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2011 (6) TMI 1006
Issues involved: Appeal against rejection of registration under section 12AA of the Income-tax Act, 1961 for being a charitable institution.
Summary:
The appeal was filed by the assessee against the order of the Commissioner of Income-tax rejecting the application for registration as a charitable institution. The Commissioner alleged that the assessee was motivated by earning profits, citing judgments from the Hon'ble Uttaranchal High Court and the Hon'ble Supreme Court. The Commissioner specifically pointed out the provision of free bus service to students in Tamil medium and the establishment of a teachers training institute as indicators of profit-making motives. However, the Tribunal found no concrete evidence to support the profit-making allegation. The Tribunal noted that running a Tamil medium school was commendable and providing free bus service was to attract students, not for profit. The excess income over expenditure was deemed necessary for improving school facilities. The Tribunal also dismissed the concern regarding the limited number of trustees involved in administration, stating it was a common practice for efficient management. The Tribunal directed the Commissioner to grant registration to the assessee trust under section 12AA, as the reasons provided by the Commissioner were deemed legally unsustainable. The appeal was allowed in favor of the assessee.
The judgment was delivered by Dr. O.K. Narayanan and Shri Hari Om Maratha, JJ. The order was pronounced in an open court on June 9, 2011, in Chennai.
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2011 (6) TMI 1005
Issues involved: Appeal by Revenue against CIT (A) order on disallowance of expenses under liquidated damages and Foreign Exchange Fluctuation claim.
Disallowance of expenses under liquidated damages: The appeal was based on two grounds - liquidated damages and Foreign Exchange Fluctuation. The assessee's counsel argued that the CIT (A) decision was in line with the Tribunal's order, hence no error. The Tribunal, following a Special Bench order, allowed the claim of liquidated damages. The CIT (A) decision was upheld as he was bound by the Tribunal's order.
Disallowance of claim under Foreign Exchange Fluctuation: The issue was also covered by a previous Tribunal order for the Assessment Years 2001-02, 2004-05, and 2006-07. The Tribunal had directed the Assessing Officer to correlate Foreign Exchange Loss/gains to specific assets and decide the issue afresh. As the issue was covered by the Tribunal's order, the CIT (A) decision was set aside, and the matter was referred back to the Assessing Officer for fresh consideration in line with the Tribunal's directions and legal principles.
Conclusion: The appeal by the Revenue was partly allowed for statistical purposes, with the Tribunal's decision pronounced on 2/6/2011.
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2011 (6) TMI 1004
Issues involved: Appeal against the order of the ld. CIT(A)-I, Jaipur dated 01-12-2010 for the assessment years 2007-08.
Issue 1: Rejection of Books of Accounts
The assessee appealed against the rejection of books of accounts under Section 145(3) of the I.T. Act. The AO found discrepancies in purchases made from certain parties suspected of issuing bogus bills. Despite being asked to produce these parties, the assessee failed to do so. The AO rejected the books of accounts based on the information collected and the failure to verify the purchases. The ld. CIT(A) upheld this rejection citing precedents and consistency in such cases. The ITAT Jaipur Bench and the Hon'ble Apex Court have also supported the rejection of books of accounts in similar situations. Therefore, the rejection of books of accounts was deemed justified.
Issue 2: Trading Addition
The assessee contested the trading addition made by the AO, while the revenue challenged the reduction of the trading addition. The AO, after rejecting the books of accounts, calculated the trading addition based on unverifiable purchases. The ld. CIT(A) directed the application of a specific gross profit rate on declared sales due to a decrease in turnover. The parties presented differing arguments regarding the gross profit rate and the treatment of non-verifiable purchases. The Tribunal considered the facts of the case, the previous year's gross profit rate, and the decrease in turnover to determine a fair gross profit rate of 12.8%. The trading addition was adjusted accordingly.
Issue 3: Disallowance of Expenses
The assessee challenged the disallowance of various expenses including freight & cartage, telephone, and traveling expenses. The disallowance of freight & cartage was deleted following a precedent set in the previous year. However, the disallowance of telephone expenses was upheld due to potential personal use. The disallowance of traveling expenses was based on the lack of specific details and evidence provided by the assessee. The ld. CIT(A) confirmed the disallowance of traveling expenses. The Tribunal found the disallowance of 10% excessive and reduced it to a reasonable amount of Rs. 50,000.
In conclusion, the appeal of the revenue was dismissed, and the appeal of the assessee was partly allowed based on the considerations and adjustments made regarding the rejection of books of accounts, trading addition, and disallowance of expenses.
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2011 (6) TMI 1003
Issues involved: Appeal challenging the order of the Income Tax Appellate Tribunal based on the requirement of obtaining consent of the Committee of Dispute (COD) as per previous judgments.
