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2013 (3) TMI 813
Issues involved:
The issues involved in this judgment are adjustment to book profit u/s 115-JB and computation of disallowance u/s 14A.
Adjustment to book profit u/s 115-JB:
The appellant challenged the adjustment to 'book profit' u/s 115-JB, contending that no adjustment can be made by importing section 14A(2) and 14A(3) into the said clause. The appellant argued that the computation of 'expense relatable to exempt income' under clause (f) of the Explanation to section 115-JB by adopting methodology laid down in Rule 8D is bad-in-law and needs to be cancelled.
Computation of disallowance u/s 14A:
The appellant also disputed the disallowance of &8377; 12,12,655/- under Section 14A, contending that the expenses debited to the profit and loss account and claimed as business expense are incurred for the purpose of the business income. The appellant argued that such disallowance is bad-in-law and needs to be deleted.
The Assessing Officer made disallowance under Section 14A of &8377; 12,12,655/-, and further made adjustment on account of disallowance of expenses under Section 14A while computing the book profit under Section 115JB. The CIT(A) confirmed the disallowance based on the application of Rule 8D for the assessment year 2008-09.
The appellant argued that adjustment on account of disallowance under Section 14A cannot be made while computing the book profit under Section 115JB, as no such expenditure was debited in the profit and loss account. The Departmental Representative contended that such an adjustment can be made under Clause (f) of Explanation-1 to Section 115JB.
The Tribunal held that no disallowance under Section 14A can be imported while computing the book profit under Section 115JB if the assessee has not debited any expenses for earning exempt income in the profit and loss account. The Tribunal emphasized that the Assessing Officer cannot tinker with accounts approved by the Board of Directors and filed before the Registrar of Companies. Consequently, the appeal was treated as partly allowed, with ground no. 2 being allowed and ground no. 1 dismissed as it had become purely academic.
In conclusion, the Tribunal partly allowed the assessee's appeal, emphasizing that no disallowance under Section 14A can be made while computing the book profit under Section 115JB if no such expenses were debited in the profit and loss account.
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2013 (3) TMI 812
Issues Involved:
1. Jurisdiction of Civil Court u/s 80 of Bombay Public Trust Act, 1950.
2. Right of appellants as ancestral Pujaris.
3. Bar of suit u/r Order IX Rule 9 C.P.C.
Summary:
1. Jurisdiction of Civil Court u/s 80 of Bombay Public Trust Act, 1950:
The primary issue was whether the Civil Court had jurisdiction to entertain the suit filed by the appellants, given the bar u/s 80 of the Bombay Public Trust Act, 1950. The High Court had dismissed the suit on the grounds that the jurisdiction of the Civil Court was barred by Section 80 of the Act, as the matter of the temple's registration as a public trust was pending before the Assistant Charity Commissioner. The Supreme Court, however, held that the appellants were only claiming their rights as ancestral Pujaris and not as trustees of any trust. The reliefs sought did not fall within the ambit of Sections 19 or 79 of the Act, which would necessitate an inquiry by the Deputy or Assistant Charity Commissioner. Therefore, the bar u/s 80 of the Act did not apply, and the Civil Court had jurisdiction to try the suit.
2. Right of appellants as ancestral Pujaris:
The appellants claimed to be the ancestral Pujaris of the Amogsidda Temple, performing Puja and receiving offerings for over six hundred years. They sought a declaration of their Pujariki rights and an injunction to restrain the respondents from interfering with these rights. The trial court had partly decreed in favor of the appellants, recognizing their rights to perform Puja by turns with the respondents. The First Appellate Court further modified the decree, affirming the appellants as hereditary Pujaris and prohibiting the respondents from causing any obstruction. The Supreme Court found that the appellants' claim was solely about their rights as Pujaris, which did not require adjudication by the Assistant Charity Commissioner.
