. Consequently, the Tribunal deleted the disallowance under section 40A(2)(a).
3. Disallowance of Sales Promotion Expenses:
The AO disallowed a significant portion of sales promotion expenses, citing a disproportionate increase in these expenses compared to the turnover and a decline in net profit. The AO argued that the assessees failed to prove the business nexus and necessity of the expenditure.
On appeal, the assessees argued that the expenses were genuine, paid through account payee cheques, and incurred due to stiff market competition. They relied on various judicial precedents to support their claim that the expenditure was wholly and exclusively for business purposes.
The CIT(A) deleted the disallowance, finding that the expenses were genuine, verifiable, and incurred through proper banking channels. The CIT(A) emphasized that it was not the Revenue's role to prescribe the nature and extent of business expenditure, provided it was genuinely incurred.
The Tribunal upheld the CIT(A)'s decision, agreeing that the genuineness of the expenses was not in doubt and that the Revenue could not dictate business expenditure. The Tribunal found no material evidence to contradict the CIT(A)'s findings and dismissed the Revenue's appeal on this issue.
4. General Grounds and Additional Grounds:
The general grounds raised in various appeals were found to be general in nature and did not require separate adjudication. No additional grounds were raised in terms of the residuary grounds, leading to their dismissal.
Conclusion:
- Appeals in ITA Nos. 3003, 3004, and 3006/Ahd/2009 were allowed for statistical purposes.
- Appeals in ITA Nos. 3005 and 3007/Ahd/2009 were partly allowed.
- The Revenue's appeal in ITA No. 3019/Ahd/2009 was dismissed.
- Corresponding stay petitions were deemed infructuous following the disposal of the appeals.
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2010 (3) TMI 1235
Issues involved:
The issues involved in this legal judgment are related to the imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961, and the satisfaction required from the CIT(A) for initiating penalty proceedings.
Imposition of Penalty under Section 271(1)(c):
The Appellate Tribunal observed that the CIT(A) did not record any satisfaction regarding the imposition of penalty on the assessee under section 271(1)(c) of the Income Tax Act. It was emphasized that the satisfaction of the CIT(A) is a prerequisite before imposing a penalty, specifically related to whether the assessee concealed income particulars or furnished inaccurate particulars. The Tribunal found that the lack of satisfaction by the CIT(A) rendered the penalty unsustainable in the eyes of the law, leading to the cancellation of the penalty. Various case laws were cited to support this decision.
Application of Section 271(1B) of the Act:
The Department contended that the Tribunal's observation regarding the lack of satisfaction by the CIT(A) for penalty imposition was erroneous in light of the insertion of section 271(1B) with retrospective effect. Section 271(1B) specifies that the satisfaction for initiating penalty proceedings should be that of the Assessing Officer (AO), not the CIT(A). However, the Tribunal held that the definition of "AO" in the Act does not include the CIT(A), and therefore, the satisfaction required for penalty initiation in cases of enhancement, as ordered by the CIT(A), should be that of the CIT(A) and not the AO. The Tribunal concluded that the insertion of section 271(1B) did not affect the previous order, and the Department's application was dismissed.
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2010 (3) TMI 1234
Issues Involved:
1. Delay in filing the appeal.
2. Deletion of addition as rent receivable.
3. Classification of service charges as business income or income from house property.
Summary:
1. Delay in Filing the Appeal:
The Revenue filed the appeal with an 18-day delay. After reviewing the condonation petition and hearing both sides, the Tribunal found the delay to be for a reasonable cause and admitted the appeal for hearing on merits.
2. Deletion of Addition as Rent Receivable:
The Revenue challenged the deletion of an addition of Rs. 1,65,46,320/- made by the Assessing Officer (AO) as rent receivable. The Tribunal noted that the issue was covered by its earlier decision in the assessee's own case for AY 2005-06. The Tribunal upheld the CIT(A)'s order, which was based on the principle that the annual value of the property should be determined as per the actual rent received or receivable, following the provisions of Section 23 of the IT Act. The Tribunal dismissed the Revenue's grounds, citing the precedent set by the Coordinate Bench and the Hon'ble Calcutta High Court.
3. Classification of Service Charges:
The Revenue contended that service charges received from tenants should be treated as income from house property, referencing the decision in Shambhu Investment (P) Ltd. [249 ITR 47]. The Tribunal, however, upheld the CIT(A)'s decision that service charges were business income. The Tribunal found that the assessee had separate agreements for tenancy and services, and provided common services to all occupants, including non-tenants. The Tribunal relied on the jurisdictional High Court decisions in CIT vs. Model Mfg. Co. (P) Ltd. [175 ITR 374] and CIT vs. Russel Properties Pvt. Ltd. [137 ITR 473], which supported the classification of such income as business income. The Tribunal dismissed the Revenue's grounds on this issue as well.
Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order on all grounds. The decision was pronounced in the Court on 31.03.2010.
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