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2008 (10) TMI 684
The Bombay High Court dismissed the appeal as no explanation was provided for a cash credit in the assessee's books, and no evidence was produced regarding share capital received from a third party. No question of law arose in this case.
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2008 (10) TMI 683
Issues Involved:
1. Determination of lease on winding up order.
2. Applicability of the Bombay Rent Act, 1947.
3. Rights of the lessors and lessees under the Transfer of Property Act, 1882.
4. Validity of assignment of leasehold rights by the Official Liquidator.
5. Requirement of notice to lessors before assignment of leasehold rights.
Detailed Analysis:
1. Determination of Lease on Winding Up Order:
The appellants contended that the lease stood determined upon the winding-up order of Prasad Mills Ltd. However, the court held that the lease did not terminate upon the winding-up order. The contractual tenancy subsists as governed by the provisions of the Transfer of Property Act, and the rights of the company in liquidation vis-a-vis the landlord do not undergo any change. The court emphasized that the lease deed executed on 10.12.1916 for 199 years remains valid, and the relationship between the parties continues until the lease period expires.
2. Applicability of the Bombay Rent Act, 1947:
The appellants argued that the provisions of the Bombay Rent Act applied, enabling them to reclaim possession of the land. The court, however, rejected this argument, referring to the judgment in Laxmidas Bapudas Darbar vs. Rudravva, which clarified that the provisions of the Rent Act do not curtail the contract period of a fixed-term lease. The court concluded that the Rent Act primarily protects tenants and does not provide grounds for eviction during the subsistence of a long-term lease unless such grounds are specified in the lease deed.
3. Rights of the Lessors and Lessees under the Transfer of Property Act, 1882:
The court examined the provisions of the Transfer of Property Act, particularly Section 108, which outlines the rights and liabilities of lessors and lessees. The court noted that the lessee has the right to transfer, mortgage, or sub-lease the leased property unless there is a contract or local usage to the contrary. The lease deed in question did not prohibit such transfers, and therefore, the lessee's rights under Section 108 remained intact.
4. Validity of Assignment of Leasehold Rights by the Official Liquidator:
The appellants contended that the Official Liquidator could not assign the leasehold rights. The court, however, held that the lease deed permitted the lessee to assign its rights, and there was no prohibition against such assignment. The court referred to the case of United Bank of India vs. Official Liquidator, where it was held that the Official Liquidator could sell the assets and properties of the company in liquidation, including leasehold interests, to benefit the creditors.
5. Requirement of Notice to Lessors Before Assignment of Leasehold Rights:
The appellants argued that any assignment of leasehold rights without prior notice to the lessors would be invalid. The court dismissed this argument, stating that the question did not arise as the leasehold rights had not yet been assigned. The court also noted that the decisions relied upon by the appellants pertained to cases where petitioning creditors were not given notice, which was not applicable in the present case.
Conclusion:
The court dismissed the appeals, upheld the validity of the long-term lease, and confirmed that the provisions of the Bombay Rent Act did not apply to curtail the lease period. The court allowed the Official Liquidator to proceed with the assignment of leasehold rights, subject to the payment of any outstanding rent by the secured creditor. The interim stay was extended for one month to allow the appellants to seek further legal recourse.
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2008 (10) TMI 682
Issues involved: Challenge to validity of notice u/s 148 of Income Tax Act, 1961 and notices u/s 142(1) and 143(2) of the Income Tax Act.
Validity of Notice u/s 148:
The petitioners challenged the validity of the notice dated 31-12-2007 issued u/s 148 of the Income Tax Act, 1961. The petitioners had filed objections opposing the reopening of the assessment upon receiving the reasons for reopening. However, the assessing officer proceeded to finalize the assessment without considering the objections raised by the petitioners. The Apex Court in the case of GKN Driveshafts (India) Limited v/s. ITO has held that the assessing officer must dispose of the objections raised by the assessee before passing the assessment order. Despite the petitioners filing objections in February 2008, the assessing officer did not address them. Consequently, the notices issued u/s 142(1) and 143(2) for finalizing the assessment were quashed and set aside. The assessing officer was directed to consider the objections and pass appropriate orders, with a directive not to finalize the assessment for four weeks if the order is adverse to the petitioners.
