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Showing 421 to 440 of 727 Records

• 2007 (4) TMI 353
  

  Nature of the amendment - whether it is at all retrospective in operation, and if not, whether the provision as amended by the Second Amendment applies to the appellant?

  Held that:- Appeal allowed. Undisputedly, the 1996 circular was binding on the revenue authorities as is spelt out in the case of April 12, 1996 and October 23, 1999 circulars. The assessments were completed on the basis of the April 12, 1996 circular. Merely because the Commissioner changes his view/opinion and according to him it was review of the earlier decision that cannot have any effect on any assessment which has been completed on the basis of the 1996 circular. That being so, the question of reopening the assessment by mere change of opinion is entirely impermissible

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• 2007 (4) TMI 351
  

  Whether Premium Ferro Alloys Ltd. is entitled to claim tax exemption on additional investments made after November 24, 1998?

  Held that:- There is no merit in the contention raised on behalf of Premium Ferro Alloys Ltd. that the said G.O. dated November 24, 1998 is prospective and not retrospective.

  However, the issues, which we have remitted to the division Bench in the earlier matters (Civil Appeal Nos. 8031 of 2004 and 8032-8033 of 2004), also arise in the present case. In the circumstances, we remit this case also to the division Bench.

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• 2007 (4) TMI 340
  

  Confiscation, fine and penalty - import of Toyota Vehicle - prohibited goods - absence of homologation certificate - misdeclaration of value and description - whether the car imported by the appellant is liable for confiscation under Section 111(d) and 111 (m) and consequent penalty?

  Held that: - the appellant has already discharged the duty liability as worked by the authorities and hence it was for the appellant to decide whether to re-export or clear the car for home consumption - Since it is a consistent practice to release the confiscated cars (which violate the norms of ITC (HS) Policy), for home consumption on payment of fine, I do not see any reason to put the appellant in this case to any different yardstick - the confiscated car has to be released to the appellant for home consumption.

  Misdeclaration of the value - Held that: - since the appellant is not challenging the assessed value, it has to be held that there was mis-declaration of the value by the appellant and confiscation on this count is upheld. Even if it is held that there was misdeclaration, it may be due to the fact the value of the cars keep on fluctuating in a short duration - There is also no contrary finding that the appellant is not going to use the car - redemption fine and penalty appears to be on higher side and is to be reduced.

  Appeal allowed in part.

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• 2007 (4) TMI 333
  

  Refund- Limitation- The importer claimed the classification under sub-heading 3823.90 and the Assistant Commissioner approved it under 3403. Commissioner (Appeals) relying on judgment of Mafatlal Industries Ltd., holding that duty paid in cases which finally ended in order/decree/judgment of courts must be deemed to have been paid under protest and limitation will not apply in such cases. Held that-reliance placed on ratio of Apex Court judgment well founded. No other grounds raised. Revenue’s appeal against grant of refund rejected.

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• 2007 (4) TMI 331
  

  Penalty- the petitioner had admittedly not filed his returns within time for the assessment years 1983-84 and 1984-85. The assessee filed the return for the assessment year 1983-84 on August 7, 1985, whereas the due date was July 31, 1983. For the assessment year 1984-85, the due date was July 31, 1984, but the return was filed on August 9, 1985. It appears that the returns were actually filed, after some survey was conducted and the assessee surrendered an income of Rs. 1 lakh for each of the assessment years. A penalty of Rs. 35,195 was levied for late submission of the return for the year 1983-84 and Rs. 18,385 for the assessment year 1984-85. The assessee had filed appeals, against the orders of levying penalty, and these appeals being I. T. As. Nos. 877 and 878 were dismissed on May 14, 1993 by the Income-tax Appellate Tribunal, here in after to be referred as “the Tribunal”. The Tribunal came to the conclusion that the assessee had not made any request for extension of time and also held that there was no material on record to support the case. Held that- the Tribunal had granted tie upto September 30, 1983, as sought by the assessee in the application. There was no material on record showing that the managing partner was under treatment and was not attending to business after September, 1983. There was neither any prayer nor explanation seeking extension of time after September 30, 1983, hence no further extension of time could have been granted.

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• 2007 (4) TMI 328
  

  Consulting Engineer- Notification No. 36/2004-ST dated 31.12.2004- The appellants had entered into a technical agreement with M/s. Demag Devalal Industrial Turbo Machinery Ltd., U.K. under which the foreign company had provided technical information/technical assistance/transfer of technical know-how for setting up/operationalisation of service centre for repair and maintenance of industrial gas turbines. The revenue has proceeded to consider this transfer of technology as coming within the ambit of “consulting engineer services” for levy of service tax. The period involved in the present case is from 28-8-2002 to 1-1-2004. Held that- transfer of technology does not come within the ambit of “consulting engineer service”. Furthermore, the Notification cited by the revenue has come into effective only from 1-1-2005 but the period in question is prior to 1-1-2005. Hence, the demand of service tax is not justifiable.