Summary:
The High Court of Karnataka considered the appeal challenging the order of the Income Tax Appellate Tribunal, Bangalore, which had dismissed the appeals filed by the Revenue on the grounds that no direction had been obtained from the Committee of Dispute (COD). The Court noted that the Tribunal's decision was based on previous judgments and the requirement of obtaining consent from the COD. However, the Court referred to recent judgments of the Hon'ble Supreme Court, including the case of ELECTRONICS CORPORATION OF INDIA LTD. vs. UNION OF INDIA & ORS., which led to the recall of the earlier judgment in ONGC vs. CITY & INDUSTRIAL DEVELOPMENT CORPN. The Court held that the order of the Tribunal was liable to be set aside and remanded for a decision on merits in accordance with the law. Consequently, the appeal was allowed, and the ITA Nos. 961 & 548/ Bang/06 were restored to the file of the Income Tax Appellate Tribunal, Bangalore Bench 'A' for further consideration. The respondent's counsel was granted permission to file vakalath within four weeks from the date of the judgment.
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2011 (6) TMI 1002
Issues involved: Appeal against acquittal u/s 395, 396, 397 IPC based on recovery of stolen property.
Facts: A robbery incident led to the death of a woman and a chowkidar. Accused persons were arrested, and recovery of stolen items was made based on their disclosure statements.
Legal Principles:
- Recovery of stolen property alone not conclusive evidence of guilt (Geejaganda Somaiah case).
- Presumption of guilt depends on time factor and nature of possession (Tulsiram Kanu case).
- Recent and unexplained possession of stolen property can be presumptive evidence of guilt (Sanjay @ Kaka case).
- Recovery of articles soon after robbery and murder can lead to presumption of guilt (Ronny Alias Ronald James Alwaris case).
Decision: No identification parade held, no witnesses identified the accused. Recovery of items not in close proximity to the incident. No adverse inference can be drawn based on recoveries. Upheld High Court's acquittal decision based on settled law on interference with orders of acquittal.
Judgment: Appeal dismissed, acquittal of accused upheld.
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2011 (6) TMI 1001
Issues Involved:
1. Disallowance of amortization of BOT project expenditure.
2. Netting of interest earned and paid.
3. Treatment of interest on deposits as income from 'other sources' and not as 'business income'.
4. Allowability of depreciation on the cost incurred by the assessee.
Summary:
1. Disallowance of Amortization of BOT Project Expenditure:
The assessee, engaged in infrastructure projects under the BOT scheme, claimed amortization of project expenditure over 17/7 years. The assessing officer disallowed this, treating the expenditure as capital in nature. The CIT (A) allowed depreciation instead. The Tribunal, referencing the case of Nyse Infrastructure Pvt. Ltd. and the Supreme Court decision in CIT vs. Madras Auto Services Pvt. Ltd., held that amortization of BOT project expenditure is allowable as revenue expenditure. The Tribunal emphasized that the expenditure did not create a capital asset for the assessee but provided an enduring business advantage, thus qualifying as revenue expenditure.
2. Netting of Interest Earned and Paid:
The CIT (A) ruled that netting of interest income against interest payment debited to the Profit and Loss Account is not permissible. The Tribunal upheld this decision, rejecting the assessee's claim for netting interest earned and paid.
3. Treatment of Interest on Deposits as Income from 'Other Sources':
The assessing officer treated the interest on deposits made for business purposes as income from 'other sources' and disallowed the proportionate interest deduction. The CIT (A) upheld this treatment. The Tribunal, following its earlier decision in the assessee's own case for the assessment year 2000-01, confirmed that the interest received represents income from 'other sources' and denied the benefit of netting interest.
4. Allowability of Depreciation on the Cost Incurred by the Assessee:
The department appealed against the CIT (A)'s decision to allow depreciation on the cost incurred by the assessee. The Tribunal, having allowed the amortization of BOT project expenditure as revenue expenditure, rejected the department's appeal on this issue.
Conclusion:
The Tribunal partly allowed the assessee's appeals regarding the amortization of BOT project expenditure and dismissed the department's appeals on the allowability of depreciation. The Tribunal upheld the treatment of interest on deposits as income from 'other sources' and denied the netting of interest earned and paid.
Order pronounced in the Court on 08-06-2011.
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2011 (6) TMI 1000
Issues involved:
The issue involved in this case is whether the allowance of depreciation should be considered in working out the utilization for computing income of the assessee, who was registered u/s 12AA of the Income-tax Act, 1961.