3. Bar of suit u/r Order IX Rule 9 C.P.C.:
The respondents contended that the suit was barred u/r Order IX Rule 9 C.P.C. because a previous suit filed by the appellants in 1967 had been dismissed for want of prosecution. The Supreme Court did not find this contention sufficient to bar the present suit, as the appellants had continuously exercised their right of Puja without objection until the recent interference by the respondents.
Conclusion:
The Supreme Court allowed the appeals, set aside the High Court's judgment and decree, and remanded the matter for a fresh decision on the second appeals. The appellants were entitled to their costs.
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2013 (3) TMI 811
Issues involved:
1. Denial of set-off of unabsorbed depreciation and business loss against gains on sale of depreciable assets.
2. Denial of adjustment of deemed short term capital gains against brought forward business loss and depreciation.
Issue 1: Denial of set-off of unabsorbed depreciation and business loss against gains on sale of depreciable assets
The assessee-company challenged the denial of set-off of unabsorbed depreciation and business loss against gains on the sale of depreciable assets. The appellant argued that the unabsorbed depreciation and business loss from the previous assessment year should be allowed to be set off against the gains on the sale of depreciable assets in the current year. The appellant pleaded for the set-off of brought forward unabsorbed depreciation and business loss against the gains on the sale of depreciable assets.
Issue 2: Denial of adjustment of deemed short term capital gains against brought forward business loss and depreciation
The appellant contested the denial of adjustment of gains on the sale of depreciable assets deemed to be short term capital gains against unabsorbed depreciation and business loss. The appellant asserted that the gains on the sale of depreciable assets should be treated as business income and be eligible for set-off against business losses and depreciation. The appellant requested that the gains on the sale of depreciable assets be considered as business income and adjusted against unabsorbed losses and depreciation.
The Assessing Officer (AO) finalized the assessment u/s 143(3) of the Income Tax Act, 1961, determining the total income of the assessee. During the assessment proceedings, the AO found that the assessee had claimed set-off of unabsorbed depreciation against short term capital gains. The AO held that unabsorbed depreciation could not be set off against income under the head capital gains.
The First Appellate Authority (FAA) compared the relevant provisions of the Income Tax Act and held that depreciation could only be set off against 'profit and gains of business' and not against other heads of income.
In the appeal before the Appellate Tribunal, the Authorized Representative argued that the assessee was entitled to claim unabsorbed depreciation against the current year's income. The Tribunal, after considering the submissions and relevant provisions, held that post-amendment provisions allowed unabsorbed depreciation to be set off against any income. Citing relevant case laws, the Tribunal directed the AO to allow set off of unabsorbed depreciation and business loss against short-term capital gains.
In conclusion, the Tribunal allowed both grounds of appeal in favor of the assessee-company, resulting in the appeal being allowed.
This summary provides a detailed overview of the judgment, highlighting the issues involved and the decisions made by the authorities and the Appellate Tribunal.
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2013 (3) TMI 810
Issues involved: Appeal by Revenue for assessment year 2006-07 regarding set off of long term capital loss against short term capital gain u/s Income-tax Act, 1961.
Details of the judgment:
1. The respondent-assessee sold its office premises and secured long term capital gains. The Assessing Officer disallowed the claim of the respondent-assessee to set off its carry forward long term capital loss against the long term capital gains made u/s Section 74 of the Act in view of Section 50 of the Act. The Commissioner of Income Tax (A) upheld the order of the Assessing Officer.
2. The Tribunal allowed the claim of the respondent-assessee to set off its long term capital loss u/s Section 74 of the Act, following its decision in the matter of Manali Investments v. Asstt. CIT [2011] 45 SOT 128 (URO)/10 taxmann.com 293 (Mum.). The Revenue appealed against the Tribunal's order in the matter of Manali Investments to the High Court in Income Tax Appeal No.1658 of 2012, which was refused to be entertained by the High Court.
3. The High Court, based on its order in Income Tax Appeal No.1658 of 2012 regarding Manali Investments, dismissed the appeal by the Revenue for assessment year 2006-07. The proposed reframed question of law was not entertained, and the appeal was dismissed with no order as to costs.
