|
Advanced Search Options
Case Laws
Showing 401 to 420 of 740 Records
-
2008 (4) TMI 343
Validity of assessment made u/s 158BC for the block period - Search And Seizure u/s 132(1) - documents found and seized - no prohibitory order issued - block assessment completed by the Assessing Officer barred by limitation - Learned counsel for the assessee, Contended that Time limit available to the AO to complete the block assessment i.e. two years from the date of drawing the last valid panchnama was up to September 30, 2002, and the assessment completed by him vide an order dated October 31, 2002 - HELD THAT:- Having regard to all these facts of the case and the surrounding circumstances as existed during the relevant period when the search and seizure action was conducted, we are of the view that there was a sufficient ground making it impracticable to the search team to complete the seizure and conclude the search on September 15, 2000, and the situation warranting issue of a prohibitory order as contemplated u/s 132(3) was clearly obtained.
In our opinion, the entire exercise of concluding the search temporarily on September 15, 2000, drawing the first panchnama on that date, passing a prohibitory order on September 15, 2000, revoking the said prohibitory order subsequently on October 3, 2000, and concluding the search finally on October 4,2000, by making the seizure of the remaining material as per the second panchnama thus was in accordance with the relevant provisions of law and there was no infirmity much less a legal infirmity making the second panchnama drawn on October 4, 2000, invalid in so far as the assessee's case is concerned as sought to be contended by the ld DR.
In that view of the matter, we hold that the second panchnama dated October 4, 2000, was a valid panchnama having been drawn in accordance with law and since the same was the last panchnama drawn in the present case, the warrant of authorisation was finally executed and the search was finally concluded on the date on which the said panchnama was drawn, i.e., October 4, 2000, as per Explanation 2(a) to section 158BE. The block assessment completed by the AO on October 31, 2002, i.e., within a period of two years from the month in which the warrant of authorisation had been executed thus was well within the time limit and the same was not barred by limitation.
Keeping in view the said decision of the hon'ble Delhi High Court in the case of M.B. Lal v. CIT [2005 (9) TMI 64 - DELHI HIGH COURT] as well as all the relevant facts of the case, we find no merit in the contentions raised on behalf of the assessee on this preliminary issue and upholding the impugned order of the ld CIT (A) confirming the validity of assessment made by the AO under section 158BC, we dismiss ground of the assessee's appeal.
-
2008 (4) TMI 342
Issues Involved:
1. Deduction u/s 80-IB on trading profit.
2. Deduction u/s 80-IB on labour charges.
3. Application of provisions of s. 80-IA(9) in computing deduction u/s 80HHC.
Summary:
Issue 1: Deduction u/s 80-IB on Trading Profit
The dispute pertains to the scaling down of the deduction claimed u/s 80-IB from Rs. 23,44,244 to Rs. 18,39,930 due to the assessee's engagement in trading activities. The CIT(A) allowed the deduction on the trading profit of Rs. 5,26,458, which was contested by the Revenue. The Tribunal referred to its previous order for the asst. yr. 2003-04, where it was held that the geared motor's role in the machinery must be examined to determine if it is an indispensable component or merely an aid. The issue was restored to the AO for fresh examination in light of these principles. Consequently, the Revenue's appeal on this ground was allowed for statistical purposes.
Issue 2: Deduction u/s 80-IB on Labour Charges
The assessee declared income from labour charges amounting to Rs. 11,54,620, which the AO disallowed, arguing it was not derived from the industrial undertaking. The CIT(A) upheld the assessee's claim, stating that the processes involved constituted manufacturing activities. The Tribunal agreed, noting that the job work involved manufacturing parts of biscuit making machinery using the same machinery as for the main product. The Tribunal found no error in the CIT(A)'s approach and upheld the deduction u/s 80-IB on labour charges. Thus, the Revenue's appeal on this ground failed.
Issue 3: Application of Provisions of s. 80-IA(9) in Computing Deduction u/s 80HHC
The AO applied s. 80-IA(9) to hold that the deduction u/s 80-IB should be reduced from the profits of business before computing the deduction u/s 80HHC. The CIT(A) upheld the assessee's claim for independent deductions u/s 80-IB and 80HHC. The Tribunal referred to the Chennai Special Bench decision in Asstt. CIT vs. Rogini Garments, which supported the AO's stance. However, an unreported judgment of the Madras High Court in SCM Creations was brought to the Tribunal's notice, which purportedly supported the assessee's view. The Tribunal set aside the CIT(A)'s order and restored the issue to the AO for fresh adjudication, considering the Madras High Court judgment. The Revenue's appeal on this ground was allowed for statistical purposes.
Conclusion:
The appeal of the Revenue was partly allowed, with issues 1 and 3 being remanded for fresh examination and issue 2 being decided in favor of the assessee.
-
2008 (4) TMI 341
Rebuttable presumption u/s 292C - Undisclosed income - Search & Seized u/s 132 - during the course of search of the residential premises - documents were found and seized under identification mark AKG/3 - evidence of unaccounted profit of the appellant - addition made by the AO on the basis of AKG/3 can be sustained or not - Computation of Gross profit - without considering the opening Stock - closing stock has been considered for arriving at the GP - the profit worked out therein is not true profit.
