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Showing 61 to 80 of 682 Records
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2007 (2) TMI 671
Issues involved: Taxability of services rendered by the appellant as a C&F Agent.
Summary:
The appeal was filed against an order-in-appeal regarding the taxability of services provided by the appellant as a C&F Agent. The revenue contended that the appellant was acting as a C&F Agent based on evidence of commission income in the balance sheet. The adjudicating authority concluded that the appellant indeed provided C&F Agent services as a middleman between principal and procurer.
The appellant argued that the services provided did not fall under the category of a C&F Agent based on the agreement clause, which required coordination activities with customers but did not encompass all typical C&F Agent activities. The Central Excise Trade Notice clarified the role of a C&F Agent, including receiving goods, warehousing, arranging dispatch, maintaining records, and preparing invoices, which the appellant was not fully engaged in.
The revenue believed that C&F Agent services should involve a broader range of activities, as per the Trade Notice. However, the agreement presented did not align with the typical responsibilities of a C&F Agent. The lower authorities had relied on a previous Tribunal decision, which was later overruled by a Larger Bench decision, leading to the success of the appellant's appeal.
The appeal was allowed, and the appellant was granted consequential relief, if any.
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2007 (2) TMI 670
Issues involved:
The issues involved in the judgment are the requirement of pre-deposit of service tax amount, penalty under Section 76 of the Finance Act, 1994, levy of service tax on activities related to manufacturing, sale, erection, commissioning, installation, maintenance, and repair services under composite contracts, interpretation of contracts for service tax purposes, and the applicability of previous judgments by the Apex Court and Tribunal.
Pre-deposit of service tax and penalty:
The appellant was directed to pre-deposit a specific amount of service tax and penalty under Section 76 of the Finance Act, 1994. The Revenue levied service tax on activities related to manufacturing, sale, erection, commissioning, installation, maintenance, and repair services under composite contracts with customers. The appellant argued that they had already paid service tax for maintenance and repair services under the composite contract, and separate levy of service tax on erection, commissioning, and installation activities was not justified. The appellant relied on various judgments, including one by the Apex Court in the case of Kone Elevators (India) Ltd., which held that the activity was a "sale" and not a "Works Contract." The Tribunal's ruling in the case of Turbotech Precision Engineer P. Ltd. was also cited, emphasizing that a "Works Contract" cannot be vivisected to levy service tax on different activities. The appellant sought a full waiver of the pre-deposit based on these judgments.
Interpretation of contracts for service tax purposes:
Upon reviewing the contract, it was observed that composite charges were imposed on the appellant for all activities, and they had already paid service tax for maintenance and repair services. Citing the Apex Court's decision in the case of Kone Elevators (India) Ltd., which classified the activity as a "sale" and not a "works contract," the Tribunal found merit in the appellant's argument. The Tribunal also considered the judgment in the case of Daelim Industrial Co. Ltd., affirmed by the Apex Court, which stated that a contract primarily based on material supply cannot be treated as a consulting contract for service tax purposes. Consequently, the Tribunal granted a full waiver of the pre-deposit amount and stayed its recovery until the appeal's disposal, indicating a prima facie case in favor of the appellant.
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2007 (2) TMI 669
Issues involved:
The judgment involves the following Issues:
1. Whether the appellant is entitled to deduction of the 'provision' made in respect of Non Performing Assets.
2. Whether the provision made in respect of Non Performing Assets is allowable as a business loss.
Issue 1:
The appellant, engaged in hire purchase financing and equipment leasing, claimed allowance for the provision of Non Performing Assets. The Assessing Officer rejected the claim, stating it was already added back in the adjustment statement. The appellant argued that the debts were not recoverable, leading to a diminution in value, and should be allowed as a business loss if not as a bad debt.
Issue 2:
The appellant contended that the provision made for Non Performing Assets, in compliance with Reserve Bank of India directions and based on overdue provisions, should be considered a business loss. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to follow the RBI directions, considering the provision as an asset and liability. However, the Income Tax Appellate Tribunal, citing a previous court decision, held that such provisions are predominantly capital in nature and not deductible, leading to the dismissal of the appeal.
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2007 (2) TMI 668
Issues involved: Interpretation of Income-tax Act, 1961 regarding taxation of Insurance Compensation as capital receipt and validity of invoking section 263 by Commissioner of Income-tax.
Judgment Summary:
Issue 1: Taxation of Insurance Compensation
The petitioner sought direction to refer the question of law regarding the taxability of Insurance Compensation as capital receipt under section 256(2) of the Income-tax Act, 1961. The assessee received compensation claimed as not taxable, but the Commissioner revised the order under section 263 to include it in taxable income. The Tribunal set aside the Commissioner's order, noting that the powers under section 263 were not applicable based on the facts and circumstances of the case.
