|
Advanced Search Options
Case Laws
Showing 421 to 440 of 776 Records
-
2005 (2) TMI 456
Issues:
- Accrual of interest income on loans given to parties
- Applicability of mercantile system of accounting
- Interpretation of judicial pronouncements on sticky advances
- Dispute over addition of accrued interest by the AO
- Decision of the CIT(A) in deleting the addition
Accrual of Interest Income on Loans Given to Parties:
The case involved the Revenue appealing against the deletion of an addition of accrued interest on loans given to two parties by the AO. The AO contended that under the mercantile system of accounting, the interest accrued on the loans should be recognized as income. However, the assessee argued that the recovery of the principal amount itself was doubtful, thus no income should be considered as accrued. The AO disagreed and brought the interest amount to tax. The CIT(A) later ruled in favor of the assessee, stating that no income had actually accrued to the assessee due to the doubtful recovery of the loans.
Applicability of Mercantile System of Accounting:
The disagreement between the AO and the assessee revolved around the application of the mercantile system of accounting. The AO insisted that under this system, accrued interest should be recognized as income. In contrast, the assessee argued that the doubtful recovery of the principal amount negated the recognition of any accrued income. The CIT(A) sided with the assessee, emphasizing that the reality of the situation indicated no income had actually accrued.
Interpretation of Judicial Pronouncements on Sticky Advances:
During the appeal process, the assessee cited various judicial pronouncements to support their argument, highlighting cases like Sri Kewal Chand Bagri vs. CIT and Godhra Electricity Co. Ltd. vs. CIT. These cases were used to reinforce the contention that in situations where the recovery of loans becomes doubtful, no income should be deemed to have accrued. The CIT(A) agreed with these arguments and ruled in favor of the assessee.
Dispute Over Addition of Accrued Interest by the AO:
The AO's decision to add the accrued interest to the assessee's income was based on the belief that under the mercantile system of accounting, such interest should be recognized as income. However, the assessee maintained that the doubtful recovery of the loans precluded any income accrual. The CIT(A) ultimately disagreed with the AO's position and deleted the addition, leading to the Revenue's appeal against this decision.
Decision of the CIT(A) in Deleting the Addition:
The CIT(A) ultimately decided in favor of the assessee, ruling that no income had accrued due to the doubtful recovery of the loans. The CIT(A) referenced judicial pronouncements and emphasized the practicality of the situation over mere accounting principles. The Tribunal, in line with the CIT(A)'s decision, dismissed the Revenue's appeal, affirming that the addition of accrued interest by the AO was not justified.
---
-
2005 (2) TMI 455
Issues:
1. Dispute over eligibility of 100% depreciation on scaffolding material for assessment years 1993-94 and 1994-95.
Analysis:
1. For the assessment year 1993-94, the assessee, engaged in civil engineering and construction work, claimed 100% depreciation on scaffolding materials. The AO disallowed the claim for materials not dispatched to the site office, totaling Rs. 4,19,440. The CIT(A) confirmed the disallowance, leading to an appeal before the Tribunal.
2. In the same year, the assessee claimed depreciation on scaffolding materials worth Rs. 22,72,378 purchased for the next assessment year. The AO disallowed Rs. 5,94,818 for materials not used for business and Rs. 3,64,284 for materials received after the end of the previous year. The CIT(A) upheld the disallowance, prompting an appeal.
3. The assessee sought to raise an additional ground that scaffolding material expenditure should be treated as revenue expenditure if depreciation is not admissible, which the Tribunal allowed for consideration.
4. The counsel cited precedents to argue that passive use of assets suffices for depreciation claims. The Departmental Representative contended that actual use is necessary, relying on relevant judgments.
5. The Tribunal held that for 1993-94, as scaffolding materials were dispatched to the site office before the year-end, passive use commenced, allowing the depreciation claim. However, for 1994-95, materials received after the previous year were not eligible, except for those received at 4:00 P.M. on the last day, deemed ready for use. Consequently, the appeal for 1993-94 was allowed, and for 1994-95, partially allowed.
-
2005 (2) TMI 454
Issues:
Rejection of application for accumulation of income under s. 11(2) of the IT Act, 1961.
Analysis:
The appeal was against the rejection of the application of the assessee for accumulation of income under s. 11(2) of the IT Act, 1961. The assessee filed Form No. 10 along with the extract of resolution stating the object of accumulation of fund. However, the AO did not consider it proper and valid. The CIT(A) also did not favor the assessee's claim. The Tribunal observed that the assessee had fulfilled the requisite conditions by filing Form No. 10 intimating the object of accumulation, which should not have been denied.
The Revenue authorities contended that the minutes of the meeting of the board of directors were manufactured and not reliable. They pointed out discrepancies between the extract filed with Form No. 10 and the complete minutes regarding the specific object of accumulation of funds. The Departmental Representative relied on judgments emphasizing the examination of the genuineness of documents by the Tribunal.
The Tribunal found that the assessee had filed Form No. 10 specifying the object of accumulation of funds and later submitted complete minutes of the board meeting with specific objects of accumulation. The Tribunal rejected the Revenue's contention regarding the genuineness of the minutes, stating that the preparation and signing of minutes after the meeting were common practice. The Tribunal referred to judicial pronouncements to support the assessee's compliance with the law and concluded that the claim should not be rejected based on mere suspicion.
In conclusion, the Tribunal allowed the appeal filed by the assessee, setting aside the CIT(A)'s order and directing the AO to allow the claim for accumulation of income under s. 11(2) of the IT Act, 1961. The addition made on this count was deleted, ruling in favor of the assessee.
-
2005 (2) TMI 453
Issues:
- Imposition of penalty under section 271C of the IT Act for shortfall in deduction of tax at source.
- Whether the failure to deduct tax at source was due to a reasonable cause.
- Interpretation of discount and rebate as not constituting commission or brokerage.
Analysis:
1. The appeal by the Revenue challenged the cancellation of a penalty imposed under section 271C of the IT Act for the financial year 2001-02. The assessee, a travel agent company, deducted tax at source on commissions paid to sub-agents but did not deduct tax on discounts and rebates, arguing that these did not constitute commission. The Assessing Officer issued a show-cause notice for short deduction of tax at source, leading to the imposition of a penalty. The Joint Commissioner of Income Tax (Jt. CIT) held the assessee liable for the penalty under section 271C.