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• 2007 (4) TMI 327
  

  Transport of goods- the appellant contention was that during the period in question, as the service tax was not applicable on the goods transport services. The same was brought into the service tax net by section 73 of the Finance Act, 1994 by an amendment in the year 2000. In the light of decided judgments held that Show Cause Notice in the present case has been issued subsequent to the amendment brought to the Finance Act with regard to GTO Services, while the SCN was required to have been issued prior to the amendment. Thus the demand has been set-aside and allow the appeal.

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• 2007 (4) TMI 320
  
  Issues Involved:
  1. Whether the four family members constituted an 'association of persons' (AoP) for carrying on their dairy business.
  2. Validity of the reassessment proceedings initiated u/s 147.
  3. Validity of the notices issued u/s 148.
  
  Summary:
  
  Issue 1: Existence of an 'Association of Persons' (AoP)
  The main issue in these appeals was whether the four family members'father and his three sons'formed an 'association of persons' (AoP) for their dairy business. The Assessing Officer (AO) and the CIT(A) held that the family members constituted an AoP based on a statement made by one of the members during a survey conducted u/s 133A. However, the Tribunal found that the AO's decision was not supported by relevant material on record. The Tribunal noted that the family members were conducting their business individually and were assessed separately for their income. The Tribunal emphasized that volition on the part of the members to form an AoP is essential, and there was no evidence to show that the family members had voluntarily combined for a common purpose. Consequently, the Tribunal held that the decision of the lower authorities that an AoP existed could not be sustained, and all assessment orders passed in the status of AoP were quashed.
  
  Issue 2: Validity of Reassessment Proceedings u/s 147
  The Tribunal observed that the reassessment proceedings initiated u/s 147 were not valid as the notices u/s 148 were not served on all the four members. The Tribunal cited several case laws to support the view that in cases where the existence of an AoP is not admitted, notices must be served on all members to validly assume jurisdiction u/s 147. The Tribunal found no material on record to show that such notices were served on all members, rendering the reassessment proceedings unsustainable.
  
  Issue 3: Validity of Notices Issued u/s 148
  The Tribunal noted that the notices u/s 148 were addressed to 'Kokani Bharat Dairy (AoP), Manager Member Zakir Peersaheb Kokani' and there was no evidence to show that these notices were served on all four members. The Tribunal held that in the absence of proper service of notices on all members, the assessment orders were unsustainable and deserved to be quashed.
  
  Conclusion:
  In conclusion, the Tribunal allowed all nine appeals filed by the assessee, holding that the family members did not constitute an AoP, and the reassessment proceedings and notices issued u/s 147 and 148 were invalid.

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• 2007 (4) TMI 318
  

  1. ISSUES PRESENTED and CONSIDERED

  The core legal issues considered in this judgment are:

  • Whether the assessee is entitled to set-off and carry forward the losses incurred by a partnership firm against the income of a succeeding proprietary concern.
  • The applicability of sections 75 and 78(2) of the Income-tax Act in determining the eligibility for such set-off and carry forward of losses.
  • Whether the interest charged under sections 234B and 234D is appropriate, given the timing of the law's enactment.

  2. ISSUE-WISE DETAILED ANALYSIS

  Issue 1: Set-off and Carry Forward of Losses

  • Relevant legal framework and precedents: The primary legal provisions involved are sections 72, 75, and 78(2) of the Income-tax Act. The precedent considered is the Supreme Court decision in the case of Madhukant M. Mehta.
  • Court's interpretation and reasoning: The court interpreted section 78(2) to mean that losses can only be carried forward and set-off by the person who incurred them, unless there is a succession by inheritance. The court found that the conversion of the partnership firm into a proprietary concern did not constitute inheritance.
  • Key evidence and findings: The court noted that the partnership firm was dissolved and converted into a proprietary concern, and that there was no succession by inheritance as required by section 78(2).
  • Application of law to facts: The court applied section 78(2) to conclude that the assessee, as an individual succeeding the firm, could not carry forward the firm's losses against his income.
  • Treatment of competing arguments: The assessee argued that the business remained the same and should be treated as a continuation. However, the court rejected this argument, emphasizing the distinct legal entities involved and the lack of inheritance.
  • Conclusions: The court concluded that the assessee was not entitled to set-off and carry forward the losses of the firm against his income.

