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2008 (12) TMI 773
Issues Involved:
1. Validity of the withdrawal of a circular letter dated 8.09.2000 by U.P. Power Corporation Ltd.
2. Applicability of the doctrine of promissory estoppel.
3. Jurisdiction of the U.P. Electricity Regulatory Commission to determine and modify tariffs.
Summary:
1. Validity of the Withdrawal of Circular Letter:
The Supreme Court examined the validity of the withdrawal of a circular letter dated 8.09.2000 by the U.P. Power Corporation Ltd. The High Court had dismissed ten writ applications challenging this withdrawal. The appellants, upon obtaining special leave, appealed to the Supreme Court. The Court referenced its decision in LML Ltd. v. State of Uttar Pradesh and Others [(2008) 3 SCC 128], which held that the doctrine of estoppel applies where a promise was made, and the consumers should not suffer due to a mistake by the Corporation.
2. Applicability of the Doctrine of Promissory Estoppel:
The Court held that the doctrine of promissory estoppel applies if a representation made by the Corporation led consumers to alter their position. The Court stated, "If by reason of the circular impugned before the High Court, the appellant was entitled to maintain a writ application; by reason of such representation, it did not waive its right." The Court further noted that the doctrine of promissory estoppel applies in the realm of a statute, referencing cases like State of Punjab v. Nestle India Ltd. and Another (2004) 6 SCC 465.
3. Jurisdiction of the U.P. Electricity Regulatory Commission:
The Court reiterated that the U.P. Electricity Regulatory Commission has the exclusive jurisdiction to determine and modify tariffs as per the Uttar Pradesh Electricity Reforms Act, 1999. The Court stated, "In view of the provisions of the 1999 Act as also the regulations framed thereunder, as the law stands now, there cannot be any doubt or dispute that the Commission alone has the exclusive jurisdiction and even for the purpose of modification and/or alteration of tariff, the Commission must be approached." The Court dismissed the contention that Sub-section (6) of Section 24 of the 1999 Act empowers license holders to modify the tariff independently.
Conclusion:
The Supreme Court concluded that the decision in LML Ltd. (supra) does not require reconsideration. The appeal was allowed, directing the respondent to refund the entire amount within four weeks and bear the costs of the appellant throughout, with counsel's fee assessed at Rs. 1,00,000/-.
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2008 (12) TMI 772
Issues involved:
The judgment involves the question of whether the Tribunal misdirected itself in disallowing the deduction claimed by the assessee in respect of staff provident fund dues due to late payment.
Issue 1: Tribunal's disallowance of deduction for staff provident fund dues
The assessee appealed against the Tribunal's judgment regarding the deduction of staff provident fund dues for the assessment year 1998-99. The Assessing Officer disallowed the deduction as the dues were paid after the prescribed due date but before the date of filing the income tax return. The CIT(A) reversed the Assessing Officer's decision, allowing the deduction. However, the Tribunal overturned the CIT(A)'s decision based on the Madras High Court judgment in CIT v. Synergy Financial Exchange Ltd., stating that the amendment to section 43B of the Income-tax Act did not apply retrospectively. The High Court, citing its own judgment in CIT v. P.M. Electronics Ltd., upheld the CIT(A)'s decision, emphasizing the binding nature of the Supreme Court's decision in CIT v. Vinay Cement Ltd. The High Court ruled in favor of the assessee, setting aside the Tribunal's judgment and affirming the CIT(A)'s decision on the issue.