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2013 (3) TMI 809
Issues involved: Appeal against penalty imposed u/s 271D for accepting cash deposits in violation of Section 269SS.
Facts and Decision by CIT(A): The penalty was confirmed as the assessee failed to comply with Section 269SS by accepting cash loans exceeding Rs. 20,000 without proving a reasonable cause. The CIT(A) observed that the transactions were genuine but upheld the penalty as no reasonable cause was shown for accepting the cash loans.
Assessee's Grounds: The assessee argued that the cash deposits were for business needs and transferred between accounts for immediate use, citing various judicial decisions where transactions between family members were not considered as loans. The assessee contended that the penalty should be dropped due to technical breaches and genuine transactions.
ITAT Judgment: After considering submissions, ITAT found that the penalty was imposed without considering the assessee's explanations. Referring to the assessee's grounds, ITAT noted that the transactions were genuine and not loans, as they involved the same person acting in different capacities. Citing relevant case law, ITAT concluded that the penalty was unjustified and deleted the penalty imposed u/s 271D.
Conclusion: The penalty imposed u/s 271D for accepting cash deposits in violation of Section 269SS was deleted by ITAT, emphasizing the genuine nature of transactions and the absence of a loan scenario. The appeal by the assessee was allowed.
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2013 (3) TMI 808
Issues Involved:
1. Application u/s 24 of the Code of Civil Procedure, 1908 for transfer of proceedings.
2. Jurisdiction of courts under the Arbitration and Conciliation Act, 1996.
3. Applicability of Section 24 of the Code of Civil Procedure, 1908 to arbitration proceedings.
Summary:
1. Application u/s 24 of the Code of Civil Procedure, 1908 for transfer of proceedings:
The Petitioner filed an application u/s 24 of the Code of Civil Procedure, 1908, seeking the transfer of Miscellaneous Application Nos. 229 and 230 of 2012, filed by the Respondents under Section 34 of the Arbitration and Conciliation Act, 1996, from the District Court, Thane to the Original Side of the Bombay High Court. The Petitioner argued that this transfer was necessary to avoid conflicting orders and judgments, as the Arbitration and Conciliation Act, 1996 mandates that one civil court should decide all matters pertaining to the arbitral reference.
2. Jurisdiction of courts under the Arbitration and Conciliation Act, 1996:
The Petitioner contended that both the Original Side of the Bombay High Court and the District Court at Thane have jurisdiction over the subject matter in issue, as admitted by the Respondents. The Petitioner relied on Sections 2(e), 34, and 42 of the Arbitration and Conciliation Act, 1996, which suggest that all proceedings in a reference should be dealt with by one court. The Respondents, however, argued that there is no power in the court to transfer the proceedings and that Section 24 of the Code of Civil Procedure, 1908 does not apply to proceedings under Section 34 of the Arbitration and Conciliation Act, 1996.
3. Applicability of Section 24 of the Code of Civil Procedure, 1908 to arbitration proceedings:
The court examined whether Section 24 of the Code of Civil Procedure, 1908 is applicable to arbitration proceedings. The court concluded that the term "proceeding" used in Section 24 is comprehensive and includes every adjudication before a court. Thus, applications under Section 34 of the Arbitration and Conciliation Act, 1996 are proceedings before a civil court, and the power to transfer them under Section 24 of the Code of Civil Procedure, 1908 is vested in the District Court or High Court. The court found no provision in the new Arbitration Act that prohibits the exercise of powers conferred by Section 24 of the Code of Civil Procedure, 1908.
Conclusion:
The court allowed the application, transferring the proceedings from the District Court, Thane to the Original Side of the Bombay High Court to avoid conflicting judgments and orders. The court clarified that the issue of jurisdiction and competency of the court to decide the applications under Section 34 of the Arbitration and Conciliation Act, 1996 is not concluded by this order, and all contentions are kept open.