  Issue 2: Charging of Interest under Sections 234B and 234D

  • Relevant legal framework and precedents: Sections 234B and 234D pertain to the charging of interest for defaults in payment of advance tax and excess refund, respectively.
  • Court's interpretation and reasoning: The court did not provide a detailed analysis on this issue as it was not adjudicated by the Commissioner of Income-tax (Appeals). However, it noted the timing of the enactment of section 234D.
  • Key evidence and findings: The assessee contended that section 234D was enacted after the assessment year in question, and thus interest should not be charged.
  • Application of law to facts: The court did not specifically address this application due to the lack of adjudication at the appellate level.
  • Treatment of competing arguments: The court did not delve into competing arguments due to procedural reasons.
  • Conclusions: The court did not make a specific determination on this issue due to procedural grounds.

  3. SIGNIFICANT HOLDINGS

  • Preserve verbatim quotes of crucial legal reasoning: "The successor in business cannot claim to carry forward the loss incurred by his predecessor in business. However, there are few exceptions to this principle. One is the case of succession by inheritance as provided in section 78(2)."
  • Core principles established: The principle that losses incurred by a firm cannot be carried forward and set-off by a succeeding individual unless there is a succession by inheritance. The distinction between different legal entities (firm and individual) is crucial in determining the applicability of loss set-off provisions.
  • Final determinations on each issue: The court upheld the decision of the lower authorities, confirming that the assessee was not entitled to set-off the losses of the firm against his income. The appeal was dismissed.

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• 2007 (4) TMI 314
  
  Issues involved:
  Validity of assessments made pursuant to notice issued under section 148 of the IT Act, 1961.
  
  Analysis:
  The appeals and cross-objections were against the common order passed by the CIT(A), Central-II, Chennai, relating to the assessment years 1987-88 to 1992-93. The main issue raised in the cross-objections by the assessee was the validity of the assessments made following the notice issued under section 148 of the IT Act, 1961.
  
  The original assessment for the year 1987-88 was completed on 23rd Dec., 1994, but was later reopened under section 147, with a notice under section 148 issued on 23rd March, 1998. The return was filed on 9th Nov., 1998, which was deemed late by the AO. The assessment was concluded on 28th March, 2000, under section 144 r/w section 147 due to the delay in filing the return.
  
  The AO's decision to reopen the assessment was based on the allegation that the assessee had inflated agricultural income. The AO's reasons for reopening were detailed in a letter, and findings from a visit to the farmhouse were cited to support this claim.
  
  The arguments presented by both sides revolved around whether there was a valid reason to reopen the assessment. The assessee contended that there was no omission, and the AO had accepted the estimate offered after due consideration. On the other hand, the standing counsel argued that the assessee had not provided sufficient details to support the claimed agricultural income, and fresh material from the Horticultural Department report indicated discrepancies.
  
  The Tribunal analyzed the case law cited by both parties and emphasized that the existence of an error is essential for reopening assessments. It was noted that the AO's opinion was primarily based on the Horticultural Department report, which was not specific to the relevant assessment years. The Tribunal concluded that there was no valid reason to initiate reassessment proceedings based on a mere change of opinion, quashing the reassessment.
  
  In light of the finding on the validity of reassessment proceedings, the Tribunal deemed the questions raised in the Departmental appeals as academic and dismissed them as infructuous. The cross-objections of the assessee were allowed, and the Department's appeals were dismissed.

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• 2007 (4) TMI 313
  
  Issues Involved:
  1. Whether the Hon'ble High Court's order is a direction for reopening of the assessment.
  2. Applicability of the time-limit prescribed u/s 149 for issuing notice u/s 148.
  
  Summary:
  
  Issue 1: Whether the Hon'ble High Court's order is a direction for reopening of the assessment.
  
  The revenue contended that the Hon'ble High Court's order constituted a direction to issue a fresh notice u/s 148. The High Court had stated, "We make it clear that the said order shall not preclude the authority from issuing a fresh notice assigning reasons." The Assessing Officer treated this as a direction and issued a fresh notice. However, the CIT(A) concluded that the High Court did not issue a direction but merely enabled the Assessing Officer to issue a fresh notice if permissible by law. The Tribunal agreed, noting that a direction implies an order requiring positive compliance, which was not present in this case. The Tribunal cited the Supreme Court's decision in Rajinder Nath v. CIT, where it was held that an observation allowing the authority to take action does not constitute a direction.
  