HELD THAT:- It is evident that s. 292C is a presumptive provision where certain facts are to be presumed by operation of law. However, it is a settled law that such presumptions are rebuttable presumptions. As per cl. (i), it is to be presumed that the books of account or documents belong to the person from whose possession or control these were found As per cl. (ii) it is to be presumed that the contents of the documents are true. Now the papers were found from the bedroom of Sri Arun Kumar Goenka. However, Sri Arun Kumar Goenka is not carrying on any business in his individual capacity. He is director of NFPL and his wife is partner in NC.
The presumption under s. 292C is rebuttable presumption and the document has to be considered considering the totality of the facts of the case. The deeming provision cannot be applied mechanically ignoring the facts of the case and the surrounding circumstances. In view of the above, we reject the contention of the learned counsel that as per s. 292C the papers are to be considered in the case of Sri Arun Kumar Goenka and not in the case of either NC or NFPL.
As per the presumption of the AO, the assessee is carrying on the business of purchase and sale of saree outside the books on large scale which has resulted in the huge income which is not recorded in the assessee's books of account every year. However, during the course of search of the assessee's premises, no unrecorded stock, cash or other assets were found. The Revenue has searched the business premises of the firm/company as well as the residential premises of the partners/directors. Not a single evidence of purchase or sale outside the books is found.
In our opinion, it is impossible to carry on business on a huge scale outside the books unless there is some unrecorded stock, cash, debtors, etc. Moreover, if the assessees had huge unrecorded income of crores of rupees in each year, it would have reflected in the form of asset or some expenditure outside the books. No significant asset outside the books or no evidence of ostensible expenditure outside the books is found. In the above circumstances, we cannot uphold the additions made by the AO in the case of both the assessees for the assessment years under consideration on the basis of loose papers by making certain presumptions which are found to be untenable or contrary to the other evidence on record. In view of the above, we delete the additions made by the AO and confirmed by the CIT(A) on the ground of alleged undisclosed net profit outside the books.
It is evident that before Settlement Commission it was never admitted by the assessees under appeal that the seized documents represent undisclosed income, on the other hand it has been contended that the seized documents cannot be relied upon to work out the true profit. Therefore, the argument of the ld DR that the huge undisclosed income was offered on the basis of loose papers before Settlement Commission is not based on any actual facts.
In the result, all the appeals filed by the assessee are allowed.
-
2008 (4) TMI 340
Allowed expenses toward employee contribution on PF u/s 43B - Additions on transfer pricing adjustments - "international transactions" u/s 92B(1) - most appropriate method for determining the ALP - assessee is a company registered in India, inter alia having three related parties in the form of subsidiaries and further step down subsidiaries incorporated in foreign countries, all of which are admittedly "associated enterprises" (AE) - cross-border transaction with an AE - ''Quantitative screening'' - determination of ALP on a transaction-by-transaction basis -
Allowed expenses toward employee contribution on PF u/s 43B - HELD THAT :- the material available on record direct the AO to verify the claim of the assessee and if the employees' contribution have been paid either before the filing of return or before the due date of filing of the return, whichever is earlier, then the claim of the assessee on account of employer's contribution should be allowed following the judgment of the Tribunal, Special Bench, Kolkata in the case of I.T.C. Ltd. We also direct the AO to verify the claim of the assessee regarding arithmetical mistake in disallowance to the extent of Rs. 4,08,181. We hold and direct accordingly and accept the ground raised by the assessee for statistical purposes.
Transactions entered by the assessee with its AE, DCIL in Bahamas - HELD THAT:- We agree with the view that gross margins of DCIL need to be compared with gross margins of comparable uncontrolled transactions or unrelated enterprises entering into such transactions.
We can conclude that DCIL is a company of substance and is performing full-fledged distribution activities. It is not a paper company established to evade taxes as argued by the CIT(A) in his order. Hence, we do not find any justification in the arguments, of the CIT(A) that entire profits should come to the assessee and DCIL should not retain profits. Further the benchmarking exercise and analysis conducted by the assessee has been examined by the CIT(A) and TPO but they have not been able to controvert the analysis of the assessee.
Therefore, we conclude, DCIL should retain the gross margins as determined through the benchmarking exercise by the assessee discussed earlier in this order. Therefore based on such analysis, in the case of asst. yr. 2003-04, the amount of adjustment in the ALP of the international transactions entered by the assessee with DCIL should be restricted to USD 275,632 as submitted and conceded by the learned Authorised Representative. This amount converted to Indian rupees based on the average currency conversion rates for the relevant year comes to Rs. 1,33,42,185. In case of asst. yr. 2004-05, based on the analysis discussed above the assessee has conducted its international transactions with DCIL at arm's length. Hence there should not be any adjustment in the ALP for this year.