Summary:
Issue 1: Allowance of Depreciation for Computing Income
The assessee claimed depreciation on its assets as an application for charitable purpose. The Assessing Officer disallowed the claim, stating it would amount to double deduction. The CIT(Appeals) upheld the disallowance based on previous court decisions. However, the appellant argued that depreciation should be allowed as a deduction. The Tribunal referred to a High Court decision where it was held that depreciation should be reduced from income for determining the funds to be applied for the trust, and there was no double deduction. No other decision against the assessee was presented, leading the Tribunal to allow the appeals and consider depreciation for calculating the income under Sections 11 and 12 of the Act.
Conclusion:
Both appeals filed by the assessee were allowed, and the order was pronounced on 24th June, 2011.
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2011 (6) TMI 999
Issues involved: Miscellaneous application against the order of ITAT Chennai regarding assessment year 2005-06.
Summary:
The assessee filed a miscellaneous application against the ITAT Chennai's order for the assessment year 2005-06. The Tribunal had considered the decision of the Bombay High Court in the case of Godrej Boyce and had directed the Assessing Officer to re-compute the quantum of expenses in accordance with Rule 8D. However, since Rule 8D came into effect from 01-04-2007, the assessee argued that the issue should not have been restored to the Assessing Officer for re-adjudication. The Tribunal rectified the mistake and expunged the lines restoring the issue to the Assessing Officer. The assessee's application was allowed, and the order was pronounced on 24/06/2011.
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2011 (6) TMI 998
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Definition and eligibility of Inland Container Depots (ICD) as "infrastructure facility" under Section 80IA.
3. Validity of penalty proceedings and the adequacy of show cause notice.
4. Bona fide belief and full disclosure by the assessee.
5. Interpretation of statutory provisions and amendments.
Issue-wise Detailed Analysis:
1. Levy of Penalty under Section 271(1)(c):
The primary grievance of the assessee was the confirmation of the penalty under Section 271(1)(c) by the CIT(Appeals). The penalty was levied for the alleged concealment of income due to the disallowed deduction under Section 80IA. The Tribunal noted that the assessee had disclosed its intention to claim the deduction to the jurisdictional Commissioner before filing the return, indicating no concealment of income or furnishing inaccurate particulars.
2. Definition and Eligibility of ICD as "Infrastructure Facility":
The assessee claimed a deduction under Section 80IA for profits from ICDs, considering them as inland ports. However, the AO disallowed this claim, which was upheld by the CIT(Appeals) and the Tribunal. The Tribunal's interpretation was based on the amendment by the Finance Act, 2001, which removed the Board's power to notify similar facilities as infrastructure facilities. Consequently, ICDs were no longer considered infrastructure facilities post-amendment.
3. Validity of Penalty Proceedings and Adequacy of Show Cause Notice:
The Tribunal examined whether the penalty proceedings were validly initiated. It was argued that the AO initiated proceedings for concealment of income but levied the penalty for furnishing inaccurate particulars. The Tribunal found that the reasons for initiating and levying the penalty were consistent, and the use of different terminologies did not invalidate the proceedings.
4. Bona Fide Belief and Full Disclosure by the Assessee:
The assessee argued that it had made a full and true disclosure of facts and that the claim was based on an audit report, which is an expert opinion. The Tribunal noted that there was no evidence of any false particulars or suppression of material facts by the assessee. Citing the Supreme Court's decision in Reliance Petro Products Pvt. Ltd., the Tribunal emphasized that a mere disallowance of a claim does not amount to furnishing inaccurate particulars.
5. Interpretation of Statutory Provisions and Amendments:
The Tribunal discussed the changes in the definition of "infrastructure facility" due to the Finance Act, 2001. It acknowledged that while the Customs Department and other authorities considered ICDs as inland ports, these interpretations were in different contexts. The Tribunal concluded that the issue was debatable and that there could be a bona fide difference of opinion between the assessee and the revenue authorities.
Conclusion:
The Tribunal held that the penalty under Section 271(1)(c) was not justified. It found that the assessee had a bona fide belief in its claim, made full disclosures, and the issue was debatable. Therefore, the penalty was deleted for the assessment years 2003-04, 2004-05, and 2005-06. The appeals were allowed in favor of the assessee.