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2008 (12) TMI 771
Issues Involved:1. Deletion of addition on account of undisclosed sales of defective shoes. 2. Deletion of disallowance by restricting the claim for depreciation on lasts and moulds. 3. Treatment of royalty paid to Nike International Ltd. as capital expenditure. Summary:Issue 1: Deletion of Addition on Account of Undisclosed Sales of Defective ShoesThe Revenue challenged the deletion of Rs. 43,24,615/- made by the AO on account of undisclosed sales of defective shoes. The Tribunal noted that an identical issue had been previously considered in the case of the same assessee, where it was restored to the AO for re-examination. The Tribunal emphasized that the AO had not justified the valuation of defective goods at a 30% or 40% discount and that the entire defective material worth Rs. 31 lacs being destroyed was unconvincing. The Tribunal, following its earlier decisions, set aside the CIT(A)'s order and restored the issue to the AO for fresh decision, allowing Ground No. 1 for statistical purposes. Issue 2: Deletion of Disallowance by Restricting the Claim for Depreciation on Lasts and MouldsThe Revenue contested the deletion of Rs. 8,12,110/- disallowed by the AO by restricting the depreciation claim on lasts and moulds from 40% to 25%. The Tribunal observed that the issue had been previously decided in favor of the assessee for AY 2003-04, where it was established that the moulds and lasts were used for manufacturing Nike footwear, thus qualifying for a higher depreciation rate. The Tribunal upheld the CIT(A)'s order, dismissing Ground No. 2 of the Revenue's appeal. Issue 3: Treatment of Royalty Paid to Nike International Ltd. as Capital ExpenditureThe Revenue disputed the deletion of Rs. 90,62,600/- added by the AO by treating the royalty paid to Nike International Ltd. as capital expenditure. The AO had argued that the royalty was for the use of technical know-how, thus qualifying as capital expenditure. However, the CIT(A) found that the royalty was a revenue expenditure, as it was related to the sales of Nike products during the relevant year and did not provide any enduring advantage to the assessee. The Tribunal upheld the CIT(A)'s decision, noting that the findings were well-reasoned and not effectively countered by the Revenue. Ground No. 3 of the Revenue's appeal was rejected. Conclusion:The appeal filed by the Revenue was partly allowed for statistical purposes, with the Tribunal restoring the issue of undisclosed sales of defective shoes to the AO for fresh consideration, while upholding the CIT(A)'s decisions on the depreciation claim and the treatment of royalty expenditure. Order pronounced in the Open Court on 18.12.2008.
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2008 (12) TMI 770
Issues Involved:
1. Computation of deduction under section 80HHC.
2. Enhancement of closing stock of sugar.
3. Deduction of estimated liability in respect of leave encashment.
4. Method of taxation of income from bonds.
5. Charging of interest under sections 234B and 234D.
6. Disallowance under section 14A of the Act in respect of administrative expenses and interest.
Issue-wise Detailed Analysis:
1. Computation of Deduction under Section 80HHC:
Grounds 1 to 7 pertain to the computation of deduction under section 80HHC. The assessee contended that the CIT(A) erred in sustaining the disallowance of the claim for deduction of Rs. 1,07,04,666/-. The assessee argued that negative profit (loss) should not be included in the computation of deduction and claimed a higher deduction based on further realization of foreign exchange. However, these grounds were not pressed by the counsel due to the Supreme Court's decision in IPCA Laboratory Ltd. vs. Dy. CIT, which held that deductions under section 80HHC cannot be claimed in the case of net loss from exports. Thus, these grounds were dismissed.
2. Enhancement of Closing Stock of Sugar:
Grounds 8, 9, and 10 challenge the enhancement of the closing stock of sugar by Rs. 11,76,750/-. The assessee argued that the stock was valued at cost or market value, whichever is lower, as per Accounting Standard-2 (AS-2), a method consistently followed by the assessee. The Tribunal found that this method had been accepted in earlier years and directed the AO to accept the stock value shown by the assessee. Therefore, these grounds were decided in favor of the assessee.
3. Deduction of Estimated Liability in Respect of Leave Encashment:
Ground 11 relates to the deduction of an estimated liability of Rs. 1.94 lakh for leave encashment. This ground was not pressed by the counsel, and thus, it was dismissed.
4. Method of Taxation of Income from Bonds:
Grounds 12, 13, and 14 concern the method of taxation of income from bonds of M/s G E Capital Ltd. The assessee contended that the income should be assessed at maturity, not annually, and that the investment was made for capital gains, not interest. These grounds were also not pressed by the counsel, leading to their dismissal.
