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2007 (10) TMI 646
MODVAT/CENVAT credit - denial on the ground that they have availed cenvat credit on the basis of the invoices supplied by the registered dealer, who has not supplied duty apid inputs but has supplied non duty paid scrap to appellant - Held that: - the Revenue has not considered the fact that the appellant had received and consumed the inputs in the factory premises and paid for the same. There is also no contrary evidence to show that the appellant had not paid the supplier's invoices raised on them - appeal allowed.
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2007 (10) TMI 645
N/N. 64/88-Cus. dated 1st March, 1988 - import of medical instruments - principles of Natural Justice - Held that: - case is remitted back to the DGHS to pass a fresh order in accordance with law after affording due opportunity to the appellants to put forth their case.
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2007 (10) TMI 644
Issues Involved:
1. Curtailment of Tax Incentives
2. Compliance with Scheme of Incentives
3. Delay in Installation and Sealing of Meters
4. Denial of Full Remission of Electricity Duty
5. Representation and Rejection by State Level Committee
6. Legal and Fundamental Rights Violation
Detailed Analysis:
1. Curtailment of Tax Incentives:
The petitioners challenged the order dated 13.09.2005 by the Commissioner of Tourism, Government of Gujarat, which curtailed the tax incentives initially granted under the New Package Scheme of Incentives for Tourism Projects 1995-2000. The petitioners argued that the order was contrary to the principles of Equity and Rule of Law, specifically Promissory Estoppel, as it reduced the tax incentives initially granted.
2. Compliance with Scheme of Incentives:
The petitioners contended that they met the criteria of the New Tourism Policy-1995, which granted tourism the status of an industry and provided a package of incentives, including tax holidays for newly set up and expanded tourism units. They were granted a temporary registration on 30.10.1998 and an eligibility certificate on 26.12.1998 for tax incentives up to Rs. 84.03 Lacs for the period from 01.12.1998 to 28.02.2003.
3. Delay in Installation and Sealing of Meters:
The petitioners installed three meters for the expanded area on 19.02.1999. However, due to delays by the Gujarat Electricity Board (GEB) in testing and sealing the meters, the remission of electricity duty was granted only from 12.01.2001 to 28.02.2003, instead of the full eligible period. The petitioners argued that this delay was not their fault and that the curtailment of the period resulted in a loss of around Rs. 18.53 Lacs.
4. Denial of Full Remission of Electricity Duty:
The petitioners argued that the Scheme of Incentives did not distinguish between new tourism units and expansions of existing units regarding tax exemptions. They claimed that the Notification dated 05.04.1997 did not limit the exemption from electricity duty to the expanded portion of the unit. The petitioners asserted that they were entitled to the full remission of electricity duty for the entire eligible period and amount.
5. Representation and Rejection by State Level Committee:
Despite making several representations, the petitioners' request for modification of the eligibility certificate and reallocation of incentives was rejected by the State Level Committee without any cogent reason. The petitioners had filed Special Civil Application No. 12326 of 2002, which was withdrawn after the court directed the competent authority to consider the representation in accordance with law. However, the State Level Committee rejected the petitioners' request again on 13.09.2005.
6. Legal and Fundamental Rights Violation:
The petitioners argued that the impugned order violated their fundamental rights under Articles 14 and 19 of the Constitution of India. They claimed that the order was against the rule of equity and contravened the provisions of the Scheme of Incentives. The petitioners asserted that they had acted in reliance on the promise of tax incentives and had made substantial investments, entitling them to enforce the promise against the respondents.
Judgment:
The court found considerable force in the petitioners' submissions. It noted that the State Government had declared the "New Tourism Policy - 1995," granting tourism the status of an industry with various incentives. The court observed that the petitioners had complied with the procedural requirements and that the delay in testing and sealing the meters was due to the GEB's laxity. The court held that the respondents were not justified in reducing the eligibility period and that the petitioners were entitled to the full sanctioned amount of electricity duty as a remission. The court directed the respondents to make good the loss of incentive amounting to Rs. 18.53 Lacs.
Conclusion:
The petition was allowed, and the respondents were directed to compensate the petitioners for the loss of incentive due to the curtailed period of electricity duty remission. The court emphasized that the petitioners were not at fault and had acted based on the assurances given by the respondent authorities.
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2007 (10) TMI 643
Issues involved:
The valuation of a property for income tax assessment purposes based on conflicting information provided by the assessee and his wife, the findings of the Valuation Cell of the Income-tax Department, and the credibility of corroborative evidence from a property dealer.