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2011 (6) TMI 997
Issues Involved:
1. Treatment of sales proceeds of geological data.
2. Disallowance of insurance premium expenses.
Summary:
Issue 1: Treatment of Sales Proceeds of Geological Data
The sole issue in the appeal for Assessment Year 2006-07 was the treatment of sales proceeds of geological data. The assessee argued that geological data should be classified as books and come under the definition of plant u/s.43(3) of the Income Tax Act, 1961. The assessee contended that the expenditure for collecting geological data was carried as "miscellaneous expenditure" in the balance sheet and not claimed as depreciation or revenue outgoes. The Assessing Officer, however, treated the expenses as incurred for acquiring a business block and considered the profit from the sale of geological data as business profit, adding Rs. 9,39,70,450/- as business income. The Commissioner of Income Tax(A) upheld this view, stating that the geological data collected was for business purposes and should be treated as business receipts. The reliance on the decisions of Elecon Engineering Co. Ltd. and Scientific Engineering House (P) Ltd. was found distinguishable on facts. The ITAT confirmed the action of the Assessing Officer, treating the sale consideration as business income, and dismissed the appeal for Assessment Year 2006-07.
For Assessment Year 2007-08, the same issue was raised, and the ITAT dismissed the related grounds based on the decision for Assessment Year 2006-07.
Issue 2: Disallowance of Insurance Premium Expenses
The second issue in the appeal for Assessment Year 2007-08 was the disallowance of Rs. 2,31,52,085/- on insurance premium paid in March 2007. The assessee argued that the payment should be treated as revenue expenditure despite being shown as pre-paid. The Assessing Officer disallowed the expense, stating it did not pertain to the relevant previous year. The Commissioner of Income Tax(A) sustained the disallowance, noting that the expenditure pertained to the subsequent Assessment Year 2008-09 and could not be allowed based on materiality.
The ITAT, however, found that the payment of insurance premium was not disputed and was for the business purpose of the assessee. The premium payment, being only 0.12% of the total expenditure, was considered immaterial. The ITAT referred to Section 30(i) and Section 31(ii) of the Act, which allow insurance premium expenses on payment basis, and concluded that the expenditure could not have been disallowed. The disallowance was deleted, and the ground was allowed.
Conclusion:
The appeal for Assessment Year 2006-07 was dismissed, while the appeal for Assessment Year 2007-08 was partly allowed.
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2011 (6) TMI 996
Issues Involved:
1. Rejection of Books of Account
2. Estimation of Net Profit
3. Verification of Transactions with Parties
4. Quantitative Reconciliation of Stock
5. Confirmation of Loans
Summary:
Rejection of Books of Account:
The assessee contended that the CIT(Appeals) erred in rejecting the books of account and estimating the net profit at 2.5% of sales, assessing the income at Rs. 1,45,36,030/- against the disclosed income of Rs. 47,39,887/-. The AO rejected the books of account due to unreliable records and assessed the income at Rs. 1,72,39,090/- based on 12% of average capital employed. The CIT(Appeals) upheld the rejection of books due to non-compliance by certain parties and lack of quantitative reconciliation of stock.
Estimation of Net Profit:
The CIT(Appeals) estimated the net profit at 2.5% of disclosed sales, reducing the income to Rs. 1,45,36,030/-. The assessee argued that the estimation was arbitrary and not based on objective evidence or past results. The Tribunal found that the lower authorities did not provide a fair basis for profit determination and concluded that the book results should not have been disturbed.
Verification of Transactions with Parties:
The AO conducted enquiries from 11 parties, with mixed compliance. Some parties confirmed transactions, while others did not respond or had moved premises. The CIT(Appeals) drew adverse inferences from non-compliance by certain parties. The Tribunal noted that sufficient grounds did not exist for rejection of books based on non-verification from a few parties, especially when most transactions were confirmed.
Quantitative Reconciliation of Stock:
The CIT(Appeals) noted the assessee's failure to submit quantitative reconciliation of gold and jewellery stock based on sale and purchase vouchers. The Tribunal found that this alone was insufficient to reject the books of account, given the overall compliance and past acceptance of book results.
Confirmation of Loans:
The assessee could not file confirmation from some loan parties. The Tribunal held that non-filing of loan confirmations could not be a basis for rejecting the books of account for trading addition purposes.
Conclusion:
The Tribunal allowed the assessee's appeal, holding that the books of account should not have been rejected and the net profit estimation by the CIT(Appeals) was unsustainable. The revenue's appeal was dismissed. The order was pronounced on 17th June, 2011.
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2011 (6) TMI 995
Issues Involved:
1. Disallowance of expenses claimed for telephone, vehicle, and depreciation on motor car.
2. Addition on account of low household withdrawals.
3. Addition due to undervaluation of stock of cement sheets.
4. Addition due to undervaluation of stock of M.S. angle channels.
5. Addition due to shortage/deficit claimed in the stock of iron and steel.
6. Addition of unexplained cash credits.
7. Rejection of book results and addition to Gross Profit.
8. Disallowance under Section 40A(3) of the Income Tax Act.
Issue-Wise Detailed Analysis:
1. Disallowance of Expenses for Telephone, Vehicle, and Depreciation on Motor Car:
During the assessment, the Assessing Officer (AO) disallowed 20% of vehicle and telephone expenses, amounting to Rs. 17,391, due to the personal element involved. The assessee argued that all expenses were business-related and maintaining a log was impractical. The CIT(Appeals) upheld the AO's decision. The Tribunal acknowledged the possibility of personal use and reduced the disallowance to 10%, directing the AO to recalculate the disallowance.