5. Charging of Interest under Sections 234B and 234D:
Grounds 17 and 18 address the charging of interest under sections 234B and 234D. The counsel argued that section 234D is applicable from assessment year 2004-05 onwards, as held by the Delhi Tribunal in ITO vs. Ekta Promoters (P) Ltd. The Tribunal agreed, holding that section 234D is substantive and applies from assessment year 2004-05. Thus, the assessee is not liable for interest under section 234D for the assessment year 2001-02. Ground 17 was partly allowed, and ground 18 was allowed.
6. Disallowance under Section 14A of the Act in Respect of Administrative Expenses and Interest:
Grounds 15 and 16, and the revenue's ground, relate to disallowance under section 14A. The AO disallowed Rs. 95,52,136/- as interest and Rs. 6,81,673/- as administrative expenses, arguing that these were incurred to earn tax-free income. The CIT(A) admitted additional evidence showing that the interest was for packing credit limit, not investments, and deleted the interest disallowance but upheld the administrative expense disallowance. The Tribunal found that the assessee proved the interest was unrelated to tax-free income, thus deleting the interest disallowance. However, administrative expenses were deemed to have been incurred for earning tax-free income, and the disallowance was upheld. The Tribunal confirmed the CIT(A)'s order, dismissing grounds 15 and 16.
Residuary Ground:
Ground 19 was not argued and thus dismissed.
Revenue's Appeal:
The revenue's appeal challenged the CIT(A)'s admission of additional evidence and deletion of interest disallowance. The Tribunal upheld the CIT(A)'s decision, finding no error requiring correction.
Conclusion:
The appeal of the assessee was partly allowed, and the appeal of the revenue was dismissed. The order was pronounced in the open court on 05.12.2008.
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2008 (12) TMI 769
The Supreme Court dismissed the case. The citation is 2008 (12) TMI 769 - SC. High court reference: 2007 (11) TMI 648 - DELHI HIGH COURT. Judges were MR. JUSTICE S.H. KAPADIA AND MR. JUSTICE B. SUDERSHAN REDDY. Petitioner represented by Mr. Parag P. Tripathi, ASG., Mr. Harish Chandra, Sr.Adv., Mr. Rahul Kaushik, Adv., Ms. Anubha Agarwal, Adv., Mr
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2008 (12) TMI 768
Issues Involved:
1. Validity of the Deed of Will.
2. Validity of the Deed of Gift.
3. Division of properties among heirs.
Summary:
1. Validity of the Deed of Will:
The primary issue was whether the Deed of Will executed by Chathu was valid. The High Court held that the execution of the Will was "shrouded in mystery" and that the fifth defendant failed to dispel the suspicious circumstances by adducing satisfactory evidence. The appellant did not examine the attesting witnesses, which is mandatory u/s 68 of the Indian Evidence Act, 1872. The court emphasized that the onus of proving the Will's legality and genuineness lies on the propounder, who must prove the absence of suspicious circumstances and the testamentary capacity of the testator. The court found that the appellant failed to prove the Will's execution, as the attesting witnesses were not examined, and the mental and physical condition of the testator was not established. Consequently, the Will was deemed not genuine.
2. Validity of the Deed of Gift:
The second issue concerned the validity of the Deed of Gift executed by Chathu. The High Court found that the execution of the Deed of Gift was also suspicious. The appellant did not examine the attesting witnesses, which is required u/s 68 of the Act if the execution is specifically denied. The court noted that the plaintiff/respondent had specifically denied the execution of the Deed of Gift in affidavits filed in respect of injunction applications. The appellant failed to prove the attestation of the Deed of Gift as required u/s 69 of the Act. The court held that the Deed of Gift was not duly proved and was also of a suspicious nature.