Valuation of Property:
The appellant contested an order by the Income-tax Appellate Tribunal regarding the value of a property in New Delhi. The assessee claimed to have purchased the property for Rs. 20 lakhs, while the Assessing Officer relied on the wife's statement indicating a purchase price of Rs. 70 lakhs. The Valuation Officer valued the property at Rs. 31.44 lakhs, but the Assessing Officer chose to accept the wife's valuation. The Commissioner of Income-tax (Appeals) reduced the value to Rs. 25.15 lakhs. The Tribunal, considering marital discord and criminal proceedings between the assessee and his wife, deemed the wife's valuation unreliable and set aside the previous findings.
Corroborative Evidence:
The Assessing Officer relied on information from a property dealer's books indicating a sale price of Rs. 70 lakhs, but the Tribunal found discrepancies. The property dealer denied brokering the deal and clarified that the figure in his books did not relate to the property in question. This undermined the credibility of the corroborative evidence presented by the revenue.
Valuation Cell's Report:
The Valuation Officer's report valued the property at Rs. 31.44 lakhs, but the Tribunal observed procedural lapses. The Valuation Officer did not seek comments from the assessee or allow an opportunity to file objections. Additionally, the revenue failed to provide evidence to discredit the value stated in the registered document. The Tribunal emphasized that a registered document typically indicates the property value unless rebutted by reliable evidence.
Judgment:
The High Court upheld the Tribunal's decision, stating that the case involved evidence evaluation and did not raise significant legal questions. The Tribunal's assessment was deemed appropriate, and the appeal was dismissed.
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2007 (10) TMI 642
Additions on Unexplained Share application Money - Loss declared - financing and trading in shares - HELD THAT:- We find that the findings of the CIT(A) as extracted hereinabove are sufficient to show that the additions made by the Assessing Officer were not justified. The reasoning and conclusions arrived at concurrently by the CIT(A) and the Tribunal suffer from no perversity and are consistent with the law as explained by this Court in CIT v. Divine Leasing & Finance Ltd.[2006 (11) TMI 121 - DELHI HIGH COURT].
We are of the view that no substantial question of law arises in these appeals. Accordingly, these appeals are dismissed.
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2007 (10) TMI 641
Issues Involved:
The judgment involves the assessment year 1998-99, where the Income-tax Appellate Tribunal dismissed the revenue's case. The revenue raised four questions of law, including the treatment of software expenses against the book profit u/s 115JA of the Act.
Question (a), (b), and (c):
The Court noted that based on the decision in CIT v. Woodward Governor (India) (P.) Ltd., no substantial question of law arises regarding these issues. The position was admitted, and the questions were not considered significant.
Question (d):
The main issue was whether the Tribunal was correct in allowing software expenses as revenue expenditure against the book profit computed u/s 115JA of the Act. The Tribunal concluded that expenses on software used in computers are revenue expenditure since software becomes obsolete quickly and needs regular updates, making it not an enduring asset.
Legal Interpretation:
The Court was informed about section 38 of the Income-tax Act, 1961, which mentions intangible assets entitled to depreciation. However, the amendment to section 32, which is not retrospective, was not seen as assisting the revenue's case. The Court opined that no substantial question of law arises in this matter.
Conclusion:
The Court upheld the Tribunal's decision and dismissed the appeal, stating that the software expenses were rightly treated as revenue expenditure. The judgment was based on the nature of software as a non-enduring asset that requires regular updates, aligning with the Tribunal's reasoning.
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2007 (10) TMI 640
Issues Involved:1. Entitlement to deduction u/s 80RR of the IT Act. 2. Levy of interest u/s 234B and 234C of the IT Act. 3. Validity of reopening proceedings u/s 147 of the IT Act. Summary:1. Entitlement to Deduction u/s 80RR of the IT Act:The assessee, a presenter, commentator, and programme compere, claimed deduction u/s 80RR of the IT Act, asserting he was an "artist." The CIT(A) and the Tribunal, following the decision in the assessee's own case for asst. yr. 1997-98, held that the assessee was not an actor or artist and thus not entitled to the deduction. The Tribunal emphasized the rule of consistency and judicial discipline, stating, "We therefore see no valid reason to take a view contrary to the one taken by this Tribunal in the assessee's own case for asst. yr. 1997-98." The Tribunal also rejected the assessee's plea to follow the decision in Amitabh Bachchan vs. Dy. CIT, noting the factual differences between the cases. 2. Levy of Interest u/s 234B and 234C of the IT Act:The assessee contested the levy of interest u/s 234B and 234C, arguing that the estimation of current income was bona fide and that the AO did not provide a specific order for charging interest. The Tribunal, following its decision in the assessee's appeal for asst. yr. 1997-98, held that the levy of interest is mandatory and automatic upon assessment. The Tribunal stated, "Levy of interest is mandatory and automatic upon the assessment. Interest is levied to compensate the exchequer for delay in or non-payment of taxes." Consequently, the Tribunal dismissed the grounds related to the levy of interest. 3. Validity of Reopening Proceedings u/s 147 of the IT Act:The assessee challenged the reopening of proceedings u/s 147, arguing it was based on a change of opinion. The CIT(A) and the Tribunal, citing the Supreme Court judgment in Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., held that since the original returns were accepted u/s 143(1), there was no application of mind by the AO, and thus no question of change of opinion. The Tribunal concluded, "In this view of the matter, ground No. 5 taken in his appeal for asst. yrs. 1996-97, 1998-99 and ground No. 4 in asst. yr. 1999-2000 is dismissed." Conclusion:All the appeals filed by the assessee were dismissed, and the prayer for the constitution of a Special Bench was rejected, as the matter was already pending before the Hon'ble jurisdictional High Court.