  Issue 2: Applicability of the time-limit prescribed u/s 149 for issuing notice u/s 148.
  
  The CIT(A) and the Tribunal both held that the notice issued u/s 148 was barred by limitation as it was issued after six years from the end of the relevant assessment year. The Tribunal emphasized that the statutory requirement for issuing a reassessment notice within six years was not met. The Tribunal also distinguished the present case from other cases cited by the revenue, such as Grindlays Bank Ltd. v. ITO and L. Alagusundaram Chettiar v. CIT, noting that those cases involved different factual circumstances and specific statutory provisions for exclusion of time during which proceedings were stayed.
  
  Conclusion:
  
  The Tribunal upheld the CIT(A)'s decision, confirming that the notice issued u/s 148 was invalid due to the lapse of the statutory time limit and that the High Court's order did not constitute a direction to reopen the assessment. The appeals of the revenue were dismissed.

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• 2007 (4) TMI 308
  

  Penalty u/s 158BFA(2) - Search And Seizure - penalty on the difference between the income returned and income assessed - HELD THAT:- In our opinion, penalty u/s 158BF A(2) is not mandatory. If the assessee offers a convincing reason or if any reasonable cause is demonstrated for non-inclusion of such income, the penalty is not attracted. In the case of Smt. Mala Dayanithi [2003 (11) TMI 280 - ITAT BANGALORE-C], held that addition not based on material found during search or material in possession of AO, but based on difference in valuation of property, as disclosed by the assessee and as estimated by the DVO, there was no concealment attracting penalty u/s 158BFA(2) of the IT Act, 1961.

  In the instant case there was an estimate at the level of the AO as well as at the level of CIT(A) in respect of net profit rate. From the entire facts of the present case, it would be clear that the income of the assessee was estimated and nothing has been brought on record by the AO that the assessee concealed any particulars of income. In our view, unless any positive concealment is found, no penalty is leviable on the addition made on estimate basis. While taking such a view, we are fortified by the decision in the case of CIT vs. Prem Das.[1999 (5) TMI 10 - PUNJAB AND HARYANA HIGH COURT].

  In our opinion, the penalty u/s 158BFA(2) is almost in pan materia to s. 271(1)(c) of the IT Act, 1961, which relates to the concealment of income. The various Benches of the Tribunal have held that unless any positive concealment is found, no penalty is leviable on the addition made on estimate basis. In the case of Hari Gopal Singh vs. CIT [2002 (8) TMI 65 - PUNJAB AND HARYANA HIGH COURT], held that where the assessment is made on estimate basis, no penalty u/s. 271(1)(c) can be imposed.

  Thus, we are of the considered view that, no penalty u/s 158BFA(2) of the IT Act, 1961 can be levied in this case. Accordingly we cancel the penalty levied by the AO and confirmed by CIT(A).

  In the result, the appeal is allowed.

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• 2007 (4) TMI 306
  
  Issues:
  1. Validity of reassessment proceedings based on the initiation of reassessment under the Income Tax Act.
  2. Interpretation of the Amnesty Scheme in relation to the filing of returns.
  3. Examination of conditions under Explanation 2(a) to Section 147 regarding income escaping assessment.
  
  Issue 1: Validity of Reassessment Proceedings:
  In the case of Asst. yr. 1986-87, the Tribunal examined the validity of the reassessment proceedings initiated by the Assessing Officer (AO) based on the non-filing of the return of income by the assessee. The AO issued a notice under Section 148 citing the reason that the assessee had not filed the return of income, leading to the initiation of reassessment. However, the Tribunal found that the return was indeed filed by the assessee under the Amnesty Scheme, which the CIT(A) failed to acknowledge. The Tribunal held that the initiation of reassessment proceedings solely on the ground of non-filing of the return when the return was already available with the Revenue was unjustified. Consequently, the reassessment proceedings were quashed, leading to the allowance of the appeal.
  
  Issue 2: Interpretation of Amnesty Scheme for Filing Returns:
  Regarding the interpretation of the Amnesty Scheme in relation to filing returns, the Tribunal observed that the return filed under the Amnesty Scheme should be considered valid under the law. The Tribunal disagreed with the CIT(A)'s view that the return filed under the Amnesty Scheme cannot be equated with a voluntarily filed return. The Tribunal emphasized that once it was established that the return was filed and available with the Revenue, the initiation of reassessment proceedings based on non-filing of the return was untenable. The Tribunal highlighted that the Amnesty Scheme aimed to unearth black money and provide exemptions, making the return filed under it legally valid. Therefore, the Tribunal annulled the reassessment proceedings based on the incorrect initiation grounds.
  