Conclusion:
The High Court made the rule absolute with no order as to costs, emphasizing the importance of addressing objections raised by the assessee before finalizing the assessment order.
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2008 (10) TMI 681
Issues involved:
The judgment deals with the questions of law regarding the correctness of the Tribunal's decision in allowing the appeal of the assessee u/s 69 on the purchase of shares at a price much lesser than the market price, and whether such purchase of shares as an investment, with a lock-in period, for a consideration below market value can be taxed as a benefit or perquisite u/s 28 (iv) disregarding the fact that the shares were pledged at market price to obtain a loan.
Question 1: Tribunal's Decision on Addition u/s 69
The High Court examined whether the Tribunal was correct in law in allowing the appeal of the assessee by holding that no addition is sustainable u/s 69 on the purchase of shares at a price much lesser than the market price. The Tribunal's judgment was reviewed, and it was noted that the Tribunal found that the purchase of shares as an investment, with a lock-in period, for a consideration below market value cannot be taxed as a benefit or perquisite under Section 28 (iv) of the Act. The Tribunal also concluded that the assessee did not secure any benefit or perquisite in consideration of a business transaction with the sellers of the shares. Based on these findings, the High Court determined that there was no substantial question of law involved in the appeal and dismissed the same.
Question 2: Taxability of Shares Purchased Below Market Value
The second issue addressed by the High Court was whether the Tribunal was justified in law in holding that the purchase of shares as an investment, with a lock-in period, for a consideration below market value, cannot be brought to tax as a benefit or perquisite u/s 28 (iv). Despite the fact that the assessee had pledged these shares at market price to secure a loan of Rs. 49.75 crores, the Tribunal's decision was based on the finding that no benefit or perquisite was obtained in relation to a business transaction with the sellers of the shares. The High Court concurred with the Tribunal's reasoning and concluded that there was no case for admission of the appeal, ultimately dismissing it.
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2008 (10) TMI 680
Issues involved: Demand for payment of service tax without prior notice and principles of natural justice.
Summary:
The petitioner, a Registered Company, entered into a technical knowhow agreement with a Canadian Company for expertise on production and business matters. The services were to be provided outside India, with the petitioner paying technical fees based on exports. The petitioner received a demand letter from the Service Tax Unit without prior notice, calling for payment of service tax. The petitioner contended that the demand was contrary to law and natural justice due to lack of prior notice. The respondents admitted to the absence of prior notice but sought permission to issue a notice for payment in compliance with the law. The High Court held that the demand letter was to be set aside due to the lack of prior notice, but allowed the respondents to initiate proceedings by issuing a proper notice and providing the petitioner with an opportunity to present its case. The writ petition was disposed of with no costs.
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2008 (10) TMI 679
Issues involved: Application u/s 130A of the Customs Act for determination of questions of law regarding confiscation of a truck by the Appellate Tribunal.
Issue 1: Confiscation of truck
The Commissioner of Customs sought direction to refer whether the Appellate Tribunal erred in setting aside the confiscation of the truck, as the owner failed to prove lack of knowledge or connivance in its use for illegal purposes. The Tribunal concluded that without evidence of the owner's knowledge of smuggling, confiscation was unjustified. The High Court upheld this decision, stating that the Customs authority's assertion alone was insufficient to prove smuggling intent, thus the conditions for confiscation under Section 115 of the Customs Act were not met.
Issue 2: Legal considerations
The Commissioner argued that the truck was rightfully confiscated due to its involvement in smuggling goods to Nepal. However, the High Court disagreed, noting that the truck was hired for legitimate transport of masoor dal from Kanpur to Raxaul. As there was no concrete evidence that the goods were intended for smuggling, the Court found no basis for confiscation under Section 115. Consequently, the Tribunal's decision to set aside the confiscation order was deemed appropriate.
Conclusion:
The High Court dismissed the application, stating that no legal question arose from the Tribunal's order. The Court found the application to be misconceived and upheld the Tribunal's decision to set aside the confiscation of the truck, emphasizing the lack of evidence linking the truck to smuggling activities.