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2007 (10) TMI 639
Issues involved: Appeal u/s 260A of the Income-tax Act, 1961 regarding penalty proceedings u/s 271(1)(b) and 271(1)(c) for the assessment year 2000-01.
In this case, the High Court of Delhi considered an appeal u/s 260A of the Income-tax Act, 1961 where the revenue challenged an order passed by the Income-tax Appellate Tribunal regarding penalty proceedings u/s 271(1)(b) and 271(1)(c) for the assessment year 2000-01. The main issue was whether the Assessing Officer had validly recorded satisfaction for initiating penalty proceedings against the assessee.
Upon review, the Court found that there was no indication that the Assessing Officer was satisfied that the assessee had concealed income, furnished inaccurate particulars, or failed to comply with any notice. The penalty order was passed only u/s 271(1)(c) of the Act, without proper satisfaction recorded by the Assessing Officer for initiating penalty proceedings.
Furthermore, the Court examined the orders of the Commissioner of Income-tax (Appeals) and the Tribunal regarding the classification of rental income as 'Income from house property' or 'Business income'. The CIT(A) had held that since two views were possible and there was no clear inference, it could not be concluded that the assessee had concealed income or furnished inaccurate particulars. The Tribunal upheld this finding, and the Court agreed that no interference was warranted with their concurrent decisions.
Ultimately, the Court concluded that no substantial question of law arose from the case and dismissed the appeal.
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2007 (10) TMI 638
Issues involved: Interpretation of Sections 158BA(3) and 158B(b) of the Income Tax Act, 1961 in relation to undisclosed income from a sale transaction of agricultural land.
Summary:
The High Court of Delhi heard an appeal by the Revenue against an order passed by the Income Tax Appellate Tribunal regarding the treatment of undisclosed income in the block assessment period u/s 132 of the Income Tax Act, 1961. The case involved a search conducted on the bank account of the Assessee post a sale transaction of agricultural land completed before the search.
The Assessing Officer contended that the cash amount received from the land sale was undisclosed income, seeking to include it in the block assessment period. However, both the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal held that since the Assessee disclosed the entire sale proceeds in a regular return before the search, the cash receipts could not be treated as undisclosed income u/s 158BA(3) and 158B(b) of the Act.
The Court analyzed the provisions of Section 158BA(3) and Section 158B(b) and concluded that the cash income recorded in the bank account before the search did not qualify as undisclosed income. It was determined that the Revenue should have assessed the income under Section 143(3) of the Act rather than Chapter XIV B. The Court found no substantial question of law and dismissed the appeal.
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2007 (10) TMI 637
Issues Involved:
1. Entitlement to depreciation on leased assets.
2. Addition of unpaid excise duty under Section 43B.
3. Disallowance of guesthouse expenses under Section 37(4).
4. Disallowance of expenses related to lease transactions.
5. Disallowance of short-term capital loss on sale of debentures.
6. Determination of cost of acquisition of property for computing capital gains.
7. Inclusion of sales tax in total turnover for Section 80HHC deduction.
8. Rectification of assessment order under Section 154 based on DVO's valuation report.
Issue-wise Detailed Analysis:
1. Entitlement to Depreciation on Leased Assets:
The primary issue was whether the assessee, a public limited company, was entitled to claim 100% depreciation on energy-saving devices leased to Andhra Pradesh State Electricity Board (APSEB). The Assessing Officer disallowed the claim, arguing it was a financial transaction rather than a genuine lease. The CIT(A) overruled this, supporting the assessee's claim based on proper documentation, installation certificates, and standard lease terms. The Tribunal upheld the CIT(A)'s decision, emphasizing the legitimacy of the transaction, the ownership of the asset by the assessee, and compliance with legal provisions.
