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Showing 501 to 520 of 664 Records
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2006 (11) TMI 167
Issues Involved:
The judgment involves the following issues:
1. Interpretation of circular on minimum tax effect for filing an appeal under section 260A of the Income-tax Act, 1961 for the assessment year 1995-96.
2. Determination of deduction under section 80-O based on gross income for the assessment year 1996-97.
3. Rejection of departmental appeal due to estimation of expenses related to earning foreign income.
Interpretation of Circular for Assessment Year 1995-96:
The appeals were filed by the Revenue under section 260A of the Income-tax Act, 1961, questioning the Tribunal's reliance on a circular regarding the minimum tax effect for filing an appeal. The court directed a reconsideration of the matter on its merits, citing a previous judgment for guidance.
Deduction under Section 80-O for Assessment Year 1996-97:
The issue pertained to the deduction under section 80-O based on the gross income for the assessment year 1996-97. The Tribunal's decision was based on a previous case without providing sufficient reasoning. The court highlighted the Tribunal's duty to thoroughly examine the facts and reasons presented by both parties before making a decision. Consequently, the court set aside the Tribunal's order and instructed a fresh hearing with the opportunity for both parties to present evidence and arguments.
Rejection of Departmental Appeal for Estimation of Expenses:
The Tribunal dismissed the departmental appeal concerning the estimation of expenses related to earning foreign income, citing a previous decision without detailed analysis. The court emphasized the Tribunal's responsibility to consider all arguments and evidence before reaching a conclusion. As a result, the court set aside the Tribunal's order for the assessment year 1996-97 and directed a rehearing with the provision for both parties to present materials and case law to support their positions.
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2006 (11) TMI 166
Reopening of the assessment - notice issued u/s 143(2) - change of opinion - Non speaking order - Whether the Appellate Tribunal was right in law in treating the letter dated December 20, 2004, by the Assessing Officer is equivalent to a notice prescribed u/s 143(2), when the letter is nothing but furnishing the reasons for reopening the assessment? - HELD THAT:- Following the two High Court judgments in the case of CIT v. Gyan Prakash Gupta [1985 (7) TMI 9 - RAJASTHAN HIGH COURT] and in Sant Baba Mohan Singh v. CIT [1972 (1) TMI 28 - ALLAHABAD HIGH COURT]. We are of the view that there are only procedural irregularities committed by the Assessing Officer and hence the reassessment cannot be annulled.
Learned counsel for the assessee also relied on the Supreme Court judgment in the case of GKN Driveshafts (India) Ltd. v. ITO [2002 (11) TMI 7 - SUPREME COURT] to support his contention that objections were not considered by the Assessing Officer while completing the reassessment and hence the order of the reassessment is bad in law.
It is clear that the Assessing Officer has to furnish reasons, within a reasonable time and on receipt of the same, the assessee can file objection to the issue of notice and the Assessing Officer is bound to dispose of the same by a speaking order, before proceeding with the reassessment. In the present case, the objections have not been considered at all by the Assessing Officer before proceeding with the reassessment. Reassessment order was completed without considering the objections to the reopening of the assessment. It is nothing but a procedural defect and, therefore, it could not be held that the reassessment is a nullity in law.
Since we are of the view that these are only irregularities committed by the Assessing Officer (i.e.) not considering the objections as well as not issuing notice u/s 143(2) of the Act, before completing the reassessment, we set aside the order of the Tribunal as well as the lower authorities with a direction to the Assessing Officer to consider the matter afresh, particularly the objections given by the assessee for reopening and issue notice u/s 143(2) of the Act, after giving opportunity to the assessee to raise all contentions relating to the reopening of the assessment as well as the merits of the case and permit the assessee to produce materials and evidence, if any, and pass orders in accordance with law, as expeditiously as possible. As the matter is remanded, it is not necessary to answer the above questions of law, as the same is likely to adversely affect the rights of either parties.
Thus, the tax case is disposed of. Consequently, M. P. Nos. 1 and 2 of 2006 are closed.