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2013 (3) TMI 807
Issues Involved:1. Applications for leave to defend. 2. Allegations of misjoinder of parties. 3. Non-filing of original documents. 4. Allegations of "money rotation transaction." 5. Claims of the transaction being a sham. 6. Deduction of tax at source. 7. Personal liability of a company director. Summary:1. Applications for Leave to Defend:Applications for leave to defend two suits u/O 37 of CPC, 1908 for recovery of Rs. 5,75,17,240/- and Rs. 9,94,14,041/- with interest and costs were adjudicated. The defendants argued that the suits were bad for misjoinder of parties, the original documents were not filed, and the transaction was a "money rotation transaction" meant to show large volumes of business for obtaining bank loans. They also claimed that the loan agreements were a farce and the amounts were never actually paid as loans. 2. Allegations of Misjoinder of Parties:The defendants argued that the suit against the defendant No.3, merely for being a Director of the defendant No.1 Company, was bad for misjoinder of parties and could not be tried as a summary suit. The court found that the law requires the joinder of such causes of action and dismissed this argument. 3. Non-filing of Original Documents:The defendants claimed the suit was not maintainable under Order 37 as the original documents were not filed. The court held that non-filing of original documents is not fatal when there is no dispute about their existence, especially when shown in Section 138 NI Act proceedings. 4. Allegations of "Money Rotation Transaction":The defendants argued that the transactions were "money rotation transactions" to show large volumes of business, which was unsubstantiated and illogical. The court found no foundation for this argument in the leave to defend applications and dismissed it as unpalatable. 5. Claims of the Transaction Being a Sham:The defendants claimed that the loan agreements were a sham and did not represent the actual agreements between the parties. The court held that the defendants, having signed the loan agreements and issued post-dated cheques, were bound by them. The plea of the transaction being a sham was not supported by any substantial evidence or circumstances in the leave to defend applications. 6. Deduction of Tax at Source:The court noted that the defendants had deducted tax at source on the interest amount due to the plaintiffs but did not issue TDS certificates. The defendants did not take any stand on whether the tax was deposited with the authorities. The court held that the defendants could not take a contrary stand before the court from that taken before the taxation authorities. 7. Personal Liability of a Company Director:The court found no case against defendant No.3, who was only a director of the defendant No.1 Company, as being personally liable for the company's dues. The suit against her was dismissed. Judgment:The applications for leave to defend were rejected. The court passed a decree in favor of the plaintiffs for Rs. 5,75,17,240/- and Rs. 9,94,14,041/- respectively, with interest pendente lite at 9% and future interest at 15% per annum on the principal amount of the loan. The plaintiffs were also entitled to costs in accordance with the law. The suit against defendant No.3 was dismissed.
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2013 (3) TMI 806
Issues involved: Questioning of prosecution under Section 138 of Negotiable Instruments Act based on the adequacy of the complaint petition.
Judgment Summary:
The petitioner challenged the prosecution under Section 138 of the Negotiable Instruments Act, arguing that the complaint petition did not provide sufficient grounds to initiate the proceedings. The complaint petition lacked specific details regarding the service of the legal notice to the accused, essential for establishing a cause of action. The absence of proof of service or return of the notice rendered the complaint insufficient to prosecute the petitioner under Section 138. The Supreme Court's decision in Shakti Travel & Tours vs State Of Bihar emphasized the importance of serving the notice before filing a case under Section 138. As the complaint failed to demonstrate proper service of notice, the court allowed the Criminal Writ Petition, quashing the impugned orders and dismissing the complaint petition.
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2013 (3) TMI 805
Issues involved: Interpretation of stock options as stock appreciation rights, employer-employee relationship for tax assessment, applicability of legal precedents, taxability of stock options as capital gains, validity of Tribunal's order.
Interpretation of stock options: The Tribunal considered the stock options granted to the appellant as akin to stock appreciation rights, similar to the case of Sumit Bhattacharya v/s. ACIT. The Tribunal's decision was based on this interpretation, which is subject to appeal before the Bombay High Court.
