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2009 (12) TMI 991
Issues involved: The judgment involves the seizure of goods meant for export to Kabul, Afghanistan, intercepted during transportation from Haridwar to Agra, and detained by the Assistant Commissioner, Mobile Squad, Agra due to missing transit declaration form.
Seizure of Goods: The goods, classified as drugs, were intended for export to Kabul, Afghanistan, through Inland Container Depot in Agra. Despite being accompanied by regular invoice bills, the goods were seized for not having the required transit declaration form, leading to a demand for 40% security of the estimated value for release.
Legal Arguments: The dealer contended that the goods were verifiable, not meant for sale in Uttar Pradesh, and were for further transportation through the Inland Container Depot under the Customs Act. Citing a previous court decision, the dealer argued that the security demanded was excessive and proposed a security amount equal to the tax leviable on the goods.
Court Decision: The court directed the release of the goods upon furnishing security equal to the tax amount applicable to the drugs, set at 4% as per a specific notification. Acknowledging the cancellation of the export order to Kabul, Afghanistan, the court allowed the goods to be taken back to the dealer's unit in Haridwar. It was clarified that any penalty proceedings initiated against the dealer would not be affected by the judgment.
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2009 (12) TMI 990
Issues involved: Appeal against deletion of addition on account of cash deposits in banks during assessment year 2006-07.
Summary:
The appeal was filed by the revenue challenging the deletion of addition made on account of cash deposits in two banks by the assessee. The AO had added unexplained cash credits of &8377; 3,65,000/- and &8377; 25,47,000/- deposited in SBM and Axis Bank respectively, along with interest. The CIT(A) granted relief to the assessee after considering a remand report and additional evidence. The revenue opposed this decision, but the ITAT upheld the CIT(A)'s findings.
The AO had noted the cash deposits in the two banks and considered them unexplained credits due to lack of substantiated income from agricultural activity during assessment proceedings. However, the CIT(A) admitted additional evidence, including details of agricultural income, which the assessee was unable to present before the AO due to reasonable cause. The assessee owned 18 acres of agricultural land since 1991, cultivated by relatives who confirmed providing cash to the assessee annually. The cash deposits in the banks were explained as part of this agricultural income accumulation, supported by bank statements and cash flow details. The mutual fund investments were funded from these bank accounts, which were not disputed by the AO. Therefore, the CIT(A) rightly directed the deletion of the addition after reviewing the remand report and evidence.
Ultimately, the ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decision. The order was pronounced on 30-12-2009.
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2009 (12) TMI 989
Issues Involved:
The issues involved in the judgment are the refusal of adjournment request by the representative of the respondents and the challenge to the order passed by the Commissioner (Appeals) regarding the modvat credit.
Refusal of Adjournment Request:
The Tribunal received a letter from the Chartered Accountant representing the respondents requesting an adjournment due to personal work. However, the Tribunal declined the adjournment request as no cogent reason was provided other than personal work, and the matter dated back to 2005.
Challenge to Commissioner (Appeals) Order:
The appellants contested the order passed by the Commissioner (Appeals) which allowed modvat credit amounting to Rs. 16,66,361. The Assistant Commissioner of Bhopal had initially disallowed this credit and imposed a penalty of Rs. 5 lakh along with interest. The challenge was based on the contention that the Commissioner did not properly interpret Notification No. 5/94-CE (NT) dated 01.03.1994 and granted modvat credit in violation of the said notification.
Interpretation of Impugned Order:
The Commissioner (Appeals) justified the modvat credit based on the decision of the Larger Bench in the case of Vikram Ispat vs. CCE, Mumbai-III. The impugned order clarified the process for determining the quantum of modvat credit for goods procured from 100% EOU, emphasizing the need to ascertain the additional duty of customs leviable on like goods imported into India and the duty paid by the EOU. The order concluded that the modvat credit was admissible to the appellant based on the provisions of Notification No. 5/95-CE.
Larger Bench Decision in Vikram Ispat Case:
The Larger Bench in the Vikram Ispat case highlighted that the duty paid by 100% EOU on goods cleared to DTA is excise duty, not customs duty. The decision emphasized that the method of recovering tax does not alter its character, and the duty paid by EOU should not be dissected into different components of customs duty. The decision also noted that the Revenue's attempt to restrict Modvat credit was unfounded, and the duty paid by EOU should be considered excise duty.
Conclusion:
The Tribunal dismissed the appeal as the impugned order was based on the decision in the Vikram Ispat case, which was not challenged by the department and hence binding. The appeal was deemed to have no grounds for interference, and therefore, it was dismissed.
