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2009 (10) TMI 924
Issues Involved: The appeal under Section 260A of the Income Tax Act, 1961 was filed against the order of the Income Tax Appellate Tribunal regarding various substantial questions of law related to foreign travel expenses, commission paid to Managing Director (MD) and executives, personal use of car and telephones, duty draw back, provision for retrenched employees' salary, and sale of scrap for the assessment year 1994-95.
1. Foreign Travel Expenses: The Assessing Officer disallowed the claim for foreign travel expenses of the MD and his wife. The CIT (A) partly upheld the claim but disallowed the expenses related to the MD's wife. The Tribunal affirmed this decision.
2. Commission Paid to MD and Executives: The Assessing Officer disallowed the deduction of commission paid to the MD and executives. The CIT (A) upheld the claim to the extent of 50%, and the Tribunal allowed the claim in full.
3. Use of Car and Telephones: The Assessing Officer disallowed the claim for the use of car and telephones, stating it was for personal use. The CIT (A) partly upheld the claim where expenses had a business purpose nexus, and the Tribunal allowed the claim in full.
4. Writing Off Duty Draw Back: The Assessing Officer did not accept the writing off of duty draw back due to a pending writ petition. However, the CIT (A) upheld the writing off, which was affirmed by the Tribunal.
5. Provision for Retrenched Employees' Salary: The Assessing Officer disallowed the provision made for retrenched employees' salary, but the claim was upheld by the CIT (A) and the Tribunal.
6. Sale of Scrap: The Assessing Officer held that income from the sale of scrap should be added to the turnover. However, the CIT (A) and the Tribunal agreed with the assessee that the scrap was not related to manufacturing or export turnover.
Judgment: The High Court dismissed the appeal, stating that the proposed questions were not substantial questions of law based on the arguments presented by both parties. The Court found no merit in the revenue's objections to the various claims made by the assessee, and therefore, the appeal was dismissed.
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2009 (10) TMI 923
Issues Involved:
1. Whether the loss incurred on the purchase of capital assets (land) should be treated as revenue loss.
2. Whether the penalty levied u/s 271(1)(c) of the Income-tax Act, 1961, is sustainable.
Issue 1: Treatment of Loss on Purchase of Capital Assets as Revenue Loss
The assessee claimed a loss of Rs. 9.50 lakhs due to the forfeiture of an advance paid for the purchase of land. The Assessing Officer (AO) disallowed this claim, treating the expenditure as capital loss, not revenue loss, and initiated penalty proceedings u/s 271(1)(c). The CIT(A) upheld the AO's decision, stating that the amount was paid for a capital asset and no business nexus was established.
The assessee argued that the forfeiture occurred due to adverse financial conditions, and since no capital asset was acquired, the expenditure should be treated as a business loss u/s 37(1) or alternatively u/s 28 of the Act. The assessee relied on the Supreme Court's decision in Patnik & C. Ltd. v. CIT and the Gujarat High Court's decision in CIT v. Gujarat Steel Tubes Ltd., which supported the treatment of such expenditures as revenue losses when no capital asset is acquired.
The Tribunal found that the assessee's project to start manufacturing did not materialize, and no capital asset came into existence. Therefore, the expenditure should be treated as a business loss. The Tribunal allowed the assessee's claim, reversing the lower authorities' findings.
Issue 2: Penalty u/s 271(1)(c)
Since the Tribunal deleted the addition in the quantum appeal, the penalty levied by the AO and confirmed by the CIT(A) u/s 271(1)(c) was also deleted.
Conclusion:
Both appeals of the assessee were allowed, with the Tribunal treating the forfeited advance as a business loss and deleting the penalty u/s 271(1)(c). The order was pronounced in open court on 16/10/2009.
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2009 (10) TMI 922
Issues involved:
The issues involved in the judgment are predeposit order, consideration of prima facie case and hardship, interpretation of section 3 and proviso to the Central Excise Act, 1944, and assessment of financial hardship in the context of the economy.
The judgment addresses the petitioner's argument that no duty was demanded prior to a specific date and that withdrawal from EOU status was done on a certain date. The Tribunal did not address this point, which is crucial for determining hardship.
Another aspect discussed is the interpretation of section 3 and the proviso to the Central Excise Act, 1944. The petitioner argues that if duty is not payable under section 3, then no duty can be demanded. This legal question was not raised before the Tribunal but needs to be answered.
