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Showing 401 to 420 of 739 Records
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2008 (12) TMI 447
Rejection of appeal on ground of delay - Held that:- Appeal allowed. Delay in filing the writ petition having been sufficiently explained in the writ petition, we are of the view that the delay may not be taken to be a ground for rejection of the writ application simply for two reasons. First, the writ petition was entertained initially by the High Court and then subsequently it was rejected only on the ground of delay. Secondly, as we have already noted the delay in filing the writ application has been sufficiently explained by the appellant - such restoration of the writ petition to be heard on merits would be subject to payment of costs of Rs. 10,000/- to the respondents which shall be paid by the appellant
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2008 (12) TMI 446
Rejection of the application for bail filed by the appellant
Whether a case has been made out of for granting the relief sought?
Held that:- Appeal dismissed. While considering an application for bail, detailed discussion of the evidence and elaborate documentation of the merits is to be avoided. This requirement stems from the desirability that no party should have the impression that his case has been pre-judged. Existence of a prima facie case is only to be considered. Elaborate analysis or exhaustive exploration of the merits is not required. Where the offence is of serious nature the question of grant of bail has to be decided keeping in view the nature and seriousness of the offence, character of the evidence and amongst others the larger interest of the public.
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2008 (12) TMI 445
The Appellate Tribunal CESTAT, Ahmedabad, in the case of Ms. Archana Wadhwa v. Shri B.S.V. Murthy, noted that the earlier order against the appellant was set aside by the Hon'ble High Court of Bombay. The matter was remanded to the Tribunal for a fresh decision. The Tribunal scheduled the appeal for disposal on 19-2-2009 to decide whether Education Cess is required to be paid by a 100% EOU for clearances in DTA.
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2008 (12) TMI 443
Issues:
Remand for fresh adjudication due to lack of import details and bill of entry numbers, application of highest exchange rate without relevant dates, question of limitation, functioning of High Powered Committee on Disputes, lack of basic import details for duty demand confirmation, failure in obtaining import details from computerized system, non-cooperation by Appellant Public Sector Unit, legality of impugned Adjudication Order.
Analysis:
The judgment by the Appellate Tribunal CESTAT, Kolkata involved the issue of remanding the case for fresh adjudication due to critical deficiencies. Both parties agreed to remand the case for fresh adjudication by the Adjudicating Commissioner, waiving the requirement of predeposit. The demand of duty amounting to over Rs. 4.00 crore was confirmed, along with an equal penalty, without providing essential import details and bill of entry numbers. The Adjudicating Commissioner applied the highest exchange rate due to the unavailability of bill of entry dates. The question of limitation and application of extended period could not be determined without the necessary dates. The High Powered Committee on Disputes was criticized for mechanically pushing the appeal without considering the factual and legal aspects. The Tribunal highlighted the lack of basic import details for confirming the duty demand and penalty, questioning the efficiency of computerization in government departments and public sector companies.
The Tribunal found it concerning that the Revenue Department failed to obtain import details from its computerized system, casting doubt on the effectiveness of computerization efforts. Additionally, the Appellant Public Sector Unit was accused of non-cooperation by not providing import details despite summons. The Tribunal emphasized the importance of submitting necessary import documents and details for a fair adjudication process. The judgment concluded that the impugned Adjudication Order was legally insufficient as it lacked essential import documents and details. Therefore, the Order was set aside, and the matter was remanded for fresh adjudication to the Adjudicating Commissioner. The Appellants were directed to cooperate fully and provide the required import details. The Adjudicating Commissioner was instructed to grant a reasonable opportunity of hearing before issuing a new order. Ultimately, the Appeal was allowed by way of remand, highlighting the importance of proper documentation and cooperation in legal proceedings.
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2008 (12) TMI 442
No cost not capital gain concept - applicability or not - Computation of capital gain - Cost of acquisition '' Nil " - taxability of receipt of sale of additional FSI received - CIT(A) confirmed the view of the ld AO that no cost no capital gains theory is not applicable to the applicant’s case - Assessee’s contention that the right to transfer by the assessee did not have any post of acquisition and hence the provisions of Chapter IV-E fail, did not find favour with the AO.
HELD THAT:- We find that the assessee became entitled to the additional FSI of around 11,000 sq. ft. due to its land holding. The assessee transferred this entitlement for a consideration to M/s. D.K. Builders. The items of capital assets specified in section 55(2) are those for which the cost of acquisition shall be taken at Rs. nil for computing capital gains. However if the assessee had not incurred any cost of acquisition on a capital asset and such capital asset does not fall in the category of the capital assets specified in section 55(2) then the judgment of the Hon’ble Supreme Court in B.C. Srinivasa Setty [1981 (2) TMI 1 - SUPREME COURT] shall apply and no capital gains would be charged.
It is abundantly clear that the assessee had not incurred any cost of acquisition in respect of the right which emanated from the 1991 Rules making the assessee eligible to additional FSI. The land and building earlier in the possession of the assessee continued to remain with it as such even after the transfer of the right to additional FSI. The ld DR could not point out any particular asset as specified in sub-section (2) of section 55, which would include the right to additional FSI.
No capital gains can be charged on the transfer of the additional FSI by the assessee for sale consideration for the reason that it has no cost of acquisition. Our view is fortified by the order of the Mumbai Bench of the Tribunal in Jethalal D. Mehta [2005 (1) TMI 595 - ITAT MUMBAI]) which was also cited before the ld CIT(A).