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2009 (12) TMI 988
Issues involved:
The judgment deals with the issue of whether converting limestone into limestone powder constitutes a manufacturing activity eligible for deduction u/s 80IB of the Income Tax Act, 1961.
Manufacturing Activity Analysis:
The primary question addressed in the judgment is whether the process of converting limestone into limestone powder qualifies as a manufacturing activity under Section 80IA and 80IB of the Income Tax Act, 1961. The definition of "manufacture" from Black's Law Dictionary is cited, emphasizing the transformation of raw materials into new forms. Reference is made to various legal precedents to determine the interpretation of "manufacture" in the context of different processes.
Legal Precedents:
The judgment cites legal precedents to establish the interpretation of "manufacture." The Supreme Court's decision in M/s. Sterling Foods v. State of Karnataka regarding the processing of shrimps, prawns, and lobsters highlights that processed items retain their original identity. The Madras High Court's ruling in Commissioner of Income Tax v. Sacs Eagles Chicory confirms that a change in form does not alter the identity of a commodity. These decisions were upheld by the Apex Court, emphasizing the continuity of identity despite processing.
Apex Court Interpretations:
The Apex Court's interpretations further clarify the concept of "manufacture." In cases such as Indian Hotels Co. Ltd. v. Income Tax Officer and Gem India Manufacturing Co., the Court distinguished between processing for consumption and true manufacturing activities. The judgment in Aspinwall and Co. Ltd. v Commissioner of Income Tax emphasized that a distinct change resulting in a new commodity signifies manufacturing. The Court stressed that a complete transformation leading to a commercially different product constitutes manufacturing.
Application to Limestone Conversion:
The judgment applies the legal principles to the conversion of limestone into limestone powder. It references the Supreme Court's decision in Lucky Minmat Pvt. Ltd. v. Commissioner of Income Tax, where the conversion into lime and concrete was deemed a manufacturing process. The Court rejects the revenue's argument that this observation was obiter dicta, affirming that the conversion of limestone into lime and lime dust qualifies as manufacturing. Consequently, both questions are answered in favor of the assessee, leading to the dismissal of the appeal.
Conclusion:
In conclusion, the judgment clarifies that the conversion of limestone into limestone powder constitutes a manufacturing activity eligible for deduction u/s 80IB of the Income Tax Act, 1961. By analyzing legal definitions, precedents, and Apex Court interpretations, the Court affirms the manufacturing nature of the process. The decision highlights the importance of transformation leading to a commercially distinct product in determining manufacturing activities under the law.
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2009 (12) TMI 987
Block assessment proceedings u/s 158BD - period of limitation - Undisclosed income of another person u/s 158BD - HELD THAT:- The time limit set in sec. 158BE automatically applies for invoking the provisions of sec. 158BD. Legislature did not find it necessary to specify the separate time limit for the same, as the enactment itself shows that both section 158BC and 158BD are inter-linked, inter-laced, interwined and both form part and parcel of the same Chapter.
Respectfully following the decision of Manoj Agarwal’s case[2008 (7) TMI 446 - ITAT DELHI-A], we hold that the notice dated 19.4.2004 issued u/s 158BD is time barred and, therefore, the assessment framed on 27.2.2006 u/s 158BD read with sec. 158BC is without jurisdiction and void ab initio. Accordingly, we quash the assessment order dated 27.2.2006 framed u/s 158BD read with section 158BC.
Where material found in search is glaringly apparent that it belongs to a third person other then the person searched, then no specific satisfaction is required to be recorded and therefore, it is not necessary to issue notice under section 158BD before the closure of the assessment of the person searched.
It is for the AO to decide while examining the ceased material that it belongs to the person searched or to a third person. Whether such distinction is glaring or not is not material as legal requirement is that of satisfaction of the AO which cannot be done away with.
Accordingly, the principles laid down in the two cases i.e. Manish Maheshwari’s case [2007 (2) TMI 148 - SUPREME COURT] and Manoj Agarwal’s case would have to be followed. All the points raised by the ld. DR have been considered in Manoj Agarwal’s case and therefore are not required to be separately considered. Thus, respectfully following the decision in Manoj Agarwal’s case [2008 (7) TMI 446 - ITAT DELHI-A] as well as Kuntesh Bhupatrai Desai’s case, we cancel the assessment and allow the appeal of the assessee.
Appeal of the assessee is allowed.