The Tribunal's assessment of hardship is also scrutinized. The Tribunal based its decision on the profit and loss account for a specific year without considering the nature of the income received. The High Court emphasizes that financial hardship should be evaluated in the context of the economy and market liquidity to avoid adverse effects on production and employment.
The High Court concludes that the petitioners have established a prima facie case, and the issue of hardship needs further examination. The impugned order is set aside, and the matter is remanded to the Tribunal for rehearing and a new decision in accordance with the law.
Additionally, a direction is given to the respondents not to take steps to recover the disputed amount during the appeal's pendency before the Tribunal.
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2009 (10) TMI 921
Issues involved:
The issue involves the applicability of section 194-A of the Income Tax Act regarding the deduction of tax at source on interest paid for belated payment of compensation for land acquired.
Summary:
Issue 1: Applicability of Section 194-A for deduction of tax on interest payment for belated compensation:
The appeal was filed under section 260-a of the Income Tax Act challenging the order passed by the Tribunal regarding the deduction of tax at source under section 194-A for interest paid to landowners for delayed compensation. The Tax Recovery Officer held the respondent liable for not deducting tax under section 194-A, leading to a demand of &8377;2,56,040. The Appellate Authority allowed the appeal, but the Tribunal upheld the original order. The substantial question of law raised was whether section 194-A was applicable for such payments.
Details:
The respondent did not dispute the payment of interest for belated compensation, acknowledging its liability to income tax. The decision in Bikram Singh's case emphasized that such payments are covered under section 194-A for tax deduction at the source. The Supreme Court's ruling confirmed that interest on delayed compensation is taxable, and the Land Acquisition Officer was justified in deducting tax under section 194-A. The contention that the circular issued by the Government of Karnataka overrides this principle was dismissed. Therefore, the substantial question of law was answered in favor of the revenue, and the appeal was allowed, setting aside the Tribunal's order and restoring the Tax Recovery Officer's decision.
Separate Judgment by Judges:
No separate judgment was delivered by the judges in this case.
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2009 (10) TMI 920
The Appellate Tribunal CESTAT, Chennai dismissed the department's appeal against the impugned order related to Customs Valuation Rules, 1988. The lower appellate authority reversed the original authority's finding that importers were related to the supplier. The department's appeal was dismissed as no evidence was presented to alter the lower appellate authority's decision. The respondent's cross objection was also disposed of.
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2009 (10) TMI 919
Issues involved: Appeal by revenue against deletion of addition of share application money u/s 68 for different assessment years.
For AY 2002-03: Revenue contended that genuineness of transaction not established by assessee. Assessee received accommodation entries from various entities. AO treated amounts as unexplained cash credits u/s 68. CIT(A) deleted additions. Tribunal found identity of share applicants proved through banking channel, supporting assessee's case.
For AY 2003-04: Assessee received share capital from two companies. AO added amount as unexplained cash credits u/s 68. Assessee filed income-tax returns of subscribing companies, proving identity. Tribunal upheld CIT(A)'s deletion of addition, citing precedents and emphasizing onus of proving identity and genuineness on assessee.
Separate Judgement: Tribunal dismissed revenue's appeals for both AYs, upholding CIT(A)'s decisions based on established identity of share subscribers and compliance with legal requirements.
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2009 (10) TMI 918
Issues involved: Interpretation of Supreme Court judgment, application of judgment to pending cases, liberty granted to respondents, aggrievement of petitioners by notices served post judgment.
The High Court of Bombay dealt with a case where several Writ Petitions were filed, some of which were decided against the petitioners. The petitioners then approached the Supreme Court, which, on 8th July 2009, set aside the High Court's judgment and the impugned orders, granting liberty to the respondents to proceed afresh within the boundaries of the Supreme Court's decision. The petitioners contended that their case was not adjudicated by the High Court and thus not part of the Supreme Court's Special Leave Petition (S.L.P.). The Court acknowledged these facts, noting that post the Supreme Court's ruling, the High Court applied the judgment universally, even to pending cases like the present petitioners', effectively revoking the impugned orders. Consequently, the Court deemed it unnecessary to issue any further directives. However, the petitioners were served notices in line with the Supreme Court's judgment. They were advised that if they felt aggrieved by these notices, they could seek appropriate legal remedies, regardless of the outcome of the Writ Petition. Ultimately, the Writ Petition was disposed of by the Court.