No material has been brought to our notice to show that the said order has been modified or reversed by the Hon’ble High Court. Further the ld DR could not point out any contrary decision. Respectfully following the precedent, we accept this ground of appeal.
The ld AR did not press other grounds of appeal, which are hereby dismissed.
Hence, the appeal is partly allowed.
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2008 (12) TMI 441
Issues Involved:
1. Disallowance of interest claim under section 271(1)(c) for assessment years 1996-97 and 1997-98.
2. Validity of penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.
Issue-wise Detailed Analysis:
1. Disallowance of Interest Claim under Section 271(1)(c) for Assessment Years 1996-97 and 1997-98:
The assessee, engaged in trading cloth, chemicals, and shares, claimed interest deductions for assessment years 1996-97 and 1997-98. The Assessing Officer (AO) observed that the assessee had debited Rs. 26,55,189 to the Profit and Loss Account for the year 1996-97 without any trading activity. The AO issued a show-cause notice questioning this claim. The assessee argued that the interest was for unsecured loans taken for acquiring tenancy rights and plant and machinery, and for a Memorandum of Understanding (MOU) with Mrs. R.K. Modi for leasehold land intended for development. The AO disallowed Rs. 14,98,750, suggesting it should be charged to the work-in-progress account, and initiated penalty proceedings.
For 1997-98, the assessee claimed Rs. 36,81,472 as interest, with Rs. 21,22,291 related to the property development loan. The AO disallowed this claim, initiating penalty proceedings under section 271(1)(c).
The CIT(A) confirmed the disallowances for both years, and the Tribunal upheld these decisions in ITA No. 5618/Mum./1999 and ITA No. 3612/Mum./2001.
2. Validity of Penalty Imposed Under Section 271(1)(c) of the Income-tax Act, 1961:
The AO imposed penalties of Rs. 6,89,425 for 1996-97 and Rs. 9,12,585 for 1997-98, which the CIT(A) confirmed. The assessee appealed, arguing the penalties were unjustified. The assessee contended that the property was intended for development, shown as stock-in-trade, and interest was claimed based on a bona fide belief that the sub-lease would be renewed. The assessee cited various decisions to support that interest on borrowed capital for asset acquisition is deductible, even if the asset isn't used in the relevant year.
The Departmental Representative (DR) argued that the Tribunal did not accept the assessee's claim of intent to develop the property, and the explanation was unconvincing, justifying the penalty under section 271(1)(c) and the Supreme Court's decision in Dharmendra Textile Processors.
The Tribunal noted the assessee's business was trading, not property development. The agreement with Mrs. Modi required renewal of the expired sub-lease before the sale deed execution, which hadn't occurred. The assessee's Balance Sheet showed the amount as loans and advances, not work-in-progress. The Tribunal found no satisfactory explanation for claiming the interest deduction, deeming it not bona fide.
The Tribunal decided to restore the issue to the CIT(A) for fresh consideration, directing the CIT(A) to seek explanations from the assessee regarding the payment and possession of the land, and decide in accordance with the Supreme Court's decision in Dharmendra Textile Processors.
Conclusion:
The appeals were allowed for statistical purposes, with the issue remanded to the CIT(A) for a fresh decision, considering the latest facts and the Supreme Court's relevant judgment.
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2008 (12) TMI 440
Computation of book profits u/s 115JB - Minimum alternate tax - gain on sale of units of mutual fund - not credited to the profit and loss account - directly taken to the Reserves Accounts in the balance sheet - claim of the assessee is that the said profit arising on redemption of units of mutual fund is arising on sale of the assets shown under investment and have no link with the business carried on by the assessee and as such these were not routed through the profit and loss account.
HELD THAT:- In view of the ratio laid down by the Hon’ble Supreme Court in Apollo Tyres Ltd.’s case [2002 (5) TMI 5 - SUPREME COURT] and by the jurisdictional High Court in Akshay Textiles Trading & Agencies (P.) Ltd.’s case [2007 (10) TMI 251 - BOMBAY HIGH COURT], we hold that where the accounts of a Company are maintained as per the Provisions of Companies Act and are Certified by the Auditors to the effect that the same are maintained as per the requirements of the Companies Act and the same are approved by the shareholders of the company in its annual general meeting and filed before the Registrar of Companies, the authenticity of such accounts has to be accepted by AO, while computing the book profits u/s 115J/115JA/115JB. AO is however empowered to make such adjustments as provided for in the Explanation to the respective section.
Once an asset is held as an investment by a company and is reflected as an investment in the balance sheet of the company from year to year, then any gain on sale of such investments is not linked to the profits and gains of the business carried on by the respective companies. The said gain of sale of units on mutual funds was offered to tax in the respective hands of the companies for the year under appeal.
Where the accounts are prepared and certified by the auditors, which in-turn are approved/adopted by the shareholders of the company and are filed before the Registrar of the Companies, AO has no powers of disturbing the profits of business as held by the Hon’ble Supreme Court in Apollo Tyres Ltd.’s case (supra). Only power of the AO is to make suitable adjustments to the profits of business under the Explanation to section 115JB. The said adjustments are relatable to the profits and gains of business carried on by the assessee. Any gain arising on sale of investments, though taxable, may necessarily be not routed through Profit and Loss Account. We uphold the order of CIT(A) that no adjustments on account of gain on sale of units of mutual fund is to be made while working out the book profits u/s 115JB. The grounds of appeal raised by the Revenue are dismissed.