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2009 (12) TMI 986
Issues Involved:
1. Deduction u/s 80IB for interest income and surrendered income.
2. Netting of interest for computing deduction u/s 80IB.
3. Low household withdrawals.
4. Disallowance of car expenses.
5. Addition u/s 40A(2)(b) for interest paid to related parties.
Summary:
1. Deduction u/s 80IB for interest income and surrendered income:
The assessee's appeal in I.T.A.No. 757/Ind/2006 was primarily concerned with the disallowance of deduction u/s 80IB for interest income and income surrendered during a survey. The A.O. disallowed the deduction, arguing that the excess stock of Kapas was unaccounted and not derived from the industrial undertaking. The Ld. CIT(A) upheld this decision, stating that the surrendered income could not be conclusively linked to the industrial undertaking. The Tribunal agreed with the Revenue Authorities, noting that the assessee was also involved in trading activities and could not prove the source of investment in the excess stock as derived from the industrial undertaking. Thus, the claim for deduction u/s 80IB was dismissed.
2. Netting of interest for computing deduction u/s 80IB:
The assessee contended that interest income should be netted against interest expenses for computing deduction u/s 80IB. The Tribunal restored this issue to the A.O. to examine the nexus between the interest paid and earned. If the nexus is established, only the net interest should be excluded from the eligible profits of the industrial undertaking. This issue was similarly addressed in I.T.A.No. 756/Ind/2009 and other related appeals, with the Tribunal directing the A.O. to re-examine the nexus.
3. Low household withdrawals:
In I.T.A.No. 756/Ind/2009, the assessee challenged the addition made for low household withdrawals. The A.O. had added Rs. 1,05,000/- based on the assumption that Rs. 10,000/- per month was reasonable for household expenses. The Tribunal found that in similar cases, withdrawals of Rs. 61,000/- were deemed sufficient. Therefore, the Tribunal held that the assessee's withdrawals of Rs. 86,000/- were adequate and deleted the addition.
4. Disallowance of car expenses:
The assessee appealed against the disallowance of 25% of car expenses. The Tribunal found that a disallowance rate of 20% was more reasonable given the facts of the case. Thus, the disallowance was partly allowed, reducing it to 20%.
5. Addition u/s 40A(2)(b) for interest paid to related parties:
The assessee contested the addition of Rs. 33,673/- made by the A.O. for paying higher interest rates to related parties compared to unrelated parties. The Tribunal upheld the Ld. CIT(A)'s decision, noting that the assessee failed to justify the difference in interest rates. Therefore, the addition was confirmed.
Conclusion:
All the appeals were partly allowed, with specific directions for re-examination of certain issues by the A.O. and adjustments to disallowances as deemed reasonable by the Tribunal. The order was pronounced in the open court on 15th December, 2009.
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2009 (12) TMI 985
Issues involved: The judgment involves the controversy regarding the addition of income from house property based on rent receivable versus municipal valuation for Assessment Years 1999-2000 to 2002-03, 2004-05, and 2005-06.
Assessment Year 1999-00 & 2000-01:
The Assessing Officer added Rs. 54,000/- for each year based on rent @ Rs. 3,000/- p.m., which the appellant contested as the properties being vacant. The CIT(A) upheld the addition citing the provisions of section 23(1)(c) and rejected the appellant's argument for municipal valuation at Rs. 500/-. The appellant appealed against this decision.
Assessment Year 2002-03, 2004-05 & 2005-06:
Similar additions were made by the Assessing Officer for these years, totaling Rs. 1,26,000/- and Rs. 75,600/- respectively, based on the same rent calculation. The appellant argued that the properties were vacant and should be taxed at municipal valuation of Rs. 500/-. The CIT(A) upheld the Assessing Officer's decision, leading to the appellant's appeal.
Appellant's Argument:
The appellant contended that the properties were self-occupied and not let out, thus municipal valuation should be the basis for determining the annual value. Referring to a decision by ITAT Mumbai 'D' Bench in a similar case, the appellant argued that municipal valuation should be adopted instead of market rent.
Revenue's Position:
The Revenue supported the decisions of the authorities below, maintaining that the annual value should be based on market rent rather than municipal valuation for self-occupied properties.
Judgment:
After considering the arguments from both sides and the ITAT Mumbai 'D' Bench decision, it was concluded that for self-occupied properties not let out, municipal valuation should be the basis for determining the annual value. The Assessing Officer was directed to adopt municipal valuation for all properties in the relevant Assessment Years, requiring the appellant to provide necessary evidence for the same. Consequently, all appeals were allowed in favor of the appellant.
This judgment highlights the importance of correctly determining the annual value of self-occupied properties for taxation purposes, emphasizing the relevance of municipal valuation over market rent in such cases.
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2009 (12) TMI 984
Issues Involved:
1. Inclusion of DEPB license income in the profit of industrial undertaking for deduction under section 80IB.
2. Inclusion of income earned from service charges in the profit of industrial undertaking for deduction under section 80IB.