2. The assessee contended before the CIT(A) that discounts and rebates were not subject to tax deduction at source as they were not considered commission or brokerage under the IT Act. The assessee presented opinions from tax experts, including former CBDT chairman, supporting their belief. The CIT(A) found that the failure to deduct tax was due to a reasonable cause, as the assessee acted in good faith based on expert advice and industry practices.
3. The CIT(A) referenced the Woodward Governor India Ltd. case and the Hindustan Steel Ltd. case to support the decision that the penalty was not warranted in this case. The CIT(A) noted that the assessee's belief was reasonable and based on expert opinions. The CIT(A) highlighted that the assessee started deducting tax on discounts once the matter was clarified by the CBDT, showing a willingness to comply with tax regulations.
4. The ITAT upheld the CIT(A)'s decision, emphasizing that the failure to deduct tax was not due to any mala fide intent or recklessness. The ITAT referred to similar cases where penalties were canceled due to a reasonable cause for non-deduction of tax at source on discounts. The ITAT found that the Revenue authorities were not justified in imposing the penalty and upheld the CIT(A)'s decision to cancel the penalty.
5. The ITAT further questioned the clarity in the penalty order regarding the specific amounts subject to tax deduction, highlighting the lack of clarity on the difference between handling charges and commissions. The ITAT concluded that the penalty imposition was not justified without clear details on the amounts for which tax was allegedly not deducted at source.
6. In conclusion, the ITAT dismissed the Revenue's appeal, affirming the cancellation of the penalty by the CIT(A) based on the reasonable cause for the failure to deduct tax at source on discounts and rebates.
-
2005 (2) TMI 452
Business Expenditure - business of share & stock brokerage - Nature of expenditure - Whether, the expenditure incurred by the assessee towards development fee and fees for operating on the floor paid to Calcutta Stock Exchange Association, towards admission fee and technology cost paid to OTC Exchange of India and towards Non-adjustable deposit for Membership subscription and deposit for Very Small Aperture Terminal (VSAT) paid to National Stock Exchange of India could be treated as revenue or capital expenditure? - HELD THAT:- There is no doubt that with a view to carry on business of share trading and share brokerage more efficiently and profitably in the present scenario of the Stock Market and working of Stock Exchanges, the operating on the floor of Stock Exchange is very much essential without which it would be difficult to manage and conduct the business of share trading and share brokerage more efficiently or more profitably. The payment is not related or connected to any capital asset which might have acquired by the assessee. It is closely linked to the business of share-trading or share-brokerage carried on by the assessee during the year under consideration.
The payment is not of the same nature as of the development fee paid to Calcutta Stock Exchange to become a member thereof by acquiring one or more share of the said Calcutta Stock Exchange Corporation Ltd. The "member" as defined in Article 1 of the Articles of Association of the Calcutta Stock Exchange Association Ltd. means any individual or a company or a Financial Corporation registered in the Register as the owner of the one or more shares in the Association. Thus, the payment of development fee to become a member of the Association and to acquire one or more shares in the Calcutta Stock is on different footing than that of making payment to operate on the floor of the Stock Exchange. Applying the cumulative effect of all the decisions referred to above in foregoing papers and the principles emerging therefrom to the facts of the present case, and having regard to the nature and object of the payment of fee for operating on the floor of the Stock Exchange, we hold that the payment of Rs. 1,50,000 made to Calcutta Stock Exchange for operating on the floor of the Exchange is allowable as being of revenue in nature. Payment of admission fee and technology cost to OTC Exchange of India
It is not in dispute that the said dealership was not transferable and neither the admission fee was refundable in any case. Even if the assessee decides or force to terminate the dealership or if the OTC Exchange of India terminates the dealership, the fee as admission fee was not refundable to the assessee as is clearly evident from the terms and conditions of appointment as a dealer of OTC Exchange of India. Similarly the payment of technology cost for providing training to the assessee's employees for the purpose of making them qualified as per OTC Exchange of India's qualification procedure is found to be necessary or condition precedent for carrying on day-to-day business as a dealer on OTC Exchange of India and to operate the counter thereof. The aim and object of the aforesaid expenditures are thus for carrying on the assessee's business and as such these are of revenue in nature. On the facts of this case, we find no reason to hold that the assessee has derived an advantage of enduring nature on capital field or otherwise has acquired any capital asset.
Deposit for Very Small Aperture Terminals (VSATs) - On perusal of the details of the deposit for installation of VSATs equipments, it is thus clear that an amount towards charges for VSATs services and facilities availed by the assessee is related to the period relevant to the assessment year under consideration. Therefore, the assessee's claim being revenue expenditure is only found to be allowable in the present assessment year under consideration and rest of the amount are allowable in subsequent years to the extent of such amount as relatable to the respective years. We order accordingly.
In the result, we answer the question referred to the Special Bench in the manner as indicated above, and thus held as under:
(i) The expenditure towards development fee paid to Calcutta Stock Exchange Association Limited is of capital in nature.
(ii) The expenditure towards fee for operating on the floor paid to Calcutta Stock Exchange Association is of revenue in nature.
(iii) The expenditure towards admission fee as a dealer on OTC Exchange of India, and payment of technology cost for providing training to the assessee's employees paid to OTC Exchange of India are of revenue in nature.
(iv) The expenditure towards non-adjustable deposit for admission as a Trading Member of the wholesale Debt market of National Stock Exchange of India and the expenditure towards Very Small Aperture Terminals (VSATs) paid to NSEIL are of revenue in nature.
Since there are other grounds of appeal in this case, the records will now be placed before the Division Bench for disposal in accordance with law.
-
2005 (2) TMI 451
Issues Involved:
1. Allowability of expenditure incurred to protect goodwill (Assessment Years 1998-99 and 1999-2000).
2. Disallowance of staff welfare expenses under Section 40A(9) of the Income Tax Act (Assessment Years 1998-99, 1999-2000, and 2000-01).
3. Set off of loss on export of trading goods against profits from export of manufactured goods for deduction under Section 80HHC (Assessment Year 1999-2000).
4. Computation of interest under Section 234C after giving full credit for TDS certificates (Assessment Year 2000-01).
Issue-wise Detailed Analysis:
1. Allowability of Expenditure Incurred to Protect Goodwill:
The appeals for the assessment years 1998-99 and 1999-2000 concern the allowability of expenditure incurred by the assessee to protect its goodwill. The assessee, a company engaged in various business activities, held a significant share in ITC Classic Finance Ltd. ("ITC Classic"), which faced financial turmoil in the mid-1990s. To protect its brand name "ITC," the assessee entered into a tripartite agreement with ITC Classic and ICICI, bearing the restructuring costs amounting to Rs. 52.79 crores and Rs. 2.02 crores for the respective years.