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2009 (10) TMI 917
Issues involved:
The correctness of CIT (A)'s order reducing fair market value u/s 32 for depreciation calculation and deleting disallowance.
Summary:
Issue 1: Correctness of CIT (A)'s order on reducing fair market value for depreciation calculation and deleting disallowance:
1. The Revenue appealed against CIT (A)'s order for the assessment year 1995-96, questioning the reduction of fair market value determined by DVO from the block for depreciation calculation and deletion of disallowance.
2. The Assessing Officer referred the matter to the Departmental Valuation Officer to ascertain the fair market value of a flat sold by the assessee. The DVO valued the property at a higher amount than the consideration received by the assessee.
3. The Assessing Officer concluded that the excess depreciation allowed was withdrawn as the full consideration was set off against the written down value remaining in the same block of assets.
4. The assessee contended that only the 'money payable' on account of the sale of the asset should be considered for reducing the written down value, not the market value. CIT (A) upheld this contention, emphasizing that the price at which the asset is sold is crucial for depreciation calculation.
5. The Revenue appealed, but the ITAT Mumbai upheld CIT (A)'s decision, stating that the Assessing Officer should not have reduced the fair market value from the block for depreciation calculation, as the sale price of the asset is the determining factor, not the market value.
6. The ITAT Mumbai found no reason to interfere with CIT (A)'s well-reasoned findings, emphasizing that the sale price, not the fair market value, should be considered for computing the block of assets. The judgment supported the assessee's stand, and no interference was warranted.
7. Consequently, the appeal of the Revenue was dismissed by the ITAT Mumbai on 29th October 2009.
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2009 (10) TMI 916
Issues involved: Appeal against orders of Income Tax Appellate Tribunal regarding eligibility for depreciation and exemption under section 12 of the Income Tax Act for a charitable institution.
Eligibility for Depreciation:
The Revenue contended that as a Trust enjoying exemption under section 11, the assessee is not entitled to claim depreciation under section 32. However, the court held that educational institutions, even if not for profit, are entitled to exemption and can claim deductions like depreciation. Charitable institutions can carry over surplus and claim benefits under the Act, including depreciation. The court cited precedent to support the eligibility of charitable institutions for depreciation benefits.
Addition of Fees Receivable:
The Revenue's addition of fees due from KSRTC was deleted by the first appellate authority and confirmed by the Tribunal. The Tribunal found that the amount had been written off by the assessee in earlier years and was not shown as receivable in the balance sheet. The court upheld the Tribunal's decision, stating there was no justification for treating this as income of the assessee.
Income Carried Forward:
For the assessment year 2003-04, the Revenue disallowed the claim as the income carried forward exceeded the limit reduced from 25% to 15%. However, the Tribunal found that the amount carried forward was for the sole purpose of running the educational institution, which is a charitable object. The court agreed with the Tribunal's decision, noting that the revenue had no evidence to suggest the fund would be used for any other purpose.
In conclusion, both appeals filed by the Revenue were dismissed by the High Court of Kerala.
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2009 (10) TMI 915
Issues Involved:
1. Unrecorded production and profits for the pre-search period.
2. Unrecorded production and profits for the post-search period.
3. Bogus purchases.
4. Loss on sale of brass billets.
5. Loss on same-day transactions.
6. Deduction under Sections 80HH and 80I.
7. Sale of scrap.
Detailed Analysis:
1. Unrecorded Production and Profits for the Pre-Search Period:
- Facts: There was a search under Section 132 of the Income Tax Act on 23-1-1992. The AO discovered discrepancies between the production figures in the chemical analysis report and the books of account, indicating unrecorded production of 391.3 MTs.
- AO's Calculation: The AO computed the undisclosed profit on unrecorded production at Rs. 1,36,23,570/- and after deducting Rs. 96.00 lakhs disclosed during the search, added Rs. 40,23,570/- as undisclosed income.
- CIT(A)'s Decision: The CIT(A) deleted the addition on grounds such as lack of evidence of unrecorded sales, incorrect assumptions by the AO, and the absence of unaccounted purchases.