3. Exclusion of sales tax and excise duty from total turnover for deduction under section 80HHC.
4. Inclusion of interest income in the total turnover for deduction under section 80HHC.
5. Inclusion of 'other income' in the profit eligible for deduction under section 80IB.
6. Deduction under section 10B on interest income.
7. Reduction of deduction under section 80IB from the 'profits of the business' for calculating deduction under section 80HHC.
8. Inclusion of 'other income' as part of the 'total turnover' for deduction under section 80HHC.
9. Inclusion of manufactured export turnover of 10B unit in the 'total turnover' for deduction under section 80HHC.
10. Charging of interest under section 234D.
Detailed Analysis:
1. Inclusion of DEPB License Income:
The Tribunal noted the CIT(A)'s decision that DEPB license income, if by way of credit for use of the license, is includible in the profits of the industrial undertaking. However, following the Supreme Court decision in Liberty India Vs. CIT, it was held that DEPB benefits do not form part of net profits of the industrial undertaking for the purposes of section 80-IA or 80-IB. Therefore, the Tribunal allowed the revenue's appeal on this ground.
2. Inclusion of Service Charges:
The CIT(A) held that service charges might be considered for deduction under section 80IB if the assessee shows that the sales were conditional upon after-sales service or arose in the course of manufacturing. The Tribunal upheld this view, noting that the CIT(A) had correctly set aside the issue to the AO for verification. The Tribunal confirmed the CIT(A)'s order and dismissed the revenue's appeal on this ground.
3. Exclusion of Sales Tax and Excise Duty:
Both parties agreed that the issue is covered by the Supreme Court decision in CIT Vs. Laxmi Machine Works, which held that excise duty and sales tax are not includible in "total turnover" for section 80HHC. The Tribunal dismissed the revenue's appeal on this ground.
4. Inclusion of Interest Income:
The CIT(A) held that interest income should not be included in the total turnover for computing deduction under section 80HHC. The Tribunal upheld this decision, noting that the revenue could not bring any material to controvert the CIT(A)'s findings. Thus, the Tribunal dismissed the revenue's appeal on this ground.
5. Inclusion of 'Other Income':
The Tribunal noted that the lower authorities excluded other income of Rs. 47,58,885/- from business income while computing income derived from the industrial undertaking for section 80IB. The Tribunal remitted the issue of Rs. 10,088/- (scrap sale) and Rs. 1,27,432/- (documentation charges), Rs. 11,124/- (insurance local sales), and Rs. 3,000/- (octroi sales) back to the AO for verification. However, it confirmed the exclusion of Rs. 46,07,241/- (interest income) from the deduction. Thus, the Tribunal partly allowed the assessee's appeal on this ground.
6. Deduction under Section 10B on Interest Income:
The assessee conceded that the issue is covered against them by judicial pronouncements. Therefore, the Tribunal dismissed the assessee's appeal on this ground.
7. Reduction of Deduction under Section 80IB:
The assessee conceded that the issue is covered against them by the decision of the Special Bench of Delhi Tribunal in ACIT Vs. Hindustan Mint & Agro Products Pvt. Ltd. Therefore, the Tribunal dismissed the assessee's appeal on this ground.
8. Inclusion of 'Other Income' in Total Turnover:
The Tribunal upheld the lower authorities' decision to include exchange fluctuation gain and miscellaneous income in the total turnover for computing deduction under section 80HHC. The Tribunal found no material to exclude these business receipts from the total turnover. Therefore, the Tribunal rejected the assessee's appeal on this ground.
9. Inclusion of Manufactured Export Turnover of 10B Unit:
The Tribunal remitted the issue back to the AO for verification, directing the AO to decide the issue afresh in accordance with the Madras High Court decision in CIT Vs. Shivagami Match Industries. Thus, the Tribunal allowed the assessee's appeal for statistical purposes.
10. Charging of Interest under Section 234D:
Both parties agreed that the issue is covered by the Special Bench decision in ITO Vs. Ekta Promoters Pvt. Ltd., which held that section 234D is applicable from assessment year 2004-05 only. Therefore, the Tribunal deleted the interest charged under section 234D and allowed the assessee's appeal on this ground.
Conclusion:
The Tribunal partly allowed both the revenue's and the assessee's appeals, remitting certain issues back to the AO for verification and confirming others based on judicial precedents. The Tribunal's order was pronounced in the presence of the parties on 10/12/2009.