3. Division of Properties:
The suit was filed by one of Chathu's daughters, claiming that the property left behind by Chathu devolved equally among the heirs. The Trial Court held that certain properties (items 1 to 3, 13, and 14) were not available for division as they were covered by Ext. B1 and B4. However, the Appellate Court held that the properties covered by Ext. B2 (Deed of Gift) and B3 (Deed of Will) were available for division. The High Court upheld this decision, finding that the appellant failed to prove the validity of both the Deed of Will and the Deed of Gift. Consequently, the properties covered by these documents were deemed available for division among the heirs.
Conclusion:
The Supreme Court found no reason to interfere with the findings of the High Court and dismissed the appeal, holding that both the Deed of Will and the Deed of Gift were not duly proved and were surrounded by suspicious circumstances. The properties covered by these documents were available for division among the heirs. The appeal was dismissed with no order as to costs.
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2008 (12) TMI 767
Interpretation of Statute - Sections 33 and 35 of the Indian Stamp Act 1899 - suit filed for recovery - document was admissible for collateral purpose or not.
HELD THAT:- Indisputably an instrument was executed. By reason of such an instrument not only the entire amount of consideration was paid but possession of the property had also been transferred - The explanation has been inserted by M.P. Act 19 of 1989. By reason of the said provision, thus, a legal fiction has been created. Although ordinarily an agreement to sell would not be subject to payment of stamp duty which is payable on a sale deed, but having regard to the purpose and object it seeks to achieve the legislature thought it necessary to levy stamp duty on an instrument whereby possession has been transferred.
We have noticed hereinbefore that Section 33 of the Act casts a statutory obligation on all the authorities to impound a document. The court being an authority to receive a document in evidence is bound to give effect thereto.
The unregistered deed of sale was an instrument which required payment of the stamp duty applicable to a deed of conveyance. Adequate stamp duty admittedly was not paid. The court, therefore, was empowered to pass an order in terms of Section 35 of the Act.
The contention of ld counsel for the appellant that the document was admissible for collateral purpose, in our opinion, is not correct.
Section 35 of the Act, however, rules out applicability of such provision as it is categorically provided therein that a document of this nature shall not be admitted for any purpose whatsoever. If all purposes for which the document is sought to be brought in evidence are excluded, we fail to see any reason as to how the document would be admissible for collateral purposes.
The view we have taken finds support from the decision of the Privy Council in Ram Rattan v. Parmananad [1945 (12) TMI 5 - PRIVY COUNCIL] where it was held that That the words ‘for any purpose’ in Section 35 of the Stamp Act should be given their natural meaning and effect and would include a collateral purpose and that an unstamped partition deed cannot be used to corroborate the oral evidence for the purpose of determining even the factum of partition as distinct from its terms.
For the reasons aforementioned, there is no merit in this appeal which fails and is dismissed. However, in the facts and circumstances of the case, there shall be no order as to costs.
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2008 (12) TMI 766
The Appellate Tribunal CESTAT MUMBAI directed the appellants to pre-deposit Rs. 2.00 crores towards duty, but they did not comply. The High Court dismissed their petition challenging the order, and the appeal was dismissed for non-compliance with Section 129E of the Customs Act 1962.
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2008 (12) TMI 765
Issues involved:
The petition was filed for quashing a notice for reassessment u/s 148 of the Income Tax Act, 1961. The main issue was whether the reassessment was valid after more than four years from the expiry of the assessment year.
Details of the Judgment:
Issue 1: Validity of Notice for Reassessment
The notice for reassessment was issued more than four years after the completion of the assessment. The notice alleged escapement of income due to speculative transactions and interest deductions. The petitioner argued that reassessment was proposed on merits by change of opinion, not due to failure of the assessee to disclose material. The court held that reassessment after the expiry of four years was not permissible if there was no omission of material in the return. As there was no failure to disclose material, the notice for reassessment was deemed without jurisdiction, rendering the assessment order also without jurisdiction.
Outcome:
The petition was allowed, and the impugned notice and order of reassessment were quashed. The court clarified that the order would not prevent the passing of any fresh order if permissible under the law. The petition was disposed of accordingly.