  Issue 3: Examination of Conditions under Explanation 2(a) to Section 147:
  In the cases of Asst. yrs. 1987-88, 1988-89, and 1989-90, the Tribunal analyzed the conditions under Explanation 2(a) to Section 147 concerning income escaping assessment. The Tribunal noted that for the reassessment proceedings to be valid, it was essential that the income of the assessee exceeded the maximum amount not chargeable to tax, and no return of income was filed. The Tribunal found that the income of the assessee for the relevant years was below the taxable limit, based on the returns filed by the assessee. The Tribunal emphasized that the initiation of reassessment proceedings solely on the ground of non-filing of the return without evidence of income exceeding the taxable limit was unjustified. Consequently, the Tribunal quashed the reassessment proceedings for these years, leading to the allowance of the appeals.
  
  In conclusion, the Tribunal's judgments focused on the legality and validity of reassessment proceedings, the interpretation of the Amnesty Scheme concerning return filing, and the examination of conditions under Explanation 2(a) to Section 147 regarding income escaping assessment, leading to the quashing of reassessment proceedings for the relevant assessment years.

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• 2007 (4) TMI 304
  
  Issues Involved:
  1. Entitlement of deduction u/s 80HHC for goods purchased from EOUs.
  2. Entitlement of deduction u/s 80HHC for goods purchased overseas and transshipped directly to a third country.
  
  Summary:
  
  Issue 1: Entitlement of deduction u/s 80HHC for goods purchased from EOUs

  The Revenue questioned whether the CIT(A) was justified in directing the AO to allow deduction u/s 80HHC of the IT Act, 1961 to the assessee. The assessee, trading in chemicals and exporting granite blocks, claimed deduction u/s 80HHC, which the AO denied, arguing that both the manufacturer and the assessee could not claim deduction for the same goods. The assessee, a registered merchant exporter, procured orders from foreign buyers and purchased goods from various manufacturers, including EOUs. The EOUs claimed deduction u/s 10B and other export benefits. The assessee provided a disclaimer certificate, surrendering export benefits to the EOUs. The CIT(A) concluded that the assessee was entitled to deduction u/s 80HHC even for goods purchased from EOUs. The Tribunal upheld the CIT(A)'s order, stating that the assessee was entitled to claim deduction u/s 80HHC on the income earned from the export, as the orders were procured by the assessee and the proceeds were realized in convertible foreign exchange in the assessee's account. The Tribunal clarified that the income earned by the assessee and the manufacturers on the same goods were different, and thus, the assessee was entitled to the deduction u/s 80HHC.

  Issue 2: Entitlement of deduction u/s 80HHC for goods purchased overseas and transshipped directly to a third country

  The assessee questioned the CIT(A)'s order confirming the disallowance of deduction u/s 80HHC for export turnover of goods purchased from overseas and transshipped directly to a third country. The AO denied the claim, stating that the goods were not exported out of India. The CIT(A) upheld the AO's decision, referring to the Customs Act's definition of export. The Tribunal, however, agreed with the assessee, citing a decision of the Mumbai Bench of the Tribunal in the case of S.M. Energy Teknik & Electronics Ltd. vs. Dy. CIT. The Tribunal concluded that the term "export" means sending goods to another country, and it did not matter if the goods were not physically brought to India. The Tribunal emphasized that the aim of s. 80HHC is to encourage export and earn foreign currency, which the assessee fulfilled. The Tribunal set aside the lower authorities' orders and directed the AO to allow the claimed deduction u/s 80HHC.

  Conclusion:

  Both the Departmental appeals were dismissed, and the assessee's appeal was allowed.

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• 2007 (4) TMI 302
  

  Monetary limit u/s 260A - Held that: guidelines issued in the circular by the Central Board of Direct Taxes and the law laid down by this court is being followed in the breach by the Department, we are constrained to direct the Commissioner of Income-tax No. VII, Mumbai City, Mumbai, who is personally present in the court pursuant to our notice, to move the Central Board of Direct Taxes with a request to issue appropriate circular in this behalf to all the Chief Commissioners of the Income-tax Department operating in the region directing them to instruct their respective advocates to withdraw pending appeals wherein the tax effect is less than Rs. 4 lakhs, unless the question of law involved or raised in the appeal or referred to this court is of a recurring nature, required to be settled by this court - The notice of motion does not survive

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• 2007 (4) TMI 300
  
  Issues Involved:
  1. Whether the amount disclosed in VDIS by the assessee prior to the raid under Section 132 of the IT Act can be considered against the estimation of income from alleged Hawala business.
  2. Whether the assessee is entitled to claim any benefit of VDIS disclosure in block assessment period cases to avoid assessment in respect of the income which according to him he had already disclosed in VDIS.
  