The Assessing Officer (AO) disallowed the claim, arguing it was an afterthought and not directly related to the assessee's business. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating the expenditure did not have a direct nexus with the assessee's business.
On appeal, the Tribunal considered the principles laid down by the Supreme Court in cases like CIT vs. Nainital Bank Ltd. and CIT vs. Delhi Safe Deposit Co. Ltd., which allow for the deduction of expenses incurred to protect goodwill. The Tribunal also referred to the House of Lords' decision in Lawson vs. Johnson Matthey Plc, which supported the assessee's claim that the expenditure was to protect its goodwill. The Tribunal concluded that the expenses were revenue in nature and incurred wholly and exclusively for the assessee's business, thus allowing the deduction under Section 37(1) of the Act.
2. Disallowance of Staff Welfare Expenses under Section 40A(9):
For the assessment years 1998-99, 1999-2000, and 2000-01, the assessee had initially offered certain sums as disallowances under Section 40A(9) before the AO but later claimed these as allowable expenses in appeals before the CIT(A). The CIT(A) refused to admit these claims, stating they were not raised at the assessment stage.
The Tribunal, considering the decisions of the Supreme Court in National Thermal Power Company Ltd. vs. CIT and Jute Corporation of India Ltd. vs. CIT, held that the assessee could raise new claims at the appellate stage. The Tribunal restored the issue to the AO for adjudication on merits, directing the AO to grant a reasonable opportunity of hearing to the assessee.
3. Set Off of Loss on Export of Trading Goods Against Profits from Export of Manufactured Goods for Deduction under Section 80HHC:
For the assessment year 1999-2000, the issue was whether the loss incurred on the export of trading goods should be set off against profits from the export of manufactured goods for computing the deduction under Section 80HHC. The Tribunal referred to the Supreme Court's judgment in IPCA Laboratory Ltd. vs. Dy. CIT, which held that such set-off is not permissible. Consequently, the Tribunal dismissed the assessee's claim.
4. Computation of Interest under Section 234C After Giving Full Credit for TDS Certificates:
For the assessment year 2000-01, the assessee sought relief regarding the computation of interest under Section 234C, requesting full credit for TDS certificates submitted during the assessment. The Tribunal restored this issue to the AO for recomputation of interest in accordance with the law, ensuring all prepaid taxes in the form of TDS and advance taxes are considered.
Conclusion:
The appeals for the assessment years 1998-99, 1999-2000, and 2000-01 were partly allowed. The Tribunal allowed the deduction of expenses incurred to protect goodwill, restored the issue of staff welfare expenses to the AO for adjudication, dismissed the claim regarding the set-off of export losses, and directed the AO to recompute interest under Section 234C after considering all prepaid taxes.
-
2005 (2) TMI 450
Tax deductible at source - Payment To Non-Residents - services rendered for providing technical plan, design and finalizing construction of the water systems - DTAA between India and USA - Whether it was falling under article 7 or article 12 of DTAA - HELD THAT:- We are of the opinion that the payments effected under the agreement with the American company squarely fell within the definition of "fees for included services" and therefore the assessee was liable to deduct tax @ of 15% of the amount payable, under section 195 of the Act. In the case of Raymond Ltd. [2002 (4) TMI 891 - ITAT MUMBAI] the payment was effected by the assessee to a company, Resident of U.K.
The nature of activities contemplated in the contract between the Indian company and the U.K. company were totally different as the question was whether the amount so paid were fees for technical services. In that case although Tribunal held that services rendered were technical services; due to specific clauses of DTAA between U.K and India, income was not taxable. Moreover, since there is a specific clause included in article 12(4) of DTAA with the USA which defines the term fees for included services and further since the payment made under the agreement in the present case falls within the said definition, the assessee cannot get benefit of the decision of the Mumbai Bench which was rendered in the context of DTAA between India and U.K.
On the contrary we find that the substance of the present agreement envisaged that the American company shall not only advice the Indian company but in fact it will prepare all the designs and drawings necessary for implementing the Water Features and also assist the Indian company in actual erection and commissioning of water features. We thus find that from the very inception of preparing schematic designs and drawings till the actual implementation and commissioning of the water features the American company was intimately connected with the project and in fact the whole project was intended to be conducted at the behest direction and supervision of the American company. In the circumstances the decision of the Coordinate Bench in the case of CESE Ltd. [2003 (8) TMI 538 - ITAT KOLKATA] cannot be applied.
We, therefore, agree with the view taken by the CIT(A) that the amounts payable to American company were "fees for included services" within the meaning of article 12(4)(b) of the DTAA with the USA and therefore liable for withholding of tax u/s 195 of the Act. Accordingly, we dismiss the appeal of the assessee.
In the result, the appeal is dismissed.
-
2005 (2) TMI 449
Issues Involved:
1. Validity of the reopening of the assessment under Section 147 of the Income Tax Act.
2. Adequacy of the reasons provided by the Assessing Officer (AO) for reopening the assessment.
3. Application of Explanation 2 to Section 147 in the context of reassessment.
4. The principle of "reason to believe" versus "reason to suspect" in the context of reassessment.
Detailed Analysis:
Validity of the Reopening of the Assessment under Section 147 of the Income Tax Act:
The appeal was directed against the order of the CIT(A) cancelling the assessment framed by the AO under Section 143(3) read with Section 147. The CIT(A) cancelled the assessment on the grounds that the AO did not discover any new material for reopening the assessment. The CIT(A) observed that all material information was available at the time of the original assessment, and the mere fact that the figure of disallowance was not appropriate was no ground to reopen the assessment.
Adequacy of the Reasons Provided by the AO for Reopening the Assessment:
The AO issued a notice under Section 148 and reframed the assessment, estimating the hedging loss at 50% of the total claimed loss. The CIT(A) found that the AO did not have any new material and that the reopening was based on the same facts as the original assessment. The CIT(A) relied on the decision of the Supreme Court in Calcutta Discount Co. Ltd. vs. ITO, which held that there was no omission or failure to disclose all material facts.
Application of Explanation 2 to Section 147 in the Context of Reassessment:
The Revenue argued that the reopening was justified under Explanation 2 to Section 147, which allows reopening if income has been under-assessed or assessed at too low a rate, among other reasons. The Departmental Representative cited the Gujarat High Court's decision in Pratul C. Patel vs. M.J. Makwana and the Bombay High Court's decision in IPCA Laboratories Ltd. vs. Gayanand Meena, which upheld the validity of notices issued under Section 147/148 within four years.