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2006 (11) TMI 165
Challenged the initiation of proceedings u/s 147 - notice issued u/s 148 - escaped assessment - Time limit for notice u/s 149 - dedution u/s 80HHC - export profits - HELD THAT:- On the basis of materials which were there with the concerned authorities at the material time, when the assessment order was passed, a decision has now been taken to disallow certain expenses, deduction of which had earlier been allowed. In the case of India Steamship Co. Ltd. v. Joint CIT [2005 (2) TMI 46 - CALCUTTA HIGH COURT], this court held that assessment could not be reopened by reason of mere change of opinion of the assessing authority on the same facts. The same view has been taken by this court in the case of Mercury Travels Ltd. v. Deputy CIT [2002 (9) TMI 95 - CALCUTTA HIGH COURT].
In this case too, the assessing authority has purported to reopen the assessment upon change of opinion on the same facts. Significantly, the Revenue has in its affidavit-in-opposition purported to take yet another ground, that is, benefit of section 80HHC could not be allowed unless export sale proceeds were received in convertible foreign exchange. As rightly pointed out on behalf of the petitioner by Mr. Bajoria there could be no question of the deduction of export profits being allowed in the first place, unless the petitioners had been able to demonstrate that the sale proceeds were received in convertible foreign exchange. It was never the case of the Revenue, not even at the time of reopening of the assessment, that the proceeds were not received in convertible foreign exchange.
In any case, it is well-established that the Revenue cannot by way of affidavit improve upon reasons initially disclosed for reopening of the assessment. As held by a Division Bench of the Bombay High Court in the case of Hindustan Lever Ltd. [2004 (2) TMI 41 - BOMBAY HIGH COURT] reasons recorded by the assessing authority cannot be supplemented or substituted either by affidavit or by oral arguments.
The writ application is, therefore, allowed. The impugned notice is set aside and quashed.
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2006 (11) TMI 164
Erroneous and Prejudicial Order - CIT, finding that inter-unit loss was not adjusted against the profit for the purpose of allowing deduction u/s 80-IA of the Act, issued a notice u/s 263 - HELD THAT:- As held by the apex court in Malabar Industrial Co. Ltd.'s case [2000 (2) TMI 10 - SUPREME COURT], every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law.
In the instant case, the CIT, while exercising power u/s 263 of the Act, had not rendered an independent finding to the effect that the course adopted by the Assessing Officer is neither permissible, nor the view taken by the Assessing Officer resulted in the loss of revenue which is prejudicial to the interests of the Revenue. In the absence of any such finding, the Appellate Tribunal, in our considered opinion, is right in setting aside the order of the CIT.
Even on the merits, on the point that inter-unit loss was not adjusted against the profit for the purpose of allowing deduction u/s 80-IA of the Act, there are two views possible; one in favour of the Revenue and the other in favour of the assessee. Therefore, on the facts of the case, when there are two views are possible and it is not the case of the Revenue that the view taken by the Assessing Officer is not permissible in law, the CIT is not justified in invoking the jurisdiction u/s 263 of the Act.
Hence, we do not find any question of law, much less a substantial question of law that arises out of the order of the Appellate Tribunal. Accordingly, the tax case appeal stands dismissed.
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2006 (11) TMI 163
Deduction u/s 80-IB - duty drawback received - income 'derived from' an industrial undertaking - HELD THAT:- Learned counsel for the Revenue relies upon the judgment of this court, in Liberty India v. CIT [2006 (9) TMI 79 - HIGH COURT, PUNJAB AND HARYANA], wherein, the question raised was examined and it was held that the amount of duty drawback received by the assessee could not be treated as income "derived from" an industrial undertaking.
We find merit in the contentions raised. For the reasons recorded in Liberty India's case, the question raised is answered in favour of the Revenue and against the assessee.
Accordingly, the appeal is allowed and the order of the Tribunal is set aside.
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2006 (11) TMI 162
Disallowance u/s 37 - expenses incurred on sponsorship Of tournament - activity of sports - element of publicity or advertisement - HELD THAT:- It is no gainsaying that sponsoring of a tournament in which the display of the sponsor's name and banners with the name of the assessee-company attached with the trophy would receive wide publicity through newspaper reports and, in itself, thus establishes the advertisement value which the assessee will get to promote its business.
We are in agreement with the Tribunal's finding that the expenses incurred by the assessee for sponsoring the trophy had the ingredient of advertisement of its business and, consequently, the assessee's claim to deduction as expenses wholly and exclusively incurred for the purpose of its business is justified.