  Detailed Analysis:
  
  Issue 1: Consideration of VDIS Disclosure Against Estimation of Income from Alleged Hawala Business
  
  The Tribunal was tasked with determining if the amount disclosed by the assessee under the Voluntary Disclosure of Income Scheme (VDIS) prior to a search and seizure operation under Section 132 of the IT Act could be used to offset the estimated income from alleged Hawala business. The search was conducted on 19th December 1997, and the assessee had already declared an undisclosed income of Rs. 18,12,525 under VDIS on 17th December 1997, which was accepted by the CIT on 20th December 1997. The Tribunal noted that the VDIS disclosure was made before the search, and therefore, the prohibition rules of VDIS, 1997, were not applicable against the assessee.
  
  The Tribunal referred to several precedents, including the Supreme Court's decision in Anantharam Veerasinghaiah & Co. vs. CIT, which held that intangible additions made to book profits during assessment proceedings constitute real income and could be available to the assessee. Similarly, the Madras High Court in S. Kuppuswami Mudaliar vs. CIT and the Punjab & Haryana High Court in CIT vs. Prem Chand Jain supported the notion that additions to income should be treated as real income available to the assessee. Based on these precedents, the Tribunal concluded that the income declared under VDIS was real income and could be used to explain the additions made in the block assessment.
  
  Issue 2: Entitlement to Claim Benefit of VDIS Disclosure in Block Assessment Period
  
  The Tribunal also examined whether the assessee could claim the benefit of the VDIS disclosure to avoid assessment for the income already disclosed under VDIS during the block assessment period. The Tribunal highlighted the relevant provisions of the VDIS, 1997, which allowed for the declaration of undisclosed income and provided immunity from further scrutiny if the declaration was made within the stipulated time frame and the tax was paid.
  
  The Tribunal noted that the assessee had declared the undisclosed income under VDIS before the search, and the CIT had accepted this declaration. Therefore, the amount declared under VDIS was available to the assessee for explaining the additions made in the block assessment. The Tribunal emphasized that the scheme under VDIS was approved by the Department of Revenue, and once a certificate was granted, it could not be questioned in subsequent regular assessment proceedings.
  
  The Tribunal concluded that the income declared in VDIS was available to the assessee to explain the additions made during the block assessment period. Both questions formulated by the Hon'ble High Court were answered against the Revenue and in favor of the assessee.
  
  Conclusion:
  
  The appeal of the assessee was allowed on the two questions/issues remanded by the Hon'ble High Court. The Tribunal clarified that the findings in this order would be considered during the hearing of subsequent appeals on merits. The appeal was allowed, and the questions were answered in favor of the assessee.

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• 2007 (4) TMI 299
  

  Disallowance of 2/3rd of royalty payment to non-resident companies - confirmed by the CIT(A) - Held that:- The similar issue came up for consideration before the Tribunal, 'D' Bench, New Delhi in assessee's own case for asst. yrs. 1997-98 and 1998-99 [Addl. CIT vs. Nestle India Ltd.- 2005 (1) TMI 333]. We, concurring with the above said decision of the Tribunal hold that the disallowance of royalty payments made by the AO and confirmed by the learned CIT(A) was not justified. We, therefore, direct to delete the same.

  Depreciation on UPS - @60% OR 15% - Whether the UPS is Plant and machinery Or an integral part of the whole computer system - HELD THAT:- UPS is a source of alternative supply of power to the computer and applying the functional test also, it is a part of power supply system and not the computer system. it is also not inbuilt in the computer as a battery in the laptop to make it an integral part of the computer system. It merely gives external aid to the computer system by ensuring the uninterrupted power supply in emergency and in regulating the flow of power. It is worthwhile to note here that the computer system can function independently without the UPS and even the UPS generally can be used to ensure uninterrupted power supply to other equipments besides computer. It is, thus, not the integral part of the computer system like printer and scanner, which being output devices of the computer system are its integral part and, thus, are included in the definition of a computer as given in s. 2(1)(i) of the Information Technology Act, 2000.

  It is also pertinent to note here that a higher rate of depreciation is provided on computers mainly because the technology used in the making of computer is rapidly developing and the same becomes obsolete very fast. Applying this criteria also, the UPS cannot be treated as a part of computer since the technology which goes into making UPS is not developing so rapidly to make it obsolete in the short span.