International transactions by the assessee with TKC - we conclude that results of the analysis done from the Indian side by the assessee show that the international transactions entered by the assessee with TKC are at arm's length. The TPO and the CIT(A) nor the TPO (sic.-AO) remarked against or made any objections against the analysis performed by the assessee to justify the ALP of its international transactions entered with TKC. Therefore, the CIT(A) erred in sustaining the adjustments made by the TPO. Hence, there should not be any adjustment in respect of international transactions in nature of deputation of employees with DCIL and TKC in respect of international transactions in nature of deputation of employees with DCIL and TKC as the transaction has been entered at arm's length for both the assessment years.
International transactions entered by the assessee with Datacore US - We agree with the submission made by the ld AR regarding testing the margins of Datacore India for the international transaction entered by the assessee with Datacore US.
The results of the economic analysis show that the arm's length OP /TC of the comparable companies is 24.08 per cent after application of the +/5 per cent range whereas the results of Datacore India for the year ended 31st March, 2003 indicate that the company has earned a profitability of 26.61 per cent on its international transactions when measured by the OP/TC criteria. This clearly establishes that the international transaction of Datacore India with its associate is at arm's length. For asst. yr. 2004-05. Selection of time period.
We extracted companies, which had sales 0 in at least two out of the three financial years ending during the period 1st April, 2001 and 16th Feb., 2004. This left us with 3,989 companies. As, we already had a set of companies from Prowess we extracted only the extra companies from Capitaline Plus, data for which were not available in Prowess. This gave us a set of 1,228 companies from Capitaline Plus. Various data fields in Capitaline Plus and Prowess were selected and the ones that were relevant to our analysis were extracted companies, which satisfied basis search criteria. A simple average of the raw numeric data fields was then computed, and various computations were performed thereon as well as on the raw data for individual years.
Quantitative screening - Quantitative screening is a process under which comparability is assessed by comparing economically significant financial data of ratios.
We conclude that the analysis undertaken by the assessee to determine the ALP of the international transaction with Datacore USA is correct and on the basis of the analysis it is seen that transaction undertaken by the taxpayer with Datacore USA is at arm's length for both the assessment years.
In the result, the appeals filed by the assessee are partly allowed.
-
2008 (4) TMI 339
Issues involved:
The judgment deals with the issue of whether the assessee is entitled to claim deduction under section 80RR of the Income Tax Act.
Details of the Judgment:
1. Facts and Background:
The assessee, an individual commercial artist and designer, entered into an agreement with a company to provide advertising and marketing services. The agreement involved various creative services such as multimedia advertising, graphic design, and creating promotional material.
2. AO's Decision:
The Assessing Officer (AO) denied the deduction under section 80RR, stating that the services provided did not qualify as work of an artist. The AO argued that the remuneration received was for general services and not specifically for artistic work.
3. CIT(A) Decision:
The Commissioner of Income Tax (Appeals) held in favor of the assessee, stating that the individual qualified as an artist and was eligible for the deduction under section 80RR.
4. Tribunal's Analysis:
The Tribunal considered the qualifications and professional background of the assessee, noting her expertise in visual communication and creative skills. The Tribunal also referred to previous interpretations of the term "artist" by the Central Board of Direct Taxes (CBDT) and other legal precedents.
5. Legal Interpretation:
The Tribunal emphasized that the term "artist" should be broadly construed to include professionals in various creative fields, not limited to the entertainment industry. The Tribunal highlighted that artistic work involves creativity and originality, which were evident in the services provided by the assessee.
6. Precedent Reference:
The Tribunal cited a previous case involving Amitabh Bachchan, where the definition of "artist" was interpreted broadly to encompass skilled performers in different creative domains.
7. Final Decision:
After considering all the facts and legal interpretations, the Tribunal upheld the CIT(A)'s decision, ruling in favor of the assessee and dismissing the Revenue's appeal. The Tribunal concluded that the income in question was eligible for deduction under section 80RR of the Income Tax Act.
-
2008 (4) TMI 338
Issues Involved:
1. Reopening of assessment.
2. Addition of Rs. 3,45,311.
3. Deletion of addition of Rs. 7,79,310 on account of short-term capital gains.
Detailed Analysis:
1. Reopening of Assessment:
The assessee contested the second reopening of assessment, arguing it was beyond four years and invalid as all material facts were disclosed during the original proceedings. The assessee's counsel emphasized that the firm sold its business to a private limited company, which was essentially a conversion of the partnership into a company. The CIT(A) initially deleted the addition of Rs. 7,79,310 made by the AO under Section 45(4), stating that the business was transferred at book value, resulting in no taxable capital gain.
The Tribunal examined Section 147, which allows reassessment if income has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The Tribunal noted that the first reopening was based on the firm's sale of assets to a company and the distribution of consideration among partners. The CIT(A) had previously found that all assets and liabilities were transferred at book value, and no revaluation occurred. Thus, the capital gain was nil after deducting the cost of assets.
The second reopening was based on the same set of facts, with the AO arguing that the agreement was void as the same person signed it in two capacities and that the stock was undervalued. The Tribunal found no failure on the part of the assessee to disclose material facts and held that the second reopening was invalid as it was merely an attempt to take a different view on the same facts.
2. Addition of Rs. 3,45,311:
The AO noticed discrepancies in the value of assets transferred to the company, estimating a difference of Rs. 3,45,311. The assessee challenged this addition, arguing that the business was sold as a going concern at book value. The CIT(A) confirmed the AO's order, leading to the assessee's appeal.