- Tribunal's Decision: The Tribunal partially upheld the CIT(A)'s decision but sustained an addition of Rs. 19,39,418/- based on the average sale price and profit calculations.
2. Unrecorded Production and Profits for the Post-Search Period:
- Facts: The AO estimated unrecorded production for the post-search period based on the average monthly production figures derived from seized material.
- AO's Calculation: The AO added Rs. 68,11,785/- for the post-search period.
- CIT(A)'s Decision: The CIT(A) deleted the addition due to lack of evidence for the post-search period.
- Tribunal's Decision: The Tribunal sustained an addition of Rs. 28,84,854/- for the months of April and May 1991 but deleted the addition for February and March 1992.
3. Bogus Purchases:
- Facts: The AO disallowed Rs. 51,08,219/- for purchases from Shreyas Metachem Pvt. Ltd., based on discrepancies in transportation records and statements from the transporter.
- CIT(A)'s Decision: The CIT(A) deleted the disallowance, accepting the genuineness of the purchases and suggesting that the goods might have been transported by another transporter.
- Tribunal's Decision: The Tribunal reversed the CIT(A)'s decision, restoring the disallowance of Rs. 51,08,219/-, citing the transporter's credible statement and the circuitous nature of transactions.
4. Loss on Sale of Brass Billets:
- Facts: The AO disallowed a loss of Rs. 33,71,188/- on the sale of brass billets, questioning the business rationale behind converting brass tubes into billets and selling them at a loss.
- CIT(A)'s Decision: The CIT(A) allowed a loss of Rs. 28,27,448/- based on a revised purchase price but sustained a disallowance of Rs. 5,43,748/-.
- Tribunal's Decision: The Tribunal allowed the entire loss of Rs. 33,71,188/-, finding no evidence of inflated purchase prices or suppressed sale prices.
5. Loss on Same-Day Transactions:
- Facts: The AO disallowed a loss of Rs. 96,581/- on same-day transactions of brass rods, suspecting manipulation.
- CIT(A)'s Decision: The CIT(A) deleted the disallowance, finding no evidence of inflated purchase prices or suppressed sale prices.
- Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision, dismissing the ground taken by the revenue.
6. Deduction Under Sections 80HH and 80I:
- Facts: The AO allowed deductions under Sections 80HH and 80I sequentially rather than simultaneously.
- CIT(A)'s Decision: The CIT(A) allowed simultaneous deductions from the gross total income.
- Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision, following the Supreme Court judgments in JCIT Vs. Mandideep Engg. and PKG. Ind. P. Ltd. and CIT Vs. Amod Stamping.
7. Sale of Scrap:
- Facts: The AO added Rs. 5,39,580/- to the income, suspecting that the sale of dross was not properly accounted for.
- CIT(A)'s Decision: The CIT(A) allowed the deduction, recognizing the sale as a genuine business loss.
- Tribunal's Decision: The Tribunal affirmed the CIT(A)'s decision, dismissing the ground taken by the revenue.
Conclusion:
- Department's Appeal: Partly allowed.
- Assessee's Appeal: Allowed.
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2009 (10) TMI 914
Issues Involved:
1. Imposition of penalties under Section 112(a) and Section 112(b) of the Customs Act, 1962.
2. Validity of confessional statements and their retraction.
3. Involvement of appellants in the smuggling racket.
4. Evidentiary value of statements and corroborative evidence.
Detailed Analysis:
Imposition of Penalties:
The appeals were filed against the imposition of penalties of Rs. 5,00,000/-, Rs. 3,00,000/-, Rs. 1,00,000/- and Rs. 10,00,000/- respectively under Section 112(a) and Section 112(b) of the Customs Act, 1962. The penalties were imposed following the seizure of smuggled goods, including gold jewelry concealed in a refrigerator, which were declared as "Personal Effects."
Validity of Confessional Statements and Their Retraction:
The appellants argued that their confessional statements were made under threat and duress and were retracted at the earliest opportunity. They contended that without corroborative independent evidence, these statements should not be used to impose penalties. The appellants relied on several judgments, including Union of India vs. Bal Mukund & Ors., which held that retracted confessions without corroborative evidence could not be the sole basis for conviction.