Issue 2: Validity of invoking section 263
The High Court found no merit in the revenue's petition. The Assessing Officer initially treated the receipt as a capital receipt during assessment under section 143(3) of the Act. The Court emphasized that the mere existence of a possible alternative opinion did not justify the exercise of powers under section 263. Therefore, the petition was dismissed.
This judgment clarifies the importance of proper assessment and the limitations on invoking section 263 of the Income-tax Act, 1961 based on the facts and circumstances of each case.
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2007 (2) TMI 667
Issues: Whether transfer of technical know-how/technology for setting up a plant for the manufacture of Trailers constitutes 'Consulting Engineer Services' for levy of Service Tax.
Summary:
The Appellate Tribunal CESTAT Bangalore considered the case where the appellants entered into agreements with a German company for transfer of technical know-how/technology for setting up a plant for manufacturing trailers. The Revenue considered this transfer as 'Consulting Engineer Services' for Service Tax levy. The Tribunal referred to various rulings, including Navinon Ltd. v. CCE, Pfizer Ltd. v. CCE, and others, which held that services transferred by a foreign company do not fall under 'Consulting Engineer Services'. The learned Counsels argued that the issue is covered by these judgments in favor of the assessee, and therefore, the stay application and appeal should be allowed.
Upon hearing the learned JDR who tried to distinguish the citations, the Tribunal carefully considered the submissions. It was noted that the Commissioner should have applied the ratio of the judgments, which clearly stated that when a foreign concern transfers technical know-how/technology, it does not fall under Consulting Engineer Services. Consequently, the Tribunal accepted the prayer for allowing the stay application and appeal based on the cited judgments. The impugned order was set aside, and the stay application and appeal were allowed with any consequential relief.
The judgment was pronounced and dictated in open court by Dr. S.L. Peeran, Member (J).
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2007 (2) TMI 666
Issues involved: Determination of service tax category - Consulting Engineer vs. Management Consultancy
Summary:
Issue 1: Determination of service tax category
The appellants, registered as Consulting Engineers, were paying Service Tax. The Revenue argued that the appellants' activities in software sales, development, maintenance, consultancy, and training should be categorized as 'Management Consultancy.' However, a previous Final Order by the Tribunal had accepted the appellants' plea to be classified as 'Consulting Engineer.' The learned Counsel submitted that the issue had already been decided in the appellants' favor for the previous period. The learned JDR filed a cross objection, asserting that the services fell under 'Management Consultancy.' Upon careful consideration, the Tribunal found that the previous Final Order in the appellants' favor was applicable to the present case as well. The Tribunal affirmed that the services rendered by the appellants indeed amounted to Consulting Engineer services. Consequently, the impugned orders were set aside, and the appeals were allowed in favor of the appellants.
Issue 2: Application of previous Final Order
The Tribunal referred to a previous Final Order in the appellant's own case, where it was established that the services provided by the appellants fell under the category of Consulting Engineers. The Tribunal noted that the Government of India had recognized Software Engineers as Consulting Engineers, as evidenced by an exemption Notification. The Tribunal agreed with the previous view that the services provided by the appellants were advisory in nature and involved consultation and advice, thus falling under the ambit of Consulting Engineers as per the Finance Act, 1994. Consequently, the Tribunal set aside the impugned Order-in-Original and allowed the appeals with consequential relief.
Conclusion:
The Tribunal, based on the previous Final Order and the nature of services provided by the appellants, determined that the appellants should be classified as Consulting Engineers for the purpose of Service Tax, rejecting the Revenue's argument for categorization under Management Consultancy. The appeals were allowed in favor of the appellants, setting aside the impugned orders and providing consequential relief, if any.
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2007 (2) TMI 665
Issues involved: Challenge to the order of dismissal of Application in I.A. No. 187 of 1999 in unnumbered Appeal, declining to condone the delay of 131 days in filing the Appeal.
Summary:
The Revision Petition challenged the dismissal of an application to condone a 131-day delay in filing an Appeal. The suit was decreed on 27-2-1998, and the Appeal was filed with the delay. The Petitioner contended that the delay was due to the case records being mixed up in the office. The Court discussed the exercise of discretion under Section 5 of the Limitation Act, emphasizing the need for a justice-oriented approach rather than technical objections. Citing previous judgments, the Court highlighted the importance of substantial justice over technical considerations in condoning delays.
The Court emphasized that delays in appeals should be condoned in the interest of justice unless there is gross negligence or deliberate inaction. It was noted that Government decisions involve procedural delays, and a liberal construction of "sufficient cause" is necessary. The Court referred to previous cases where delays were condoned due to public interest and the unique functioning of Government departments. The Court stressed the need for a pragmatic and justice-oriented approach in such matters.