The Tribunal found that the AO's second reopening was invalid, thus quashing the addition of Rs. 3,45,311. The Tribunal emphasized that the assets were transferred at book value, and there was no revaluation or distribution of capital assets that would result in a taxable gain.
3. Deletion of Addition of Rs. 7,79,310 on Account of Short-term Capital Gains:
The Revenue appealed against the CIT(A)'s deletion of the Rs. 7,79,310 addition. The AO had treated this amount as short-term capital gain under Section 45(4), arguing that the distribution of assets on the firm's dissolution was taxable.
The Tribunal examined Section 45(4), which taxes profits from the transfer of capital assets on dissolution or otherwise. The Tribunal noted that the firm's assets were transferred to the company at book value, and the partners received shares in proportion to their capital accounts. There was no revaluation or distribution of assets that would result in a taxable gain. The Tribunal distinguished between vesting of property in a company and distribution of capital assets, concluding that Section 45(4) was not applicable as there was no distribution of capital assets.
The Tribunal also considered Section 45(1) and Section 48, which provide for the computation of capital gains. It concluded that the full value of consideration received was the book value of the assets, and after deducting the cost of acquisition, the capital gain was nil. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.
Conclusion:
The Tribunal allowed the assessee's appeal, quashing the second reopening of assessment and the addition of Rs. 3,45,311. It also dismissed the Revenue's appeal, upholding the deletion of the Rs. 7,79,310 addition on account of short-term capital gains.
-
2008 (4) TMI 337
Issues Involved
1. Validity of the order passed under Section 143(3) read with Section 147.
2. Determination of the residential status of the assessee as 'resident' versus 'not ordinarily resident' (NOR).
3. Entitlement to deduction under Section 80RRA.
Detailed Analysis
1. Validity of the Order Passed Under Section 143(3) Read with Section 147
The assessee contended that the reopening of the assessment was bad in law as it was based on a change of opinion. The return was initially processed under Section 143(1)(a) and later reopened under Section 148. The assessee argued that the ex parte order under Section 144 was passed without sufficient opportunity for representation. However, this ground was not pressed before the first appellate authority and was subsequently not pursued before the Tribunal. The Tribunal upheld the reopening of the assessment, referencing the Supreme Court judgment in Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., which clarified that processing under Section 143(1)(a) does not constitute an assessment, thus validating the reopening.
2. Determination of Residential Status
The primary issue was whether the assessee's residential status was 'resident' or 'not ordinarily resident' (NOR) under Section 6(6) of the IT Act. The assessee argued that he was NOR, which would exempt foreign income under the proviso to Section 5(1)(c). The Tribunal considered various precedents and the CBDT circular, concluding that the assessee met the criteria for NOR status. The Tribunal emphasized that the amendment to Section 6(6) by the Finance Act, 2003, was not retrospective and applied only from 1st April 2004. The Tribunal followed the Supreme Court's reversal of the Gujarat High Court's decision in Pradip J. Mehta vs. CIT, affirming that both conditions (residence in nine out of ten preceding years and presence in India for at least 730 days in the last seven years) must be met for ordinary resident status. Consequently, the Tribunal directed the AO to treat the assessee as NOR.
3. Entitlement to Deduction Under Section 80RRA
The assessee made an alternative claim for deduction under Section 80RRA, which was not initially claimed due to the belief that he was NOR. The Tribunal noted that the assessee satisfied all conditions for the deduction, including being a citizen of India, receiving remuneration in foreign currency for services rendered abroad, and having the terms of service approved by the Ministry of Finance. The Tribunal held that the Revenue should have considered this legal claim and afforded the assessee an opportunity to furnish the necessary details. However, since the primary issue was resolved in favor of the assessee, the Tribunal did not separately adjudicate this alternative claim.
Conclusion
The Tribunal allowed the appeals, directing the AO to treat the assessee as 'not ordinarily resident' and thus exempting the foreign income from tax. The reopening of the assessment was upheld, but the alternative claim under Section 80RRA was not separately adjudicated due to the favorable decision on the primary issue.
-
2008 (4) TMI 336
Issues: Penalty under section 271(1)(c) for assessment year 1992-93.
Analysis:
1. The appeal was filed by the assessee against the order of CIT(A) regarding the penalty levied under section 271(1)(c). The assessee contended that all relevant facts were disclosed to the Assessing Officer, thus no case for penalty existed. The Department, however, argued that a search action revealed undisclosed jewellery, silver articles, and investments in electronic items, leading to additional income declaration by the assessee.
2. Upon review of submissions and orders, it was found that a search action in 1992 led to the seizure of undisclosed items, with the assessee voluntarily declaring additional income of Rs. 21,64,800 for the relevant year. The assessee claimed the income was earned from gambling and requested the auction of seized items to pay the due tax. The CIT(A) rejected this claim, stating the request letter from the Chartered Accountant was invalid without specific authorization from the assessee. However, the Tribunal held that the conditions of Explanation 5 of section 271(1)(c) were met, as the basis of penalty was the voluntary declaration of additional income by the assessee.