Involvement of Appellants in the Smuggling Racket:
The investigation revealed that the appellants were part of a smuggling syndicate led by one Pappa Totla and Arvind Saxena. The appellants, including Vivek Dutta, Sanjay Nair, and Ravi Kotian, were involved in clearing smuggled goods using forged documents. The statements recorded during the investigation indicated that the appellants were aware of the smuggling activities and had previously cleared similar consignments.
Evidentiary Value of Statements and Corroborative Evidence:
The Revenue argued that the confessional statements, even if retracted, were admissible under Section 108 of the Customs Act. The Supreme Court in CC, Madras vs. D. Bhoormull and Naresh J. Sukhawani vs. Union of India supported the view that confessional statements could be used as corroborative evidence in customs cases. The adjudicating authority found sufficient evidence, including forged documents and the concealment of gold jewelry, to corroborate the involvement of the appellants in the smuggling activities.
Conclusion:
The Tribunal upheld the penalties imposed on the appellants, concluding that they were actively involved in the smuggling of goods. The arguments regarding retracted confessional statements were dismissed, as the evidence and circumstances of the case sufficiently proved the appellants' involvement. The appeals were dismissed, and the impugned order was upheld.
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2009 (10) TMI 913
Issues involved:
The judgment involves the following Issues:
1. Applicability of the principle of mutuality to amounts received by the appellant.
2. Tax liability on the sum of Rs. 7,44,000/- received from members.
3. Tax liability on the sum of Rs. 20,695/- received as interest.
Issue 1: Applicability of the principle of mutuality:
The substantial question of law was whether the appellate Tribunal was correct in determining that the principle of mutuality does not apply to the various amounts received by the appellant. The Court referred to a previous judgment of the Division Bench in Income Tax Appeal No. 931/2004, where it was held that the principle of mutuality does apply. Consequently, the Court answered this question in favor of the assessee and against the revenue.
Issue 2: Tax liability on sum received from members:
The second substantial question concerned the tax liability on the sum of Rs. 7,44,000/- received from the members. Following the precedent set in the aforementioned Division Bench judgment, the Court ruled in favor of the assessee, holding that this amount is not liable to be taxed as income of the appellant.
Issue 3: Tax liability on interest received:
The third question revolved around the tax liability on the sum of Rs. 20,695/- received as interest. Consistent with the previous decision, the Court decided in favor of the assessee, stating that this amount is not liable to be taxed as income of the appellant.
The Court noted that the appellant did not press questions 4 and 5. Both parties agreed that the three questions discussed above were addressed in the Division Bench judgment. Consequently, the Court disposed of the appeal in favor of the assessee, with no order as to costs.
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2009 (10) TMI 912
The Supreme Court's judgment in 2009 (10) TMI 912 - SC dismissed the case after condoning the delay.
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2009 (10) TMI 911
Issues involved: Interpretation of donation receipts u/s 68 of the Income Tax Act, 1961 for a charitable trust.
Summary:
The appeal before the Appellate Tribunal ITAT Delhi arose from an order of the CIT(Appeals) for the A.Y. 2003-04 concerning a trust registered u/s 12A(a) of the Income-tax Act, 1961. The Assessing Officer treated donations of &8377; 7,65,467/- as accommodation entries and subjected them to tax at the maximum marginal rate. However, the CIT(Appeals) disagreed, stating that the appellant had proved the genuineness of the donations and that the burden lay on the assessee to explain the credit entry. The CIT(Appeals) deleted the addition of &8377; 7,65,467/-, allowing the benefit of sections 11 & 12 of the Income Tax Act.
The Departmental Representative (DR) supported the Assessing Officer's findings, while the assessee cited relevant case law. The Tribunal noted that to claim exemption u/s 11, the assessee must show that donations were voluntary. In this case, the assessee disclosed the donations and provided a list of donors. The Tribunal held that the absence of a complete list of donors did not imply an attempt to introduce unaccounted money, especially when a significant portion of the donations was used for charitable purposes. Citing a decision of the Delhi High Court, the Tribunal declined to interfere with the CIT(A)'s order.
Ultimately, the revenue's appeal was dismissed, and the order was pronounced on 9-10-2009.