2. Addition of Unpaid Excise Duty under Section 43B:
The assessee contested the addition of Rs. 10,44,351 made under Section 43B for unpaid excise duty on finished goods. The Tribunal found that the assessee had consistently followed a method of not including excise duty in the valuation of closing stock, which was in line with ICAI guidelines. The Tribunal ruled that Section 43B was inapplicable as the excise duty was neither claimed as a deduction nor paid. Consequently, the addition was deleted.
3. Disallowance of Guesthouse Expenses under Section 37(4):
The assessee challenged the disallowance of Rs. 71,825 as guesthouse expenses. The Tribunal upheld the disallowance, citing the Supreme Court's decision in Britannia Industries Ltd. vs. CIT, which clarified that expenses incurred for maintaining a guesthouse are not deductible, regardless of their business purpose.
4. Disallowance of Expenses Related to Lease Transactions:
The assessee disputed the disallowance of Rs. 1,66,280 estimated as expenses related to the lease transaction with APSEB. The Tribunal acknowledged the peculiar situation where records were destroyed due to a building collapse but upheld the nominal disallowance made by the Assessing Officer, considering it reasonable.
5. Disallowance of Short-term Capital Loss on Sale of Debentures:
The assessee claimed a short-term capital loss of Rs. 5 crore on the sale of debentures, which the Assessing Officer disallowed, suspecting a scheme to reduce long-term capital gains tax liability. The Tribunal, after considering the documentary evidence and market conditions, found no basis for the disallowance and directed the Assessing Officer to set off the loss against the capital gains tax.
6. Determination of Cost of Acquisition of Property for Computing Capital Gains:
The assessee contested the substitution of the fair market value of the property as on April 1, 1981, by the Assessing Officer, who used wealth-tax valuation. The Tribunal ruled that wealth-tax valuation was not appropriate for capital gains purposes and directed the Assessing Officer to accept the fair market value reported by the assessee, supported by a registered valuer's report.
7. Inclusion of Sales Tax in Total Turnover for Section 80HHC Deduction:
The assessee argued against including sales tax in the total turnover for computing the deduction under Section 80HHC. The Tribunal, referencing the Supreme Court's decision in CIT vs. Lakshmi Machine Works, directed the exclusion of the sales tax element from the total turnover for Section 80HHC computation.
8. Rectification of Assessment Order under Section 154 Based on DVO's Valuation Report:
The Revenue's appeal concerned the rectification of the assessment order based on the DVO's valuation report, which was higher than the wealth-tax valuation but lower than the assessee's reported value. The Tribunal found the appeal infructuous as the main issue had already been resolved in favor of the assessee in the quantum appeal.
Conclusion:
The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeal, providing detailed reasoning for each issue based on legal precedents, documentary evidence, and applicable accounting standards. The order was pronounced on October 29, 2007.
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2007 (10) TMI 636
Issues Involved:
1. Addition under Section 68 of the Income-tax Act, 1961.
2. Disallowance of interest related to the addition under Section 68.
3. Disallowance of expenses.
4. Validity of notice under Section 148 for reassessment.
Detailed Analysis:
1. Addition under Section 68 of the Income-tax Act, 1961:
The revenue appealed against the deletion of an addition of Rs. 2,89,84,79,013/- made by the Assessing Officer (A.O.) under Section 68. The CIT(A) had deleted this addition, and the Tribunal upheld this deletion. The Tribunal noted that the addition was based on an order under Section 263, which was set aside by the Tribunal earlier, holding that the A.O.'s original order was not erroneous or prejudicial to the revenue. Since the Tribunal's earlier order was not overturned by any higher authority, the ground for addition under Section 68 did not survive. Thus, the Tribunal dismissed this ground.
2. Disallowance of Interest Related to the Addition under Section 68:
The A.O. had disallowed interest of Rs. 9,17,03,473/-, which was claimed by the assessee on deposits that were added under Section 68. The CIT(A) deleted this disallowance, considering it consequential to the deletion of the addition under Section 68. However, the Tribunal examined this issue on merits. It was found that the statutory audit for the year 1998-99 revealed no excess provision for interest liability. Given that the provision for interest was found fair and reasonable, the Tribunal upheld the CIT(A)'s decision to delete the disallowance of interest. Thus, this ground was also dismissed.