In the result, all the seven appeals filed by the revenue in the case of seven different assessees mentioned above are dismissed.
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2008 (12) TMI 439
Issues:
1. Tax treatment of insurance claim received for damage to capital assets.
2. Disallowance of foreign travel expenses.
Issue 1: Tax treatment of insurance claim received for damage to capital assets:
The judgment involves cross-appeals by the assessee and the revenue against the order of the Commissioner of Income-tax (Appeals) regarding the tax treatment of insurance claims received for damage to capital assets. The assessee's business involved printing and marketing various products, and a major fire caused substantial damage to their premises. The insurance claim received was for loss of stock, repair costs of machinery and building, and other expenses due to the fire.
The key contention was whether the insurance claim should be taxed as income in the year of receipt or based on accrual principles. The assessee argued that since the amount was receivable against capital assets, it should be treated under section 45(1A) of the Income-tax Act, which taxes profits or gains from damage to capital assets as capital gains in the year of receipt. The revenue, however, argued that the word "received" in section 45(1A) does not prohibit taxing the claim on a mercantile basis.
The tribunal analyzed the facts and relevant provisions, noting that the insurance claim was for damage to capital assets. Referring to section 45(1A), which taxes such receipts as capital gains in the year of receipt, the tribunal held that the amount received against repair costs of machinery and building should be taxed in the year of receipt, not based on accrual. The tribunal deleted the additions made by the revenue, confirming the treatment by the assessee as in accordance with the law.
Issue 2: Disallowance of foreign travel expenses:
Another issue in the judgment was the disallowance of foreign travel expenses claimed by the assessee. The assessee incurred expenses for foreign travel to explore and strengthen export markets in various countries. The Assessing Officer disallowed a portion of the expenses, claiming they were not wholly and exclusively for business purposes.
The assessee explained that the trips were essential for business expansion and strengthening existing markets. The Commissioner of Income-tax (Appeals) upheld the expenses, noting that the trips were conducted by company officials for business purposes, with no evidence to the contrary.
The tribunal considered the submissions and held that the foreign travel expenses were incurred wholly and exclusively for business purposes under section 37(1) of the Income-tax Act. The detailed documentation provided by the assessee supported the business nature of the trips, leading to the dismissal of the revenue's appeal and allowing the assessee's appeal.
In conclusion, the tribunal allowed the assessee's appeal and dismissed the revenue's appeal in the judgment.
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2008 (12) TMI 438
Issues Involved:
1. Condonation of delay in filing appeals.
2. Justification for the delay provided by the assessee.
3. Legal precedents and principles regarding condonation of delay.
Summary:
Issue 1: Condonation of Delay in Filing Appeals
The appeals were filed late by 7 years and 6 months. The assessee filed an affidavit explaining the delay, which was opposed by the Departmental Representative, arguing that delay can only be condoned if it is properly explained and justifiable.
Issue 2: Justification for the Delay Provided by the Assessee
The assessee claimed that the delay was due to various reasons, including:
- The CIT(A)'s order was passed on 26-3-1999 and received within the year 1999.
- Differences between partners and financial crises led to disarray in the firm's affairs.
- The firm was involved in multiple litigations, and the factory was auctioned in 2004.
- The tax consultant expired in 2002, and the assessee faced health issues and financial crises, preventing him from engaging a new consultant.
- In October 2006, with the help of Dr. Ruparel, the assessee gathered necessary papers and filed the appeal on 5-1-2002.
Issue 3: Legal Precedents and Principles Regarding Condonation of Delay
The Tribunal reviewed various judgments:
- Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471: Sufficient cause for condonation should be interpreted to do even-handed justice.
- Vedabai alias Vaijayanatabai Baburao Patil v. Shantaram Baburao Patil [2002] 253 ITR 798: Courts should adopt a pragmatic approach and interpret "sufficient cause" liberally.
- Raju Ramchandra Bhangde v. CIT [1984] 148 ITR 391: Not every mistake of counsel affords sufficient cause for condonation.
- Surinder Kumar Boveja v. CWT [2006] 287 ITR 52: Ignorance of law or neglect is not sufficient ground for condonation.
- CIT v. Ram Mohan Kabra [2002] 257 ITR 773: Delay can be condoned only for sufficient and good reasons, supported by proper evidence.
- J&K Small Scale Inds. Development Corpn. Ltd. v. Asstt. CIT [2008] 115 ITD 11: Provisions relating to the specified period of limitation must be applied with their rigour and effective consequences.
Conclusion:
The Tribunal concluded that the assessee was aware of the legal proceedings and had pursued the matter before the Assessing Officer. Despite claiming health issues and financial crises, no evidence was provided to support these claims. The Tribunal found that the delay of 7 years and 6 months was not justified and sufficient cause was not shown. Therefore, the request for condonation of delay was rejected, and the appeals were dismissed as barred by limitation.
Result:
All the appeals of the assessee are dismissed.