It will be profitable to notice here that the Tribunal itself has confirmed disallowance of deductions in respect of a benefit match in the assessment order of the previous year in which neither the name of the assessee was published in the brochure issued on the eve of the benefit match nor was it established by any evidence that such expenditure was in the nature of business advertisement. Thus, the distinction reflects the real nature of the sponsorship value. Where the sponsorship carries the advertisement of the business it carries advertisement value for promoting the business.
Thus, this appeal fails and is hereby dismissed.
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2006 (11) TMI 161
Issues Involved:
1. Entitlement to deduction u/s 80HHC for duty drawback and cash compensatory support without actual export during the year.
Summary:
Issue 1: Entitlement to Deduction u/s 80HHC for Duty Drawback and Cash Compensatory Support Without Actual Export During the Year
The appeal was filed u/s 260A of the Income-tax Act, 1961, by the Revenue against the order of the Income-tax Appellate Tribunal, Madras, "A" Bench. The substantial question of law formulated was whether the Tribunal was right in holding that the deduction u/s 80HHC in respect of duty drawback and cash compensatory support is allowable even though no export was done by the assessee.
The assessee, a 100% export-oriented unit, filed a return for the assessment year 1991-92, which was processed u/s 143(1)(a) and later scrutinized u/s 143(3). The Assessing Officer denied the deduction u/s 80HHC on the grounds of no export during the year. The Commissioner of Income-tax (Appeals) allowed the appeal, which was confirmed by the Tribunal.
The Revenue argued that without actual export, the assessee is not entitled to the deduction, citing the Supreme Court judgment in CIT v. Sterling Foods [1999] 237 ITR 579. The assessee contended that the incentives received were connected to prior exports and should be considered as profits derived from export, relying on the Supreme Court judgment in P. R. Prabhakar v. CIT [2006] 284 ITR 548.
The court noted that the assessee received cash compensatory support and duty drawback for exports made in the previous year, but no export was made during the relevant assessment year. The amendment of section 28 by the Finance Act, 1990, with retrospective effect, clarified that such incentives are taxable under "Profits and gains of business or profession" and not as export profits.
Section 80HHC requires actual export for deduction, and the formula for computing export profits involves the export turnover and total turnover, both of which were nil for the assessee during the year. The expression "derived from" in the section implies a direct nexus between profit and export, which was absent in this case.
The court distinguished the present case from P. R. Prabhakar, where there was actual export, and aligned with the Delhi High Court's view in Sanjeev Malhotra v. CIT [2006] 286 ITR 364, which required actual export for claiming deduction u/s 80HHC.
In conclusion, the court held that mere receipt of duty drawback and cash compensatory support without actual export does not entitle the assessee to deduction u/s 80HHC. The question was answered in favor of the Revenue and against the assessee. No costs.
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2006 (11) TMI 160
Issues involved:
The judgment involves the disallowance of deduction u/s 80HHC for the transfer of exhibition rights of a film outside India during the assessment year 1993-94. The main issue is whether the deduction under section 80HHC in relation to the export of a film print for exhibition outside India is valid in law.
Judgment Details:
1. Disallowance of Deduction u/s 80HHC:
The Revenue disallowed the assessee's claim for deduction u/s 80HHC for the transfer of exhibition rights of a film print outside India during the relevant assessment year. The Assessing Officer held that it did not amount to the export of goods or merchandise. The Commissioner of Income-tax (Appeals) allowed the appeal, which was further upheld by the Income-tax Appellate Tribunal in favor of the assessee.
2. Interpretation of Section 80HHC by Bombay High Court:
The Bombay High Court in Abdulgafar A. Nadiadwala v. Asst. CIT [2004] 267 ITR 488, interpreted the scope of section 80HHC concerning the transfer of telecasting rights of films to a foreign enterprise. The High Court considered whether the product involved could be classified as 'goods' or 'merchandise,' whether it was exported out of India involving clearance at the customs station, and if the consideration received could be termed as sale proceeds constituting part of export turnover.
3. Bombay High Court's Findings:
- The High Court held that the transaction involving the purchase of rights and transfer of telecasting rights for a film print could be described as goods or merchandise falling within the ambit of section 80HHC.
- It was determined that the transaction indeed involved the export of goods out of India, constituting a sale that cleared customs station, as per the provisions of section 80HHC.