The Principle of "Reason to Believe" Versus "Reason to Suspect":
The assessee's counsel argued that the assessment could not be reopened purely on the ground of change of opinion, citing the Full Bench judgment of the Delhi High Court in CIT vs. Kelvinator of India Ltd. The counsel contended that the AO did not have "reasons to believe" that income had escaped assessment and that the reopening was based on the same facts without any fresh material. The counsel also cited the Supreme Court's decision in Phool Chand Bajrang Lal vs. ITO, which held that "reason to believe" should not be construed as "reason to suspect."
The Tribunal found that the AO did not mention the reasons for reopening the assessment and that the reopening was done solely because the earlier estimate was considered low. The Tribunal noted that the reopening of assessment cannot be done for making roving enquiries and that there was no failure on the part of the AO to apply the correct provisions of the Act during the original assessment.
The Tribunal upheld the CIT(A)'s order, stating that there was no reason to believe that income had escaped assessment and that the reopening was done merely to re-estimate the hedging loss, which is not permissible.
Conclusion:
The Tribunal dismissed the appeal, affirming the CIT(A)'s decision to cancel the reassessment. The Tribunal concluded that the reopening of the assessment was not justified as it was based on the same facts without any new material, and there was no valid "reason to believe" that income had escaped assessment.
-
2005 (2) TMI 448
Issues Involved:
(i) Addition of Rs. 13,26,78,581 under Section 68 of the IT Act.
(ii) Addition of Rs. 3,64,235 on account of entertainment under Section 37(2).
(iii) Addition of Rs. 4,06,762 for medical expenses of the CEO's wife.
(iv) Deletion of interest under Section 234B.
Detailed Analysis:
Issue (i): Addition under Section 68 of the IT Act:
The appellant-company, acting as an agent for a foreign principal, collected advance payments from customers for various services. These funds were held in trust and accounted for in the principal's account. The discrepancy between the balances reported by the appellant and the principal led the AO to add Rs. 13.26 crores to the appellant's income for the assessment year 1997-98. The Tribunal found that these advances were business receipts of the principal, held in trust by the agent, and not the agent's income. The Tribunal agreed with the appellant that the amounts could not be taxed until all uncertainties ceased, which occurred in the assessment year 1999-2000. Therefore, the addition of Rs. 13.26 crores in the assessment year 1997-98 was incorrect, and the amount should be assessed in the year 1999-2000.
Issue (ii): Addition on account of entertainment under Section 37(2):
The appellant argued that the expenses incurred were for business purposes, such as hiring cars, food, beverages during seminars, and advertisement. The Tribunal found it challenging to demarcate what constitutes entertainment and what constitutes business expenditure. Given the nature of the expenses, an element of entertainment could not be ruled out. The Tribunal found the CIT(A)'s allowance of the expenses reasonable and declined to interfere.
Issue (iii): Addition for medical expenses of the CEO's wife:
The appellant claimed reimbursement of medical expenses for the CEO's wife. The Tribunal noted that there was no evidence to prove that the CEO was a regular employee of the company. The relationship between the CEO and the company did not establish a master-servant relationship necessary for such claims. Thus, the Tribunal upheld the disallowance of the medical expenses.
Issue (iv): Deletion of interest under Section 234B:
The appellant contested the charging of interest under Section 234B, arguing that the AO did not specifically direct this in the assessment order. The Tribunal referred to the Supreme Court's decision in CIT vs. Anjum H. Ghaswala, which made the charging of interest mandatory. The omission of the direction in the assessment order was considered a technical error that could not prevent the mandatory provisions from applying. Therefore, the Tribunal upheld the charging of interest under Section 234B.
Conclusion:
The appeal was partly allowed. The Tribunal held that the addition of Rs. 13.26 crores should be assessed in the year 1999-2000, not 1997-98. The claims for entertainment expenses and medical expenses were disallowed, and the charging of interest under Section 234B was upheld.
-
2005 (2) TMI 447
Challenged the revision order passed u/s 263 - erroneous and prejudicial to the interest of Revenue - reducing the DEPB entitlements from profits of the business - HELD THAT:- We are of the view that on the given facts and circumstances of the case, it cannot be said that the order of the AO is erroneous and prejudicial to the interest of Revenue. The AO has passed the order under s. 143(3) after taking all the necessary details and after discussing the case with the representative of the assessee. Now, the learned CIT has a different view on the issue involved. Under the circumstances, the decision of Hon'ble Supreme Court in the case of Malabar Industries Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT], comes to the help of the assessee.
Thus, we hold that on the given facts and circumstances of the case, the learned CIT was not justified in invoking the jurisdiction u/s 263. Accordingly, the order of the learned CIT is quashed.
In the result, the appeal filed by the assessee is allowed.
-
2005 (2) TMI 446
Issues Involved:
1. Deduction of estimated construction cost for non-saleable areas.
2. Accounting method and recognition of liability.
3. Matching principle of cost and revenue.
4. Timing of recognizing income and corresponding expenses.
Detailed Analysis:
1. Deduction of Estimated Construction Cost for Non-Saleable Areas:
The assessee-company, involved in a building project with a charitable trust, claimed a deduction of Rs. 1,08,16,500 for the estimated cost of constructing two buildings to be handed over to the trust free of cost. The AO disallowed this deduction, viewing it as a contingent liability, not an actual liability, and premature. The CIT(A) upheld this view, stating that such expenses could only be allowed when actually incurred.
2. Accounting Method and Recognition of Liability:
The assessee followed the completed contract method of accounting, offering income in the year of completion of each building and deducting the pro-rata cost of non-saleable areas. The AO, however, argued that the method of apportionment used by the assessee was not acceptable, citing the Supreme Court decision in Tuticorin Alkali Chemicals & Fertilisers Ltd. vs. CIT. The AO considered the sale of flats and the construction of free buildings as separate transactions, thus disallowing the deduction.
3. Matching Principle of Cost and Revenue:
The Tribunal found the AO's approach contradictory, as the AO recognized income from the sale of the first building but deferred the corresponding expenditure. The Tribunal emphasized the matching principle, which requires that income and related expenses be recognized concurrently. The assessee's contractual obligation to construct two free buildings was integral to the project, and the cost should be defrayed by the saleable buildings. The Tribunal supported the assessee's method of proportionately estimating and deducting this cost.