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2008 (12) TMI 437
Issues Involved:
1. Non-allowability of Keyman Insurance Policy premium.
2. Disallowance of interest on debit balances in partners' capital accounts.
Issue-wise Detailed Analysis:
1. Non-allowability of Keyman Insurance Policy Premium:
Facts and Arguments:
- The Revenue challenged the CIT(A)'s decision allowing the deduction of Rs. 34,62,952 paid as Keyman Insurance Policy premium under section 37(1) of the Income-tax Act.
- The Assessing Officer (AO) disallowed the claim, arguing that a partnership firm is not distinct from its partners and relied on the Supreme Court's decision in Malabar Fisheries Co. v. CIT.
- The assessee contended that under the Income-tax Act, a partnership firm and its partners are separate entities, and the premium should be allowed as a business expenditure.
Tribunal's Findings:
- The Tribunal reviewed several legal precedents and legislative provisions, including sections 2(31), 10(10D), 28(vi), and Circular No. 762 issued by the CBDT.
- It was held that for the purposes of the Income-tax Act, a partnership firm is treated as a separate entity from its partners.
- The Tribunal noted that Keyman Insurance Policy premiums are allowable as business expenditure regardless of the relationship between the insured and the insurer, as long as it is related to the business.
- The Tribunal upheld the CIT(A)'s decision, confirming that the Keyman Insurance Policy premium paid by the firm is allowable as business expenditure.
2. Disallowance of Interest on Debit Balances in Partners' Capital Accounts:
Facts and Arguments:
- The AO disallowed interest on debit balances in partners' capital accounts, arguing that the withdrawals were not for business purposes.
- The assessee argued that the withdrawals were for business purposes and that the salary payable to partners, if credited monthly, would offset the debit balances.
Tribunal's Findings:
- The Tribunal noted that the partnership deed provided for charging interest on debit balances in partners' capital accounts.
- It found that the withdrawals were used for the partners' other individual businesses, not for the firm's business.
- The Tribunal disagreed with the CIT(A)'s decision to delete the disallowance, stating that the CIT(A) did not correctly examine the facts.
- The Tribunal directed the AO to recompute the interest chargeable after crediting the salary payable to the partners on a monthly basis and to provide an adequate opportunity for the assessee to be heard.
Conclusion:
- The Revenue's appeal was partly allowed, with the Tribunal upholding the disallowance of interest on debit balances but confirming the allowability of the Keyman Insurance Policy premium.
- The assessee's cross-objection was dismissed due to a delay in filing without a bona fide reason.
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2008 (12) TMI 436
Non-deduction of tax at source - dairy business - milk sold to concessionaires - Revenue contended concessionaires to be agents and assessed difference between MRP of the product & purchase price to be commission - TDS u/s 194H - order passed u/s 201(1) and 201(1A) - HELD THAT:- In the present case it is found that there has been no redrafting of the agreements and the agreements as placed before us being the same as was found in the course of survey and as per the terms of the agreement which are identical even in 1993 as also in 2003, the discount as given by the assessee to its concessionaires are nothing but discount and do not have any characteristics of a commission.
Consequently, we are of the view that the decision of the Hon’ble Jurisdictional High Court upholding the order of this Tribunal in the case of Delhi Milk Scheme [2008 (3) TMI 2 - HIGH COURT OF DELHI] would have no application to the assessee’s case insofar as the facts, as also the terms of the agreement are completely different. Further just because the assessee keeps a substantial control over the concessionaires it cannot be said that the relationship is one of principal and agent, as the control would have to be seen when these agreements were drafted. Obviously any body who gives his space, machinery and equipment to another would like to put substantial clauses which can be invoked to cancel such agreements if it is found that the person they are dealing with is not trustworthy or is doing anything to the detriment of the assessee.
In such circumstances it cannot be said that the strict control clauses of the agreement makes the transaction between the assessee and the concessionaires to be one of principal and agent. If the actual functional and operational clauses of the agreements are seen it would clearly show that it is one between two principals to which the provisions of section 194H would not apply. In these circumstances, we are of the view that the provisions of section 194H would not be attracted on the discounts given by the assessee to its concessionaires and consequently the order of the ld. CIT(A) as also the AO passed u/s 201(1) and 201(1A) are set aside.
Therefore, the appeal of the assessee is allowed.
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2008 (12) TMI 435
Issues Involved:
1. Whether the loss on sale of shares is to be treated as capital loss or as business loss.
2. Even if the loss is treated as a business loss, whether the same is to be treated as a loss from speculative business within the meaning of Explanation to section 73 of the Income-tax Act, 1961.
Issue-wise Detailed Analysis:
1. Treatment of Loss on Sale of Shares: Capital Loss vs. Business Loss
The assessee had debited a sum of Rs. 1,61,28,946 as a loss on the sale of investment in the P&L account for the assessment year 2004-05. The Assessing Officer (AO) treated this loss as a capital loss, not a business loss, and disallowed its set-off against other income. The AO noted that the loss on investment would be long-term capital loss and should be carried forward to be set-off against long-term capital gains only.
Upon appeal, the CIT(A) upheld the AO's decision, treating the loss from shares as a capital loss. The CIT(A) noted that the shares were purchased in different financial years (prior to 31-3-1991, 1991-92, and 1994-95) and were held as investments, not as stock-in-trade. The shares were shown as investments in the balance sheet, and the company had made a provision for diminution in market value under the head investment, not claimed as business loss. The treatment in the P&L account further established that the shares were held as investments. Therefore, the CIT(A) concluded that the loss on the sale of shares was a capital loss.