- The consideration received in the transaction was considered as export proceeds, synonymous with sale proceeds, making the assessee eligible for deduction u/s 80HHC.
4. Application of Legal Principles by Madras High Court:
Applying the legal principles established by the Bombay High Court and the Supreme Court in Tata Consultancy Services v. State of Andhra Pradesh [2004] 271 ITR 401, the Madras High Court held that exporting the right of exhibition of a film print qualifies as the sale of goods or merchandise. Consequently, the assessee satisfied the conditions under section 80HHC, entitling them to the deduction.
5. Final Decision:
Based on the settled legal precedents and interpretations, the Madras High Court ruled in favor of the assessee and against the Revenue, dismissing the tax case appeal and allowing the deduction u/s 80HHC. No costs were awarded in this matter.
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2006 (11) TMI 159
TDS "u/s 194C Or 194J" - Payments to outside producers for television programmes - HELD THAT:- We observe that Explanation III, which was introduced simultaneously with section 194J, is very specific in its application to not only broadcasting and telecasting but also include "production of programmes for such broadcasting and telecasting". If, on the same date, two provisions are introduced in the Act, one specific to the activity sought to be taxed and the other in more general terms, resort must be had to the specific provision which manifests the intention of the Legislature. It is not, therefore, possible to accept the contention of the Revenue that programmes produced for television, including "commissioned programmes", will fall outside the realm of section 194C, Explanation III of the Act. We find no infirmity in the view taken by the Tribunal which we hereby affirm.
Thus, we hold that these appeals do not involve any substantial question of law. The appeals are accordingly dismissed.
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2006 (11) TMI 158
Determination of Gross Total Income - Deduction u/s 80-I - business income from telecommunication cables - loss on account of lease business - HELD THAT:- Learned counsel for the assessee would place reliance on a judgment of this court in CIT v. Siddaganga Oil Extractions P. Ltd.[1992 (11) TMI 65 - KARNATAKA HIGH COURT]. In the said judgment, two other judgments of this court have been noticed CIT v. H. M. T. Ltd. and Sterling Foods v. CIT [1984 (6) TMI 41 - KARNATAKA HIGH COURT]. A careful reading of the said judgment would show that the said Division Bench of this court has not taken into consideration the impact of section 80AB of the Act. In the light of the subsequent judgment of the Supreme Court these judgments are of no assistance to the assessee. In the given circumstances, we deem it proper not to place reliance on this judgment for the purpose of consideration of section 80AB and that too in the light of the subsequent judgment of the Supreme Court which is binding on us.
In the case on hand, unfortunately both the parties have not chosen to refer to the Tribunal the impact of section 80AB. If only the Department had invited the attention of the Tribunal to the impact of section 80AB the Tribunal would not have passed this order. We express our displeasure in the matter. To avoid such recurring instances, in future, the Income-tax Department is well-advised to engage competent legal counsel, before the Tribunal, whenever large sums of money are involved with complicated questions of law. Income-tax provides revenue to the Government. If the Department is not properly defended, it would result in unnecessary references to this court and loss of time of every body concerned including the time of this court. We deem it proper to direct learned counsel to place our order before the Commissioner for proper remedical action in future cases.
In the result, this appeal is accepted. The order of the Tribunal in so far as this issue is concerned, is set aside.
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2006 (11) TMI 157
Issues involved:
The judgment involves the interpretation of the term "installed" under section 32A of the Income-tax Act, 1961, and whether the assessee is entitled to investment allowance on the cost of machinery.
Interpretation of "installed" under section 32A:
The case involved a dispute regarding the eligibility of the assessee for investment allowance under section 32A of the Income-tax Act, 1961. The key question was whether the machinery in question was considered "installed" within the relevant assessment year. The Income-tax Appellate Tribunal held that the lack of electricity did not affect the eligibility for investment allowance, but based on other facts, it concluded that the machinery was not "installed" during the assessment year. The Tribunal considered the machinery as part of a larger plant and noted that it was not capable of functioning without other necessary components. The Tribunal also highlighted that certain essential components were acquired after the relevant assessment year, indicating that the machinery was not ready for use by the end of that year.