2. Addition on Account of Low Household Withdrawals:
The AO observed that the household withdrawals of Rs. 1.32 lakh for a family of nine were insufficient and estimated the expenses at Rs. 3 lakh, adding Rs. 1.68 lakh to the income. The assessee argued that their simple lifestyle as Terapanthi Jains justified the low expenses. The CIT(Appeals) upheld the AO's addition, and the Tribunal agreed, noting that even a modest lifestyle would require more than Rs. 11,000 per month for a family of nine.
3. Addition Due to Undervaluation of Stock of Cement Sheets:
The AO added Rs. 40,896 for undervaluation of cement sheets, noting discrepancies in the valuation method. The assessee argued that damages during transit and storage justified the lower valuation. The CIT(Appeals) and the Tribunal upheld the AO's addition, emphasizing the lack of records for damaged goods and the scientific properties of asbestos cement sheets that contradicted the assessee's claims.
4. Addition Due to Undervaluation of Stock of M.S. Angle Channels:
The AO added Rs. 1,23,341 for undervaluation of M.S. angle channels, rejecting the assessee's claim of corrosion and weight loss due to industrial conditions. The CIT(Appeals) and the Tribunal upheld the addition, noting the absence of records for damaged stock and the unrealistic claim of maintaining old stock without documentary evidence.
5. Addition Due to Shortage/Deficit Claimed in the Stock of Iron and Steel:
The AO added Rs. 1,62,133 for claimed shortages in stock, rejecting the assessee's explanation of inevitable weight variations in bulk purchases. The CIT(Appeals) upheld the addition. The Tribunal, however, restored the matter to the AO for fresh adjudication, directing verification of the assessee's consistent practice of claiming shortages in earlier and subsequent years.
6. Addition of Unexplained Cash Credits:
The AO added Rs. 7.95 lakh as unexplained cash credits, questioning the genuineness of transactions with certain creditors and a gift from Shri Nilesh J Kothari. The CIT(Appeals) upheld the addition, noting the lack of evidence for the identity and creditworthiness of the creditors/donor. The Tribunal restored the matter to the AO, allowing the assessee to produce the creditors/donor for examination.
7. Rejection of Book Results and Addition to Gross Profit:
The AO rejected the book results and added Rs. 15,10,880 to the Gross Profit, citing undervaluation of stock and shortages. The CIT(Appeals) deleted the addition, reasoning that the AO should not have made further additions after addressing undervaluation and shortages. The Tribunal restored the matter to the AO for fresh adjudication, aligning with its decision on undervaluation and shortages.
8. Disallowance Under Section 40A(3) of the Income Tax Act:
The AO disallowed Rs. 43,619 for cash payments exceeding Rs. 20,000, rejecting the assessee's explanation of business exigencies. The CIT(Appeals) deleted the disallowance, but the Tribunal restored the AO's decision, emphasizing that the payments were not covered under Rule 6DD exceptions.
Conclusion:
The Tribunal partly allowed the appeals of both the assessee and the Revenue for statistical purposes, directing fresh adjudication on several issues by the AO.
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2011 (6) TMI 994
Issues Involved: The judgment involves the treatment of income from the sale of land as either long-term capital gain or business income, and the confirmation of additions and disallowances made by the Assessing Officer regarding agricultural income, interest expenditure, and certain expenses.
Treatment of Income from Sale of Land:
The appeal by the revenue and cross objection by the assessee were against the order of CIT(A) V, Baroda for the assessment year 2004-05. The revenue contended that the income of Rs. 55,69,429/- received by the assessee from the sale of land should be treated as business income, not long-term capital gain. However, the CIT(A) upheld the assessee's position, citing a similar case involving Shri Bholabhai R. Patel (HUF) where the income was treated as capital gain. The tribunal confirmed the CIT(A)'s decision, stating that the case was covered by the earlier order, and dismissed the revenue's appeal.