Considering the facts of the case, the Court found the delay in filing the Appeal not unreasonable and held that the opportunity to pursue the Appeal should not be shut out. Consequently, the Impugned order was set aside, and the civil Revision Petition was allowed. The Principal District Judge was directed to take the Appeal on file for disposal in accordance with the law.
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2007 (2) TMI 664
Suit for specific performance of a development agreement - Non-grant of injunction - denying protections for their right of development of additional 1,00,000 sq.ft. by way of TDR on the suit plot - Whether the appellants have made out a prima facie case that the agreement relied upon was an agreement for sale and not an agreement for security and/or alternatively an agreement for development which could not be specifically performed - HELD THAT:- The learned Single Judge on a consideration of the various documents including the agreement has come to the prima facie finding that the agreement is an agreement to sell, which can be specifically enforced. The respondents, therefore, will have to make out a case that the finding by the learned single Judge is perverse. The view taken by the learned trial Court, ordinarily will have to be upheld,if it was a view capable of being taken, irrespective of the Appellate Court arriving at a conclusion that another view is probable which is a better view and as long as the findings based on which the view is taken are not perverse.
Whether on account of the term in the clause which permits acquisition of slum TDR the Appellants in so far as the additional F.S.I.is concerned, are not entitled for an injunction to that extent - In our opinion, the Appellant in the first instance have a right to use F.S.I. of the property and the S.F.I. by whatever name of the reservations of D.P. Road and/or P.G. of the entire property to the extent of 2,00,000 sq.ft. in terms of the agreements. To that extent the learned single Judge clearly erred in law in clarifying the order. Specific performance can be granted of the land or interest in the land, belonging to a person who has agreed to sell the land with interest therein. If the person is not the owner or has no interest in the land agreed to be sold or transferred there is no question of granting specific performance.
Slum TDR is not interest on the owners property. It is F.S.I. of some other land which is transferable in terms of D.C. Regulations. TDR may be owned by the holder but not the land from which TDR was generated. It can only be used on the owners property in terms of D.C. Regulation. Therefore, it is the F.S.I. of the entire property, including of R.G. and D.P. Road, which alone in terms of the Agreement, prima facie which can be specifically enforced. In such circumstances irreparable loss and injury would be occasioned to the Appellants, if the injunction is not granted. The balance of convenience is in their favour as compensation in money in such cases, would not be adequate. To that extent, we are clearly of the opinion, that the clarification given in the impugned order is liable to be set aside and we accordingly do so.
Whether the Appellants are entitled to right of way as claimed in the Agreement and in the suit - In the instant case this is not an easement of necessity nor an easement by prescription. The only term of the contract was to provide an access. The plot has been sub-divided and the sub-division sanctioned by the Planning Authority. The Appellants are entitled to develop a part of the plot C-2 in terms of the Agreement. Plot No. C-2 has an independent access in terms of the sanctioned sub division. Even in a case of easement of prescription or necessity, the owner can always on the facts of a case alter the access on the same land as long as it is provided on the same property and is easily accessible and does not have any impediments. In our opinion the learned Single Judge prima facie, on the facts, was right in not granting the injunction . We are clearly of the opinion that the Appellants have failed to make out a case irreparable loss or injury at the interim stage, in so far as access is concerned.
Thus, appeal is partly allowed to the extent that we set aside of the impugned order of the learned Single Judge. The Cross Objections are rejected.
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2007 (2) TMI 663
Issues involved:
The judgment involves the interpretation of penalty provisions under sections 67, 68, 70, 75, 76, and 77 of the Finance Act, 1994 in a case related to service-tax compliance by a traveling agent.
Summary:
Issue 1: Interpretation of penalty provisions under the Finance Act, 1994
The application under s. 35H of the Central Excise Act challenged the order of the Customs, Excise and Gold Control Tribunal regarding the reduction of penalty under ss. 67 and 68 of the Finance Act, 1994. The respondent, a service provider, was issued a show-cause notice for penalty under s. 70 of the Finance Act, 1994, along with recovery of service-tax and interest. The respondent's explanation for delayed payment was considered by the adjudicating authority, leading to the imposition of a reduced penalty. The Tribunal further reduced the penalty to &8377; 5,000, prompting the petitioner to appeal against this decision.
Issue 2: Application of s. 80 of the Finance Act, 1994
The respondent argued that s. 80 of the Finance Act, 1994, provides for the non-imposition of penalty in cases where there is a reasonable cause for the failure to pay service-tax on time. The respondent's explanation for the delay, including misappropriation by staff and misunderstanding of tax obligations, was deemed valid by the adjudicating authority. The failure to consider s. 80 by the authorities was highlighted, indicating that no penalty should have been levied based on the circumstances and the respondent's explanation.