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2008 (12) TMI 764
Issues involved:
The judgment involves the following Issues:
1. Whether the Tribunal was right in remanding the matter back to the respondent despite the legal position being well settled and material facts being on record.
2. Whether the trade incentive given to dealers should be considered as commission or brokerage under section 194H of the IT Act, 1961.
3. Whether the price at which dealers sell goods determines the true relationship between the appellant company and the dealers.
Issue 1:
The assessee, a manufacturer of bicycles, appointed dealers for sales. The AO treated the trade incentive given to dealers as falling under section 194H. The CIT(A) accepted the assessee's case, considering the incentive as a discount rather than commission. The Revenue appealed to the Tribunal, arguing that the incentive was subject to TDS and did not result in price abatement. The Tribunal, referring to a Gujarat High Court judgment, remanded the matter to the AO for re-examination after verifying the sale price.
Issue 2:
The assessee contended that the sale price alone should not determine the relationship between the company and dealers. The Revenue argued that the matter was remanded for re-examination and there was no need for interference. The CIT(A) had concluded that the incentive was a discount based on simple agreements between the company and dealers.
Issue 3:
The Tribunal's observation that the price at which dealers sell goods determines the relationship between the parties was challenged. The Tribunal clarified that the entire order should be considered, not just one sentence. Following the Gujarat High Court judgment, the Tribunal stated that if dealers sold goods at the purchase price, the trade incentive would be considered as commission. The matter was remanded to the AO for independent examination, allowing the assessee to produce additional evidence if needed.
In conclusion, the tax case appeal was disposed of without costs, and the connected miscellaneous petition was closed.
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2008 (12) TMI 763
Issues involved: Change of method of accounting for accessories and computation of relief under section 80HHC.
The High Court of Bombay heard the counsel for both parties regarding the main issue of whether the assessee was justified in changing the method of accounting for accessories that remained unused at the end of the previous year. The Income-tax Appellate Tribunal had considered this issue and found that the change of method in writing off the accessories, even if unused, was not bona fide. The Tribunal confirmed the order of the CIT (A) in this regard, stating that the items like buttons, elastic, labels, and threads still held some value and were not obsolete. The Tribunal also upheld the action of the Assessing Officer in reducing 90% of certain miscellaneous income for the purpose of relief under section 80HHC. The Court agreed with the Tribunal's findings, dismissing the appeal as no substantial question of law was involved.
In the judgment, it was noted that the change in the method of accounting for unused accessories was not considered bona fide by the Tribunal. The Tribunal found that there was no evidence presented to show what happened to the stock of accessories worth over Rs. 10,00,000. Consequently, the Court agreed with the Tribunal's decision in favor of the Revenue and against the Assessee, as there was no merit in the appeal based on the factual findings presented.
The Court affirmed the Tribunal's decision regarding the change in the method of accounting for unused accessories and the computation of relief under section 80HHC. The Tribunal's findings that the accessories still held some value and that the change in accounting method was not bona fide were upheld by the Court, leading to the dismissal of the appeal.
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2008 (12) TMI 762
Issues involved:
The judgment involves issues related to the tax treatment of interest receipts, foreign exchange gains, freight expenses, and PF/ESIC contributions u/s 10A of the IT Act for the assessment year 2002-03.
Interest Receipts:
The appeal concerned the tax treatment of interest receipts earned by the appellant from fixed deposits kept as margin money with the bank. The Tribunal decided the issue based on a previous order in the appellant's own case for A.Y. 2003-04, holding that such interest has a nexus with the business of the undertaking and should be assessed as business income. The Tribunal directed the AO to exclude the net interest from the profits eligible for Section 10A, provided the nexus between interest received and paid is proven. The ground of the assessee was partly allowed for statistical purposes.
Foreign Exchange Gains:
The issue revolved around treating foreign exchange gains earned on the realization of export proceeds as part of business profit, export turnover, and total turnover for the calculation of deduction u/s 10A. The Tribunal relied on a previous decision and directed the AO to grant exemption to the assessee u/s 10A in the year of export, excluding the amount from the profits of the year under consideration. This ground of the Revenue was disposed of accordingly.