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2008 (10) TMI 678
Issues involved:
The issues involved in the judgment are:
1. Whether the Income-tax Appellate Tribunal was correct in deleting the addition made by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) regarding outstanding creditors for freight under section 69C of the Income-tax Act, 1961 for the assessment year 2003-04.
2. Whether the impugned order passed by the Income-tax Appellate Tribunal was perverse or not.
Issue 1: Addition of Outstanding Creditors for Freight
The Assessing Officer disallowed/added back a sum of &8377; 71,57,277 towards outstanding creditors for freight under section 69C of the Income-tax Act, 1961, for the assessment year 2003-04. The Assessing Officer contended that the expenses claimed as outstanding towards freight charges payable were not real and genuine as the assessee failed to produce the creditors for verification. This disallowance was confirmed by the Commissioner (Appeals).
Issue 1 Details: Tribunal's Decision
Upon appeal, the Income-tax Appellate Tribunal deleted the addition. The Tribunal noted that the assessee maintained primary and subsidiary records such as lorry receipt registers, vouchers, and details of Tax Deducted at Source, which were found to be in order. The Tribunal observed that the Assessing Officer's rejection of vouchers as internally generated was unwarranted, as the vouchers were signed by recipients and verifiable. The Tribunal also highlighted that complete details of Tax Deducted at Source were available, and entries in regular books of account were maintained chronologically. The Tribunal further pointed out that the Assessing Officer failed to provide evidence to support the conjecture of cash payments, as subsequent payments were made by Account Payee Cheques. Based on a comprehensive review of the evidence, the Tribunal concluded that the addition should be deleted.
Issue 1 Conclusion: Tribunal's Decision Upheld
The High Court upheld the Tribunal's decision, stating that there was no legal infirmity in the Tribunal's order to warrant interference. The Court found no evidence of perversity in the order, as there was no indication of consideration of irrelevant evidence or ignoring relevant evidence. As no substantial question of law arose from the Tribunal's order, the appeal was dismissed.
Issue 2: Perversity of the Impugned Order
The second issue raised was whether the impugned order passed by the Income-tax Appellate Tribunal was perverse or not. This question was considered in light of the Tribunal's decision to delete the addition of outstanding creditors for freight.
Issue 2 Conclusion: No Perversity Found
The High Court determined that there was no perversity in the impugned order of the Tribunal. The Court noted the absence of any evidence indicating the consideration of irrelevant evidence or the ignorance of relevant evidence. As no legal infirmity or substantial question of law was identified, the appeal was dismissed.
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2008 (10) TMI 677
The Delhi High Court dismissed a writ petition challenging the condonation of delay by the Customs, Excise and Service Tax Appellate Tribunal in a revenue appeal. The Court declined to interfere with the Tribunal's findings, stating it would not substitute its view for that of the Tribunal.
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2008 (10) TMI 676
Issues Involved:
1. Disallowance of depreciation on intellectual property rights (IPR).
2. Exclusion of telecommunication expenses from export turnover for section 10A deduction.
3. Setting off loss of non-eligible business against profits of eligible business for section 10A deduction.
4. Treatment of rental income from sub-letting of property for section 10A deduction.
5. Adjustment of foreign tax credit.
6. Deletion of addition on account of provision for warranty.
7. Inclusion of belated export proceeds in computing section 10A deduction.
Issue-wise Detailed Analysis:
1. Disallowance of Depreciation on Intellectual Property Rights (IPR):
The assessee acquired intellectual property rights (IPR) consisting of software codes and licenses during FY 2001-02. The cost of these assets was written off against the share premium account as approved by the Karnataka High Court. The Assessing Officer (AO) disallowed the depreciation claim, arguing that the asset was not shown in the balance sheet and was treated as 'miscellaneous expenditure'. The CIT(A) upheld this view, stating that the write-off resulted in NIL cost of acquisition, thus making depreciation inapplicable. The Tribunal, however, noted that the write-off against the share premium account should not affect the statutory right to claim depreciation under section 32. It restored the matter to the AO to ascertain the nature of the IPR and its usage for business purposes, and to allow depreciation if the asset qualifies as an intangible asset under section 32.