Functional capability and completion of installation:
The High Court emphasized the importance of establishing the functional capability of the machinery to produce the intended yield. It clarified that for investment allowance eligibility, the machinery should not only be installed but also functional or capable of being put to use. The Court distinguished between a single machine and a plant, noting that in this case, the machinery was part of a larger plant necessary for production. Therefore, the mere installation of the specific machinery was not sufficient as the entire plant needed to be functional to yield the product. The Court highlighted that the relevant date for investment allowance entitlement is when the machinery becomes capable of producing.
Decision and Conclusion:
The High Court ruled in favor of the Revenue and against the assessee, stating that the machinery in question was not capable of being put to use during the relevant assessment year. The Court emphasized the need for functional capability and completion of installation for investment allowance eligibility under section 32A of the Act. The judgment underscored that the machinery must be capable of producing the intended yield to qualify for the investment allowance. Consequently, the reference was ordered in favor of the Revenue, with no costs incurred.
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2006 (11) TMI 156
Issues Involved:
1. Deletion of income assessed u/s 68 of the Income-tax Act, 1961.
2. Evidence and material for the genuineness of the loan.
3. Assessment of income u/s 68 for the assessment year 1985-86.
4. Redetermination of business income by the Tribunal.
Summary:
Issue 1: Deletion of income assessed u/s 68 of the Income-tax Act, 1961
The Revenue challenged the Tribunal's decision to delete the addition of Rs. 61,85,000 as income assessed u/s 68. The Tribunal had accepted the assessee's claim that the loan was genuine, despite expressing disbelief and suspicion about the transaction. The High Court found that the Tribunal's acceptance of the transaction based on the "excise contract" was unacceptable and lacked material evidence. The Court held that the findings of the Tribunal regarding the genuineness of the transaction were to be set aside.
Issue 2: Evidence and material for the genuineness of the loan
The Tribunal had accepted the genuineness of the loan from Sri Appa Rao, despite his contradictory statements and lack of capacity to lend such a huge amount. The High Court noted that the Tribunal's findings were based on surmises and conjectures, and there was no acceptable material to support the genuineness of the loan. The Court emphasized that large sums of money involved required credible evidence, which was absent in this case.
Issue 3: Assessment of income u/s 68 for the assessment year 1985-86
The High Court agreed with the Assessing Officer and the Appellate Commissioner that the assessee failed to prove the source and nature of the cash credits satisfactorily. The Court referred to several Supreme Court judgments, including Jamnaprasad Kanhaiyalal v. CIT, A. Govindarajulu Mudaliar v. CIT, and Sumati Dayal v. CIT, which established that the burden of proof lies on the assessee to explain the cash credits. The Court concluded that the income was rightly assessed u/s 68 as income from undisclosed sources.
Issue 4: Redetermination of business income by the Tribunal
The Tribunal had redetermined the business income at Rs. 1 lakh as against Rs. 5 lakhs assessed by the Assessing Officer. The High Court found fault with the Tribunal's decision, stating that the Tribunal failed to consider the material facts and laws applicable to the case. The Court upheld the Assessing Officer's determination of business income at Rs. 5 lakhs.
Conclusion:
The High Court accepted the appeal, answered the questions of law in favor of the Revenue, and set aside the order of the Tribunal. The Court emphasized the need for credible evidence to support the genuineness of large cash transactions and upheld the assessment of income u/s 68 of the Income-tax Act, 1961.
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2006 (11) TMI 155
Non-admission of appeal u/s. 249(4) - no admitted tax liability - Payment of tax due on the income returned - Search and seizure operation - whether the order of the Commissioner, confirmed in the appeal before the Tribunal is sustainable or not - HELD THAT:- From a reading of the order of the Commissioner and the Tribunal, it is clear to us that tax due at the time of filing of appeal was not made over in terms of section 249(4) of the Act. It is also to be noticed at this stage by us that the appellants, in terms of the material on record have chosen to say in unmistakable terms that they did not have any source to raise funds to make good the tax due at the time of filing the appeal. They have further stated in their statement of objections that in terms of section 249(4) of the Act, the appeal cannot be admitted in the absence of tax on the admitted income. This very statement of the appellants before the authority would go to show that the appellants have failed even according to them to comply with the mandatory requirement of section 249(4) of the Act.
Therefore, we are satisfied that there exist no legal errors either in the order of the Commissioner or in the order of the Tribunal. The orders are therefore, accepted by us in the case on hand, particularly, in the light of the admitted facts in terms of the return and in terms of the submission as we see from the material on record. Thus, we hold that both the appeals are liable to be rejected by answering the questions of law against the assessees.