The Tribunal agreed with the CIT(A), noting that the assessee had shown the shares as investments and not as stock-in-trade. It is well settled that an assessee can hold certain shares as stock-in-trade and others as investments. The Tribunal upheld the CIT(A)'s order, holding the loss on sale of shares as a capital loss.
2. Applicability of Explanation to Section 73: Speculative Loss
Without prejudice to the finding that the loss on sale of shares is a capital loss, the CIT(A) also held that even if the loss is treated as a business loss, it would be a speculative loss under the Explanation to section 73 of the Act. The Explanation deems a company to be carrying on a speculation business if any part of its business consists of the purchase and sale of shares of other companies, except for companies mainly earning income from interest, house property, capital gains, or other sources, or companies whose principal business is banking or granting loans and advances.
The CIT(A) found that the assessee did not fall into the excluded categories. The principal business of the assessee was not granting loans and advances but investment in shares. The application of funds indicated that the principal business was investment in shares. Therefore, the transaction fell within the ambit of Explanation to section 73, making the loss on sale of shares a speculative loss, not allowed to be set off against business income.
The Tribunal upheld this view, referencing the decision of the Hon'ble Calcutta High Court in the case of CIT v. Arvind Investment Ltd., which held that Explanation to section 73 applies even if the entire business consists of the purchase and sale of shares. The Tribunal also cited similar decisions by ITAT Bombay Benches, affirming that the Explanation applies to companies whose entire business activity is the purchase and sale of shares.
Conclusion:
The Tribunal dismissed the appeal, upholding the CIT(A)'s order that the loss on the sale of shares was a capital loss. Even if considered a business loss, it would be treated as a speculative loss under Explanation to section 73, not allowed to be set off against other business income.
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2008 (12) TMI 434
Issues Involved:
1. Addition of Rs. 18,38,133 u/s 68 of the Income-tax Act, 1961.
2. Disallowance of stamp duty in computing capital gains.
Summary:
Issue 1: Addition of Rs. 18,38,133 u/s 68 of the Income-tax Act, 1961
The assessee contested the addition of Rs. 18,38,133 made by the Assessing Officer (AO) u/s 68 of the Income-tax Act, 1961, which was confirmed by the CIT(A). The AO had added this amount as unexplained cash credit, representing receipts from one A.S. Patil, who was not traceable. The assessee argued that the amount was received from Patil for cultivating asparagus on his land, and despite efforts, Patil did not appear before the AO to confirm the transactions. The AO assessed the receipts as unexplained cash credit due to lack of satisfactory evidence and the non-appearance of Patil. The Tribunal, after examining the records and the affidavit filed by Patil, concluded that the assessee had established the identity of the creditor, genuineness of the transaction, and creditworthiness of the creditor. The Tribunal noted that the assessee had land holdings and was engaged in agricultural operations, corroborated by various documents and reports. Consequently, the addition made by the AO was deleted.
Issue 2: Disallowance of stamp duty in computing capital gains
The assessee challenged the disallowance of stamp duty in computing capital gains. The Tribunal held that stamp duty spent by the purchaser should be added to the cost of the land. Therefore, the disallowance made by the AO was deleted.
Conclusion:
The appeal filed by the assessee was allowed, with the addition of Rs. 18,38,133 u/s 68 and the disallowance of stamp duty in computing capital gains being deleted.
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2008 (12) TMI 433
Issues Involved:
1. Treating the revised return of income as non est.
2. Computation of MAT tax liability and income assessed as per the provisions of section 115JB.
3. Charging of interest under sections 234B and 234C.
4. Disallowance of depreciation on motor car.
5. Disallowance of electricity expenses.
6. Disallowance of foreign traveling expenses of Directors.
Issue-wise Detailed Analysis:
I. Treating the Revised Return of Income as Non Est:
The CIT(A) confirmed the action of the Assessing Officer in treating the revised return of income filed by the appellant-company as non est. The CIT(A) observed that the Assessing Officer had taken into consideration the details filed with the revised return for computation of total income, thus dismissing the appellant's grievance.
II. Computation of MAT Tax Liability and Income Assessed as per the Provisions of Section 115JB:
The CIT(A) dismissed the appeal on the basis that, as per section 115JB, book profit is allowed to be reduced by the amount of profits eligible for deduction under sections 80HHC and 80HHF, but not under sections 80-IA or 80-IB. The CIT(A) referenced the Supreme Court decision in Apollo Tyres Ltd. v. CIT, which mandates the Assessing Officer to accept the authenticity of the accounts as per the Companies Act without modifying the book profits shown in the P&L Account. The Tribunal upheld this decision, emphasizing that section 115JB concerns the computation of book profit, not total income, and deductions under section 80-IB are not applicable for computing book profit under this section.
III. Charging of Interest under Sections 234B and 234C:
The CIT(A) upheld the levy of interest under sections 234B and 234C, referencing the Madras High Court decision in CIT v. Geetha Ramakrishna Mills (P.) Ltd., which held that interest is applicable even when the assessment is made under section 115JB. The Tribunal confirmed this view, citing the Special Bench decision in Ashima Synthetics, which held that interest under sections 234B and 234C is chargeable even when income is determined under section 115JB.