2. Exclusion of Telecommunication Expenses from Export Turnover for Section 10A Deduction:
The AO excluded telecommunication expenses related to the delivery of computer software from the export turnover. The Tribunal held that if such expenses are part of the consideration for export, they should be excluded from the export turnover. However, it also ruled that any amount excluded from the export turnover should similarly be excluded from the total turnover, following precedents set by various decisions of the Tribunal.
3. Setting Off Loss of Non-Eligible Business Against Profits of Eligible Business for Section 10A Deduction:
The AO adjusted the loss from a non-eligible business unit against the profits of the eligible unit before allowing the deduction under section 10A. The CIT(A) upheld this adjustment based on the jurisdictional High Court's decision in Himatshingike Seide Ltd. The Tribunal, however, ruled that losses from non-eligible units should not be set off against profits of eligible units for computing section 10A deductions. It directed the AO to compute the deduction without setting off the non-eligible unit's losses.
4. Treatment of Rental Income from Sub-Letting of Property for Section 10A Deduction:
The AO treated the rental income from sub-letting a property in Canada as 'income from other sources' and excluded it from the profits eligible for section 10A deduction. The CIT(A) agreed, stating there was no direct nexus between the rental income and the business of software development. The Tribunal upheld this view, noting that the rental income did not arise from the business carried on by the assessee and hence should be taxed as 'income from other sources', while the rent paid for the property should be allowed as a business expense under section 37.
5. Adjustment of Foreign Tax Credit:
This issue was neither addressed by the AO nor by the CIT(A). The Tribunal restored the matter to the AO for consideration, along with the issue of depreciation.
6. Deletion of Addition on Account of Provision for Warranty:
The CIT(A) allowed the provision for warranty as an ascertained liability based on precedents set by the Tribunal in similar cases. The Tribunal upheld this decision, referencing the jurisdictional High Court's ruling in the case of Wipro GE Medical System, which allowed such provisions as deductible expenses.
7. Inclusion of Belated Export Proceeds in Computing Section 10A Deduction:
The CIT(A) directed the AO to include belated export proceeds in the computation of section 10A deduction after verifying the facts. The Tribunal found the CIT(A)'s direction appropriate and required no interference, noting that the AO should consider the delayed export proceeds subject to section 10A provisions.
Conclusion:
The Tribunal partly allowed the appeals of the assessee, requiring the AO to re-examine the issues of depreciation on IPR and foreign tax credit, while upholding the CIT(A)'s decisions on the other issues. The appeals filed by the revenue were dismissed.
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2008 (10) TMI 675
Issues Involved:
1. Deletion of addition of Rs. 95 lakhs made u/s 68 on account of alleged accommodation entries.
2. Deletion of addition of Rs. 47,500/- made on account of commission allegedly paid for obtaining accommodation entries.
3. Validity of initiation of reassessment proceedings u/s 148.
4. Admission of additional evidence by CIT(A) and its verification by AO.
Summary:
1. Deletion of Addition of Rs. 95 Lakhs u/s 68:
The Revenue appealed against the CIT(A)'s order deleting the addition of Rs. 95 lakhs made by the AO u/s 68 for alleged accommodation entries. The AO had added this amount as unexplained credits, claiming it was introduced through accommodation entries from M/s Suma Finance and Investment Ltd. The CIT(A) admitted additional evidence provided by the assessee, which included documents confirming the sale of shares and the receipt of Rs. 82 lakhs from M/s Suma Finance and Investment Ltd. The CIT(A) concluded that the amount was received by way of sale of shares and could not be considered a credit entry to which Section 68 would apply, thus deleting the addition.
2. Deletion of Addition of Rs. 47,500/- on Account of Commission:
The AO had also added Rs. 47,500/- as unexplained expenditure on account of commission allegedly paid for obtaining the accommodation entries. Since the CIT(A) deleted the addition of Rs. 95 lakhs, the related commission addition was also deleted, as there was no justification for the commission if the primary addition was not sustained.