Freight Expenses:
The dispute involved excluding the amount of freight on export from the total turnover for the calculation of deduction u/s 10A. The Tribunal, referring to a previous order, held that freight and insurance charges, not resulting in profit, should not be included in the total turnover. Consequently, the ground of the Revenue was dismissed for the year in question.
PF/ESIC Contributions:
The issue centered on considering the enhanced amount on account of PF and ESIC for the deduction u/s 10A, with the contention that such deductions are available only on profits derived from manufacturing activity. The Tribunal, based on a previous ruling, directed the AO to grant exemption u/s 10A on the assessed income enhanced due to disallowed contributions. The ground of the Revenue was dismissed in this regard for the relevant year.
In conclusion, the appeal filed by the Revenue was partly allowed, with the Tribunal providing detailed reasoning and directions on each issue presented before it.
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2008 (12) TMI 761
Issues involved: Computation of income under the head "Income from house property" u/s.24 of the Income Tax Act.
Summary:
1. The appeal by the assessee, a partnership firm, for the asst. year 2005-06, pertains to the computation of income under "Income from house property." The only issue is the deduction of association maintenance charges of Rs. 1,77,000 claimed by the assessee. The Assessing Officer disallowed the claim, stating it was not allowable u/s.24 of the Income Tax Act. The Commissioner of Income-tax (Appeals) upheld this decision, leading the assessee to appeal before the Tribunal.
2. The assessee argued that the association charges were not claimed as a deduction u/s.24 but u/s.23(1)(b) while computing the annual letting value of the property. They contended that these charges, paid by the property owner, affect the annual letting value of the property. Supporting documents were provided, including bills issued by the apartment owners' Association. The Tribunal noted previous decisions where similar charges were held deductible while estimating the annual letting value of the property u/s.23.
3. After careful consideration, the Tribunal found in favor of the assessee, citing previous Tribunal orders. It was held that the association maintenance charges should be deducted while computing the annual letting value of the property u/s.23, as they impact the property's value. No contrary judgments were presented by the department. Therefore, the Tribunal directed the Assessing Officer to allow the deduction of association maintenance charges. The appeal of the assessee was allowed with no order as to costs.
4. The order was pronounced in the open court on 23.12.2008.
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2008 (12) TMI 760
Issues involved: Interpretation of exemption u/s 54F for two residential houses; Verification of investment source and usage as one residential house.
Interpretation of exemption u/s 54F: The appellant sought clarification on whether the Tribunal was justified in directing the Assessing Officer to allow exemption u/s 54F for two residential houses if they are adjacent, interconnected, and used as one residential house, with investment made from the Assessee's own account.
Verification of investment source and usage: The Tribunal ordered verification by the Assessing Officer to confirm if the investment for both flats was made by the Assessee from his own funds and if the flats were being used as one residential house. The order of the CIT (A) was set aside for this purpose, and the matter was remanded for verification.
The Tribunal emphasized the need for verification by the Assessing Officer regarding the investment source and usage of the two flats as one residential house. The Tribunal directed that if it is confirmed that both flats are being used as one residential house and the investment was made by the Assessee, then exemption should be allowed for both flats u/s 54F.
The High Court, upon review, found no substantial question of law in the matter and consequently dismissed the appeal in light of the remand for verification by the Assessing Officer.
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2008 (12) TMI 759
Condonation of delay u/s 5 of Limitation Act - Taxation of notional interest on loan - Mode of set off for short term capital gain - loan given by the assessee to a company of which the assessee was a promoter.
HELD THAT:- This court after perusing the application for condonation of delay, condoned the delay u/s 5 of the Limitation Act based on the grounds stated in the petition.
Taxation of notional interest on loan: The CIT (A) held that the Assessing Officer had taxed hypothetical income, emphasizing that the Income Tax Act does not permit taxation of hypothetical income. The Commissioner concluded that the addition of notional interest as business income was deleted, and the mode of set off for short term capital gain was also discussed.