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2009 (10) TMI 910
Issues Involved:
1. Eligibility of scrap sales income for deduction u/s 80IB of the Income Tax Act.
2. Treatment of disallowed expenditure under section 40(a)(ia) for deduction u/s 80IB.
Issue 1: Eligibility of Scrap Sales Income for Deduction u/s 80IB:
The appellant, engaged in manufacturing, claimed 100% deduction u/s 80IB for profit from its manufacturing unit in a backward area. The Assessing Officer disallowed the deduction on scrap sales income, stating it was not derived from manufacturing activity. However, the Ld. Commissioner of Income Tax(Appeals) allowed the claim, emphasizing the direct nexus of scrap with manufacturing activity. Citing various judgments, including Ship Scrap Traders vs. Commissioner of Income-tax, it was held that scrap sales income is attributable to the priority industry and eligible for deduction under section 80IB.
Issue 2: Treatment of Disallowed Expenditure under Section 40(a)(ia) for Deduction u/s 80IB:
The Assessing Officer disallowed expenditure due to delayed TDS deposits and classified it as income from other sources. The Ld. Commissioner of Income Tax(Appeals) upheld the disallowance but directed to treat it as business income for deduction u/s 80IB. The Tribunal noted that even if the addition is sustained, the assessee would be entitled to deduction u/s 80IB as it forms part of business profit. It was clarified that any addition under section 40(a)(ia) falls under the head computation of business income, not income from other sources. The Tribunal dismissed the Revenue's appeal, affirming the eligibility of the assessee for deduction u/s 80IB on the disallowed expenditure.
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2009 (10) TMI 909
Issues involved: Cross appeals filed by the assessee and the Revenue against the order of CIT(A) dated 24.12.2008 for AY 2003-04, in the matter of order passed by the AO u/s 143(3)/144 of the IT Act.
Summary:
1. Assessee's Delay in Submission of Details:
The AO observed that the assessee, engaged in manufacturing, food processing, and infotech, deliberately delayed submission of relevant details despite multiple opportunities. The AO disallowed half of the US office expenses due to lack of furnished details and added it back to the income. The AO also rejected the claim for deduction u/s 80IA, stating the assessee was not engaged in manufacturing activity. Additionally, expenses related to the infotech division were disallowed under Section 14A read with Section 10A. The assessment was completed u/s 143(3)/144, resulting in the deletion of some expenditure by CIT(A) and the direction for carry forward of losses related to the infotech division.
2. Best Judgment Assessment and Legal Position:
The assessee contended before CIT(A) that the AO cannot compute income based on guesswork and speculation. The AO's assessment was framed u/s 143(3)/144 due to the non-cooperative attitude of the assessee. While the AO has wide powers for best judgment assessment, it should not be arbitrary or punitive but based on a fair estimate considering all facts. The AO must indicate the basis of income assessed, failing which the order is liable to be set aside. The CIT(A) also did not correctly appreciate the legal position regarding set off and carry forward loss of an exempt unit.
3. Decision and Restoration of Appeal:
After considering the arguments, the Tribunal decided to restore the appeal to the AO for fresh examination of all issues. The assessee is directed to provide all relevant details, and the AO is instructed to re-examine all claims after giving the assessee a fair hearing. Both the appeals of the assessee and Revenue are allowed for statistical purposes.
Decision pronounced in the open Court on 14th October, 2009.
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2009 (10) TMI 908
Issues involved: Whether deduction of interest paid on borrowed funds diverted by the assessee to sister concerns as interest-free loans is justified.
Summary:
The High Court of Kerala addressed the question of whether the Tribunal was correct in allowing deduction of interest paid on borrowed funds that were diverted by the assessee to sister concerns as interest-free loans. The Court noted that the Tribunal had based its decision on the Supreme Court's ruling in S.A. Builders Ltd. v. CIT [2007] 288 ITR 11, but failed to consider the specific facts of the case. The Court highlighted that the Tribunal assumed the advances were made from the assessee's own funds due to substantial profits, but pointed out that interest-free advances were made annually amounting to Rs. 2 crores despite significant borrowings by the assessee. The Court found the assessee's argument illogical, stating that if the assessee had substantial profits and own funds, there should be no need to rely on borrowed funds. The Court emphasized that for interest on borrowed funds to be allowed u/s 36(1)(iii) of the Income-tax Act, it must be for business purposes. The Court concluded that the assessee must establish the interest in the sister concern, the business carried out by it, the financial position of the sister concern, and the interest derived by the assessee to prove commercial expediency for justifying interest-free advances made from borrowed funds. As the Supreme Court decision relied upon by the Tribunal was not available during the assessment, the Court allowed the appeals, vacated the Tribunal's orders, and remanded the cases to the Assessing Officer for further examination based on cash flow statements, constitution of sister concerns, assessee's interest, and financial position of the business concerns at the time of making the advances. The Court directed the Assessing Officer to issue a written pre-assessment notice containing proposals for disallowance of interest, if any, and reasons for the same to provide the assessee with an opportunity to respond before completing the assessment.