Conclusion:
In light of the respondent's valid explanation for the delay in payment and the provisions of s. 80 of the Finance Act, 1994, the Court found that no penalty should have been imposed. The failure of both the assessee and the Revenue to notice s. 80 led to the imposition of a reduced penalty. The Court declined to refer the question raised by the Revenue for decision, emphasizing that the peculiar facts of the case warranted the absence of any penalty.
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2007 (2) TMI 662
Issues involved: Interpretation of service tax liability u/s "Management consultancy" for services provided under an agreement.
Summary:
The appellant, Glaxo Smithkline Consumer Healthcare Ltd., entered into an agreement with their group company, appointing the appellant as a non-exclusive agent to sell products. The issue arose when "business auxiliary service" was brought under service tax in July 2003. The appellant claimed they were not liable for service tax, but subsequent adjudication orders held them liable under "Management consultancy" service. The appellant appealed against this order.
During the hearing, the appellant cited a previous Tribunal order where similar services were classified as "business auxiliary service." The Tribunal analyzed various costs incurred by the appellant and concluded that the services provided did not fit the definition of "Management Consultancy Service." Instead, they were more aligned with "business auxiliary service." As a result, the levy of service tax on staff costs under "Management Consultancy Service" was deemed incorrect.
The Tribunal found that the appellant's services fell under "business auxiliary service" from July 2003, and the tax was correctly paid. Therefore, no demand or refund was necessary. The appeal was ordered accordingly, setting aside penalties and demands for tax and interest.
In conclusion, the Tribunal clarified the classification of the appellant's services under the service tax regime, determining that they aligned more with "business auxiliary service" rather than "Management Consultancy Service."
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2007 (2) TMI 661
Issues involved: Determination of liability for service tax on supply of personnel under the category of "Business Auxiliary Services" and consideration of time-bar for payment.
In the judgment by Appellate Tribunal CESTAT BANGALORE, the appellant, a service provider offering security services and personnel like drivers, nurses, loaders, etc., contested the categorization of supplying employees under "Business Auxiliary Services" for service tax liability. The appellant argued that providing personnel does not constitute promotion, marketing, or sale of goods as per the definition of "Business Auxiliary Services." They pre-deposited a partial amount and sought waiver for the remaining balance, citing that the department was aware of the services provided, making the claim time-barred. The appellant's counsel emphasized a strong case on merits for waiving the balance amount.
Upon consideration, the Tribunal agreed with the appellant that supplying personnel does not align with the definition of "Business Auxiliary Services" involving promotion or marketing activities, thus exempting &8377; 20 lakhs from pre-deposit. Regarding the remaining amount, the appellant's plea of being time-barred was acknowledged, as they were already under service tax coverage with all details disclosed to the department. Consequently, the Tribunal granted a waiver for the balance amount, allowing a stay on recovery until the appeal's disposal. The appeal was scheduled for hearing in due course.
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2007 (2) TMI 660
Issues Involved:
1. Deductibility of expenditure paid to Ghaziabad Engineering Co. (P.) Ltd.
2. Alternative contention regarding the nature of expenditure.
3. Allowance of higher rates of depreciation on roads, culverts, storage tanks, and pipelines.
4. Deduction u/s 40A(7) for additional liability for gratuity.
Summary:
Issue 1: Deductibility of Expenditure Paid to Ghaziabad Engineering Co. (P.) Ltd.
The assessee-company entered into an agreement with Ghaziabad Engineering Co. (P.) Ltd. (GEC) to render services for which a consideration of Rs. 5,50,000 per year was payable. The Tribunal disallowed the deduction due to lack of evidence proving performance of the contract. However, the High Court noted the long-standing relationship between the parties and the acceptance of oral advice. The Court emphasized that the agreement was bona fide and that the authorities should be slow in rejecting the contention of the assessee unless a strong case is made against it. The Court held that the expenditure was allowable and answered this issue in favor of the assessee.
Issue 2: Alternative Contention Regarding the Nature of Expenditure
Since the first question was answered in favor of the assessee, the second question, which was an alternative contention, was not addressed.
Issue 3: Allowance of Higher Rates of Depreciation on Roads, Culverts, Storage Tanks, and Pipelines
The Tribunal allowed higher rates of depreciation on roads, culverts, storage tanks, and pipelines. The High Court referred to previous judgments, including CIT v. Motor Industries Co. Ltd. and CIT v. Gwalior Rayon Silk Mfg. Co. Ltd., which treated roads, drains, and storage tanks as 'plant' for depreciation purposes. The Court answered this issue in favor of the Revenue, holding that roads, culverts, storage tanks, and pipelines in the factory are to be treated as 'plant' for depreciation purposes.