4. Timing of Recognizing Income and Corresponding Expenses:
The Tribunal noted that while the project was integrated, it was divisible into segments. Recognizing income and expenses on the completion of each segment (building) was practical and in line with accounting principles. The Tribunal referenced the case of Bharat Earth Movers vs. CIT, where the Supreme Court held that a fastened liability must be allowed as a deduction even if not quantified. The Tribunal also cited the decision in Dy. CIT vs. Rajgir Builders, where a similar deduction was allowed for estimated construction costs of non-saleable areas.
Conclusion:
The Tribunal concluded that the assessee was justified in claiming the deduction of Rs. 1,08,16,500 for the estimated cost of constructing the free buildings. This deduction aligns with the matching principle and the practical approach of segment-wise project completion. The appeal by the assessee was allowed, directing the AO to allow the deduction in computing the taxable income.
-
2005 (2) TMI 445
Issues Involved:
1. Legality of the CIT(A)'s order confirming the AO's stand under Section 248 of the IT Act.
2. Legality of the direction to deduct tax at source at 20% while remitting funds to Deutsche Bank, UK.
3. Rejection of the application for remitting funds without deducting tax at source following the withdrawal of exemption under Section 10(15)(iv)(f).
4. Absence of direction regarding the taxability of interest payable on loans.
5. Direction to deduct tax at 20% on future interest payments on the loan.
Detailed Analysis:
1. Legality of the CIT(A)'s Order Confirming the AO's Stand under Section 248:
The appellant-company challenged the CIT(A)'s order which confirmed the AO's direction under Section 195(2) to deduct tax at source at 20% on remittance to Deutsche Bank, UK. The appellant argued that the CIT(A)'s order was "bad in law, illegal and without application of proper facts." The Tribunal noted that the CIT(A) had dismissed the grounds of appeal in a cursory manner, simply affirming the AO's direction without thorough consideration of the appellant's submissions.
2. Legality of the Direction to Deduct Tax at Source at 20%:
The Tribunal examined the facts leading to the AO's order under Section 195(2), which directed the appellant to remit interest to Deutsche Bank after deducting withholding tax at 20%. This direction was based on the withdrawal of exemption under Section 10(15)(iv)(f) by the Government of India. The Tribunal noted that the appellant had raised foreign currency loans for financing its projects and had been remitting interest without deducting withholding tax until the exemption was withdrawn. The Tribunal found that the CIT(A) had not adequately addressed the appellant's argument that the withdrawal of exemption was unjustified and legally incorrect.
3. Rejection of Application for Remitting Funds Without Deducting Tax:
The appellant contended that the withdrawal of the exemption by the Government of India was not permissible under Section 10(15)(iv)(f), which did not provide for such withdrawal. The Tribunal noted that the CIT(A) had dismissed this ground, stating that the power to grant and withdraw exemptions rested with the Government. However, the Tribunal found that the CIT(A) had not properly considered the appellant's argument regarding the legality of the withdrawal of exemption.
4. Absence of Direction Regarding Taxability of Interest:
The appellant argued that the CIT(A) had erred in not giving direction regarding the taxability of interest payable on the loans. The Tribunal noted that the CIT(A) had dismissed this ground on the basis that the exemption had been withdrawn, and therefore, the appellant was liable to deduct tax on any future interest payments. The Tribunal found that the CIT(A) had not fully addressed the appellant's concerns regarding the taxability of interest.
5. Direction to Deduct Tax at 20% on Future Interest Payments:
The appellant challenged the CIT(A)'s direction to deduct tax at 20% on all future interest payments on the loan. The Tribunal noted that the CIT(A) had upheld the AO's direction without adequately considering the appellant's arguments regarding the legality of the withdrawal of exemption and the applicability of Section 10(15)(iv)(f).
Conclusion:
The Tribunal found that the withdrawal of exemption under Section 10(15)(iv)(f) was unjustified and illegal, as the section did not provide for such withdrawal. Consequently, the Tribunal held that the appellant was not liable to deduct withholding tax at 20% on the interest payment to Deutsche Bank. The Tribunal quashed the AO's order under Section 195(2) and reversed the CIT(A)'s findings, allowing the appellant's appeal.
-
2005 (2) TMI 444
Issues Involved:
1. Validity of the block assessment order without mandatory notice under Section 143(2).
2. Legitimacy of considering Chapter VI-A deductions in block assessment.
3. Entitlement of the assessee-firm to deductions under Section 80-IA.
4. Withdrawal of deductions under Section 80HHC.
5. Validity of the block assessment based on search conducted on premises of another entity.
Detailed Analysis:
1. Validity of the Block Assessment Order Without Mandatory Notice Under Section 143(2):
The assessee-firm contended that the block assessment order was void due to the absence of a mandatory notice under Section 143(2) of the IT Act, 1961. The Tribunal admitted additional grounds and examined the legality of the block assessment initiated on the basis of the search conducted on premises not belonging to the assessee-firm at the time of search.
2. Legitimacy of Considering Chapter VI-A Deductions in Block Assessment:
The assessee-firm argued that the CIT(A) erred in concluding that deductions under Chapter VI-A could be considered in a block assessment. The Tribunal found that the AO's withdrawal of deductions under Sections 80HHC and 80-IA was based on materials already disclosed in regular assessments, which cannot be the subject of block assessment.
3. Entitlement of the Assessee-Firm to Deductions Under Section 80-IA:
The AO concluded that the assessee-firm did not fulfill the conditions for deductions under Section 80-IA, as the business was formed by the reconstruction of an existing business (BPI), involved transfer of used plant and machinery, and did not employ the requisite number of workers. The Tribunal found that the AO's conclusions were based on materials already disclosed in regular assessments and not on any new evidence found during the search. The Tribunal held that the deductions claimed were not "false" and the AO's findings were a change of opinion rather than discovery of undisclosed income.
4. Withdrawal of Deductions Under Section 80HHC:
The AO partially withdrew deductions under Section 80HHC, arguing that excessive deductions were claimed due to non-apportionment of certain expenses. The CIT(A) reduced the disallowance and remitted part of it for re-examination. The Tribunal found that the AO's findings were based on materials already disclosed in regular assessments and not on new evidence from the search.
5. Validity of the Block Assessment Based on Search Conducted on Premises of Another Entity:
The search was conducted on 7th Dec, 1998, at premises belonging to SLL, not the assessee-firm, which had assigned its business to SLL on 12th May, 1998. The Tribunal held that the block assessment on the assessee-firm was unlawful as the search premises did not belong to the assessee-firm at the time of the search. The Tribunal cited the decision in CIT vs. Tirupati Oil Corporation, where it was held that block assessment must be on the entity whose premises were searched.