3. Disallowance of Expenses:
The A.O. had disallowed expenses amounting to Rs. 2,76,24,511/- due to non-production of books and vouchers by the assessee. The CIT(A) deleted this disallowance, noting that the books and vouchers were produced but not examined by the A.O. due to lack of time. The Tribunal found that the A.O. should have granted additional time to examine the evidence. Therefore, the Tribunal restored the matter to the A.O. for verification of the expenses with reference to the vouchers and directed a de novo decision after hearing the assessee. Thus, this ground was allowed for statistical purposes.
4. Validity of Notice under Section 148 for Reassessment:
The revenue challenged the CIT(A)'s decision to cancel the reassessment for the assessment year 1990-91. The reassessment was based on three reasons: non-charging of interest from a sister concern, disallowance of service charges, and underreporting of interest income on FDRs. The CIT(A) found that these issues were already discussed during the original assessment, and there was no failure on the part of the assessee to disclose material facts. The Tribunal upheld the CIT(A)'s decision, noting that the original assessment was completed after detailed inquiries and there was no new material to justify the reopening. Additionally, the notice under Section 148 was issued after four years, requiring the A.O. to show that income escaped assessment due to the assessee's failure to disclose material facts, which was not demonstrated. Therefore, the Tribunal dismissed the revenue's appeal and allowed the assessee's cross-objections.
Conclusion:
The Tribunal dismissed the revenue's appeal on the grounds of addition under Section 68 and disallowance of interest, upheld the CIT(A)'s deletion of these additions, and restored the issue of disallowance of expenses to the A.O. for fresh examination. The reassessment notice under Section 148 was also found invalid, leading to the dismissal of the revenue's appeal and allowance of the assessee's cross-objections. The order was pronounced in the open court on 12 October 2007.
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2007 (10) TMI 635
Issues involved:
The issues involved in the judgment are deductions made under the V.R.S. Scheme, contravention of Section 10(10C) and Section 89 of the Income Tax Act, compliance with Rule 2BA of the Act, and the discretion of the Bank to fill up vacancies under the Staff Exit scheme.
The Petitioner approached the court alleging that deductions made by the respondent under the V.R.S. Scheme were in contravention of Section 10(10C) and Section 89 of the Income Tax Act. The court referred to a previous decision in CIT Vs. Nagesh Devidas Kulkarni, which clarified that benefits under Section 10(10C) are restricted to Rs. 5 lakhs, and benefits beyond that amount are available under Section 89 of the Act.
During the arguments, it was highlighted that to avail the benefit under Section 10(10C), compliance with Rule 2BA of the Act is necessary. Rule 2BA states that the vacancy caused by voluntary retirement should not be filled up. However, Clause 14 of the Staff Exit scheme allows the Bank to exercise discretion in filling up vacancies caused by officers' release under the Exit Option.
The court concluded that if the Petitioners are aggrieved by the clause or the rule regarding filling up vacancies, they have the option to pursue remedies independently. The Petition was disposed of with these observations.
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2007 (10) TMI 634
Short payment of Tribunal fee payable - No nexus of income between the order passed u/s 263 and the assessed income u/s 143(3) - CIT order does not relate to the computation of income - order passed by AO is erroneous and prejudicial to the interest of Revenue - HELD THAT:- The finding given in the order passed u/s 263 is not based on the computation of total income by the AO. Therefore, we are of the view that the objection raised by the Registry is not sustainable and the assessee has paid the fees in accordance with clause (d) of section 253(6) of the Act which was rightly applicable in the case of the assessee.
In our considered opinion this cannot be a sufficient ground for setting aside of the assessments. While making the assessment order, it is the satisfaction of the AO who made enquiry and it should be the touchstone to base the validity of the assessment order passed by him. The CIT cannot substitute his subjective view in place of the findings of the AO until and unless the view taken by the AO is unsustainable in law. No cogent material evidence was brought to our knowledge by the ld DR which may prove that the decision taken by the AO not to make the addition on both the issues in the case of the assessee was unsustainable in law.
We do not agree with the submission of the ld DR that no prejudice is caused to the assessee as the assessment order has been set aside on both the issues to be made de novo and the assessee will have another chance to agitate these issues again. If the action of the CIT is illegal, the order passed by CIT cannot be sustained. All the subsequent actions carried out on the illegal order are void.
The AO in the impugned case has decided not to make the addition on both the issues. The view taken by the AO was one of the possible views and cannot be regarded to be the view unsustainable in the law. By passing the impugned order CIT tried to impose his view on the AO. This tantamount to be the change of opinion, which is not permissible u/s 263. We are therefore, of the view that the case of the assessee is duly covered by the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME COURT]. Respectfully following the same, we annul the order passed by the CIT u/s 263 by holding that the CIT was not correct in law in taking action u/s 263 and the order passed is illegal.