Issue 4: Deduction u/s 40A(7) for Additional Liability for Gratuity
The Tribunal allowed a deduction of Rs. 10.48 lakhs for additional liability for gratuity, even though the payment to the fund was made after ten years. The High Court referred to its earlier decision in ITRC 617/1998 and upheld the Tribunal's decision, answering this issue in favor of the assessee.
Conclusion:
1. The expenditure of Rs. 5,50,000 paid to GEC was deductible.
2. The alternative contention was not addressed.
3. Higher rates of depreciation on roads, culverts, storage tanks, and pipelines were allowed in favor of the Revenue.
4. The deduction for additional liability for gratuity u/s 40A(7) was allowed in favor of the assessee.
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2007 (2) TMI 659
Issues involved:
The legality of reassessment proceedings under section 147(a) of the Income Tax Act due to no addition being made in the consequential assessment for the income stated to have escaped assessment.
Summary:
Issue 1: Legality of reassessment proceedings under section 147(a) of the Act
The High Court considered a case where the original assessment was completed in 1971, and a reassessment was done in 1980 under section 147(a) of the Act, resulting in an addition of unaccounted money deposited by the assessee with another individual. However, the Appellate Assistant Commissioner found discrepancies in the reasons recorded for reopening the assessment and the actual basis for the reassessment. The Tribunal also noted that the original reason for reopening the assessment did not align with the addition made in the reassessment. The Court emphasized that the reasons for framing reassessment cannot differ from those that initiated proceedings under section 147(a) of the Act. Citing the Supreme Court's decision in CIT v. Sun Engg. Works (P.) Ltd., it was clarified that reassessment should only focus on the income that escaped assessment and not revisit the entire assessment. The Court also referred to a similar stance taken in the case of Vipan Khanna v. CIT. Consequently, the Court ruled in favor of the assessee, stating that the reassessment proceedings were not valid in the eyes of the law, and the addition made was unsustainable. The reference was disposed of accordingly.
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2007 (2) TMI 658
Income from undisclosed sources - Search and seizure Operation - addition was based on a loose paper No. 7 - dumb document - whether presumption lying under Section 132(4A) can be raised against the assessee - non-speaking order - Notice issued u/s 143(2) - Re-opening of the assessment u/s 148 - HELD THAT:- We notice that the AO could not establish that the assessee has charged any interest, if at all the impugned; figures were advances. There is no material to show that the AO has taxed these advances as wealth of the assessee. There is also no material to show that the assessee has taken any action to recover the money from the alleged debtors. It is not believable that the assessee or his legal heir would forget their money lying with the debtors. By one way or other, he or his legal heir would try to recover the money. The department has not done anything to find out that after the search in April, 1995. We are also unable to satisfy ourselves as to why the alleged transactions are considered in the assessment year 1989-90 when there is no date mentioned on the document. Once search took place in April, 1995, then undated paper could be presumed to be belonging to that period and hence the year of taxability would be assessment year 1996-97. Thus, it is merely by surmises that the AO has taxed it in the year 1989-90.
Thus, a document found during the course of search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant assessment year. Any gap in various components as mentioned in Section 4 of the I.T. Act must be filled up by the AO through investigations and correlations with other material found either during the No. 7 course of the search or on investigation. As a result, we hold that document No. 7 is a non-speaking document.
Since the facts of the present case are similar to the case of Sri Kantilal & Bros., we are of the view that no addition u/s 68 of the Act can be made on the basis of loose sheet being document No. 7 found during the course of the search.
Presumption lying u/s 132(4A) - In our considered view, such presumption is available to the proceedings u/s 132(5). In Section 278D, a separate presumption has been provided for invoking in prosecution proceedings. As no such presumption is provided in assessment proceedings, we infer that where the Legislature intended to provide such presumption it has been so provided in various Chapters. In Chapter relating to search and seizure that presumption about books of account and documents is provided but it is limited to the summary proceedings about retention or release of the assets u/s 132(5). This cannot be extended to assessment proceedings. Our view is supported by the decision of the Hon'ble Supreme Court in P.R. Metrani v. CIT [2006 (11) TMI 136 - SUPREME COURT].
Thus, the case of the Revenue is not assisted by Section 132(4A) in any way. Even otherwise our considered view is that such presumption can only be raised when document is speaking one and it reflects complete transactions without two interpretations.
As a result, we hold that the impugned document No. 7 is a dumb document and no addition an be made on that basis. Therefore, we confirm the order of the Ld. CIT (A) and dismiss the appeal filed by the revenue.
Re-opening of the assessment u/s 148 and addition on the basis of a seized loose paper No. 9 - We find that there is a direct nexus of the material available with the AO with the formation of the belief. Once it is done, in our considered view the reopening is justified. As a result, we reject the contention of the ld. A.R. in this regard. We uphold the order of ld. CIT (A) wherein he has confirmed the re-opening of the assessment. This ground of the assessee is, therefore, rejected.