At this stage, Sri A. Shankar, learned counsel for the assessees would say that he would advise his clients to make good the admitted tax in terms of the returns filed by them for the purpose of consideration of appeals, for which, he wants some breathing time for making such payment.
If payment is made by the assessees-appellants in terms of this order, the Commissioner (Appeals) shall consider the appeals on merits and pass appropriate orders in accordance with law, without in any way being influenced by the earlier proceedings. No opinion on the merits is expressed by us. All contentions of either of the parties are left open. Ordered accordingly.
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2006 (11) TMI 154
Issues involved: Appeal against order of Income-tax Appellate Tribunal regarding deduction under section 10B for assessment year 200001 in a case involving export of computer software.
Summary:
The High Court of Madras dismissed the appeal filed by the Revenue against the order of the Income-tax Appellate Tribunal. The case revolved around the interpretation of deduction under section 10B for an assessee engaged in the business of exporting computer software. The Assessing Officer had initially included domestic turnover in export turnover for computation of deduction under section 10B. However, the Commissioner revised the order under section 263, leading to a reduction in the benefit of deduction under section 10B. The Tribunal, on appeal by the assessee, ruled in favor of the assessee stating that domestic turnover should be considered as part of export turnover for the purpose of the deduction under section 10B.
The Revenue raised two substantial questions of law in the appeal:
1. Whether the Tribunal was correct in considering domestic turnover as part of export turnover for deduction under section 10B.
2. Whether the Tribunal was justified in relying on the second proviso to section 10B(1) for deciding the issue related to export turnover.
The Tribunal's order highlighted that the domestic turnover did not exceed 25 per cent of the total sales, meeting the requirements specified in the second proviso to section 10B(1). This provision stated that profits from domestic sales not exceeding 25 per cent of total sales would be deemed as profits from export. The High Court, based on this finding, concluded that there was no substantial question of law to be considered and hence dismissed the appeal.
In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of meeting the specified criteria under section 10B for claiming deductions related to export turnover in the case of computer software exports.
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2006 (11) TMI 153
Issues Involved:
The appeal involves the compliance of section 127 of the Income-tax Act, 1961 and the jurisdiction to decide the case of the appellant.
Comprehensive Details:
The Assessing Officer made an addition of Rs. 2,44,243 to the income of the assessee, which was contested by the assessee claiming it was from agricultural income. The Commissioner of Income-tax (Appeals) partly allowed the appeal but upheld an addition of Rs. 1 lakh. The Tribunal then remanded the matter to the Assessing Officer.
The assessee also challenged the order of transfer of jurisdiction under section 127 of the Income-tax Act, 1961, stating that it rendered the reassessment proceedings void. The Tribunal, referring to a previous order, noted that the assessee had knowledge of the transfer order but did not challenge it at the appropriate forum.
The main issue was whether the assessee could challenge the transfer order under section 127 in the assessment proceedings. The Court clarified that the scope of assessment proceedings is limited to determining income and tax liability, and the validity of a transfer order cannot be questioned in such proceedings. If aggrieved, the assessee should challenge the order separately through administrative channels or legal remedies.
Referring to legal precedents, the Court emphasized that if there is an abuse of power in a transfer order, appropriate action can be taken, but the provision itself is not void. The Court highlighted that the situation of a transfer order is different from that of reopening an assessment under section 34, where the assessee has the opportunity to contest the reasons for reopening.
Ultimately, the Court held that since the assessee did not raise the jurisdictional objection in a timely manner before the Assessing Officer, it cannot be raised on appeal. Consequently, the Court found no substantial question of law and dismissed the appeal.
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2006 (11) TMI 152
Issues Involved: Challenge to compulsory purchase order u/s Chapter XX-C of Income-tax Act, 1961 based on violation of principles of natural justice and inadequate comparison of property value.