Since, we have already annulled the order passed by CIT u/s 263, we, therefore, are of the view that the other ground whether the addition can be made on merit or not become academic does not require adjudication.
In the result, the appeal filed by the assessee stands allowed.
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2007 (10) TMI 633
Issues involved:
The issue involves the rejection of the claim of the Assessee regarding short-term capital loss and the permission granted by the Commissioner of Income-tax (Appeals) for additional evidence to be adduced by the Assessee.
Short-term Capital Gain and Loss:
The Assessee declared a short-term capital gain on sale of agricultural land which was adjusted against a short-term capital loss on sale of shares. The Assessing Officer rejected the claim of the Assessee due to the inability to produce the broker to verify the genuineness of the transaction. The Assessee then appealed before the Commissioner of Income-tax (Appeals) and produced documents to establish the genuineness of the transaction. The CIT(A) allowed the appeal after permitting the Assessee to adduce additional evidence. The Revenue's appeal to the Tribunal was dismissed.
Permission for Additional Evidence:
The Revenue contended that the CIT(A) erred in allowing the Assessee to adduce additional evidence since the documents were not produced before the Assessing Officer initially. However, the Court disagreed, stating that the Revenue had the opportunity to verify the details in those documents, including confirming the broker's whereabouts, as the documents were available during the appeal before the Tribunal. The Assessee's counsel argued that the correct address of the broker was provided to the Assessing Officer, who failed to summon the broker to verify the transaction's genuineness. The Court held that the Assessing Officer should have taken steps to trace out the broker to confirm the transaction's authenticity.
Conclusion:
The Court found no error in the opinion expressed by the CIT(A) and the Tribunal regarding the rejection of the Assessee's claim for short-term capital loss. It was noted that the Assessing Officer had failed to adequately investigate the genuineness of the transaction, despite having all the necessary particulars of the broker. Consequently, the Court dismissed the appeal, stating that no substantial question of law arose for consideration.
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2007 (10) TMI 632
Issues involved:
1. Whether payments to doctors should be treated as professional charges or salary.
2. Whether the payments made to doctors are liable for tax deduction under Section 192(1) of the Income-tax Act, 1961.
Issue 1:
The case involved a dispute regarding the nature of payments made by the assessee to various doctors, whether they should be considered as professional charges or salary. The Assessing Officer contended that the payments should be treated as salary due to the absence of bills and work details, assuming the doctors were part-time employees. However, the assessee argued that the doctors were specialists who visited the hospital for limited hours, providing medical treatment independently without an employer-employee relationship. The CIT (A) reversed the Assessing Officer's decision, stating that the doctors were not employees and could be considered as receiving salary only if an employer-employee relationship existed. The Tribunal upheld this view, emphasizing the lack of evidence supporting an employer-employee relationship and the doctors' independent professional status.
Issue 2:
The second issue revolved around the tax deduction liability under Section 192(1) of the Income-tax Act, 1961, for the payments made to the doctors. The Assessing Officer demanded TDS and interest under Section 201 and 201(1A) of the Act, totaling &8377; 19,82,247. However, the CIT (A) ruled in favor of the assessee, stating that no TDS was required as there was no employer-employee relationship established. The Tribunal concurred with this decision, noting that the doctors operated independently, were not exclusive to one hospital, and their income was assessed under 'income from business/profession'. The Tribunal found no justification for treating the doctors' professional income as constituting salary, thereby dismissing the appeal by the revenue.
In conclusion, the High Court dismissed the appeal, emphasizing that the existence of an employer-employee relationship is a question of fact. The court upheld the findings that the visiting doctors were not employees but independent professionals, free to work at multiple hospitals. Citing the judgment of the Calcutta High Court, the court ruled that the provisions of the Income-tax Act concerning TDS and interest under Section 201(1A) were not applicable in this case due to the absence of evidence supporting an employer-employee relationship.
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2007 (10) TMI 631
Issues Involved: Appeal u/s 260A of the Income-tax Act, 1961 regarding commission expenses claimed by the assessee for the assessment year 2001-02.
Summary:
The appeal was filed by the revenue against an order passed by the Income-tax Appellate Tribunal regarding the payment of commission expenses by the assessee. The assessee claimed a total sum of &8377; 38.25 lakhs as commission expenses, with specific amounts paid to different commission agents. The Assessing Officer and the Commissioner of Income-tax (Appeals) were not satisfied with the explanation provided by the assessee regarding these payments.
The Tribunal, in its order, carefully examined the evidence on record, including correspondence between the parties and bills raised on the assessee for work done by the commission agents in relation to contracts with public sector undertakings. After evaluating the evidence, the Tribunal concluded that there was an agreement, albeit not in writing, between the parties, and that the work was indeed carried out by the commission agents as per this agreement, justifying the payments made by the assessee to them.