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2009 (12) TMI 983
Issues involved:
1. Utilization of interest bearing funds for advancing interest free loans.
2. Disallowance of interest payment made to DDA.
Utilization of interest bearing funds for advancing interest free loans:
The Tribunal observed that the AO alleged the assessee utilized interest bearing funds for advancing interest free loans, but failed to establish any nexus to support this claim. The assessee demonstrated that the interest bearing funds were not used for interest free advances, as the interest paid on overdrafts and inter-corporate deposits were not linked to such advances. Additionally, the assessee had sufficient share capital and reserves to cover these interest free advances. The revenue did not provide any evidence to counter these assertions. Consequently, the Tribunal upheld the CIT(A)'s decision that disallowance was made on incorrect grounds, as no link was found between interest bearing funds and interest free advances. The disallowance of Rs. 37,76,204 was upheld, and no question of law arose.
Disallowance of interest payment made to DDA:
Regarding the interest payment of Rs. 9,64,267 made to DDA, it was argued that this payment was non-penal in nature and resulted from delayed payment of arrears of ground rent. The Tribunal held that unless the expenditure contravened any law, it could not be disallowed. The CIT(A)'s decision that this payment was not penalty in nature and therefore could not be disallowed was upheld. The Tribunal declined to interfere with the deletion of this disallowance as well.
Separate Judgement:
No separate judgement was delivered by the judges.
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2009 (12) TMI 982
The Supreme Court dismissed Special Leave Petitions 16877/08, 22331/08, and 18118/09 after condoning delay. However, in S.L.P.(C) Nos.18045/09, 18046/09 & CC 10437/09, leave was granted and Civil Appeals were dismissed with no order as to costs.
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2009 (12) TMI 981
Issues involved: Cross appeals filed by the assessee and the Revenue against the orders passed by the Ld. CIT(A)-IX, Mumbai for the assessment year 2003-04.
Issue 1: Unexplained credit u/s. 68 of the I.T. Act
- The appellant, a company engaged in the business of readymade garments, faced an addition of &8377; 20,50,000/- as unexplained credit u/s. 68 of the I.T. Act due to lack of confirmation letters during assessment proceedings.
- Despite the appellant's efforts to explain the situation, including submitting copies of criminal complaints and legal notices regarding lenders' refusal to issue confirmations, the AO held the creditworthiness and identity of the loan givers remained unexplained.
- The Ld. CIT(A) directed the AO to verify the claim from earlier assessment records for certain loans and delete the addition if they were found to be old advances reflected in previous balance sheets.
- The Ld. CIT(A) confirmed the addition of &8377; 11,00,000/- in the case of one lender due to lack of satisfactory explanation or supporting evidence provided by the assessee.
- Regarding other lenders, although evidence of legal action was submitted, the creditworthiness and genuineness of the transactions were not established to the satisfaction of the authorities.
Issue 2: Disallowance of proportionate interest on loans
- The assessee paid interest on secured and unsecured loans but faced disallowance of &8377; 12,53,435/- for interest-free loans that were connected to interest-bearing loans.
- The AR clarified that the loans and advances amounting to &8377; 1,07,87,166/- included "Advance Income tax & TDS" and were not diverted for non-business purposes.
- The Ld. CIT(A) held that the disallowance was unjustified as the amount of &8377; 1,07,87,166/- was indeed advance income-tax and TDS.
- The Revenue challenged the decision, arguing that the disallowance should not have been deleted and questioning the characterization of the loans and advances as advance income tax and TDS.
- An error was noted in the CIT(A)'s order regarding the figures related to advances and deposits, prompting a reevaluation by the Assessing Officer to verify the balance sheet and rework any disallowance if necessary.
Conclusion:
- The appeal filed by the assessee was allowed for statistical purposes, while the appeal filed by the Revenue was also allowed for statistical purposes.
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2009 (12) TMI 980
Issues involved: Appeal challenging order of CIT(A) regarding disallowance of depreciation on fixed assets, appeal regarding addition made on account of incorrectness and incompleteness of books of account, and appeal regarding direction to allow carry forward of brought forward losses of earlier years without basis.
Issue 1: Disallowance of depreciation on fixed assets
The revenue appealed against the CIT(A)'s decision to delete the addition of Rs. 4,26,936 made on account of disallowance of depreciation on fixed assets. The Assessing Officer disallowed 50% of the depreciation claimed by the assessee based on auditors' comments and nature of business. However, the first appellate authority found that the fixed assets were duly reflected in the balance sheet with no new additions. The assessee had regularly claimed depreciation on all assets since inclusion in the balance sheet. The Tribunal noted that the revenue did not provide evidence to counter the factual findings in the impugned order. Considering the tax effect and lack of evidence, the appeal of the revenue was liable to be dismissed. The decision was supported by a previous Tribunal case involving R.K. Hotels (ITA No.383/Ind/09).