Confirmation of Additions and Disallowances:
Regarding the addition of Rs. 1,29,378/- in agricultural income treated as income from other sources, the A.O. found discrepancies in the declared income. The CIT(A) partially allowed the appeal, sustaining a portion of the disallowance. The cross objection by the assessee on this ground was dismissed as the CIT(A) had been reasonable in granting relief. In another ground, the disallowance of Rs. 12,39,410/- out of interest expenditure was challenged. Both parties agreed that the matter was covered by a previous ITAT order and was sent back to the A.O. for fresh adjudication. The third ground related to disallowance of Rs. 1,75,103/- on certain expenses, where both parties agreed on a restriction to 1/5th of the total expenditure, following a previous ITAT decision. This ground of the assessee's cross objection was partly allowed.
Conclusion:
The judgment upheld the treatment of income from the sale of land as long-term capital gain, dismissed the revenue's appeal, and partly allowed the cross objection of the assessee on certain additions and disallowances. The order was pronounced on 10th June 2011.
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2011 (6) TMI 993
Issues Involved:
The judgment involves two main issues:
1. Treatment of foreign exchange expenditure for deduction u/s 10B of the Act and amortization of capital expenditure.
Treatment of Foreign Exchange Expenditure:
The appeals by the Revenue for the assessment years 2006-07 and 2007-08 raised the issue of whether foreign exchange expenditure should be excluded from export turnover and total turnover for calculating the deduction u/s 10B of the Act. The assessee, a software development company eligible for u/s 10B claim, incurred expenses in foreign currency for technical services outside India. The Assessing Officer excluded these expenses from export turnover but not from total turnover. The ld. CIT(A) disagreed, following a Tribunal decision in the assessee's favor. The Tribunal confirmed the ld. CIT(A)'s order based on a previous decision in the assessee's case, holding that such expenses must be excluded from both export and total turnover.
Amortization of Capital Expenditure:
The second issue concerned the addition made by the Assessing Officer for amortization of capital expenditure. The company claimed sums for amortization of business acquisition expenses related to acquiring clientele and resources of various companies in the USA. The Assessing Officer disallowed the claim, but the ld. CIT(A) allowed it. The Tribunal found this issue also in favor of the assessee based on a Special Bench decision in the assessee's case, which clarified the treatment of expenses incurred in foreign exchange for providing technical services outside India. The Tribunal directed the issue to be reconsidered by the Assessing Officer in line with the Special Bench decision, allowing the ground for statistical purposes only.
Conclusion:
The Tribunal upheld the ld. CIT(A)'s order on both issues, dismissing the Revenue's appeals. The appeals were partly allowed for statistical purposes.
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2011 (6) TMI 992
Issues involved: Appeal against orders of Commissioner of Income Tax (Appeals) for assessment years 2003-04 and 2004-05 u/s 143(3) of the Income-tax Act, 1961.
For assessment year 2003-04:
1. Disallowance of provisions for contract contingencies: Tribunal confirms addition based on previous decision against the assessee, following Accounting Standards.
2. Addition for depreciation on plastic moulds: Tribunal upholds addition based on previous decision against the assessee.
3. Disallowance of contributions to welfare funds: Tribunal remits issue back to Assessing Officer for fresh consideration as per earlier order.
4. Treatment of ERP implementation expenses: Tribunal rules expenses as capital expenditure, denying revenue treatment for training and implementation costs.
5. Add backs for MAT purposes: Tribunal confirms add backs, dismissing the ground raised by the assessee.
For assessment year 2004-05:
1. Contract contingencies and depreciation on plastic moulds: Tribunal decides against the assessee based on previous year's order.
2. Disallowance of contributions to welfare funds: Issue remitted back to Assessing Officer.
3. Deduction of excise duty on closing stock: Tribunal directs Assessing Officer to allow deduction for excise duty paid before the due date.
4. Disallowance of section 80HHC deduction: Issue remitted back for fresh consideration.
5. Adjustment of add backs for MAT: Tribunal rejects the ground raised by the assessee.
In conclusion, both appeals by the assessee are partly allowed for statistical purposes, with specific directions given for each issue.
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2011 (6) TMI 991
Issues Involved:
1. Whether the property is an asset chargeable to Wealth Tax within the meaning of section 2(ea) of the Wealth-tax Act, 1957.
2. Validity of the re-opening of the assessment u/s 17(2) of the Wealth-tax Act, 1957.
3. Determination of the nature of the property (industrial land vs. urban land).
4. Valuation of the property for Wealth-tax purposes.
5. Claim of exemption u/s 5(1)(vi) of the Wealth-tax Act, 1957.
Summary:
Issue 1: Chargeability to Wealth Tax
The department contended that the ld. CWT (A) erred in holding that the property is not an asset chargeable to Wealth Tax within the meaning of section 2(ea) of the Wealth-tax Act, 1957. The ld. CIT (A) concluded that the property in question is an industrial establishment and not merely land, thus exempt from Wealth Tax.