Employer-employee relationship: The Tribunal determined the existence of an employer-employee relationship between PUSA and the appellant, leading to the assessment of benefits from stock options as perquisites under Section 17(2)(iii) of the Act.
Applicability of legal precedents: The Tribunal's decision regarding the applicability of the principles established in CIT v/s. Infosys Technologies Limited was questioned. The appellant argued that the Tribunal misdirected itself by holding that the Infosys case was distinguishable and not relevant to their situation.
Taxability of stock options: The Tribunal concluded that the appellant did not acquire any capital asset upon receiving the stock options, leading to the impugned sum not being exigible to tax as capital gains. This decision raised the issue of whether the stock options should be taxed differently.
Validity of Tribunal's order: The appellant challenged the Tribunal's order dated 19-11-2010, alleging that it was perverse, contrary to the weight of evidence, and founded on irrelevant considerations. The appellant contended that the Tribunal's conclusions were vitiated and plagued by infirmities, questioning the judicial reasoning behind the Tribunal's inferences.
This summary provides a detailed breakdown of the issues involved in the judgment, highlighting the key legal aspects and arguments presented by the parties involved.
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2013 (3) TMI 804
Interest on Borrowed Capital u/s 36(1)(iii) - Assessee Company is in the business of manufacturing of transformer. The AO’s objection was that the assessee had shown capital WIP, including capital advances but no interest expense had been capitalised. The assessee’s answer was that the capital advance was made from own funds and not from borrowed funds. A.O. disallowed proportionate interest u/s.36(1)(iii). - HELD THAT : - As Assessee demonstrated that there were non-interest bearing own funds and those funds were claimed to have been utilized for the purpose of capital WIP. A.O. cannot presume that the interest-bearing funds could have been used as a capital WIP.
Decision in the case of - THE COMMISSIONER OF INCOME TAX VERSUS RELIANCE UTILITIES & POWER LTD. [2009 (1) TMI 4 - BOMBAY HIGH COURT], relied upon.
Calculation Of Value Of Inventories Taxation u/s 145 A - A.O. that the assessee had shown an amount receivable on account of unutilized MODVAT and also a closing balance of CENVAT credit. Admittedly, those amounts were not included in the value of the closing stock. The A.O. has observed that as per the provisions of section 145A the taxes/duty/cess related to stock are required to be included in the value of the closing stock. - HELD THAT :- A.O. is directed to verify the accounting policy adopted by the assessee in respect of Modvat/Cenvat incentives and if it is according to the law, then not to disturb the method of accounting of the assessee in this regard.
Decision in the cases of - ASSISTANT COMMISSIONER OF INCOME-TAX VERSUS. NARMADA CHEMATUR PETROCHEMICALS LTD. [2010 (8) TMI 263 - GUJARAT HIGH COURT] and COMMISSIONER OF INCOME-TAX VERSUS UNIQUE INDUSTRIES [2008 (5) TMI 238 - GUJARAT HIGH COURT], relied upon.
Depreciation on New Commercial Vehicle under Clause VI-A of the Appendix - Assessee has claimed excess depreciation on the new commercial vehicle purchased. The AO’s objection was that those vehicles were not registered by the RTO “Commercial Vehicle”, also vehicle used by the appellant is a private vehicle not used for the purpose of hire. HELD THAT : - The vehicle purchased by the appellant fulfills all the conditions prescribed in the Income Tax Act and the related Motor Vehicle Act and falls within the definition of Commercial Vehicle. The Act has nowhere prescribed that a commercial vehicle should be a vehicle which is used for the purpose of hire . It only prescribes that the vehicle should be used for the purpose of business or profession.
Depreciation on Computer Software - IT Act overwrites Accounting Standards - Assessee has claimed depreciation on computer software. The AO disallowed the depreciation holding that it was an application software and should be treated as intangible asset. Also, AS 26 specify computer software as intangible asset. HELD THAT :- The Income Tax Act does not make any difference between the system software and the application software. The schedule only provides the depreciation @ 60% on the computer software and the term ‘computer software’ has also been defined in the Appendix – I. The classification made by the Accounting Standards cannot overwrite the definition given in the Income Tax Act.