3. The Tribunal concluded that no concealment or inaccurate particulars of income were evident, as the assessee had proactively disclosed the additional income and sought to pay the tax through auctioning seized items. Therefore, the penalty under section 271(1)(c) was canceled, and the appeal of the assessee was allowed.
-
2008 (4) TMI 334
Issues Involved:
1. Deduction under Section 80HHE of the IT Act.
2. Disallowance of overseas maintenance allowance.
3. Validity of agreements between the assessee and M/s KBS.
4. Technical qualifications and employment status of personnel sent to Dublin.
5. Relevance of training and technical expertise of the employer.
6. Deduction of tax at source (TDS) on overseas maintenance allowance.
7. Disallowance of bad debts.
Issue-wise Detailed Analysis:
1. Deduction under Section 80HHE of the IT Act:
The Revenue contended that the CIT(A) erred in allowing the Section 80HHE deduction claimed by the assessee, arguing that the assessee failed to prove it was providing onsite technical services or technically qualified manpower to its offshore client. The CIT(A) allowed the deduction based on the assessee's agreements with M/s KBS, employee statements, and inward remittance certificates. The Tribunal upheld the CIT(A)'s decision, noting that the employees were technically qualified and engaged in onsite software development and technical services, satisfying the conditions under Section 80HHE.
2. Disallowance of Overseas Maintenance Allowance:
The AO disallowed the overseas maintenance allowance of Rs. 75,18,365, questioning the genuineness of the payments and the failure to deduct TDS. The CIT(A) deleted the disallowance, accepting the assessee's explanations and employee confirmations. The Tribunal supported the CIT(A)'s decision, emphasizing that the payments were made through normal banking channels and were reasonable. The Tribunal also noted that the Revenue had previously dropped proceedings under Section 201(1A) related to TDS.
3. Validity of Agreements between the Assessee and M/s KBS:
The AO doubted the validity of the agreements due to discrepancies in dates, lack of notarization, and stamping. The CIT(A) and the Tribunal found the agreements valid as they satisfied the essential elements of a lawful contract. The Tribunal noted that the agreements were binding between the parties, and their validity was not a prerequisite for claiming deduction under Section 80HHE.
4. Technical Qualifications and Employment Status of Personnel Sent to Dublin:
The AO questioned the technical qualifications and employment status of the personnel sent to Dublin. The CIT(A) and the Tribunal found that the employees were technically qualified and on the payroll of the assessee. The Tribunal noted that the employees' qualifications and experience were substantiated through their statements and supporting documents.
5. Relevance of Training and Technical Expertise of the Employer:
The AO argued that the employer should have trained the employees and possessed technical expertise. The Tribunal disagreed, stating that it was not necessary for the employer to have full technical knowledge as long as the employees were qualified and experienced. The Tribunal emphasized that the managing partner's qualifications and experience were sufficient.
6. Deduction of Tax at Source (TDS) on Overseas Maintenance Allowance:
The AO disallowed the overseas maintenance allowance due to non-deduction of TDS. The CIT(A) and the Tribunal found that the payments were reimbursements for expenses and not part of salaries, thus not subject to TDS. The Tribunal noted that the Revenue had previously accepted the assessee's explanations regarding TDS.
7. Disallowance of Bad Debts:
The assessee's cross-objection related to the disallowance of bad debts was dismissed as infructuous since the Tribunal upheld the CIT(A)'s decision on the Section 80HHE deduction.
Conclusion:
The Tribunal upheld the CIT(A)'s decisions, allowing the Section 80HHE deduction and deleting the disallowance of the overseas maintenance allowance. The Tribunal found the agreements valid, confirmed the technical qualifications and employment status of the personnel, and ruled that the payments were not subject to TDS. The cross-objection regarding bad debts was dismissed as infructuous. Both the Revenue's appeal and the assessee's cross-objection were dismissed.
-
2008 (4) TMI 333
Computation of income of charitable or trust - Carry forward of deficit on account of excess expenditure - Accumulation of income u/s.11(1)(a) - Entitled to first accumulate or set apart 25 per cent of the total income of the trust and then claim a carry forward of the excess amount, incurred on application for purposes of the trust, over and above the remaining income i.e. 75 per cent of the total income for its set off against the income of the trust in succeeding year?.
HELD THAT:- The Hon'ble Bombay High Court in the case of Institute of Banking [2003 (7) TMI 52 - BOMBAY HIGH COURT] held that the income derived from the trust property has also got to be computed on commercial principles and if the commercial principles are applied then the adjustments of expenses incurred by the trust for charitable and religious purposes in earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in subsequent years in which the adjustments have been made having regard to the benevolent provisions contained in s. 11 of the Act.
The accumulation of 25 per cent of the total income is permissible when the assessee failed to apply the total income of the trust in a particular year. If the assessee applies the entire income of the trust he is entitled to claim 100 per cent exemption and there is no question of further accumulation of 25 per cent of the total income of the assessee. If the assessee incurs more expenditure than the total income of the trust the expenditure over and above to the income can be carried forward and is allowed to be set off against the income in succeeding year.