Mode of set off for short term capital gain: The CIT found that the Act did not prescribe a specific mode of set off for short term capital gain, allowing the assessee to choose the most beneficial option. It was noted that the assessee's option should favor them and not the revenue, as per established legal principles. The CIT concluded in favor of the assessee, stating that the disallowance had been made on presumption.
High Court found no illegality or irregularity in the order passed by the Tribunal and upheld the decision. It was determined that no substantial question of law was involved in the appeal, leading to the dismissal of the appeal.
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2008 (12) TMI 758
Issues involved: Determination of liability to deduct tax at source (TDS) on a composite contract involving supply of equipment and erection/commissioning works, consideration of permanent establishment (PE) and business connection in India.
Summary:
1. The department appealed against the CIT (A) order for assessment year 2006-07, contesting the decision that the assessee is not liable to deduct TDS on a composite contract with a non-resident company having PE in India and business connection. The Assessing Officer treated the contract as composite, attributing income to India under sec. 44BBB. CIT (A) found two identifiable segments in the contract and held that only income from erection and commissioning is taxable in India.
2. The CIT (A) considered the two separate letters by the assessee, one for equipment supply and the other for erection/commissioning, and concluded that income from the supply segment, taking place outside India, is not taxable in India. The departmental representative argued for TDS on the entire contract, citing the composite nature of the agreement.
3. The main contention was that it was an FOB contract with title passing outside India, supported by the absence of manufacturing activity in India. The Tribunal analyzed the composite agreement, referring to the Board's instruction and Sale of Goods Act provisions to ascertain the intention of the parties. It upheld CIT (A)'s decision that no TDS is required on the supply agreement and the 10% income tax on the erection agreement is reasonable.
4. The Tribunal dismissed the department's appeal, emphasizing that no income arises to the supplier from the supply segment of the composite contract. It upheld CIT (A)'s order based on lack of business profit due to no activities in India as per the DTAA between India and China.
5. The judgment was pronounced on 19-12-2008.
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2008 (12) TMI 757
Issues Involved:
1. Nature of the asset gifted by the donor.
2. Validity of the gift in law.
3. Head of income under which the sale of shares should be taxed.
4. Computation of income under the head capital gains.
Issue-wise Detailed Analysis:
(I) Nature of the Asset Gifted by the Donor:
The case revolves around the nature of the asset gifted by the donor, SCL, to the assessee. The assessee claimed that the donor gifted application money for Optionally Fully Convertible Debentures (OFCDs) in ADIL. However, the Tribunal noted that no debenture issue was brought out by ADIL, and the amount advanced by SCL was shown as unsecured recoverable loans in the accounts. It was inferred that no such issue of debentures was made, and the amount advanced was a simple loan transaction. The Tribunal concluded that the asset gifted was an unsecured loan with a realizable value of Rs. nil, not OFCDs.
(II) Validity of the Gift in Law:
The Tribunal examined whether the transfer of debt by the donor to the assessee constituted a valid gift. The conditions of Sections 122 and 123 of the Transfer of Property Act were scrutinized. The Tribunal found that the gift was made voluntarily by the donor and accepted by the donee, fulfilling the criteria of Section 122. Additionally, the gift of the actionable claim was considered valid under Section 123, as it could be made by delivery, which in this case was through writing and acceptance. The Tribunal held that there was a valid gift of an unsecured loan with a book value of Rs. nil.
(III) Head of Income for Taxation of Sale of Shares:
The Tribunal addressed whether the income from the sale of shares should be taxed under the head 'Profits and gains of business or profession' or 'Capital gains.' The assessee had not carried on any business in prior years or during the year under consideration. The shares were reflected as investments in the assessee's accounts, and no business of dealing in shares was conducted. The Tribunal concluded that the shares were held as investments and not as stock-in-trade. Therefore, the profit from the sale of shares should be taxed under the head 'Capital gains.'