Issue 2: Incorrectness and incompleteness of books of account
The revenue appealed against the addition made on account of incorrectness and incompleteness of books of account. The Tribunal noted a typographical error in the figure mentioned in the appeal grounds, with the correct amount being Rs. 3,94,732 instead of Rs. 6,37,206. The tax effect was below the prescribed monetary limit for filing the appeal. The Tribunal decided to dismiss the revenue's appeal based on the tax effect and the insertion of sec. 268A in the Act. The decision was in line with Board instructions specifying monetary limits for filing appeals before various courts and tribunals.
Issue 3: Direction to allow carry forward of brought forward losses
The revenue challenged the direction of the first appellate authority to allow carry forward of brought forward losses of earlier years without basis. The revenue contended that no basis was provided for the decision, and the Assessing Officer rightly disallowed it due to lack of proof from the assessee. However, the first appellate authority found that all previous years' returns were duly filed and available in the Assessing Officer's records. The Tribunal agreed that the assessed loss, not set off, should be allowed as per section 72. Citing relevant judicial pronouncements, the Tribunal found no infirmity in the first appellate authority's decision and dismissed the revenue's appeal.
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2009 (12) TMI 979
Issues involved: Assessment under the Interest Tax Act, 1974 for interest received in hire purchase business.
Assessment under Interest Tax Act:
The question raised in the appeals is whether the assessee, engaged in chitty business, is liable to be assessed under the Interest Tax Act on interest received in hire purchase business. The Tribunal held that the respondent is not assessable under the Act, a decision challenged by the revenue.
Definition of 'financial company' under the Act:
The respondent's assessability to interest tax hinges on falling within the definition of a 'financial company' as per section 2(5B) of the Act. The respondent does not qualify as a credit institution under section 2(5A), prompting an examination of whether it fits the definition of a 'financial company'. The Act defines 'financial company' to include various types of companies, such as hire-purchase finance company, investment company, housing finance company, loan company, mutual benefit finance company, residuary non-banking company, and miscellaneous finance company.
Principal business determination:
The respondent, primarily engaged in chitty business, does not meet the criteria of a hire-purchase finance company as its principal business is not hire-purchase transactions. Since the respondent is not involved in investment or housing finance, it does not fall under those categories either. Although engaged in money lending, it is not the principal business, excluding it from being classified as a loan company. The respondent also does not qualify as a mutual benefit finance company. The contention that the respondent falls under sub-clause (va) or (vi) is rejected.
Chitty business and interest tax liability:
The court analyzed whether the chitty business, which involves collecting kuri subscription and paying prize amounts, falls within the definition of a 'financial company'. Given that chitty business does not entail advancing loans and interest is charged only on default payments, it is deemed outside the scope of the Act. The legislature did not intend to cover chitty business under the Act, as interest on default payments cannot be equated to interest on loans or advances.
Miscellaneous finance company classification:
The alternative argument that the respondent could be classified as a 'miscellaneous finance company' under sub-clause (vi) is dismissed. As the respondent's principal business is chitty business and only a subsidiary activity involves hire purchase financing, it does not meet the criteria for a miscellaneous finance company. The appeals are thus dismissed, affirming the Tribunal's decision that the respondent's principal business does not fall within the Act's scope.
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2009 (12) TMI 978
The Supreme Court dismissed the special leave petition as the impugned order did not have any legal infirmity. The High Court's decision to refuse to review the order was upheld.
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2009 (12) TMI 977
Issues Involved:
The issue involves the interpretation of Rule 61 of the Rajasthan Minor Mineral Concession Rules, 1986 in the context of an 'Excess Royalty Collection Contract' entered into by the State Government, specifically regarding the entitlement of a contractor to a grace period for paying dues without interest.
Summary:
The respondents entered into an 'Excess Royalty Collection Contract' with the State of Rajasthan, agreeing to pay a fixed amount annually in consideration of collecting excess royalty on marble. A dispute arose when the department demanded interest for delayed payments, which was contested by the respondents. The High Court ruled in favor of the respondents, granting them a grace period of 15 days for payment without interest. The appellants challenged this ruling, arguing that the grace period should only apply for the first ten days of the contract month.
Upon careful consideration, the Supreme Court found that while the procedures for Royalty Collection Contracts and Excess Royalty Collection Contracts are similar, they are conceptually different as per the rules. The Court noted that Rule 61 specifically refers to certain types of dues, excluding 'Excess Royalty Collection Contract Amount'. The Court highlighted that the introduction of 'Excess Royalty Collection Contract' as a new concept was not reflected in Rule 61, indicating that the 15 days interest-free period does not apply to such contracts.