In this case, he is entitled to claim the carry forward of the excess expenditure but he will not be allowed to accumulate 25 per cent of the total income first and then claim the excess expenditure for its carry forward, to subsequent years. We accordingly set aside the order of the CIT(A) and restore the matter to the file of the AO with a direction to allow the carry forward of the excess expenditure incurred by the assessee to subsequent year for its set off only in terms indicated.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
-
2008 (4) TMI 332
Eligibility for deduction u/s 10A - Export of Computer Software - Term of "Computer software" includes "Maintenance of software" or not - Whether the work in corrections of bugs in OVISS, customizing Programmes developed, code change in OVISS could be called as ''Manufacture or Development of Software'' - Assessee was working under contracts with M/s. OVI to modify the software called 'OVISS' in order to ensure full and proper functioning of such software, and also had to support M/s. OVI in the event of faults and damages due to improper use of the software, handle queries, make master data management and handle monitoring and trouble shooting -
HELD THAT:- Maintenance of software, especially when it involves ERP modules, or bought out software's would require routines and sub-programs for interfacing it with other legacy systems and also for migration from other legacy systems to new system and building in new functionalities, which could vary from user to another user.
Thus, every maintenance or modification or bug repairing would require independent code and each such independent code/procedure including codes written of interfacing and specific problem solving relating to legacy programme would still be software's and nothing else.
We also find from Explanation 2 to section 10A that computer software means any computer programme recorded on any disc, tape, perforated media or other information storage device which is transmitted or exported from India by any means. There is no dispute that whatsoever the software, the software which were in nature of bug repairing, interpreting and code maintenance programmes, could have been transmitted by the assessee to its client abroad only if it was recorded initially in some information storage device, which could be either the hard disc memory or any other memory devices temporarily or permanently used for the purpose of storing the programme codes. In taking this view, we are also fortified by the decision of the Tribunal in ISBC Consultancy Services Ltd. v. Dy. CIT [2002 (8) TMI 840 - ITAT MUMBAI], wherein it was held that even customization of software involves intellectual process, and it meets the criteria propounded by classical connotation of the term 'manufacture'.
Thus, AO as well as CIT(A) fell in error in denying the assessee deduction u/s 10A for the work done by it on behalf of OVI and in considering the receipts therefrom as not from production or manufacture of computer software. Therefore, we set aside the orders of CIT(A) and AO in this regard and direct that assessee be allowed deduction u/s 10A received by it from M/s. OVI as well.
In the result, appeal of the assessee is allowed.
-
2008 (4) TMI 331
Credit Balance of Current opened account mutually by the party - deemed dividend u/s 2(22)(e) or not? - Interpolate the entries of the trading account in the current account u/s 145 - Applicability of Explanation to section 73 - single transaction of purchase of shares "constituted a separate, independent business" or not? - interest-free advances.
Credit Balance of Current opened account mutually by the party - deemed dividend u/s 2(22)(e)? - HELD THAT:- It is seen that any payment made by a company in which public are not substantially interested, out of its accumulated profits, to a shareholder or to any concern in which such a shareholder is a member or partner and has substantial interest, by way of loan or advance is deemed dividend income of the recipient. In this case, undisputedly assessee is the recipient of the loan from M/s. PIPL. It is also not disputed that M/s. PIPL has accumulated profits. The assessee is not the shareholder of M/s. PIPL, but it is the concern in which the shareholder of M/s. PIPL, Mr. Gaurang Gandhi holds more than 20 per cent of equity share capital. Therefore, the provisions of section 2(22)(e) are very much applicable.
Whether the Assessing Officer was empowered to interpolate the entries of the trading account in the current account? - Section 145 entrusts the Assessing Officer not only with the right but also a duty to consider whether or not the books disclose the true state of accounts and whether the correct income can be deduced therefrom and to proceed according to his judgment on this question. The Hon'ble Supreme Court in the case of CIT v. British Paints India Ltd.[1990 (12) TMI 2 - SUPREME COURT], has held that section 145 confers sufficient power upon the officer-nay it imposes a duty upon him-to make such computation in such manner as he determines for deducing the correct profits and gains. In view of the same, we uphold the action of the Assessing Officer in treating the entries of the trading account as entries of financial transaction account after considering the nature of transactions.
In the case on hand the assessee had received payment in excess of the regular transactions with PIPL in order to discharge its liabilities and therefore the transactions would fall within the purview of section 2(22)(e) of the Income-tax Act.
We are in agreement with the learned counsel for the assessee that only the net amount and on the days when the credit is in excess has to be considered for the purpose of deemed dividend u/s 2(22)(e) and only that part of the amount which has been paid by PIPL to discharge the liability of the assessee company in excess of what it is due to pay to the assessee company for its regular business transactions, is to be considered as deemed dividend under section 2(22)(e) of the Act. We, accordingly, direct the Assessing Officer to recompute the deemed dividend under section 2(22)(e). The assessee's ground of appeal is therefore partly allowed.