3. Validity of Initiation of Reassessment Proceedings u/s 148:
The CIT(A) upheld the validity of the reassessment proceedings initiated by the AO u/s 148, rejecting the assessee's challenge on this issue. The reassessment was based on specific information about the introduction of unaccounted money through accommodation entries.
4. Admission of Additional Evidence by CIT(A) and Its Verification by AO:
The CIT(A) admitted additional evidence provided by the assessee, which was not initially presented to the AO. This evidence included various documents confirming the transactions with M/s Suma Finance and Investment Ltd. The AO objected to the admission of this additional evidence, arguing that the assessee had sufficient opportunity to present it during the assessment proceedings. The Tribunal observed that the AO did not verify the additional evidence in his remand report and focused mainly on objecting to its admission. The Tribunal held that the CIT(A) should have afforded the AO a specific opportunity to verify the additional evidence after admitting it. Consequently, the Tribunal set aside the CIT(A)'s order and restored the matter to the AO for fresh examination and verification of the additional evidence, directing the AO to decide the issue afresh after proper verification and providing the assessee an opportunity to be heard.
Conclusion:
The Tribunal allowed the Revenue's appeal for statistical purposes, setting aside the CIT(A)'s order and remanding the matter to the AO for fresh adjudication after verifying the additional evidence.
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2008 (10) TMI 674
Time limitation - Held that: - The tribunal has held that the show-cause notices issued by the authorities were barred by limitation because during the period from October 1985 to September 1989 there were decisions of the tribunal in favour of the assessee - appeal rejected.
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2008 (10) TMI 673
Issues involved: Appeal arising from order u/s 263 by CIT regarding deduction u/s 10A for communication expenses in export turnover computation.
Summary:
Issue 1: Incorrect computation of deduction u/s 10A by not excluding communication expenses:
The assessee company filed its return of income declaring total income. The CIT observed that communication expenses were not excluded from export turnover for deduction u/s 10A, resulting in excess claim allowed by AO. CIT issued notice u/s 263, directing exclusion of expenses attributable to software delivery. The AO's order was set aside for proper computation of expenses for export turnover.
Issue 2: Validity of CIT's order u/s 263:
The AR argued that the AO's order was not prejudicial to revenue as the assessee was not heard on the matter. The Tribunal held that for invoking sec. 263, the AO's order must be both erroneous and prejudicial to revenue. Merely disagreeing with AO's view does not make the order prejudicial unless it is legally unsustainable. The Tribunal found that the CIT was not justified in invoking sec. 263 in this case.
In conclusion, the Tribunal quashed the CIT's order, emphasizing the need for proper exclusion of communication expenses from export turnover for deduction u/s 10A.
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2008 (10) TMI 672
Issues Involved:
1. Validity of the rectification order u/s 154 of the Income-tax Act.
2. Time-barred nature of the rectification order.
Summary:
Validity of the Rectification Order u/s 154:
The revenue appealed against the Commissioner of Income-tax (Appeals) decision, which held the Assessing Officer's rectification order u/s 154 as invalid and void ab initio. The original assessment was completed u/s 143(3) on 30-3-1999. Subsequent rectifications were made, but none addressed the exemption u/s 10B. The Commissioner of Income-tax (Appeals) concluded that the rectification order dated 3-3-2006 was invalid as it attempted to rectify an issue from the original assessment order dated 30-3-1999, which was not addressed in any intervening orders.
Time-barred Nature of the Rectification Order:
The revenue argued that the rectification was within four years of the earlier rectification order. However, the Commissioner of Income-tax (Appeals) and the Tribunal found that the rectification sought by the revenue was beyond four years from the date of the original order, as per section 154(7). The Tribunal noted that the rectification order dated 3-3-2006 attempted to rectify a mistake from the original assessment order dated 30-3-1999, which was not addressed in any intervening rectification orders. Therefore, the rectification was time-barred.
Case Laws and Precedents:
The Tribunal referred to several case laws, including Hind Wire Industries Ltd. v. CIT, Waldies Ltd. v. CIT, and Salem Co-operative Spg. Mills Ltd. v. CIT, to support its decision. These cases established that rectification orders must be within four years of the original or intervening order if they address the same issue. Since the rectification in question did not address an issue from any intervening order, it was deemed time-barred.