Summary:
The High Court of BOMBAY delivered a judgment in a case challenging a compulsory purchase order u/s Chapter XX-C of the Income-tax Act, 1961. The petitioners owned a flat and entered into an agreement of sale with a respondent. The appropriate authority issued a notice to show cause for compulsory acquisition, relying on five sale instances without providing prior information to the petitioners. The petitioners challenged the order, citing a violation of natural justice principles and inadequate comparison of property values. The court noted that the order lacked discussion on the merits and characteristics of the compared flats, leading to serious infirmity in the decision. The Union of India attempted to defend the order, suggesting a rehearing, but the court deemed it unnecessary due to the prolonged duration since the original order. The court allowed the petition, quashing the compulsory purchase order and directing the issuance of a No Objection Certificate (NOC) in favor of the petitioners. The ruling was made absolute with no costs imposed.
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2006 (11) TMI 151
Issues involved: Interpretation of deduction under section 80HHC and section 32AB of the Income-tax Act.
Interpretation of deduction under section 80HHC:
The appellant, a company engaged in the business of manufacturing and selling tea, claimed deduction under section 80HHC and section 32AB of the Income-tax Act for the assessment year 1990-91. The Assessing Officer disallowed the claim under section 80HHC based on the interpretation of rule 8(1). The appellant appealed to the Commissioner of Income-tax, who granted both reliefs. However, the Income-tax Appellate Tribunal allowed the appeal of the Income-tax Department, leading to the present appeal. The court framed the substantial question of law regarding the deduction under section 80HHC, which was answered based on a previous decision of the court in the case of Bazaloni Group Ltd. v. CIT [2005] 272 ITR 11.
Interpretation of deduction under section 32AB:
The appellant claimed deduction under section 32AB, but the Assessing Officer excluded interest income from the gross receipt, stating it was not a "business receipt." The appellate authority disagreed, stating that all incomes of the appellant arose from the business and should be included in the profits of the eligible business income under section 32AB. However, the Tribunal held that interest income and dividend income did not come from the profits of the business and therefore cannot be included for deduction under section 32AB. The court analyzed the definition of "eligible business or profession" under section 32AB and referred to the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 for guidance.
Conclusion:
The court examined the activities of the appellant company, including investment in shares, lending money for interest, and the tea business. The court found that these activities were interconnected and part of the same business, similar to the precedent set in Apollo Tyres case. Therefore, the court allowed the appeal, setting aside the Tribunal's order and answering both questions of law in favor of the appellant and against the Revenue.
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2006 (11) TMI 150
Entitled for the claim of depreciation u/s 32, when the machinery are kept ready for use? - machinery being actually used or employed in the earning of income - HELD THAT:- The Calcutta High Court in CIT v. Oriental Coal Co. Ltd.[1994 (1) TMI 82 - CALCUTTA HIGH COURT], also noticed Liquidators of Pursa Ltd. v. CIT [1954 (2) TMI 1 - SUPREME COURT] and thereafter it ruled that under sub-section (1) of section 32 there should be actual user of plant and machinery for the purposes of business.
The Bombay High Court in Dineshkumar Gulabchand Agrawal v. CIT[2003 (1) TMI 19 - BOMBAY HIGH COURT], has ruled that the word "used" in section 32 of the Income-tax Act, 1961, denotes that the asset has been actually used and not that it is merely ready for use. The expression "used", means actually used for the purposes of the business. A special leave petition filed against the said judgment stood dismissed.
We are of the view that the kept ready theory is not available to the assessee for the purpose of claiming depreciation when the Legislature has chosen to use the word "used" we have to give a full meaning to it and avoid reading something not intended by the Legislation. After all, these benefits are provided for certain purposes. That purpose is used in terms of the statute. If the machinery is not used, section 32 is not applicable and hence, the assessee cannot have any benefits, if granted would result in reading something which is not provided in the statute in terms of section 32.
In the result, we accept the contention of Sri Indra Kumar, learned counsel and accept this appeal. In the result, the following order is passed. The appeal is accepted. The questions of law are answered in favour of the Revenue.
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2006 (11) TMI 149
Penalty levied u/s 272A(2)(e)? - failure to file the returns within the time stipulated - charitable trust - granted registration u/s 12A by the CIT(A) - proves that there was reasonable cause for the said failure - HELD THAT:- In our view, in the facts of the present case, where the Department contends that notices were issued, and the assessee denies receiving such notices, the burden is on the Department to show that such notices were served on the assessee. There is no finding rendered by the CIT(A) or Tribunal that the notices in question were in fact served on the assessee. Therefore, the only conclusion that can be drawn is that the assessee was not served these notices and was consequently not afforded the opportunity of being heard before the penalties were imposed. In our view, this by itself is sufficient to set aside the orders imposing the penalty on the appellant for the assessment years in question.