Conclusion:
The Tribunal set aside the block assessment order on the grounds that no new evidence was found during the search to prove the deductions claimed by the assessee-firm were false, and the assessment was based on materials already disclosed in regular assessments. The appeal by the assessee was allowed, and the appeal by the Revenue was dismissed.
-
2005 (2) TMI 443
Issues Involved:
1. Disallowance of interest under Section 36(1)(iii) of the Act.
2. Disallowance of interest paid to M/s P.J. Pipes & Vessels (P) Ltd.
3. Addition of interest receivable on advance to M/s Apurva Tubes (P) Ltd.
4. Addition on account of inflated purchases transacted through M/s P.J. Pipes & Vessels.
5. Addition on account of inflated valuation of opening stock.
6. Disallowance of excess rent paid to Shri Bharat J. Vora under Section 40A(2)(b) of the Act.
7. Disallowance of interest receivable on advance to M/s Apurva Tubes (P) Ltd. for the asst. yr. 1991-92.
8. Disallowance of interest amount on account of alleged cash balance for the asst. yr. 1991-92.
Detailed Analysis:
1. Disallowance of Interest under Section 36(1)(iii) of the Act:
The AO disallowed Rs. 3 lakhs out of interest for the asst. yr. 1989-90, noting that the assessee had excess cash holdings. The CIT(A) confirmed this disallowance. However, the Tribunal found that the disallowance was based on a similar disallowance in the preceding year, which had been decided in favor of the assessee by the Tribunal. Following the earlier decision, the Tribunal deleted the addition of Rs. 3 lakhs, allowing the assessee's grounds on this issue.
2. Disallowance of Interest Paid to M/s P.J. Pipes & Vessels (P) Ltd.:
The AO disallowed interest payment in excess of 15%, resulting in a disallowance of Rs. 1,42,800. The CIT(A) sustained disallowance of interest in excess of 18%, resulting in a net addition of Rs. 71,300. The Tribunal found that the interest paid at 21% was reasonable and deleted the addition of Rs. 71,300, allowing the assessee's grounds and rejecting the Revenue's grounds on this issue.
3. Addition of Interest Receivable on Advance to M/s Apurva Tubes (P) Ltd.:
The AO added Rs. 2,10,000 as interest receivable on an advance of Rs. 5,67,893. The CIT(A) sustained disallowance to the extent of Rs. 85,175. The Tribunal found that there was no chance of recovery of the principal amount, and it was improper to expect the assessee to charge interest. The Tribunal deleted the disallowance of Rs. 85,175, allowing the assessee's grounds and rejecting the Revenue's appeal on this issue.
4. Addition on Account of Inflated Purchases Transacted through M/s P.J. Pipes & Vessels:
The AO made an addition of Rs. 6 lakhs based on inflated purchases. The CIT(A) deleted the addition, finding that the transactions were not collusive and the purchases were genuine. The Tribunal upheld the CIT(A)'s order, rejecting the Revenue's ground on this issue.
5. Addition on Account of Inflated Valuation of Opening Stock:
The AO made an addition of Rs. 2 lakhs to the trading results, noting that the opening stock was valued at inflated figures. The CIT(A) deleted the addition, observing that there was no addition made to the closing stock for the asst. yr. 1988-89. The Tribunal upheld the CIT(A)'s order, rejecting the Revenue's ground on this issue.
6. Disallowance of Excess Rent Paid to Shri Bharat J. Vora under Section 40A(2)(b) of the Act:
The AO disallowed Rs. 1,64,748 out of total rent paid to Shri Bharat J. Vora, considering the rent excessive. The CIT(A) deleted the disallowance, finding that the rent paid was reasonable for the premises in a commercial area. The Tribunal upheld the CIT(A)'s order, rejecting the Revenue's ground on this issue.
7. Disallowance of Interest Receivable on Advance to M/s Apurva Tubes (P) Ltd. for the Asst. Yr. 1991-92:
The CIT(A) sustained the addition of Rs. 66,220 as interest receivable on advance. The Tribunal, following its decision for the asst. yr. 1989-90, deleted the addition, allowing the assessee's grounds on this issue.
8. Disallowance of Interest Amount on Account of Alleged Cash Balance for the Asst. Yr. 1991-92:
The CIT(A) sustained the disallowance of Rs. 5,640 on account of alleged cash balance. The Tribunal, following its decision for the asst. yr. 1989-90, deleted the addition, allowing the assessee's grounds on this issue.
Conclusion:
Both the appeals of the assessee are allowed, and the only appeal of the Revenue is dismissed.
-
2005 (2) TMI 442
Income From Other Sources - interest income earned during the pre-operative period - deductible u/s 57(iii) - HELD THAT:- Since consolidated details of expenses have been maintained, apportionment has been done by the assessee on pro-rata basis. It is seen that the assessee-company has also taken into account the various administrative expenses. On estimate basis, the assessee-company has apportioned these administrative expenses as pertaining to earning of interest income. In our view, all administrative expenses have been primarily incurred for the purpose of the assessee's business and the assessee-company is not required to incur such administrative expenses for earning interest income, which flows from the term deposits made with the banks. Therefore, in our view, the administrative expenses or part thereof cannot be allowed u/s 57(iii).
Only interest expenditure is required to be apportioned to the investment which are yielding interest income to the assessee. The Assessing Officer is, therefore, directed to work out the quantum of interest expenditure, which is allowable u/s 57(iii) on pro-rata basis as per the details already made available by the assessee and reproduced by the ld. CIT(A) in his order, in respect of all the three assessment years. Opportunity shall be allowed to the assessee.
In the result, while the appeals are allowed.
-
2005 (2) TMI 441
Issues Involved:
1. Deduction under Section 80L for income of minor children clubbed under Section 64(1A).
2. Prima facie adjustment under Section 143(1)(a).
Issue-wise Detailed Analysis:
1. Deduction under Section 80L for income of minor children clubbed under Section 64(1A):
The primary issue was whether the assessee could claim a deduction under Section 80L for the income of minor children that was clubbed with the assessee's income under Section 64(1A) of the Income Tax Act.
- Facts: The assessee declared income earned by two minor children under Section 64(1A) and claimed a deduction under Section 80L at the rate of Rs. 15,000 per minor child.