IV. Disallowance of Depreciation on Motor Car:
The Assessing Officer disallowed 1/5th of the depreciation on motor cars due to personal use, but the CIT(A) deleted this disallowance, holding that a company cannot have personal use of motor cars. The Tribunal, referencing the Gujarat High Court decision in Sayaji Iron & Engg. Co. v. CIT, directed the Assessing Officer to verify the terms and conditions of service and re-adjudicate the issue accordingly.
V. Disallowance of Electricity Expenses:
The Assessing Officer disallowed half of the electricity expenses due to the non-availability of the rent agreement. The CIT(A) deleted this disallowance, stating that the non-furnishing of the rent agreement cannot be the basis for such disallowance. The Tribunal upheld the CIT(A)'s decision, noting that the disallowance was made on guesswork without a proper basis.
VI. Disallowance of Foreign Traveling Expenses of Directors:
The Assessing Officer disallowed the foreign traveling expenses of the Directors due to a lack of evidence regarding business generated from the trip to South Africa. The CIT(A) deleted this disallowance, finding that the expenses were incurred for business purposes and the company had received NRI bookings. The Tribunal upheld the CIT(A)'s decision, noting that no material was brought on record by the revenue to contradict the CIT(A)'s findings.
Conclusion:
The appeals filed by the assessee were partly allowed, while the appeals of the revenue were statistically partly allowed. The Tribunal upheld the CIT(A)'s decisions on most issues, emphasizing the importance of adhering to statutory provisions and judicial precedents.
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2008 (12) TMI 432
Issues Involved:
1. Validity of the order u/s 154/143(1) of the Income-tax Act.
2. Entitlement to interest u/s 244A of the Income-tax Act, 1961.
3. Requirement of approval from CCIT or CIT for determining the period of delay attributable to the assessee u/s 244A(2).
Summary:
1. Validity of the order u/s 154/143(1) of the Income-tax Act:
The assessee challenged the order passed by the CIT(A) u/s 154/143(1) of the Income-tax Act, claiming it was bad both in law and on facts. The Tribunal did not specifically address this issue in the judgment.
2. Entitlement to interest u/s 244A of the Income-tax Act, 1961:
The assessee, a Public Sector Undertaking, filed appeals against the CIT(A)'s order for the assessment years 2001-02 and 2002-03. The primary contention was the denial of interest u/s 244A on the refund amount. The assessee argued that the interest should be allowed from 1st April of the relevant assessment year till the date of granting the refund. The CIT(A) held that the Assessing Officer was justified in not allowing the interest for the period attributable to the assessee's delay in filing the revised return. However, the Tribunal found that the Assessing Officer and CIT(A) were not authorized to exclude any period for the purpose of granting interest u/s 244A(1) without referring the matter to the Chief Commissioner or Commissioner as mandated by section 244A(2).
3. Requirement of approval from CCIT or CIT for determining the period of delay attributable to the assessee u/s 244A(2):
The Tribunal emphasized that u/s 244A(2), if there is any question regarding the period to be excluded for the purpose of interest, it must be decided by the Chief Commissioner or Commissioner. The Assessing Officer had excluded the period from 1st April of the relevant assessment year till the date of filing the revised return without such a referral, which was beyond his jurisdiction. The Tribunal directed the Assessing Officer to refer the matter to the Chief Commissioner or Commissioner to determine the period of exclusion as per section 244A(2).
Conclusion:
The Tribunal set aside the orders of the Assessing Officer and CIT(A) and restored the matter to the file of the Assessing Officer with the direction to refer the issue regarding the exclusion period to the Chief Commissioner or Commissioner for determination. The appeals filed by the assessee were allowed for statistical purposes.
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2008 (12) TMI 431
Issues Involved:1. Depreciation on capitalized interest. 2. Applicability of section 44C to head office expenditure. Summary:Issue 1: Depreciation on Capitalized InterestThe revenue contested the CIT(A)'s decision to allow relief of Rs. 6,85,95,042 on account of depreciation on capitalized interest. The assessee had debited interest on capital borrowed for capital expenditure, which was added back to income, and claimed depreciation on this amount. The CIT(A) found that the interest was not capitalized in the books but added to the income, thus entitling the assessee to depreciation. The ITAT upheld CIT(A)'s decision, stating that since the interest was treated as capital in nature and added to the cost of assets, the assessee was entitled to depreciation. Therefore, this ground was dismissed. Issue 2: Applicability of Section 44C to Head Office ExpenditureThe revenue challenged the CIT(A)'s direction to allow head office expenditure without applying section 44C, arguing that the expenditure was not head office expenditure but reimbursement to a third party. The CIT(A) noted that the expenditure was incurred by BG International Ltd., an affiliate, and not the head office, thus section 44C was not applicable. Additionally, the CIT(A) held that even if considered head office expenditure, the PSC with the Government of India, read with section 42(1), allowed such deductions. The ITAT agreed, stating that section 42(1) and the PSC provided a special regime for deductions, overriding section 44C. The ITAT referenced the Supreme Court's decision in CIT v. Enron Oil & Gas India Ltd., which emphasized the PSC's independent accounting regime. Consequently, this ground was also dismissed. Conclusion:In conclusion, the ITAT dismissed the appeal, upholding the CIT(A)'s decisions on both grounds.