It also does not show that the assessee has, in fact, advanced Rs. 20,000 or for that matter Rs. 5,30,000 on various dates. Thus, on the basis of same reasoning as we have given in respect of document No. 7 in revenue's appeal, we hold that the document No. 9 also is non-speaking so far as entry of Rs. 20,000 or for that matter entry of Rs. 5,30,000 being the total of various entries are concerned. It is not established by the AO that they are monies advanced. It is also not established that they are not recorded in the regular books of accounts. It is also not established that they relate to the assessee.
As held in Revenue's appeal, presumption u/s 132(4A) cannot be raised in assessment proceedings. Thus, following our own reasoning in Revenue's appeal, the addition sustained by the Ld. CIT (A), in our view, is incorrect and the same is, therefore, deleted.
Unexplained investment - search and seizure operations - found loose paper - HELD THAT:- The nature of transaction is clear that they are purchases. The date is available i.e. 27.6.1992 and finally the quantum of expenditure is also clear i.e. Rs. 1,31,736. Thus, there is no room for any doubt and therefore, we are of the considered view that lower authorities were justified in treating this amount as expenditure/investment and as no explanation was forthcoming, it was rightly treated as unexplained investment. It was for the assessee to submit cogent material so as to show that inference drawn by the AO was incorrect. It was for him to bring evidence from the concerned party that it is not a purchase but only a quotation. Since no such material was produced by the assessee, the onus shifted back to the assessee, remained undischarged. As a result, we confirm this addition. This ground of the assessee, therefore, fails.
Notice issued u/s 143(2) - assessment completed u/s 143(3) - We are of the view that there is no merit in the argument of the Ld. A.R. It is because there has been amendment in Section 148 wherein issuance of notice u/s 143(2) after expiry of 12 months is no longer required and in absence of issuance of such notice within 12 months, the assessment will not be declared invalid. This amendment was introduced by the Finance Act, 2006 with retrospective effect from 1.10.1991. Even otherwise, our view that assessment cannot be annulled merely because notice u/s 143(2) was issued beyond 12 months in re-assessment proceedings initiated under Section 148(1) finds support from the decision of I.T.A.T. Amritsar Bench in the case of Sharma and Co. v. ACIT, [2004 (6) TMI 242 - ITAT AMRITSAR].
After the amendment by Finance Act, 2006, the view was explicitly made clear that time limit for issuance of notice u/s 143(2) will not apply in re-assessment proceedings. Therefore, this additional ground taken by the assessee has no force and hence fails. As a result, this ground of the assessee is dismissed. As a result, the appeal filed by the assessee is partly allowed.
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2007 (2) TMI 657
Issues Involved:
1. Disallowance of depreciation.
2. Disallowance under Section 43B for late deposit of provident fund.
3. Disallowance of overages and shortages.
4. Disallowance of technical and consultancy fees.
5. Inclusion of service charges in turnover and related tax implications.
6. Deduction under Section 80-IA.
7. Computation of deduction under Section 80HHD.
8. Validity of reopening assessment for the assessment year 1995-96.
Detailed Analysis:
1. Disallowance of Depreciation:
The assessee challenged the disallowance of Rs. 37,037 in depreciation. The AO reduced the opening WDV of various block of assets by the value of assets sold/discarded during the year. The contention was that under Section 32 of the IT Act, 1961, depreciation is available for assets used in the business, whether sold/discarded or not. The Tribunal directed the AO to verify the usage of assets for more than 180 days and pass suitable orders. The assessee's claim was upheld.
2. Disallowance under Section 43B for Late Deposit of Provident Fund:
The AO disallowed Rs. 11,04,010 for late deposit of provident fund contributions. The deposit was made on 27th April 1998, beyond the due date of 20th April 1998. The assessee argued that the deposit was made before the filing of the return, citing the Gauhati High Court's decision in CIT vs. Assam Tribune. The Tribunal found merit in the assessee's contention and directed the AO to allow the deduction.
3. Disallowance of Overages and Shortages:
The AO disallowed Rs. 9,570 on account of overages and shortages due to lack of details or explanation. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in confirming the additions, as the assessee failed to provide necessary details.
4. Disallowance of Technical and Consultancy Fees:
The AO disallowed Rs. 10 lakhs paid for the use of marble in the central courtyard of Lallgarh Palace, considering it a capital expenditure. The assessee argued it was revenue expenditure for facilitating hotel operations. The Tribunal, referencing the Supreme Court's decision in Empire Jute Co. Ltd. vs. CIT, held that the expenditure facilitated trading operations without adding to fixed capital, thus allowable as revenue expenditure.