(IV) Computation of Income under the Head Capital Gains:
The Tribunal examined the computation of capital gains. The assessee declared income under the head 'Capital gains' at Rs. nil by reducing the cost of shares sold by invoking Section 49(1). The AO had held the transaction of gift as non-genuine and computed income under 'Profits and gains of business or profession' with a cost of Rs. nil. The Tribunal noted that the learned CIT(A) erred in examining the nature of the capital asset gifted and overlooked vital aspects affecting the computation of capital gains. The Tribunal directed the AO to decide the computation of capital gains afresh, considering the cost of the actionable claim and the applicability of Section 49(1).
Conclusion:
The Tribunal held that the gift of an unsecured loan with a book value of Rs. nil was valid. The income from the sale of shares should be taxed under 'Capital gains.' The computation of capital gains was remitted to the AO for fresh consideration, with the scope limited to the computation part. The Tribunal clarified that issues decided in the earlier part of the order would not be re-argued before the AO.
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2008 (12) TMI 756
Computation of profit u/s 80IA - computation of receipts for captively consumed power at the rate at which it had purchased the power from the Board.
Assessing Officer held that since the assessee sold the units to outsiders at the rate of ₹ 3.70 per unit, such amount alone should be taken into consideration as receipts for the units captively consumed.
HELD THAT:- The law has already been settled by this Court. Therefore, in our considered opinion, we do not find that there is any substantial question of law involved in this matter which is to be gone into by this Court.
Hence, the appeal is dismissed.
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2008 (12) TMI 755
Issues involved:
The judgment pertains to assessment years 1994-95 and 1995-96, addressing the question of taxation on payments made to a non-resident contractor for work done outside India under a composite contract.
Issue 1 - Taxability of payments to non-resident contractor:
The main issue in the case was whether payments made to a non-resident contractor for work done outside India under a composite contract are liable to be taxed in India. The Hon'ble ITAT had previously held that no portion of such payments is taxable in India. The matter had also been considered by the Supreme Court in a related case involving the same parties for previous assessment years. The Supreme Court observed that substantial questions of law did arise in the case and remitted the matter back to the ITAT for fresh consideration in light of the law laid down in the previous judgment. Consequently, the orders passed by the Income Tax Appellate Tribunal for the relevant assessment years were set aside, and the present Income Tax Appeals were allowed.
Conclusion:
The High Court ruled in favor of the appellant, allowing the Income Tax Appeals and setting aside the orders of the Income Tax Appellate Tribunal for the assessment years 1994-95 and 1995-96.
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2008 (12) TMI 754
Issues involved:
The appeal under section 260-A of the Income tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chandigarh Bench-B regarding the treatment of grants-in-aid received by a charitable society for promotion of sports from Central/State Govt., the method of accounting for interest income, and the adjudication of additional grounds of appeal raised by the revenue.
Treatment of grants-in-aid:
The assessee, a charitable society for promotion of sports, received grants from Central and State Government for specific purposes. The Assessing Officer treated the grants as income due to non-compliance with Form No.10 notice requirements. However, the CIT(Appeals) upheld the claim of the assessee. The Tribunal held that contributions received by a trust for charitable purposes are exempt under section 11 of the Act. Grants received for charitable purposes were deemed exempt from income tax, while income from interest was to be considered as income from other sources based on cash system of accounting. Grants-in-aid for expenditure were to be treated as income of the society, directing a fresh decision by the Assessing Officer.
Method of accounting and voluntary contributions:
The Tribunal found no reason to treat grants-in-aid for sports advancement as taxable income of the society, affirming the cash system of accounting maintained by the assessee. The grants were considered voluntary contributions and not taxable income, emphasizing that the method of accountancy is a factual matter.
Adjudication of additional grounds:
The judgment noted that certain additional grounds were raised by the revenue, but there was no reference to them in the Tribunal's order. Without this reference, the Court could not address whether the additional grounds were raised. The revenue had the option to request the Tribunal to consider these matters, and as such, the Court found no substantial question of law to arise.
Conclusion:
The Court dismissed the appeal, stating that no substantial question of law was found to warrant further consideration in the case.
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