Conclusion:
The Tribunal upheld the Commissioner of Income-tax (Appeals) decision, concluding that the rectification order dated 3-3-2006 was invalid and time-barred. The appeal filed by the revenue was dismissed.
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2008 (10) TMI 671
Issues involved: Application for waiver of pre-deposit of service tax, education cess, penalty u/s 78 and penalty u/s 76 of the Finance Act, 1994.
Summary:
Issue 1: Service Tax and Education Cess Amounts
The applicant sought waiver of pre-deposit of a substantial amount of service tax and education cess. The counsel argued that the activity of handling, loading, and unloading coal was in accordance with an agreement with Western Coalfields Limited. Reference was made to similar cases where unconditional stay was granted. However, the respondent pointed out differences in other cases.
Issue 2: Composite Agreement and CBEC Circular
Upon reviewing the impugned order, it was noted that the applicant had a composite agreement but billed separately for transportation and loading/unloading. The CBEC Circular clarified that loading and unloading activities, even within the coal mining area, fall under "cargo handling service." The implication of the agreement needed detailed examination during the final hearing. The Tribunal found that a prima facie case for complete waiver was not established. Therefore, the applicant was directed to pre-deposit a specific amount within a set timeframe, with a provision for waiver of the remaining amount subject to compliance.
This judgment highlights the importance of detailed examination of agreements and relevant circulars in determining the applicability of service tax and penalties.
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2008 (10) TMI 670
Issues involved: Challenge to judgment quashing charges under Section 20(b)(ii)(C) of the NDPS Act and directing framing of charges under Section 20(b)(i) of the Act.
Judgment Summary:
Issue 1: Interpretation of NDPS Act provisions
The High Court quashed charges under Section 20(b)(ii)(C) of the NDPS Act and directed framing of charges under Section 20(b)(i) of the Act. The appellant argued that no new offence was created by the Amendment Act, but a more stringent sentence was provided. The High Court's view was that a new offence was made out due to the higher punishment imposed. However, it was held that no new offence was created by the Amendment Act, and the punishment cannot exceed what was originally provided for.
Issue 2: Constitutional implications
Article 20(1) of the Constitution prohibits creating an offence retrospectively and ensures that the penalty may not be higher than what was prescribed at the time of the offence. The validity of the Amendment Act was upheld previously, stating that pending cases should be disposed of according to the amended provisions. It was emphasized that no ex-post facto legislation is permissible for increasing the severity of punishment, but legislative benevolence can reduce the sentence for the same offence. The High Court's decision was deemed unjustified as there was no creation of a new offence, only an amendment to the punishment under Section 20 of the Act.
Conclusion:
The appeal was dismissed with the clarification that no new offence was created by the Amendment Act, and the punishment cannot exceed what was originally provided for. The High Court's decision to quash charges under Section 20(b)(ii)(C) and direct framing of charges under Section 20(b)(i) was upheld.
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2008 (10) TMI 669
Issues involved:
The issues involved in this judgment are the taxability of reimbursement of expenditure against supply of material, customs duty, and interest received on income-tax refunds under section 44BB of the Income Tax Act, and the applicability of Double Taxation Avoidance Agreement (DTAA) between India and USA.
Taxability of Reimbursement of Expenditure:
The appeal and cross objection arose from the order of the CIT(A) regarding the taxability of reimbursement of expenditure against supply of material, customs duty, etc. The assessee, a US company engaged in providing services related to mineral oils, claimed exemption for certain expenditures under section 44BB of the Act. The AO included these amounts for taxation. The ITAT held that the reimbursement of expenditure against the supply of material is taxable based on the decision of the jurisdictional High Court. However, regarding customs duty, the ITAT accepted the assessee's plea as it did not fall within the receipts contemplated in section 44BB of the Act.
Interest Received on Income-Tax Refunds:
The assessee received interest under section 244A of the Act from the department, which the AO assessed as income from other sources and taxed at 41%. The assessee contended that the interest should be taxed at 15% under the DTAA between India and USA or at 20% under section 115A of the Act. The ITAT, following a similar ruling in a UK-India DTAA case, directed the AO to tax the interest at 15% under the DTAA between India and USA.