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2008 (12) TMI 430
Issues Involved:
1. Examination of the identity, creditworthiness, and genuineness of the gift.
2. Details of bank accounts of the donor and the donee.
3. Legality and validity of the order passed under section 263 of the Income-tax Act, 1961.
4. Principles of natural justice and fair play.
5. Revisional power of the Commissioner under section 263.
Issue-wise Detailed Analysis:
1. Examination of the Identity, Creditworthiness, and Genuineness of the Gift:
The assessee filed a return of income for the assessment year 2003-04, declaring a total income of Rs. 91,590, which included a gift of Rs. 2 lakhs from Manisha Goyal, sister of the karta Rajesh Goyal. The Assessing Officer (AO) initially accepted the gift as genuine after examining the relevant documents, including the identity and creditworthiness of the donor. However, the Commissioner of Income-tax (CIT) later revised this assessment order under section 263, citing that the AO did not adequately examine the identity, creditworthiness, and genuineness of the gift. The CIT observed that the AO did not obtain the donor's bank statement to verify her creditworthiness, despite the donor's total income being only Rs. 18,741 for the relevant assessment year.
2. Details of Bank Accounts of the Donor and the Donee:
The CIT noted that the AO failed to obtain the details of the bank accounts of both the donor and the donee. The CIT emphasized that the AO did not verify the source of the deposit in the donor's bank account on the date of the gift, which was crucial to establish the genuineness of the gift. The CIT concluded that the assessment order was erroneous and prejudicial to the interest of the revenue due to these lapses.
3. Legality and Validity of the Order Passed Under Section 263 of the Income-tax Act, 1961:
The assessee contended that the order passed under section 263 was illegal, unwarranted, and against the principles of natural justice. The assessee argued that the AO had already examined all relevant documents and found the gift to be genuine. The Tribunal examined the provisions of section 263 and the precedents set by the Hon'ble Supreme Court, particularly in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83. The Tribunal concluded that the twin conditions for invoking section 263-i.e., the order being erroneous and prejudicial to the interest of the revenue-did not co-exist in this case.
4. Principles of Natural Justice and Fair Play:
The assessee argued that the CIT did not consider the written submissions filed by the assessee, making the order arbitrary and lopsided. The Tribunal noted that the CIT must provide reasons for passing an order under section 263 and must base his decision on proper material. The Tribunal found that the AO had made proper inquiries during the reassessment proceedings and had examined all relevant documents before accepting the gift as genuine.
5. Revisional Power of the Commissioner Under Section 263:
The Tribunal emphasized that the revisional power under section 263 is of wide amplitude but must be exercised within the bounds of law and fairness. The Tribunal reiterated that an order could only be revised if it is both erroneous and prejudicial to the interests of the revenue. The Tribunal found that the AO had reopened the assessment specifically to verify the gift and had examined all relevant documents before concluding that the gift was genuine. The Tribunal concluded that the CIT's order was not justified as the AO had taken a possible view based on the evidence available before him.
Conclusion:
The Tribunal held that the CIT had not established that the assessment order was both erroneous and prejudicial to the interests of the revenue. The Tribunal canceled the revisional order passed by the CIT under section 263 and restored the original assessment order. The appeal of the assessee was partly allowed.
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2008 (12) TMI 429
TDS u/s 194J - Whether the services are facilities availed by the assessee from VSNL/MTNL and other concerns towards bandwidth and net work operating infrastructure can be said to be ‘technical services’ u/s 194J r/w Explanation 2 to clause (vii) of section 9(1)? - AO passed order u/s 201(1) and 201(1A) - HELD THAT:- In this case, the assessee has availed the bandwidth services and other infrastructure for providing the internet net excess to its customers. These are standard facilities availed by the assessee. Moreover, in our opinion the assessee’s case is covered by the decision of the Hon’ble Delhi High Court in the case of Estel Communications (P.) Ltd.[2008 (3) TMI 327 - DELHI HIGH COURT]. We, therefore, hold that the payment made by the assessee-company to VSNL, MTNL and other concerns for availing the services of the bandwidth net work infrastructure cannot be said to be technical services within the meaning of section 194J of the Act r/w Explanation 2 to clause (vii) of section 9(1) of the Act. We, therefore, allow the appeals filed by the assessee and cancel the order passed by AO u/s 201(1) and 201(1A) of the Act.
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2008 (12) TMI 427
Issues Involved:
1. Invocation of Section 79 of the Income-tax Act.
2. Disallowance of renovation expenses of leased premises.
3. Disallowance of equipment lease rent.
4. Disallowance of expenditure due to cessation of business.
5. Addition under Section 41(1) regarding relinquishment of liabilities.
6. Addition under Section 41(1) regarding waiver of term loan and overdraft.
7. Set-off of short-term capital loss against other income.
8. Adoption of sale consideration for computing capital loss.
Detailed Analysis:
1. Invocation of Section 79 of the Income-tax Act:
The Assessing Officer (AO) invoked Section 79, denying the carry forward and set-off of business losses and unabsorbed depreciation due to a change in the beneficial ownership of the company. The AO noted substantial changes in the shareholding pattern and directorship, concluding a change in management. The assessee argued that the company falls under exceptions to Section 79, as it is a company in which the public are substantially interested, and more than 51% of the voting power was held by the same persons on the relevant dates. The Tribunal found that 51% of the shareholding remained unchanged from 31-3-1995 to 31-3-1998, thus falling within the exceptions of Section 79. The Tribunal also noted that the AO incorrectly focused on changes in management and directorship rather than shareholding.