The High Court held that no substantial question of law arose from the Tribunal's order as it was based on a proper appreciation of the evidence, and no perversity was found in the Tribunal's decision. Therefore, the appeal was dismissed.
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2007 (10) TMI 630
Deduction claimed u/s 10A - STP (Software Technology Park) unit - 'export turnover' - reduction of expenditure incurred in foreign currency - HELD THAT:- In the present case, there are materials to show that the expenditure in foreign currency is related to technical services rendered outside India by the assessee in connection with development of computer software to the customers outside India. The aforesaid three aspects clearly reveal that the expenditure incurred by the assessee in foreign currency do not relate to any of the export obligation done by the assessee. When once expenditure so incurred in foreign currency is not for purpose of export obligation, there is no substance in the assessee's claim to deduct the same from the export turnover. Considering this aspect we do not find any infirmity in the order of the learned CIT(A) in confirming the action of the AO. It is ordered accordingly.
Alternatively, learned counsel for assessee had insisted for reduction of expenditure in foreign currency from the total turnover in case expenditure has to be reduced from export turnover. In our view, the alternative relief sought for by the assessee appears to be sound and proper.
Sec. 10A has incorporated in entirety the philosophy of s. 80HHE. The definition of the terms 'computer software' and 'convertible foreign exchange' in s. 10A are the same as in s. 80HHE. However, from out of the three terms relevant for applying the formula, s. 10A defines only one term namely 'export turnover'. The other two terms 'profits of the business' and 'total turnover' are not defined. Since the section proceeds broadly on lines similar to s. 80HHE in the absence of the definition of any term in s. 10A, one could refer to the definition of a similar term in s. 80HHE. Thus, the term 'total turnover' for s. 10A purposes, should be the same as understood for the purposes of s. 80HHE.
The term 'total turnover' no doubt is not defined in s. 10A. However, the term 'total turnover' would be an enlargement of the term 'export turnover'. Therefore, we are of the view that the assessee should succeed in the alternative submission made. Accordingly, we direct the AO to exclude the expenditure incurred in foreign currency by the assessee from the total turnover. It is ordered accordingly.
Exclusion of a sum from the export turnover - HELD THAT:- This amount was excluded by the AO on the ground that foreign exchange in respect of the same was not received in time. At the time of hearing, learned counsel for assessee pointed out that M/s Canara Bank issued a letter by which the banker, being an authorized dealer, was authorized to permit extension as the bills raised during the relevant year by the assessee are less than USD 10000 value. Considering this, we direct the AO to verify and allow the claim of the assessee. It is ordered accordingly.
Sales effected to other STP - Deemed export only for the purpose of duty draw back - HELD THAT:- A cursory perusal would indicate that sale of such software by one STP to another STP within the country would be treated as deemed export only for the purpose of duty draw back and exempt from terminal excise duty. As rightly contended by the ld DR, s. 10A, with relevant proviso, stood during the relevant time itself provides that when domestic sales of STP unit do not exceed 25 per cent, such sale should be deemed to be the profits and gains derived from the export of such articles or things or computer software. Thus the provisions of s. 10A as it stood specifically provide how much benefit to be given to the assessee if sales to another STP when not exceeded 25 per cent of the total products.
From the perusal of the Exim Policy (Chapter 6), it is seen that whatever benefit given should be as per the provisions of ss. 10A and 10B of the IT Act. Apart from the benefit conferred under the aforesaid chapter, nothing has been indicated in respect of any deemed export when the issue is considered under the IT Act. The Exim Policy extracted (Chapter 8.1 and 8.3) obviously does not include in respect of benefit to be given under IT Act other than one referred to under Chapter 6.12(a). When this being consciously omitted in the policy, we do not find any force in the stand taken by the learned counsel for assessee to treat the sales effected to other STP by the assessee as deemed export. This ground fails.
In the result, the appeal filed by the assessee is partly allowed to the extent indicated above.
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2007 (10) TMI 629
Issues involved:
The issue involves the confirmation of the order passed by the CIT (A) canceling the penalty levied u/s 271(1)(c) amounting to Rs. 11,37,949 by the Assessing Officer in respect of the addition, which stood confirmed.