Single transaction of purchase of shares "constituted a separate, independent business"? - Having gone through the material on record as well as the decision of the Tribunal in the assessee's own case for the AY 2002-03 cited supra, we find that the Tribunal has considered the fact that the assessee has only a single transaction of purchase of shares without any further trading activity at all and, therefore, the provisions of Explanation to section 73 do not apply.
We find that the facts and circumstances for this year are exactly the same and the decision of the co-ordinate Bench in the assessee's own case cited supra is in favour of the assessee.Thus, this ground of appeal of the assessee is allowed.
Interest-free advance - We find that both the Assessing Officer as well as the CIT(A) have held that the interest paid was towards the loan taken for purchase of shares. As long as the nexus between the interest-bearing funds and the interest-free advances is not established, the disallowance cannot be made. We find that this issue is covered by the decision in the case of Bombay Samachar Ltd. [1969 (6) TMI 2 - BOMBAY HIGH COURT] and the assessee is entitled to succeed. This ground of appeal is, therefore, allowed.
In the result, assessee's appeal is partly allowed.
-
2008 (4) TMI 330
Issues:
Application for restoration/revival of ROM Application No. 151/2000 after recall of Misc. Order, dismissal of application as infructuous, main grievance related to admissibility of modvat credit on explosives and furnace oil, decision of the Tribunal set aside by the Supreme Court, request for recall of order to consider the issue of modvat credit on furnace oil.
Analysis:
The judgment pertains to an application for restoration/revival of a ROM Application after the dismissal of a Misc. Order. The applicant had filed the Misc. Application for modification of a Final Order, which was dismissed as infructuous based on the counsel's statement. The Supreme Court had decided on the issue raised in the ROM application, rendering it non-existent in the eye of the law. The Tribunal's order sought to be modified was set aside by the Supreme Court, making any modification by the Tribunal inappropriate.
In addressing the applicant's grievance regarding the admissibility of modvat credit on explosives and furnace oil, the Tribunal noted that the Larger Bench dismissed the entire appeal even though the issue of furnace oil was not before it. The Tribunal opined that the applicant should have sought rectification/modification of the final order before approaching the Supreme Court. As the decision of the Tribunal merged with the Supreme Court's decision, the Tribunal lacked the competence to modify the order, leading to the dismissal of the application for restoration.
In conclusion, the Tribunal dismissed the application, stating that restoration of the ROM would not serve any purpose as the Tribunal could not make any modifications to the order due to the decision of the Supreme Court. The judgment was dictated and pronounced in open court on a specified date.
This detailed analysis of the judgment highlights the key issues involved, the Tribunal's reasoning, and the ultimate decision rendered in the case.
-
2008 (4) TMI 329
Quantum of Penalty - Interpretation of statute - Held that: - it is clear that even where a minimum penalty is prescribed, the authority has discretion to impose a lesser penalty depending on the facts and circumstances of the case. It need hardly be emphasized that imposition of penalty is a penal action and therefore, there cannot be cut and dried formulae for quantifying the amount. The attending facts and circumstances, nature and gravity of the offence, defence of the person and the extent of evasion among other things will have to be taken into account in doing so.
The amount mentioned in Rule 173Q(1) of the 1944 Rules or Rule 25(1) of the 2002 Rules is the maximum, and not the minimum. The amount shall not exceed the duty determined; if it is more than rupees five thousand, or rupees five thousand if the duty determined is less than rupees five thousand. It is needless to say that while exercising discretion in fixing the amount, the authorities are supposed to give due regard to the relevant factors.
-
2008 (4) TMI 328
Issues: Quashing of Criminal Complaint under Section 482 of CrPC based on exoneration in adjudication proceedings by CEGAT.
In this judgment, a petition was filed seeking the quashing of a criminal complaint under Section 135(1)(b) of the Customs Act, 1962, pending before the Metropolitan Magistrate. The complaint alleged involvement in smuggling goods of foreign origin. The goods were seized, and the Commissioner of Customs ordered confiscation and imposed a penalty. However, the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) exonerated the petitioner due to lack of evidence of smuggling. The petitioner relied on the judgment in Sunil Gulati case and argued that since CEGAT's exoneration order was final, continuation of criminal proceedings was unjustified.
The petitioner's counsel cited the Calcutta High Court judgment in Modern Malleables Limited case to support the argument for quashing criminal proceedings post exoneration in adjudication proceedings. On the other hand, the respondent's counsel relied on the judgment in Mohd. Ali Jabiullaha case, which held that exoneration in adjudication does not warrant quashing of criminal proceedings. The Court noted that CEGAT's exoneration was based on evidence presented by the Department, making it distinguishable from the Mohd. Ali Jabiullaha case. The Court found the present case aligned with the Sunil Gulati judgment, which emphasized quashing criminal proceedings post exoneration. Given the finality of CEGAT's exoneration order, the Court ruled in favor of quashing the criminal complaint.
Ultimately, the Court allowed the petition and discharged the petitioner from the criminal complaint. The order for quashing the complaint was issued, and a copy was directed to be sent to the concerned Metropolitan Magistrate promptly. The judgment highlighted the significance of exoneration in adjudication proceedings by CEGAT as a valid ground for seeking the quashing of criminal complaints under Section 482 of the Criminal Procedure Code.