  Thus, we find it difficult to accept the contention of the learned counsel for the assessee that UPS is a part of computer and is entitled to a higher depreciation rate of 60 per cent and rejecting the same, we uphold the impugned order of the learned CIT(A) confirming the disallowance made by the AO by restricting the claim of the assessee for depreciation on UPS treating the same as plant and machinery. Ground No. 2 of the assessee's appeal is accordingly dismissed.

  Incurred expenses on advertisement and sale promotion - sales in India - HELD THAT:- The expenditure has been incurred to promote sales in India. Therefore, these expenses were incurred wholly and exclusively for the purpose of business of the assessee. Further, payment for these expenses have been made to third parties in India who are not in anyway related the Nestle SA. Therefore, there is no justification on the part of AO to invoke the provisions of s. 92 of the Act in the matter. Therefore, we find ourselves in agreement with the view of CIT(A) that provisions of s. 92 are not applicable for the allowability of this expenditure. The expenditure incurred by the assessee company on advertisement/sales promotion of some Nestle products in India may give rise to certain benefit to Nestle SA, but this cannot be a ground to disallow the claim of the assessee, once it is established that the expenditure in question has been incurred by the assessee for the purpose of business of the assessee inasmuch as the expenditure by the assessee on advertisement/sales promotion has direct nexus with the earning of income by the assessee.

  It may be mentioned that an identical issue had come up for consideration in the case of Star India (P) Ltd. vs. Addl. CIT[2006 (7) TMI 668 - ITAT MUMBAI] wherein it has been held that advertisement expenses incurred on promoting viewership of TV channel by the assessee engaged in procuring programmes for those channel was expenditure incurred wholly and exclusively for the purpose of its business and it could not be disallowed on the ground that it might have also benefited the assessee's principal.

  Thus, we do not find any reason to interfere with the order of the CIT(A) passed in this regard. Hence, the same is upheld.

  In the result, the appeal filed by the assessee is partly allowed and that of the Revenue is dismissed.

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• 2007 (4) TMI 298
  

  Assessment u/s 158BD r/w s. 158BC - Search And Seizure - Document found marked as Annex. AD-46 - undisclosed income - Addition made on basis of the entries found in the books of accounts of the party under searched - HELD THAT:- The combined reading of the provisions of ss. 158BA and 158BB shows that the AO has to prove on the basis of evidence found as a result of search and such other material or information as are available with him and relatable to such evidence that the assessee had the undisclosed income chargeable to tax in the block assessment. In block assessments, additions can be made on the basis of concrete material and not on suspicion or surmises. Suspicion, however strong, cannot take place of proof.

  No corroborative material of any nature whatsoever was brought on record by the AO to indicate that noting on the seized paper was related to the assessee. This document was seized from the office of Dr. M.C. Gupta, but neither during the course of search nor even thereafter the Department has tried to record his statement to substantiate their stand that document was belonging to any of the companies in whose hands the addition was made. This document indicated transaction in respect of 3 big has of land, alleged to be purchased from three persons, but in the books of none of the assessees there was any such transaction for 3 bighas, so as to corroborate the same with seized document. Furthermore, the Department itself has carried out the valuation of the land shown by the assessee in their regular returns, by its own valuation cell, which has also valued the same near to the price at which these were shown by the assessee in their books of account. The registering authorities have also registered the land purchased by the assessee at the price shown in the sale deed. Thus, neither the State Government being the registering authorities supports the value taken by the AO on the basis of dumb document, nor the valuation cell of the IT Department itself supports the rate of land shown in the document so found.

  Applying the propositions laid down by the various authorities as referred by the ld AR during the course of hearing, to the facts and circumstances of the present case where addition has been made on the basis of dumb document, the AO could not corroborate the document or its contents with any other information or evidence, whereas on the contrary the documents/information so gathered by the AO goes against the Department, we do not find any merit in the additions so made by the AO and confirmed by the CIT(A), in case of all the assessees. We therefore direct for deletion of all these additions.

  Ground taken with regard to initiation of penalty proceedings u/s 158BFA(2), being premature is dismissed in limine - In the result, all the three appeals of the assessee are allowed in terms indicated hereinabove.