Issue 2: Validity of Re-opening of Assessment
The Wealth-tax assessment was completed u/s 17/16(3) of the W.T. Act by ACWT, Circle-2, Alwar. The assessment was re-opened by issuing notice u/s 17(2) on 31.3.2005. The assessee was not provided with the reasons for re-opening despite requests. The ld. CWT (A) held that non-supplying of reasons is a procedural lapse, and the assessment completed by the AO was valid.
Issue 3: Nature of the Property
The assessee argued that the land in question is industrial land and exempt from Wealth Tax. The AO disagreed, treating it as urban land. The ld. CIT (A) found ample evidence that the land was allotted for industrial purposes and had been used as such since 1883. The land was considered industrial by the UIT and Collector (Stamps), Alwar. The ld. CIT (A) upheld the land as industrial, not urban, thus not taxable under the W.T. Act.
Issue 4: Valuation of the Property
The AO valued the property at commercial rates, which the ld. CIT (A) found misplaced. The ld. CIT (A) directed the valuation at industrial rates, considering the DLC rates applicable for industrial land. The valuation was directed to be done at Rs. 216 per sq. yard, as per the registered valuer's report.
Issue 5: Claim of Exemption
The assessee claimed exemption u/s 5(1)(vi) of the W.T. Act. The ld. CIT (A) upheld the claim, stating that the property is the only asset of the appellant and entitled to exemption. The ld. CIT (A) also noted that the land could not be taxed as urban land due to refusal of construction permission by the UIT.
Conclusion:
The Tribunal found no infirmity in the findings of the ld. CIT (A). The department's appeals were dismissed, and the ld. CIT (A)'s decision that the property is an industrial establishment exempt from Wealth Tax was upheld. The order was pronounced in the open court on 10.6.2011.
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2011 (6) TMI 990
Issues Involved:
1. Alleged contempt of court order dated 18.08.2010.
2. Compliance with the principles of natural justice.
3. Adequacy of opportunity provided to the petitioner to respond to the show cause notice.
4. Validity of the cancellation of the petitioner's license.
Issue-wise Detailed Analysis:
1. Alleged contempt of court order dated 18.08.2010:
The petitioner alleged that the respondents did not comply with the court's order dated 18.08.2010, which directed the removal of the seal from the petitioner's premises and the provision of documents to enable the petitioner to respond to a show cause notice. The court noted that the respondents claimed to have complied with the order by removing the seal and providing the documents. However, the petitioner contended that the access provided was insufficient, particularly to the computer system necessary for preparing a detailed explanation.
2. Compliance with the principles of natural justice:
The petitioner argued that the lack of access to the computer system and records hindered their ability to respond adequately to the show cause notice, thereby violating the principles of natural justice. The court acknowledged the importance of natural justice but emphasized that the contempt proceedings were not the appropriate forum to adjudicate the adequacy of compliance with these principles.
3. Adequacy of opportunity provided to the petitioner to respond to the show cause notice:
The court examined whether the petitioner was given a fair opportunity to respond to the show cause notice. It was noted that the premises were opened on 18.09.2010 and 20.09.2010, but the petitioner claimed this was insufficient time to access necessary records. The court highlighted the difference in views between the petitioner and the licensing authority regarding the sufficiency of the opportunity provided, which could not be resolved in contempt proceedings.
4. Validity of the cancellation of the petitioner's license:
The court observed that the cancellation of the petitioner's license was a separate matter that should be challenged through appropriate legal channels rather than in contempt proceedings. The court emphasized that the contempt jurisdiction is limited to determining whether there was a deliberate disobedience of the court's order.
Conclusion:
The court concluded that while there might have been grounds to argue that the petitioner was not given sufficient opportunity to respond to the show cause notice, this did not amount to contempt. The court found no evidence of deliberate disobedience by the respondents. Consequently, the contempt petition was dismissed, and the petitioner was advised to seek remedy against the cancellation of the license through appropriate legal avenues.
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2011 (6) TMI 989
Issues Involved:
1. Eligibility for Promotion
2. Disobedience of Court Orders
3. Judicial Indiscipline by the Andhra Pradesh Administrative Tribunal
4. Retrospective Amendment of Service Rules
5. Contempt of Court Proceedings
Detailed Analysis:
1. Eligibility for Promotion:
The third respondent was promoted to the post of Assistant Commissioner of Endowments despite not being eligible as per the statutory rules. The petitioner, who was the senior-most eligible officer, was overlooked. The third respondent's promotions were facilitated by higher-level officers and were contrary to the service rules, which did not include the post of Special Category Stenographer as a feeder post for the promotion to Assistant Commissioner.