Summary:
The Tribunal, in paragraph 5 of its order, analyzed the matter comprehensively. It acknowledged that the assessee disclosed the claim of interest u/s 36(1)(iii) and had provided explanations for the same. The Tribunal noted that the assessee had previously claimed the deduction, which was allowed by the CIT (A) and later restored by the ITAT. The Tribunal emphasized that the disallowance of interest did not imply concealment of income or inaccurate particulars by the assessee. It highlighted that the onus was on the Revenue to prove the falsity of the explanation offered by the assessee, which was not substantiated. Additionally, the Tribunal referred to a decision stating that a claim admitted by the High Court as a substantial question of law cannot be considered frivolous or mala fide for penalty u/s 271(1)(c). Ultimately, both the CIT (Appeals) and the Tribunal concluded that it was not a suitable case for imposing a penalty under Section 271(1)(c) of the Act, leading to the dismissal of the appeal.
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2007 (10) TMI 628
Issues involved: Appeal u/s 260A of the IT Act, 1961 against the order of the Income-tax Appellate Tribunal regarding provision for bad and doubtful debt and depreciation on enhanced value of plant and machinery due to fluctuation in foreign exchange rate.
Provision for Bad and Doubtful Debt: The assessed made a provision for bad and doubtful debt amounting to Rs. 87,26,210. The AO added this amount to the assessed's book profits u/s 115JA of the Act, stating it was not for an ascertained liability. However, the CIT(A) allowed the assessed's appeal, holding that the provision was for an ascertained liability. The Revenue appealed to the Tribunal, which dismissed the appeal, relying on various decisions. The Court noted previous decisions holding that a provision for bad and doubtful debts is a provision for an ascertained liability u/s 115JA, rejecting the Revenue's argument based on subsequent years' write-offs and lack of scientific management policy.
Depreciation on Enhanced Value of Plant and Machinery: The second issue concerned the Tribunal allowing depreciation to the assessed on the enhanced value of plant and machinery due to fluctuation in the foreign exchange rate. This issue was decided against the Revenue based on a previous decision of the Court. The Court found no substantial question of law arising and dismissed the appeal.
In conclusion, the Court upheld the Tribunal's decision regarding the provision for bad and doubtful debt, emphasizing that it was for an ascertained liability u/s 115JA. The Court also affirmed the Tribunal's decision on allowing depreciation on the enhanced value of plant and machinery, based on a previous ruling. No substantial questions of law were found to arise in either issue, leading to the dismissal of the appeal.
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2007 (10) TMI 627
Liable to deduct TDS u/s 195 ? - Payments made to foreign companies - down linking (bandwidth) charges - assessee did not make any TDS on the ground that payments are not covered under the direct provisions of sec.5 or any deeming provisions of section 9 - CIT (A) granted relief to the assessee - HELD THAT:- In our view, this issue is squarely covered by the decision of this Tribunal in the case of the assessee for assessment years 1997-98 and 2001-02. Applying the same, we confirm the orders of the learned CIT(A).
Disallowance of subscription payments u/s 40A(1) - such payment fall u/s 195 - AO held that by means of this payment, the assessee has got the benefit of technical consultation and therefore the payments fall within the ambit of section 195 of the IT Act - CIT(A) granted relief to the assessee - HELD THAT:- In our view, this issue is also squarely covered by the decision of this Tribunal in the case of the assessee fog assessment years 2001-02 to 2003-04 held that; ''Annual subscription was an access fee to Gartner database maintained outside India. Fee was payable even if no service was utilized. It was like a gate pass or entry fee and could not be treated as imparting of information. The payment was for obtaining data and use in the way assessee wanted it to be used. It was for use of a copyrighted article and not for transfer of right in the copyright in the article. Just as a book it is a copyright article. Purchase of the book allows use of information contained therein but does not transfer of the copyright therein. Even if the payment for use of any copyright is covered the copyright should be of a literary, artistic or scientific work and no other. ''
Applying the same, we confirm the order of the learned CIT (A) . It is ordered accordingly.
Deduction u/s 80HHE - Exchange variation gain in EEFC Account - assessee did not exclude expenditure in foreign currency both from export turnover as well as total turnover - HELD THAT:- This issue is also covered by the decision of this Tribunal in the case of the assessee for assessment year 1998-99 held that; ''Though it is worded as foreign exchange currency fluctuation, it is nothing but part of export turnover and a sort of additional sale price. Thus, the same is profit of the eligible undertaking for claiming deduction u/s 10B. Similarly, it cannot be treated as other receipts for excluding 90 per cent of the same u/s 80HHE. We accordingly hold that such sum being foreign exchange gain is not to be excluded while computing profit eligible for deduction u/s 10B as well as for computing profits of the business for the purpose of computing deduction u/s 80HHE. ''
Therefore, applying the same, we confirm the order of the learned CIT (A).
In the result, the revenue’s appeals are dismissed and the assessee’s appeals are allowed.
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