- Assessing Officer's Decision: The AO disallowed the deduction of Rs. 30,000 for AY 1997-98 and Rs. 24,000 for AY 1998-99, stating that the separate claim under Section 80L in respect of minors' income was prima facie disallowable.
- CIT(A)'s Decision: The CIT(A) deleted the disallowance, relying on prior case laws and holding that the issue was controversial and outside the purview of prima facie adjustments.
- Revenue's Argument: The revenue argued that after the insertion of Section 64(1A) by the Finance Act, 1992, minors' income must be clubbed with the parent's income, and the only permissible deduction was Rs. 1,500 per minor child under Section 10(32).
- Assessee's Argument: The assessee contended that they were entitled to a deduction under Section 80L for each minor child in addition to their own income, relying on previous case laws.
- Tribunal's Decision: The Tribunal held that with effect from 1-4-1993, all income of a minor child must be included in the total income of the parent, and the only permissible deduction was under Section 10(32). It was concluded that the assessee was not entitled to separate deductions under Section 80L for the minor children's income.
2. Prima facie adjustment under Section 143(1)(a):
The second issue was whether the Assessing Officer was correct in making prima facie adjustments under Section 143(1)(a) for the disallowance of deductions claimed under Section 80L.
- Assessing Officer's Action: The AO made prima facie adjustments, disallowing the deductions claimed under Section 80L for the minor children's income.
- CIT(A)'s Decision: The CIT(A) reversed the AO's adjustments, stating that the issue was debatable and thus outside the scope of prima facie adjustments.
- Revenue's Argument: The revenue argued that the adjustments were correctly made as there was no room for doubt or debate regarding the disallowance of separate deductions under Section 80L after the insertion of Section 64(1A).
- Tribunal's Decision: The Tribunal agreed with the revenue, stating that the provisions clearly indicated that no separate deduction under Section 80L was permissible for the income of minor children clubbed under Section 64(1A). Therefore, the prima facie adjustments made by the AO were correct and justified.
Conclusion:
The Tribunal reversed the CIT(A)'s order and upheld the Assessing Officer's prima facie adjustments, disallowing the deductions claimed under Section 80L for the minor children's income. The appeals by the revenue were allowed.
-
2005 (2) TMI 440
Issues Involved:
1. Addition of Rs. 50,00,000 as unexplained investment.
2. Validity of notice, charging of interest under s. 158BFA(1), and initiating proceedings under s. 158BFA(2).
Detailed Analysis:
1. Addition of Rs. 50,00,000 as unexplained investment:
The primary issue in this appeal was the addition of Rs. 50,00,000 advanced to Mr. P. Balakrishna, which was treated as unexplained investment. The assessee, engaged in money lending, pawn broking, and jewelry business, was subjected to a survey on 13th July 1999, where he admitted to advancing Rs. 50,00,000 from his income and agreed to pay the due income tax. This was confirmed in a letter to the DDI (Inv) on the same day. A subsequent search on 19th July 1999 led to a notice under s. 158BC, and the assessee filed a return for the block period, declaring an undisclosed income of Rs. 1,26,100. The AO assessed Rs. 50,00,000 as undisclosed income for the block period, which was upheld by the CIT(A), who reasoned that the unaccounted advances were only brought to light due to the search.
The assessee's counsel argued that the disclosure during the survey should be considered as disclosed income, citing the Tribunal's decision in Smt. Sivabala Devi vs. Asstt. CIT, which held that information disclosed during a survey under s. 131 should not be treated as undisclosed income for block assessment purposes. The Departmental Representative countered that the transaction was not recorded in the books of account and was admitted by the assessee as being out of concealed income.
The Tribunal analyzed the definition of "undisclosed income" under s. 158B(b) and the computation method under s. 158BB(1). It noted that the due date for filing the return for the assessment year 1999-2000 had not expired at the time of the search and that the income declared during the survey was included in the regular return. The Tribunal concluded that income declared during a survey under s. 133A loses its character as undisclosed income during a subsequent search under s. 132, as it is no longer undisclosed. This principle was supported by the Supreme Court's decision in CIT vs. Tarsem Kumar, which held that known and certain property does not need to be searched or seized. The Tribunal also referenced the Chennai Tribunal's decision, which emphasized that disclosure under s. 131 is sufficient for the purposes of the IT Act.
Based on these findings, the Tribunal held that the addition of Rs. 50,00,000 as undisclosed income was not justified and should be deleted.
2. Validity of notice, charging of interest under s. 158BFA(1), and initiating proceedings under s. 158BFA(2):
These grounds were not pressed before the Tribunal and were therefore dismissed for want of prosecution.
Conclusion:
The appeal was partly allowed, with the deletion of the Rs. 50,00,000 addition as unexplained investment, while the grounds relating to the validity of notice and charging of interest were dismissed.
-
2005 (2) TMI 439
Issues:
Appeal against rectification under section 154 to an intimation issued under section 143(1)(a) for assessment year 1997-98. Interpretation of section 115JA of the Income Tax Act regarding minimum tax on companies with book profits and dividends. Applicability of section 115JA when a company is not distributing dividends. Binding nature of CBDT circulars on IT authorities. Whether two views are possible in the interpretation of section 115JA for rectification under section 154.
Analysis:
Issue 1: Appeal against rectification under section 154
The appeal concerned a rectification under section 154 to an intimation issued under section 143(1)(a) for the assessment year 1997-98. The rectification was made by the Assessing Officer (AO) to compute the income under section 115JA at 30% of the book profit, resulting in a revised income assessment and charging of interest under section 234B. The appeal challenged the correctness of the income computation under section 115JA and the rectification process.
Issue 2: Interpretation of section 115JA
The crux of the appeal revolved around the interpretation of section 115JA of the Income Tax Act, which imposes a minimum tax on companies with book profits and dividends. The appellant contended that since the company was not distributing dividends, the provision of section 115JA should not be applicable. Reference was made to Circular No. 762 issued by the CBDT, explaining the legislative intent behind section 115JA to tax companies with substantial book profits but not paying taxes. The appellant argued that the circular's interpretation should prevail, citing legal precedents supporting the binding nature of CBDT circulars on IT authorities.
Issue 3: Applicability of section 115JA without dividends
The debate centered on whether section 115JA applies only when a company is distributing dividends. The appellant argued that without dividend distribution, the provision of section 115JA should not be invoked. This argument was supported by the CBDT circular's interpretation and legal principles of promissory estoppel. The appellant contended that the legislative intent behind section 115JA was clear from the circular and should guide the application of the provision.