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2009 (10) TMI 907
Issues Involved:
Appeals filed by the assessee against the order of Director of Income Tax canceling registration u/s 12A and withdrawal of 80-G exemption.
Issue 1: Registration u/s 12A and withdrawal of 80-G exemption
The assessee, a registered society, was granted registration u/s 12A and exemption u/s 80G. The Director of Income Tax (DIT) canceled the registration u/s 12A and consequently withdrew the exemption u/s 80G. The DIT contended that the registration was erroneously granted to a school, which had no legal existence, instead of the society that owned and operated the school. The DIT held that the school was not entitled to registration u/s 12A and exemption u/s 80G. The assessee challenged this decision before the Appellate Tribunal.
Issue 2: Power of DIT to cancel registration u/s 12A
The Appellate Tribunal considered the power of the DIT to cancel the registration granted u/s 12A. The Tribunal referred to a previous case where it was held that the DIT cannot withdraw or cancel the registration granted under section 12A. The Tribunal analyzed the provisions of sections 12A, 12AA(1), and 12AA(3) of the Income Tax Act. It was observed that the DIT can cancel registration only in cases where it has been granted under section 12AA(1)(b), not under section 12A. The Tribunal emphasized that the law does not empower the DIT to cancel or withdraw the registration granted under section 12A.
Decision:
The Appellate Tribunal, following the precedent and legal analysis, held that the DIT did not have the power to cancel the registration granted under section 12A. Therefore, the order of the DIT canceling the registration u/s 12A and the consequential withdrawal of exemption u/s 80G were deemed invalid. As a result, both appeals of the assessee were allowed, and the registration u/s 12A was restored.
This judgment highlights the importance of correctly interpreting and applying the provisions of the Income Tax Act regarding registration and exemptions for charitable institutions and the limitations on the authority of the Director of Income Tax in canceling such registrations.
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2009 (10) TMI 906
Sale of software - Whether the vendor retain ownership or grants user rights only to licensee, the amount received for permitting Reliance to utilize the computer software is taxable as 'royalty' within the meaning of Article 12 (3) of DTAA - non-resident company - HELD THAT:- Learned counsel however, placed reliance upon the decision of ITAT, Delhi Bench, in the case of Infrasoft Ltd. v. Asstt.[2008 (12) TMI 245 - ITAT DELHI-F] to submit that the decision of the Apex Court has limited application and the principle therein cannot be applied to the peculiar facts of the instant case inasmuch as the amount received by the assessee under the license agreement was in lieu of allowing the use of software and thus it cannot be termed as a royalty either under the Income Tax Act or under DTAA. In the light of the decisions cited by the learned counsel appearing on behalf of the assessee and in the absence of any contrary view taken on this issue, we do not find any infirmity in the Order passed by the learned CIT (A) and accordingly reject ground No. 1 of the Revenue.
Upon hearing ld DR as well as the learned counsel appearing on behalf of the assesses, we are of the opinion that in the interests of substantial justice the matter deserves to be restored to the file of the Assessing Officer who is directed to verify as to whether there were two separate payments or one payment and if it is found that there is only one payment the plea of the assessee deserves to be accepted. However, since the issue is not examined in proper perspective, the Assessing Officer is directed to reconsider the matter in accordance with law.
Thus, we are of the view that the Order passed by the learned CIT(A) does not call for interference and accordingly reject ground No.3 of the Revenue. In the result, appeal filed by the Revenue is treated as partly allowed for statistical purposes.
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2009 (10) TMI 905
The Kerala High Court upheld the respondent-assessee's right to write off losses in instalments for securities purchased above face value but redeemed at face value. The departmental appeal was dismissed.
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9911796707