2. Disobedience of Court Orders:
The court observed that the orders of this Court were disobeyed by the concerned officers by finding one lame justification or the other. Despite the Court's suspension of the tribunal's order promoting the third respondent, he continued to hold the post of Assistant Commissioner and was further promoted to Deputy Commissioner. The official respondents failed to implement the Court's orders even after the Supreme Court dismissed the third respondent's appeal, leading to the filing of the contempt case.
3. Judicial Indiscipline by the Andhra Pradesh Administrative Tribunal:
The Vice Chairman of the Andhra Pradesh Administrative Tribunal acted in gross judicial indiscipline amounting to contempt of this Court by passing an order interdicting the implementation of the Court's orders. The tribunal's interim orders directly interfered with the final order of this Court, which had attained finality. The court highlighted the need for judicial discipline and the supremacy of the constitutional court.
4. Retrospective Amendment of Service Rules:
The service rules were amended in 2006 to include Special Category Stenographers as a feeder post for the promotion to Assistant Commissioner. The third respondent sought retrospective effect for this amendment, which was rejected by the Government. The tribunal's order suspending the Government's rejection was also found to be improper as it interfered with the Court's final orders.
5. Contempt of Court Proceedings:
The court found the official respondents guilty of willful disobedience of its orders. Despite the Court's interim and final orders, the third respondent was promoted, and the orders were not implemented timely. The court noted that the official respondents aided the third respondent in defying the Court's orders. The contempt case was admitted, and the respondents were directed to appear for imposing an appropriate sentence.
Conclusion:
The writ petition was allowed with costs, and the contempt case was listed for further proceedings. The court emphasized the need for adherence to judicial hierarchy and the implementation of its orders to maintain the rule of law and the prestige of the judiciary. The tribunal's order was suspended, and the parties were directed to agitate the matter before the tribunal in accordance with the law.
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2011 (6) TMI 988
Issues involved: Determination of unexplained cash deposits in bank account for assessment year 2006-07.
Facts of the case:
The assessee made cash deposits totaling &8377; 3,15,000/- in her bank account, claiming it was from past savings out of her income. The Assessing Officer (A.O.) noted small cash transactions in the bank account, indicating no surplus cash in earlier years. The A.O. added &8377; 3,15,000/- as undisclosed income. The CIT(A) reduced the addition to &8377; 1,97,825/-, considering opening cash and current year's net income.
Decision:
The Appellate Tribunal observed that the cash flow statements filed by the assessee were based on income returned and household expenses. The Tribunal found no justification in sustaining the addition of &8377; 1,97,825/- by the CIT(A), as there was no evidence of investment elsewhere. Consequently, the Tribunal deleted the addition of &8377; 1,97,825/- and allowed the appeal.
Significant Phrases:
- "unexplained cash deposits in bank account"
- "alleged unexplained cash deposits"
- "discharged her burden of showing the source of the cash"
- "undisclosed income"
- "cash flow statements"
- "benefit of opening cash in hand"
- "cash accumulation"
- "investment elsewhere"
Judges:
- Shri H.L. Karwa, Vice President
- Shri Mehar Singh, Accountant Member
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2011 (6) TMI 987
Issues involved: Disallowance of indirect expenses u/s 14A of the Income Tax Act, 1961.
Summary:
The appeal was made against the order of CIT(A) - II, Ludhiana for the assessment year 2007-08 u/s 143(3) of the IT Act. The only ground of appeal was the adhoc disallowance of indirect expenses at Rs. 50,000 under Rule 8D. Despite the absence of the assessee, the issue was considered after hearing the Ld. DR for the Revenue.
The main issue in the appeal was the disallowance of Rs. 50,000 on account of indirect expenses related to the earning of exempt income. The Assessing Officer had noted dividend income of Rs. 3.35 crores and investments in equity. The assessee claimed the dividend income as exempt under section 10(34) / 10(35) of the Act. The Assessing Officer, invoking section 14A, computed the disallowance at Rs. 4,94,720. The CIT(A) restricted the disallowance to Rs. 50,000, citing that Rule 8-D was not applicable to the year under appeal.
The assessee challenged the disallowance of expenses under Rule 8-D, which was deemed not applicable to the year under appeal. The constitutional validity of section 14A(2) & (3) and Rule 8D was upheld by the Bombay High Court. The Court clarified that Rule 8D was to be applied prospectively from 01.04.2007. The CIT(A) upheld the disallowance of Rs. 50,000 related to the earning of exempt income.
Following the Bombay High Court's ruling, the disallowance of Rs. 50,000 was upheld as expenditure related to the earning of exempt income under section 14A. Consequently, the appeal of the assessee was dismissed.
The order was pronounced in the Open Court on June 21, 2011.
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