2. Disallowance of Renovation Expenses of Leased Premises:
The AO disallowed Rs. 49,56,422 incurred on renovation of leased premises, treating it as capital expenditure and disallowed depreciation due to the cessation of business. The Tribunal directed the AO to grant depreciation on the capitalized renovation expenses, as the business was operational until 16-9-1997, relevant to the assessment year 1998-99.
3. Disallowance of Equipment Lease Rent:
The AO disallowed Rs. 13,97,234 paid as equipment lease rent to Federal Bank, which the assessee had already offered as income under Section 41(1). The Tribunal found the disallowance to be a case of double taxation and directed the AO to verify and ensure no double addition.
4. Disallowance of Expenditure Due to Cessation of Business:
The AO disallowed Rs. 1,31,610 incurred on salaries, directors' remuneration, and travelling expenses post cessation of business on 16-9-1997. The Tribunal upheld the disallowance, noting that the expenses were not incurred for maintaining corporate status but were related to a closed business.
5. Addition Under Section 41(1) Regarding Relinquishment of Liabilities:
The AO added Rs. 40,27,412 under Section 41(1) due to relinquishment of liabilities based on a tripartite agreement. The Tribunal set aside the issue for fresh adjudication, directing the AO to examine whether the liabilities were trading liabilities and if they were allowed as deductions in earlier years.
6. Addition Under Section 41(1) Regarding Waiver of Term Loan and Overdraft:
The AO added Rs. 2,29,99,690 under Section 41(1) for waiver of term loan and overdraft from Federal Bank. The Tribunal held that Section 41(1) does not apply to the waiver of loans and that Section 28(iv) was also not applicable. The Tribunal followed the jurisdictional High Court's decision in Mahindra & Mahindra Ltd., allowing the assessee's ground.
7. Set-off of Short-term Capital Loss Against Other Income:
The Tribunal directed the AO to allow the set-off of short-term capital loss against other income, following the decision in J.K. Chemicals Ltd.
8. Adoption of Sale Consideration for Computing Capital Loss:
The CIT(A) directed the AO to adopt the sale consideration of Rs. 7,85,057 for computing capital loss, based on a valuation report. The Tribunal upheld this direction, noting the AO did not provide contrary evidence.
Conclusion:
The appeal by the assessee was partly allowed, and the appeal by the revenue was dismissed. The Tribunal provided detailed directions on each issue, ensuring proper application of legal principles and verification of facts.
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2008 (12) TMI 426
Issues Involved:
1. Applicability of the decision of the Hon'ble Supreme Court in CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297.
2. Jurisdiction of the Tribunal to raise a ground or permit the respondent to raise a ground adversely affecting the appellant when no cross-appeal or cross-objection has been filed.
Issue-wise Detailed Analysis:
1. Applicability of the Decision in CIT v. Sun Engineering Works (P.) Ltd.:
The assessee contended that the decision in Sun Engineering Works (P.) Ltd. was inapplicable as the issues in the current appeal had not attained finality. The Supreme Court in Sun Engineering Works held that a matter which had reached finality could not be reopened in reassessment proceedings. The assessee had appealed against the original assessment on book profit under section 115JA and the levy of interest under sections 234B and 234C, and these matters were pending before the Tribunal when the reassessment notice was issued. Thus, these issues had not been concluded and could be validly raised in reassessment proceedings. The Tribunal agreed, emphasizing that the decision in Sun Engineering Works should be read in the context of the specific facts and legal questions before the Court. Since the issues in the present appeal were still under litigation and had not reached finality, the ratio of Sun Engineering Works was deemed inapplicable.
2. Jurisdiction of the Tribunal to Raise a Ground or Permit the Respondent to Raise a Ground Adversely Affecting the Appellant:
The assessee argued that the Tribunal could not raise a ground or permit the Department to raise a ground adversely affecting the appellant when no cross-appeal or cross-objection had been filed by the Department. This argument was supported by several judicial pronouncements, including Motor Union Insurance Co. Ltd. v. CIT, New India Life Assurance Co. Ltd. v. CIT, and State of Kerala v. Vijaya Stores. These cases established that if the respondent (the Department in this case) had not filed a cross-appeal or cross-objection, they were deemed satisfied with the decision of the lower authority and could not seek relief adversely affecting the appellant. The Tribunal accepted this argument, noting that the Department had not appealed against the CIT(A)'s order nor filed any cross-objection. Therefore, it was not within the Tribunal's jurisdiction to raise or permit the Department to raise a ground adversely affecting the assessee. The Tribunal distinguished the case from National Thermal Power Co. Ltd. v. CIT, where the issue was whether the Tribunal could entertain an additional ground of appeal raised by the assessee, not the Department.
Conclusion:
The Tribunal concluded that both preliminary issues were decided in favor of the assessee. The appeal on merits was to be refixed and heard by the Bench. The Tribunal emphasized that a case is a precedent only for what it explicitly decides, and the ratio decidendi of Sun Engineering Works was not applicable as the issues in the present case had not reached finality. Furthermore, the Tribunal held that it had no jurisdiction to raise or permit the Department to raise a ground adversely affecting the assessee in the absence of a cross-appeal or cross-objection by the Department.
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