-
2008 (4) TMI 327
What is the scope of Rule 3, 4 and 5 of the HRRSMACD Rules, 1997 in case of fixation of annual capacity of production in view of the change of parameters to be effected by the manufacturers?
Whether the Tribunal was right in holding that Rule 5 of the HRRSMACD Rules 1997 is not the relevant clause for determination of annual capacity of production where there was a change in the parameters and, that it was only Rule 4 which was relevant rule in determining the annual capacity of production, when Rule 5 does not exclude Ihe cases of re-determination in case of change in parameters by applying Rule 4 of the said Rules?
Held that:- No hesitation to answer question no. 1, in favour of the respondent and against the Revenue when change of machinery and parameters, leads to reduction of annual capacity, Rule 5 would not apply, meaning thereby, that Rule 4 of the aforesaid Rules only shall have application to the facts of the case.
We have to decide the question no. 2 also in favour of the respondent and against the appellant-revenue. Once the power vested with the Central Government under Section 3A of the Central Excise Act 1944 which enures it to frame Rules has been taken away, by omission of the said Section, it will have no competence or jurisdiction or power to frame Rules.
-
2008 (4) TMI 326
Prosecution - commission of offence punishable under Section 135 of the Customs Act - anticipatory bail seeked - Held that:- True, investigation is yet on but it is not a case where custodial interrogation shall be essential as the entire case is based on documentary evidence and the petitioner can be subjected to interrogation without being given custody to the respondent, therefore, it is a fit case where petitioner is entitled to anticipatory bail.
Accordingly, the petitioner is admitted to anticipatory bail. In the event of his arrest he shall be released on bail on his furnishing a personal bond in the sum of ₹ 50,000/- with one surety in the like amount to the satisfaction of the Arresting Officer.
-
2008 (4) TMI 325
Issues Involved:
Challenging seal application on factories due to license violation.
Analysis:
In the present case, two partnership firms challenged the action of the Assistant Commissioner, Central Excise and Customs in applying seals on their factories due to a license violation by the lessee of the factories. The petitioners had filed suits seeking permission to run the factories, which were initially granted by the Civil Court but later set aside by the High Court. The petitioners then submitted representations to the Department, which remained undecided, leading to the filing of the present petitions in 2007.
Undertaking and Payment Plan:
During the hearing, the petitioners offered to pay the dues of the lessee in installments and requested permission to run the factories. The High Court considered the interests of justice and directed the respondent to permit the petitioners to run the factories based on the undertaking given by the petitioners. The petitioners were required to deposit an initial sum and pay the remaining dues in monthly installments. The seals were to be removed upon the deposit of the first installment.
Clarifications and Liabilities:
The High Court clarified that the order allowing the petitioners to run their factories did not absolve the lessee from its liability towards the Excise Department. It was emphasized that efforts should continue to recover dues from the lessee. The order did not prejudice the petitioners' rights to recover dues from the lessee. The judgment disposed of both petitions, making the rule absolute in the specified terms.
This detailed analysis of the judgment highlights the issues involved, the payment plan proposed by the petitioners, the High Court's decision based on the interests of justice, and the clarifications regarding the liabilities of the lessee and the petitioners.
-
2008 (4) TMI 324
Unaccounted money - illegal purchases - order or direction to quash and set aside the demand Notice
Held that:- In the opinion of this Court, the second notice dated 22-9-1988 is issued against the petitioner in continuation of the first notice dated 22-11-1979 and merely because there is absence of reference to the first notice in the second notice, it could not be said that the second notice was not issued in pursuance of the first notice dated 22-11-1979. It may be noted that the appellate Tribunal while dealing with this issue has rightly held that the present petitioner had made voluntary disclosure as a calculated plan to regularise the earnings from his illegal activities . As regards the savings from salary to the tune of ₹ 30,000/- during 1966 to 1968, the present petitioner has failed to produce any proof worth the name, leave apart salary slip, not even the identity card, of having served as a seaman in the Navigation Department.
There is a concurrent finding of facts by the competent authority as well as the appellate authority, and therefore, this Court cannot enter into the arena of re-appreciation of evidence on record to come to a different conclusion than the one taken by the authorities below. The scope of the powers while dealing with a petition filed under Article 226 of the Constitution is very limited and must be confined strictly to the errors apparent on the face of the record. In this petition no grounds exist which would justify this Court to interfere as no evidence whatsoever has been produced to show that the properties in question were purchased out of licit source of income by the petitioner, and therefore, the impugned orders as well as the notice cannot be quashed and set aside.
-
2008 (4) TMI 323
Whether the Court has power to impose condition while enlarging the accused on bail in a non-bailable offence, where punishment is not more than 7 years? OR
Whether power to impose condition can be exercised by the Court in a case of non-bailable offence only when punishment is more than 7 years?
Held that:- As the petitioner has already preferred a fresh application and the same is being heard by another learned Single Judge of this Court, this issue may be left open or may be answered in any other appropriate proceedings. Therefore, it is not necessary to answer the question posed in the order of Reference by the learned Single Judge. This Reference is accordingly disposed of.
............
|
9911796707