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2013 (3) TMI 803
Issues Involved:
1. Additions on account of advances for the purchase of silver ornaments.
2. Additions on account of loan and deposits.
Issue 1: Additions on account of advances for the purchase of silver ornaments
The assessee, engaged in the business of silver ornaments and bullion, received advances from three parties: Ambrish Bhai Soni (Rs. 2,00,000), Krishna Verma (Rs. 1,00,000), and Kuldeep Kumar Soni (Rs. 1,00,000). The A.O. noticed discrepancies in the cash book and bank deposits, leading to the addition of Rs. 2,00,000 u/s 68 of the Act. The assessee's explanation that the entry was missed due to oversight was not accepted. The ITAT referred to a previous case (Shri Ram Baboo Agarwal vs. ACIT) and emphasized that the burden of proving the identity, creditworthiness, and genuineness of the transaction lies on the assessee. The assessee failed to provide sufficient evidence, leading to the confirmation of the addition.
Issue 2: Additions on account of loan and deposits
The assessee received loans from Narayan Das (Rs. 2,00,000) and Nitin Kumar Verma (Rs. 1,00,000). The A.O. found that cash was deposited in the bank accounts of the creditors just before issuing cheques to the assessee, leading to the addition u/s 68 of the Act. The CIT(A) confirmed these additions. The ITAT referred to the jurisdictional High Court's judgment in the case of Smt. Suman Gupta and other relevant cases, concluding that the assessee failed to prove the creditworthiness of the creditors and the genuineness of the transactions. The ITAT upheld the CIT(A)'s order, confirming the addition of Rs. 5,75,000 and deleting the addition of Rs. 2,50,000 where sufficient funds were available in the creditors' bank accounts before issuing cheques to the assessee.
Conclusion:
The appeal of the assessee was dismissed, confirming the additions made by the A.O. and CIT(A) due to the failure to prove the identity, creditworthiness, and genuineness of the transactions as required u/s 68 of the Act.
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2013 (3) TMI 802
Issues Involved: Appeal against penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 for non-disclosure of interest income received from bank in the return of income.
Summary:
The appellant, an individual engaged in construction and transport business, filed a return of income declaring total income of Rs. 2,37,910 for the relevant year. The Assessing Officer (A.O.) noted that interest income of Rs. 7,32,404 from Fixed Deposits (FDRs) and Savings Bank (SB) account was not offered to tax. The A.O. added this amount to the total income and initiated penalty proceedings u/s 271(1)(c) for alleged concealment. The appellant claimed oversight in not including the interest income and argued it was not intentional concealment. However, the A.O. imposed a penalty of Rs. 2,42,000.
The appellant challenged the penalty before the Commissioner of Income Tax (Appeals) [CIT(A)], reiterating that the interest income was disclosed in the capital account filed with the return, and it was an inadvertent error. The CIT(A) upheld the penalty, stating the appellant's actions amounted to filing inaccurate particulars of income deliberately to evade tax.
On further appeal to the Appellate Tribunal, the appellant contended that the disclosure of interest income in the capital account and TDS certificates showed no intention to conceal income. Citing a Supreme Court decision, the appellant argued against the penalty imposition. The Revenue, however, supported the penalty citing non-disclosure of interest income as concealment.
The Tribunal observed that the interest income was disclosed in the capital account and TDS certificates were filed, indicating no intent to conceal income. Similar disclosures in previous and subsequent years supported the inadvertent nature of the error. Referring to the Supreme Court decision, the Tribunal concluded it was not a fit case for penalty u/s 271(1)(c) and canceled the penalty imposed by the A.O. and upheld by the CIT(A).
In conclusion, the appeal by the assessee was allowed, and the penalty under u/s 271(1)(c) was canceled based on the facts and legal precedents presented.