The Court also addressed the contention regarding the amendment of Rule 61 to increase the interest rate, clarifying that a subsequent dispute over interest rate adjustments does not alter the interpretation of the rule itself. The State's argument that Rule 61 is inapplicable to 'Excess Royalty Collection Contracts' was upheld, leading to the decision to set aside the High Court's judgment and uphold the demand for interest at 12% per annum without applying the 15 days grace period under Rule 61.
In conclusion, the Supreme Court allowed the appeal, reinstated the trial court's decision, and upheld the demand for interest on delayed payments related to the 'Excess Royalty Collection Contract'.
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2009 (12) TMI 976
Issues Involved:
1. Assessment of total income.
2. Disallowance of contribution to PF u/s 43-B.
3. Taxation of discrepancy in stock as "deemed income" u/s 69C.
4. Set off of depreciation for the current and brought forward years.
Summary:
Issue 1: Assessment of Total Income
The assessee did not press ground No.1, and accordingly, this ground was dismissed.
Issue 2: Disallowance of Contribution to PF u/s 43-B
The AO disallowed the claim for employer's contribution of Rs. 70,858/- u/s 43B of the Act and added an amount of Rs. 70,858/- on account of employees' contribution in terms of sec. 36(1)(va) read with sec. 2(24)(x) of the Act. The CIT(A) allowed the employer's contribution paid before the due date of filing of return u/s 43B but upheld the disallowance of employees' contribution. The Tribunal, relying on the decision in the case of CIT v. P.M. Electronics Ltd., allowed the claim of the assessee, holding that the employees' contribution towards PF, having been made within the due date of filing of the return u/s 139(1), should not be disallowed. Thus, ground no. 2 was allowed.
Issue 3: Taxation of Discrepancy in Stock as "Deemed Income" u/s 69C
During a survey u/s 133A, a discrepancy of 31,751 kgs in stock was found, and the Managing Director voluntarily offered Rs. 14,35,000/- for tax as additional income. The AO added this amount as undisclosed investment u/s 69C and declined to set off depreciation against this income. The CIT(A) upheld this addition, stating that the unaccounted stock represents unexplained expenditure. The Tribunal agreed with the CIT(A), citing the Hon'ble Gujarat High Court's decision in Fakir Mohammed Haji Hassan v. CIT, which held that such deemed income cannot be classified under any of the heads of income u/s 14, and thus, deductions under the provisions corresponding to such heads will not apply. Consequently, the assessee's claim of set off of current and brought forward depreciation against such income was not tenable. Thus, ground nos. 3 and 4 were dismissed.
Issue 4: Set Off of Depreciation for the Current and Brought Forward Years
The Tribunal upheld the CIT(A)'s decision, confirming the disallowance of the claim for set off of current and brought forward depreciation against the unexplained expenditure represented by the unaccounted stock.
Conclusion:
The appeal was partly allowed, with ground no. 2 being allowed and ground nos. 1, 3, and 4 being dismissed. The order was pronounced in the open court on 18.12.2009.
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2009 (12) TMI 975
Issues involved:
The issue involves the validity of a suspension order u/s Rule 10 of the Central Civil Services (CCA) Rules, 1965 amended by Notification dated 23rd December, 2003, and the impact of the failure to review the suspension within the stipulated time frame as per the amended rules.
Details of the Judgment:
Issue 1: Validity of Suspension Order
The respondent, a Civilian Motor Driver-II, was suspended pending inquiry on 10th August, 2002. The suspension was not reviewed within the required timeframe as per the amended rules. The respondent claimed that the suspension order lapsed due to non-extension by the Review Committee. The Central Administrative Tribunal quashed the suspension order, which was challenged before the High Court.
Issue 2: Review of Suspension Order
The High Court held that the petitioners could have reviewed the suspension within 90 days from the amended rules' effective date, as there was no stay on the respondent's application. The delay in review was attributed to the respondent's application before the Tribunal, which caused a stay on the proceedings.
Issue 3: Interpretation of Administrative Tribunals Act
The Union of India argued that the proceedings were stayed due to the respondent's application before the Tribunal, as per Section 19(4) of the Administrative Tribunals Act, 1985. The respondents contended that the absence of a stay did not prevent the petitioners from reviewing the case.