Respectfully adopting the reasoning of the Full Bench of this court in J. T. (India) Exports v. Union of India [2001 (9) TMI 10 - DELHI HIGH COURT] which was rendered in the context of the Imports and Exports (Control) Act, 1947, we are of the view that there is an implied requirement of the principles of natural justice that before imposing a penalty u/s 272A(2)(e) of the Act, notices are required to be both issued and served upon the assessee to enable it to defend itself in the penalty proceedings. It is trite that the imposition of any penalty has adverse civil consequences and has to be preceded by the affording of an opportunity of being heard to the assessee. Only then can the assessee urge factors relevant to the question of penalty and independent of the explanations offered during assessment proceedings. It affords a chance to the assessee to show why penalty should be either waived altogether or should be less than what is proposed by the Department.
On the merits of the case, we find that the explanation offered by the appellant for not filing the returns within the time stipulated under the Act appears to be a plausible one.
Thus, we are of the considered view that the appellant has proved that there was reasonable cause within the meaning of section 273B of the Act for the failure to file income-tax returns for the relevant assessment years within the time stipulated and, therefore, no penalty was required to be levied in terms of section 272A(2)(e) of the Act.
Therefore, the impugned orders of the authorities below, i.e., the Assessing Officer, CIT(A) or the Tribunal are hereby set aside. The appeals are, accordingly, allowed with no orders as to costs.
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2006 (11) TMI 148
Issues Involved:
1. Justification of cancelling the penalty by the Tribunal.
2. Legitimacy of initiating penalty proceedings under section 273(b) in reassessment proceedings.
Issue-wise Detailed Analysis:
1. Justification of Cancelling the Penalty:
The Tribunal had to decide whether the penalty imposed under sections 271(1)(a), 271(1)(b), 271(1)(c), and 273(b) of the Income-tax Act, 1961, was justified. The respondent-assessee was found with 2240 kgs of smuggled ganja valued at Rs. 6,72,000, and the Income-tax Officer treated this amount as unexplained investment, leading to the imposition of penalties. The Tribunal, however, referenced the Supreme Court's decision in CIT v. Piara Singh [1980] 124 ITR 40 (SC), which allowed for the deduction of business losses incurred during illegal activities, and CIT v. Smt. Jagjit Kaur [1980] 126 ITR 540 (All), which stated that assessments under section 147(a) were not "regular assessments" for the purposes of section 273(b).
The Tribunal concluded that the confiscated ganja represented a business loss, resulting in nil income for the assessee, and thus no penalty was leviable under the mentioned sections. This decision was supported by the fact that the assessee's claim of business loss was not unreasonable, given the conflicting judicial opinions on the matter. Therefore, the Tribunal's decision to cancel the penalties was upheld as the assessee had a reasonable cause for not filing the return or concealing particulars of income.
2. Legitimacy of Initiating Penalty Proceedings under Section 273(b) in Reassessment Proceedings:
The Tribunal had to determine whether reassessment could be treated as a regular assessment for the purposes of initiating penalty proceedings under section 273(b). The Tribunal initially held that reassessment under section 147 could not be considered a regular assessment, referencing the decision in CIT v. Smt. Jagjit Kaur [1980] 126 ITR 540 (All). However, the court noted that the insertion of sub-section (6) in section 215 by the Taxation Laws (Amendment) Act, 1984, clarified that an assessment made for the first time under section 147 should be regarded as a regular assessment for the purposes of sections 215, 216, 217, and 273.
This provision was deemed clarificatory and retrospective, aligning with the Supreme Court's decision in K. Govindan and Sons v. CIT [2001] 247 ITR 192 (SC), which also held that an assessment made for the first time under section 147 is a regular assessment. Consequently, the Tribunal's view that penalty under section 273(b) could not be initiated in reassessment proceedings was incorrect. The reassessment completed under section 144 was treated as a regular assessment, allowing for the initiation of penalty proceedings under section 273(b).
Conclusion:
The court answered the first question in the affirmative, supporting the Tribunal's decision to cancel the penalties, and the second question in the negative, allowing for penalty proceedings under section 273(b) in reassessment cases. The parties were left to bear their own costs due to the divided success.
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