Conclusion:
The ITAT partly allowed the revenue's appeal and allowed the cross objection of the assessee. The reimbursement of expenditure against the supply of material was held taxable, while customs duty was excluded from taxation under section 44BB. The interest received on income-tax refunds was directed to be taxed at 15% under the DTAA between India and USA. The order was pronounced on 24.10.2008.
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2008 (10) TMI 668
False misrepresentation - fraudulently and dishonestly induced the complainant and her deceased husband to place their signatures and thumb impression on some papers - Power of Attorney was used by the accused for executing a sale deed in favour of his wife Vijaya Satardekar (Respondent Nos. 2) - it was contended that High Court should not have relied on the evidence in the Civil Suit for the purpose of quashing the criminal case -
HELD THAT:- It cannot be said as an absolute proposition that under no circumstances can the Court look into the material produced by the defence at the time of framing of the charges, though this should be done in very rare cases, i.e. where the defence produces some material which convincingly demonstrates that the whole prosecution case is totally absurd or totally concocted. We agree with Shri Lalit that in some very rare cases the Court is justified in looking into the material produced by the defence at the time of framing of the charges, if such material convincingly establishes that the whole prosecution version is totally absurd, preposterous or concocted.
However, in this case it cannot be said that the evidence in the Civil Suit which was produced by the defence before the trial court established convincingly that the prosecution case is totally absurd or preposterous. In our opinion this is a matter which has to be looked into by the trial Court.
In DR. MONICA KUMAR & ANR VERSUS STATE OF U.P. & ORS [2008 (5) TMI 687 - SUPREME COURT] this Court referred to various decisions on the point of quashing the criminal proceedings against the accused. In this decision this Court quashed the criminal proceedings against the accused, though on the allegations in the F.I.R. prima facie an offence was made out. Thus quashing of the criminal case was done considering all the facts and circumstances of the case. No doubt, in this decision the Court has relied on Article 142 of the Constitution, but in our opinion the result would have been the same irrespective of Article 142.
The judgment of the High Court in respect of Ranjit Sataredkar set aside - it is directed that the criminal proceedings against him will go on in the trial Court - appeal allowed.
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2008 (10) TMI 667
Issues:
Challenge to order confirming demand and penalty due to breach of natural justice principles.
Analysis:
The petitioner challenged an order confirming a recovery demand and penalty due to a breach of natural justice principles. The petitioner's appeal against the original order was dismissed as time-barred, leading to the challenge based on the order's alleged violation of natural justice. The authority is obligated to grant a hearing before concluding proceedings. The order mentioned specific dates for a personal hearing, but the petitioner did not appear, leading to the authority's final decision. However, subsequent letters requested further documents and set new hearing dates, contradicting the original order's claim of a final hearing. The petitioner requested more time to produce required documents, which was orally assured by the authority. The court found the original order violated principles of natural justice due to factual inaccuracies and failure to allow adequate time for the petitioner to present necessary documents.
The respondents argued that the petitioner should have pursued alternate remedies and challenged the order before a tribunal. However, the court cited the exception that allows intervention when an order breaches natural justice principles. As the order was found to violate natural justice, the court set aside the impugned order and remitted the proceedings for reconsideration in accordance with the law. The court held that the availability of alternate remedies or their time-barred nature should not prevent interference when principles of natural justice are breached. The petition was allowed, and the original order was overturned, directing a fresh consideration by the authority.
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2008 (10) TMI 666
Issues Involved:
1. Validity of proceedings u/s 158BD.
2. Jurisdiction of the Assessing Officer (A.O.).
3. Barred by limitation.
4. Merits of the additions made by the A.O.
Summary:
1. Validity of proceedings u/s 158BD:
The assessee argued that the proceedings u/s 158BD were not validly initiated as the A.O. did not record his satisfaction that the undisclosed income belonged to the assessee. The Tribunal referred to the Supreme Court judgment in Manish Maheshwari vs. ACIT, which mandates that the A.O. of the searched person must record satisfaction and transmit the material to the A.O. having jurisdiction over the other person. The Tribunal found that the pre-conditions for assuming jurisdiction u/s 158BD were not satisfied, thus rendering the proceedings invalid.