5. Inclusion of Service Charges in Turnover and Related Tax Implications:
The AO included service charges in the assessee's turnover and disallowed certain deductions, treating part of the service charges as income. The assessee argued that service charges collected were for and on behalf of banquet employees and not part of its income. The Tribunal remanded the issue to the AO for reconsideration, emphasizing the need to consider the customary practice in the hotel industry and the legal principles of diversion by overriding title.
6. Deduction under Section 80-IA:
The assessee claimed that income from exchange fluctuation, insurance claims, interest on KEB deposit, NSC, and scrap sales should be included in computing deduction under Section 80-IA. The Tribunal, following precedents, allowed the assessee's claim and directed the AO to recompute the deduction.
7. Computation of Deduction under Section 80HHD:
The AO computed the deduction based on the entire business income, while the assessee claimed it should be based on income from each eligible hotel. The Tribunal, referencing its earlier decision in the assessee's own case, held that the deduction should be computed for each approved hotel individually. The assessee's claim was allowed.
8. Validity of Reopening Assessment for the Assessment Year 1995-96:
The assessee challenged the reopening of assessment, arguing that no valid notice under Section 148 was served. The Tribunal found that the notice dated 28th March 2002 was not properly served, rendering the reopening invalid. The assessment order was quashed, and the appeal for the assessment year 1995-96 was allowed.
Conclusion:
The appeal for the assessment year 1998-99 was partly allowed, and the appeal for the assessment year 1995-96 was fully allowed. The Tribunal directed the AO to reconsider certain issues, verify facts, and pass suitable orders in line with the legal principles and precedents cited.
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2007 (2) TMI 656
Addition on account of receivable interest on amounts advanced to the subsidiary company - HELD THAT:- In the instant case, the Tribunal, after careful analysis of the materials available on record found that no fresh loan was given by the assessee to its sister concern during the relevant assessment year and moreover, similar claim of allowance of interest paid on borrowings as interest referable to the advances given to its subsidiary company was allowed during the earlier assessment years, and the same remains unchallenged till date. In our considered opinion, such finding given by the Tribunal based on valid materials, does not warrant interference.
Payment of incentives to Dock Labour Board workers - HELD THAT:- The first appellate authority as well as the Tribunal found that there is no breach of law in making payments which were essentially incidental to the carrying of the appellant's business with a view to earning profits, and such finding given by both the authorities, after wading through the materials available on record, in our considered opinion, needs no interference.
Expenditure as loose tools written off - HELD THAT:- The reasoning of the CIT (Appeals), which was confirmed by the Tribunal, was based on appreciation of the materials on record, which revealed that the assessee had not sold such tools and if and when such tools are sold, the same would be brought into the profit and loss account. Such finding, based on appreciation of facts, in our considered opinion, warrants no interference. Hence, this substantial question of law needs no consideration.
Addition on interest/clearing and handling receipts, stevedoring receipts, agency fees, service charges - HELD THAT:- The Tribunal had consistently held the above issue in favour of the assessee and the Revenue had accepted the earlier order and counsel for the Revenue had not produced any material or evidence before us to take a different view. When a consistent view has been taken by the Tribunal, there is no error or infirmity in the order of the Tribunal and it does not require interference and hence no substantial question of law arises for consideration.
In the result, finding no substantial question of law arising for our consideration, these appeals are dismissed. No costs.
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2007 (2) TMI 655
Tax interest granted on enhanced compensation - quantum of enhanced compensation - HELD THAT:- We find that in the present case the assessee has already received the enhanced compensation as we as interest on such enhanced compensation. HUDA who has acquired the land has not challenged the quantum of enhanced compensation in further appeal. Only the landowners have challenged the compensation granted in this regard. Thus the amount of interest which has already been received is not going to be recovered back. Thus to the extent of amount already received, the same has attained finality and hence in view of the decision of Special Bench of the Tribunal in the case of Dy. CIT v. Padam Prakash (HUF) [2006 (9) TMI 222 - ITAT DELHI-E] the interest actually received has to be brought to tax. This ground is accordingly to be dismissed in all the cases.
Denial of exemption u/s 54B r/w section 54H - HELD THAT:- Investment in the new agricultural land by the assessee in the name of their family members cannot be a bar for granting exemption u/s 54B/54H of the Act. So long as the consideration has passed from the consideration received on transfer of asset, deduction has to be granted considering the spirit of the provision. We accordingly hold that in view of the discussion and in view of the decision of the Tribunal in Babu Ram v. ITO [2004 (2) TMI 285 - ITAT DELHI-A], the assessee is entitled to deduction u/s 54B/54H of the Act. The Assessing Officer shall verify that the assessee has invested in agricultural land based on the land records as may be produced by the assessee before him. If it is found that the assessee has acquired agricultural land, the assessee should be held eligible for exemption u/s 54B/54H of the Act.
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2007 (2) TMI 654
Issues involved: Service tax demand, limitation period for demand, management consultancy services, liability to service tax.