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• 2007 (4) TMI 297
  

  Deduction claimed u/s 80M - Eligible for deduction "Gross dividend or Net Dividend" income - HELD THAT:- From the record, we found that direct expenditure with respect to such investment works out to be Rs. 12,35,200. It is also a matter of record that assessee was in receipt of dividend once in a year in the form of 8 to 10 dividend vouchers, which were to be deposited in the bank account. Therefore, it cannot be said that any major administrative expenses was attributable to such deposit of dividend warrants in bank. Recently, in case of Punjab State Industrial Development Corporation Ltd. vs. Dy. CIT [2006 (4) TMI 187 - ITAT CHANDIGARH] has held that actual expenditure incurred has to be considered while allowing deduction u/s 80M and there is no question of taking expenditure on estimation or presumption basis.

  Thus, we direct the AO to allow deduction u/s 80M after reducing a sum of Rs. 12,35,200 from the amount of gross dividend. We direct accordingly.

  Computation of deduction u/s 80HHC - All indirect cost is to be apportioned between the export turnover and total turnover - Interest cost is indirect cost for deduction u/s 80HHC - HELD THAT:- From the record, we found that during the year, expenditure on account of interest payment amounting to Rs. 43.52 crores, was incurred. None of the interest was paid in connection with exports and was not, therefore, related to exports. Therefore, no part of interest paid was required to be considered for computing indirect cost while computing deduction u/s 80HHC of the Act.

  Thus, being agreeing the submission of ld AR, we do not find any merit in the order of lower authorities for apportioning the interest expenditure which are not attributable to the export of trading goods, while working out indirect cost liable to be reduced from the amount of export turnover of trading goods, for working out deduction eligible u/s 80HHC(3)(b) of the Act.

  Deduction u/s 80HHC - apportioning export incentive between export house and supporting manufacturer - HELD THAT:- Whenever, an export house surrenders part of its export turnover, in favour of the supporting manufacturer, it is required to issue a certificate as referred to in cl. (b) of sub-s. (4A), in respect of the amount of turnover specified therein, then the amount of deduction in the case of the assessee being export house shall be reduced by such amount which bears to the total profit derived by the assessee from export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods.

  Thus, in respect of the income which the assessee did not disclaim in favour of the supporting manufacturer which pertains to and is attributable to the export incentive, there is no reason to reduce the export incentive relatable to the disclaimed turnover in terms of proviso to s. 80HHC(1) of the Act. We, therefore, direct the AO not to apportion the export incentive in the ratio of export turnover disclaimed to the total export turnover of trading goods under proviso to s. 80HHC(1) of the Act. This ground is, therefore, allowed in favour of assessee.

  In the result, the appeal of the assessee is allowed in terms indicated hereinabove.

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• 2007 (4) TMI 296
  
  Issues Involved:
  1. Levy of interest u/s 234B(3) beyond the date of payment of tax u/s 140A.
  2. Recomputing deduction u/s 80HHC by deducting unabsorbed investment allowance.
  
  Summary:
  
  Issue 1: Levy of Interest u/s 234B(3) Beyond the Date of Payment of Tax u/s 140A
  
  The assessee, a public sector company, challenged the order of the Commissioner of Income-tax (Appeals)-II, Cochin, which confirmed the levy of interest u/s 234B(3) beyond the date of payment of tax u/s 140A. The original assessment was completed u/s 143(3) and subsequently reassessed u/s 147, resulting in an increased tax liability. The controversy centered on whether the self-assessment tax paid u/s 140A should be considered when computing interest payable u/s 234B(3). The Assessing Officer and CIT(A) opined that u/s 234B(3), only subsection (1) was relevant, ignoring subsection (2) which considers tax paid u/s 140A. The Tribunal held that interest should be charged only up to the date the tax was paid u/s 140A, applying the rule of harmonious construction. Thus, the order of the CIT(A) was set aside, and the Assessing Officer was directed to compute interest liability up to the date of payment u/s 140A.
  
  Issue 2: Recomputing Deduction u/s 80HHC by Deducting Unabsorbed Investment Allowance
  
  The assessee contested the CIT(A)'s confirmation of the Assessing Officer's order u/s 154, which reduced the deduction u/s 80HHC by adjusting unabsorbed investment allowance from the assessment year 1990-91. The CIT(A) upheld the Assessing Officer's view, referencing decisions from the Kerala High Court and the Supreme Court, which mandated the set-off of unabsorbed allowances before computing deductions u/s 80HHC. The Tribunal found no merit in the assessee's argument that the issue was debatable and not subject to rectification u/s 154, affirming that the language of the statute was clear. Consequently, the Tribunal dismissed the assessee's contention on this issue.
  
  Conclusion:
  
  The appeal was partly allowed, with the Tribunal directing the reassessment of interest liability u/s 234B(3) considering the tax paid u/s 140A, while upholding the reduction of deduction u/s 80HHC by adjusting unabsorbed investment allowance.

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