Judgment Summary:
The Supreme Court upheld the decisions of the Central Administrative Tribunal and the High Court. It was held that the suspension order became invalid after 90 days as it was not reviewed within the stipulated timeframe. The delay in review due to the respondent's application did not justify the order's revival. The Court dismissed the Special Leave Petition, emphasizing the importance of adhering to the prescribed timelines for suspension reviews.
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2009 (12) TMI 974
Issues involved:
1. Interpretation of interest under section 234B and 234C of the Income Tax Act, 1961 in relation to income computed under section 115JA for Assessment Years 1997-1998 and 2000-2001.
2. Permissibility of deduction for provision for bad debts of Rs. 15,84,669/- in the assessment year 1999-2000.
Interpretation of interest under section 234B and 234C:
The Third Member, in agreement with the Accountant Member, held that interest under section 234B and 234C of the Income Tax Act, 1961 is applicable when computing income under section 115JA for the Assessment Years 1997-98 and 2000-2001. The majority view supported the levy of interest by the Assessing Officer under these sections. Consequently, certain grounds in the appeals of the Revenue for the mentioned assessment years were allowed, while a ground in the appeal of the assessee for the AY 2000-01 was dismissed.
Permissibility of deduction for provision for bad debts:
Regarding the deduction for provision for bad debts of Rs. 15,84,669/- in the assessment year 1999-2000, the Third Member agreed with the view that this deduction is not permissible. However, it was noted that once the debts are written off in the books of account, the Assessing Officer should allow the deduction of bad debts in the year when all bad debts are actually written off. The provision for bad debts amounting to Rs. 15,84,669/- was rightly disallowed by the Assessing Officer for the assessment year in question. The majority view directed the Assessing Officer to allow the amount of bad debt in subsequent assessment years when the bad debts are actually written off in the books of accounts. The Assessing Officer was instructed to act accordingly.
Other grounds/appeals:
There were no differences between the Accountant Member and Judicial Member in respect of other grounds/appeals for all the assessment years. A typographical error in the proposed order of the Judicial Member was noted, which was corrected for statistical purposes. As a result, all the appeals of the revenue and assessee were treated as partly allowed.
This judgment was pronounced in open Court on the 18th of December, 2009.
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2009 (12) TMI 973
Issues involved: Appeals against rejection of registration application u/s 12AA of the Income Tax Act by the Director of Income Tax (Exemption), Ahmedabad based on the application of provisions of section 13(1)(b) of the Income Tax Act.
The Appellate Tribunal, ITAT Ahmedabad, heard appeals by different assessees challenging the rejection of their registration applications u/s 12AA of the Income Tax Act by the Director of Income Tax (Exemption), Ahmedabad. The Director had rejected the applications citing that the cases of the assessees fell under the purview of section 13(1)(b) of the Income Tax Act.
The counsel for the assessees contended that the issue was favorably decided by the ITAT, Indore Bench in the case of Dawoodi Bohra Jamat and Others Vs CIT, where it was held that the provisions of section 13(1)(c) were not applicable as the trust in question was a public religious trust with solely religious objectives. This view was further supported by the Madhya Pradesh High Court in the case of CIT Vs Dawoodi Bohra Jamat, emphasizing that section 13(1)(b) was not applicable to a religious trust like the one in question.
In contrast, the Deputy Commissioner of Income Tax stood by the decisions of the Director of Income Tax (Exemption) in rejecting the registration applications.
After considering the arguments and legal precedents, the Tribunal found in favor of the assessees, citing the decisions of the ITAT, Indore Bench, and the Madhya Pradesh High Court. The Tribunal directed the Director of Income Tax (Exemption) to grant registration to the assessees u/s 12AA of the Income Tax Act within one month from the date of the order. Consequently, both appeals of the assessees were allowed.
The order was pronounced on 22nd December 2009.
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2009 (12) TMI 972
Issues involved: Interpretation of actuarial valuation report, exercise of powers u/s 263 of the Act by Revisional Authority, validity of Tribunal's decision.
Interpretation of actuarial valuation report: The Appellant argued that the Assessing Officer failed to consider the actuarial valuation reports for specific periods, leading to the Revisional Authority's intervention u/s 263 of the Act. However, the Respondent's Senior Counsel highlighted that the actuarial report for a different year was indeed submitted during assessment proceedings, and the Revisional Authority found no legal basis to invoke u/s 263 for that reason. The Tribunal did not address this specific issue, rendering the Appellant's argument irrelevant.
Validity of Tribunal's decision: The Appellant conceded that other issues raised in the appeal were adequately addressed by the Tribunal, acknowledging no fault in their handling. Consequently, since the key question regarding the actuarial valuation report did not warrant consideration, the appeals were dismissed for lack of substantial legal questions, with no costs imposed.
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