2. Jurisdiction of the Assessing Officer (A.O.):
The jurisdiction over the case was transferred from the Assistant Commissioner of Income-tax, Companies Circle 1(7) to the Deputy Commissioner, Central Circle 17, New Delhi, by an order u/s 127. The Tribunal noted that the first mentioned A.O. had no jurisdiction to issue the notice dated 31.05.2001. The notice issued by the second mentioned A.O. on 15.07.2002 was validly served on the assessee, but the satisfaction note was not recorded by the A.O. of the searched person (Shri S.K. Jain), thus invalidating the proceedings.
3. Barred by limitation:
The assessee contended that the assessment was barred by limitation as the notice u/s 158BD read with section 158BC was issued on 30.05.2001, and the assessment should have been completed by 31.05.2003. However, the assessment was completed on 30.07.2004. The Tribunal did not specifically address this issue as the proceedings were already held invalid on other grounds.
4. Merits of the additions made by the A.O.:
Since the matter was decided in favor of the assessee on the preliminary ground of invalid proceedings, the Tribunal did not examine the merits of the additions made by the A.O. but deleted by the learned CIT (A).
Conclusion:
The appeal of the revenue was dismissed, and the order of the learned CIT (A) was upheld. The Tribunal pronounced the order in the open Court on 04-07-2008.
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2008 (10) TMI 665
Issues Involved:
1. Genuineness of the gifts received by the assessee.
2. Application of Section 68 of the Income Tax Act.
3. Disallowance of additional sales-tax and job work expenses.
Issue-wise Detailed Analysis:
1. Genuineness of the Gifts Received by the Assessee:
The assessee received gifts amounting to Rs. 50 lakhs from Shri Pawan Kumar Jain and Rs. 10 lakhs from Shri Sagar Chand Jain. The Assessing Officer (AO) examined the donors and the donee to verify the genuineness of these gifts. The AO concluded that the gifts were not genuine based on several observations:
- There was no blood relationship between the donors and the donee.
- The donors had business dealings with the donee.
- The bank account of Shri Pawan Kumar Jain had insufficient funds when the gift was made.
- No special reason for giving such a huge gift was provided by the donors.
The AO treated the gifts as income from undisclosed sources under Section 68 of the Income Tax Act. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this decision, stating that there was no circumstantial evidence to justify the gifts as genuine.
2. Application of Section 68 of the Income Tax Act:
The primary onus to justify the genuineness of the cash credit lies on the assessee. To prove the genuineness of the cash credit, the assessee must establish:
- The identity of the creditor.
- The creditworthiness of the creditor.
- The genuineness of the transaction.
In this case, the identity and creditworthiness of the donors were established through their tax returns, balance sheets, and bank statements. The donors confirmed the gifts through their statements and affidavits. Despite this, the AO and CIT(A) concluded that the gifts were not genuine based on human probabilities and cultural norms.
3. Disallowance of Additional Sales-Tax and Job Work Expenses:
The assessee also contested the disallowance of additional sales-tax of Rs. 2765 and job work expenses of Rs. 20,545. However, these grounds were not pressed during the proceedings and were dismissed for want of prosecution.
Judgment:
The Tribunal examined the evidence and found that the assessee had provided sufficient proof to establish the genuineness of the gifts. The donors were persons of means, and their relationship with the donee was established through their statements and affidavits. The Tribunal held that the AO and CIT(A) had relied on surmises and conjectures rather than concrete evidence to treat the gifts as non-genuine.
The Tribunal concluded that the assessee had discharged the onus of proving the genuineness of the gifts. The addition of Rs. 60 lakhs as income from undisclosed sources was deleted. The disallowance of additional sales-tax and job work expenses was dismissed for want of prosecution.
Conclusion:
The appeal was partly allowed, with the Tribunal deleting the addition of Rs. 60 lakhs and dismissing the disallowance of additional sales-tax and job work expenses. The judgment emphasized the importance of concrete evidence over suspicion and conjecture in determining the genuineness of transactions under Section 68 of the Income Tax Act.
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