Service tax demand and limitation period: The Revenue appealed against the Commissioner of Central Excise (Appeals) dropping the service tax demand raised on the respondents for the period 16-10-1998 to 31-3-1999, claiming it was barred by limitation. The appellants, registered as share brokers, were found to be acting as consultants for merger & acquisitions of companies. Despite receiving payment for these services, they failed to pay service tax. The Assistant Commissioner communicated their liability to pay service tax in November 1999. A show cause notice was issued in September 2001, after the CBEC clarified in June 2001 that advisory services in merger and acquisition transactions are taxable under management consultancy services. The Tribunal agreed with the Commissioner (Appeals) that the demand was barred by limitation as the respondents were not aware or should have been aware of their liability to pay service tax, thus rejecting the appeal.
Management consultancy services and liability to service tax: The High Court directed the CBEC to clarify whether financial advisors providing services in merger and acquisition transactions are considered management consultants liable to service tax. The CBEC's circular confirmed that such advisory services are taxable under management consultancy services. The Tribunal held that since the respondents were not aware of their liability to pay service tax for providing financial advisory services for mergers and acquisitions, the extended period of limitation cannot be applied against them. Therefore, the demand for service tax was considered barred by limitation, upholding the decision of the Commissioner (Appeals) and rejecting the appeal.
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2007 (2) TMI 653
Issues:
The judgment involves the disallowance of depreciation claimed by the appellant for the assessment year 1990-91 under Section 260A of the Income Tax Act, 1961.
Depreciation Claim Disallowance:
The appellant, a limited company, claimed depreciation of Rs. 9,70,663 for past years. The Assessing Officer disallowed this claim, stating that adjustments for computing book profit must be made as per the Companies Act, 1956. The AO held that the appellant incorrectly debited the sum for arrears of depreciation due to a change in the method of calculating depreciation. The CIT(A) directed the AO to allow the claim of arrears of depreciation, citing relevant provisions of the Companies Act and a Tribunal decision supporting the appellant's method of depreciation calculation.
Appellate Proceedings:
The CIT(A) allowed the depreciation claim, emphasizing the appellant's compliance with the Companies Act and the legitimacy of the method used for claiming depreciation. The Revenue appealed to the Tribunal, which disallowed the claim based on the change in depreciation method. The Tribunal relied on a previous judgment and rejected the claim for earlier years' depreciation to determine book profit under Section 115J of the Act.
Judicial Interpretation:
The High Court analyzed the applicability of the judgment in a similar case and emphasized the need to comply with the Companies Act for calculating book profit. Reference was made to the Supreme Court's stance on the AO's limited power in computing book profit under Section 115J. The Court differentiated between prospective and retrospective claims for depreciation method change, concluding that the change must be applied prospectively from the date of implementation.
Conclusion:
The High Court ruled in favor of the appellant, allowing the depreciation claim prospectively from the date of method change. The judgment highlighted the importance of adhering to the Companies Act provisions and the limited powers of the AO in adjusting book profit. The appeal was disposed of with no costs awarded.
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2007 (2) TMI 652
Issues Involved: The judgment involves two main issues: 1. Investment of Rs. 60 lacs made by M/s Gold Mark Enterprises, a company incorporated in Mauritius, and 2. Entitlement of the Assessee to deduction under Section 80-IA of the Income Tax Act, 1961.
Investment Issue: The Revenue challenged the order of the Income Tax Appellate Tribunal regarding the investment made by M/s Gold Mark Enterprises. The Tribunal had concluded that the identity of the investor was established by the Assessee, citing precedents like CIT vs. Achal Investment Ltd. and CIT vs. Steller Investment Ltd. The Tribunal found that the Assessee had met its initial burden, and the investment could not be considered undisclosed income. The Tribunal noted that no addition was made to the Assessee's income for the assessment year 1996-97. The High Court held that no substantial question of law arose regarding the Rs. 60 lacs investment by M/s Gold Mark Enterprises.
Clarification on Investment Amount: It was clarified that for the assessment year 1995-96, the investment amount was Rs. 40 lacs, not Rs. 60 lacs as initially mentioned.
Deduction under Section 80-IA Issue: The second issue raised by the Revenue concerned the entitlement of the Assessee to deduction under Section 80-IA of the Income Tax Act, 1961. The High Court found this issue to raise a substantial question of law and admitted the appeal on this ground. A specific question of law was framed regarding the correctness of the Income Tax Appellate Tribunal's decision on the Assessee's entitlement to deduction under Section 80-IA.
Conclusion: The High Court admitted the appeal on the second issue related to the Assessee's entitlement to deduction under Section 80-IA and directed the filing of paper books in accordance with the High Court rules, granting liberty to the Assessee to submit the paper book that was before the Tribunal.
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