Issue 4: Binding nature of CBDT circulars
The appellant emphasized the binding nature of CBDT circulars on IT authorities, citing legal precedents to support this argument. The circular in question provided a clear interpretation of section 115JA, emphasizing the taxation of companies with book profits and dividend distributions. The appellant relied on legal principles to assert that the circular's interpretation should guide the application of section 115JA in the absence of dividend distributions by the company.
Issue 5: Possibility of two views in interpreting section 115JA
The crux of the matter was whether there were two possible views in interpreting section 115JA for the purpose of rectification under section 154. The appellant argued that since two plausible views existed regarding the applicability of section 115JA without dividend distributions, the rectification under section 154 was not justified. Legal precedents were cited to support the argument that rectification cannot be made when two views are possible on a subject matter, as held by the Hon'ble Supreme Court and the Hon'ble Karnataka High Court.
Conclusion
The appellate tribunal, after considering the arguments and legal precedents presented by both parties, allowed the appeal. The tribunal set aside the order passed under section 154, emphasizing the importance of considering all interpretations and legal principles in applying section 115JA. The decision highlighted the significance of legislative intent, CBDT circulars, and the necessity to avoid prima facie adjustments when two plausible views exist in interpreting tax provisions.
-
2005 (2) TMI 438
Double Taxation Relief - purchase of software - payment made to the foreign companies - Whether, the payment is royalty or not - HELD THAT:- According to the ITO (TDS), the payment made by the assessee-company to the foreign companies for purchase of software is to be treated as royalty u/s 9(1)(vi) of the IT Act read with section DTAA of relevant countries.
In view of the provisions of section 90(2) of the Act, we have to give preference to the definition as provided in the treaties. Apart from the provisions of the treaties, we have to consider the licence agreement entered into by the assessee with foreign companies which has been quoted at page 17 of the paper book filed by the revenue. It has been submitted by the revenue that under such an agreement, the developer of the software licences its intellectual property in the software in favour of the licensee. As a result of such agreement, the licensor of the software retains ownership over the copyright in the software and protects such copyright in the licence
On perusal of the agreement between the parties, we are of the view that in the present case also what the assessee had acquired is only a copy of the copyrighted articles i.e., software, whereas the copyright remains with the owner, i.e., foreign parties.
We find that the incorporeal right to software i.e., copyright remained with the owner and the same was not transferred to the assessee. We have also noticed the definition of 'royalty' in the DTAA, which has been quoted above. The primary condition for bringing within the definition of 'royalty' in DTAA is that the payments of any kind received as consideration for the use of or right to use any copyright of a literary, artistic or scientific work etc., Right to use of a copyright is totally different from right to use the programme embedded in a cassette or CD or it may be a software.
In this case, the assessee had acquired a ready made off the shelf computer programme for being used in its business. No right was granted to the assessee to utilize the copyright of the computer programme. The assessee had merely purchased a copy of the copyrighted article, namely, a computer programme which is called 'software'. Looking to the circumstances of the case and considering the fact that the definition of 'royalty' as provided in the treaties does not apply to the facts of the case. We are of the view that the finding recorded by the authorities below cannot be sustained. Accordingly, we hold that the remittance made by the appellant for purchase of software is not an income in India, hence, no tax is to be deducted in India under section 195 of the Income-tax Act, 1961. Since we have decided the issue on merit, therefore, we are not going into the technical objections raised on behalf of the assessee.
In the result, the appeals are allowed.
-
2005 (2) TMI 437
Issues Involved:
1. Jurisdiction of the Assessing Officer (AO).
2. Determination of Annual Letting Value (ALV) of the property.
Issue-wise Detailed Analysis:
Issue No. 1: Jurisdiction of the Assessing Officer (AO)
The assessee contended that the Additional Commissioner of Income Tax (Addl. CIT), Special Range, Amritsar, lacked jurisdiction to pass the assessment order. The learned counsel for the assessee argued that Section 2(7A) of the Income Tax Act does not include the Addl. CIT in the definition of an "Assessing Officer." The jurisdiction was initially with the ITO, Ward-2(2), Amritsar, and it was transferred under Section 127 by the CIT (Central), Ludhiana, to the Jt. CIT, Special Range, Amritsar. The assessee objected to this transfer, arguing that the return of income was below Rs. 5 lakhs, and thus the jurisdiction should not have been transferred.
The Department argued that Section 2(28C) includes the Addl. CIT in the definition of "Jt. CIT," and the CIT (Central), Ludhiana, had validly transferred jurisdiction. The CIT(A) rejected the assessee's contention, stating that the Addl. CIT and Jt. CIT have the same powers and functions. The Tribunal upheld this view, stating that the jurisdiction was validly assigned, and the Addl. CIT, Special Range, Amritsar, was competent to pass the assessment order. The Tribunal also referred to Section 124(3) and (4), which restricts challenging the jurisdiction of the AO after the assessment order is passed.
Issue No. 2: Determination of Annual Letting Value (ALV) of the Property
The assessee argued that the flat at 309, Abhimanyu Apartments, Patparganj, New Delhi, was incomplete and uninhabitable due to the lack of electricity and water supply, and thus its ALV should be 'nil.' The AO disagreed, stating that Section 22 of the IT Act charges "any building or land" to tax, irrespective of its habitability. The AO assessed the ALV at Rs. 76,258 based on the cost of the flat and the cost indexation.
The CIT(A) upheld the AO's decision, rejecting the assessee's reliance on the Bombay High Court decision in Shree Nirmal Commercial Ltd. vs. CIT. The Tribunal, however, found merit in the assessee's argument, noting that the flat was indeed incomplete and uninhabitable during the relevant assessment years. The Tribunal referred to the Orissa High Court's definition of a "house" and the Bombay High Court's ruling that a property must be inherently capable of being let out to attract the charge under Section 22.
The Tribunal concluded that the authorities below did not properly verify the assessee's claims about the flat's condition. Given the lack of essential amenities, the flat could not reasonably be expected to be let out. Therefore, the Tribunal set aside the orders of the authorities below and deleted the addition of the ALV to the assessee's income.
Separate Judgments:
For ITA No. 491/Asr/2001 (AY 1998-99), the appeal was partly allowed, and for ITA No. 386/Asr/2002 (AY 1999-2000), the appeal was allowed, with both orders setting aside the additions made by the authorities below. Parties were directed to bear their own costs.
............
|
9911796707