(Order pronounced on 15-03-2013)
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2013 (3) TMI 801
Issues involved: Appeal by revenue for assessment year 2006-07 regarding disallowance under section 80IB of the Income Tax Act, 1961 on sale proceeds of stilt parking and common office expenses of Poiser Project, and common expenses relating to Poiser Project and Saki Naka Project.
Issue (a):
The Tribunal allowed the appeal of the assessee and deleted the disallowance under section 80IB of the Income Tax Act, 1961 on sale proceeds of stilt parking and common office expenses of Poiser Project. The High Court admitted the appeal on this issue.
Details:
The Tribunal upheld the order of the CIT(A) and found that the assessee maintained separate accounts for Poisar project and Saki Naka project. It was noted that the Assessing Officer presumed that the assessee debited Poisar project expenses to Saki Naka Project to benefit under section 80IB(10) of the Act. However, the Tribunal found that the expenses for Poisar project were properly accounted for and no defects were pointed out in the books of account. As this decision was based on factual findings, the High Court declined to entertain this question.
Issue (b):
The Tribunal also allowed the appeal of the assessee and deleted the disallowance under Section 80IB of the Income Tax Act, 1961 on common expenses related to Poiser Project and Saki Naka Project. The High Court did not entertain this issue as it was based on factual findings.
Conclusion:
The High Court admitted the appeal on question (a) regarding the disallowance under section 80IB of the Income Tax Act, 1961 on sale proceeds of stilt parking and common office expenses of Poiser Project. The Tribunal's decision on question (b) regarding common expenses between Poiser Project and Saki Naka Project was not entertained due to being based on factual findings.
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2013 (3) TMI 800
Issues involved: Appeal by revenue for assessment year 2007-08 regarding disallowance under section 80IB and 80IB(10) of the Income Tax Act, 1961.
Disallowed deduction under section 80IB: The High Court considered whether the Tribunal was correct in allowing the appeal of the assessee and deleting the disallowance under section 80IB on the sale proceeds of stilt parking. The Court analyzed the facts and circumstances of the case along with the legal provisions to determine the correctness of the Tribunal's decision.
Disallowance under Section 80IB(10): The Court examined whether the Tribunal was justified in deleting the disallowance under Section 80IB(10) on common expenses related to two projects, Poisar Project and Saki Naka Project. The revenue contended that the expenses were debited to Saki Naka Project with the intention to suppress its profit, thereby increasing the profit of Poisar Project. The Court compared this issue with a similar question raised in a previous appeal and decided not to entertain it based on the reasons provided in the earlier order.
Admission of the appeal: The Court admitted the appeal on question (a) regarding the disallowance under section 80IB, indicating that further consideration and analysis would be undertaken on this specific issue.
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2013 (3) TMI 799
Issues involved: Classification of stock-in-trade, Conversion of stock-in-trade to investment, Tax liability on conversion, Legality of conversion, Motive behind conversion, Treatment of profits on sale of shares.
Classification of stock-in-trade: The appellant, a private limited company, shifted its stock-in-trade of shares to investment, claiming long term capital gain on the sale of shares in the assessment year 2004-05. The AO assessed it as business income, alleging intentional tax avoidance due to the conversion. The Ld. CIT(A) allowed the claim, stating that there is no specific ban on such conversion and relied on the decision of the Hon'ble Supreme Court in Sir Kilabhani Premchand case.
Conversion of stock-in-trade to investment: The appellant discontinued share trading activity and converted its shares to investments due to a shift in business model. The Ld.AR argued that this was a conscious business decision, supported by entries in books and consistent treatment of profits as capital gains. The legality of such conversion was supported by the decision of the Hon'ble Supreme Court in Sir Kikabhai Premchand case.
Tax liability on conversion: The Revenue contended that the conversion was a device to avoid tax liability, citing the Twin star Holdings Ltd case. However, the Ld.CIT(A) found no evidence of sham transactions for tax avoidance and upheld the conversion based on audited accounts and clarificatory notes.
Legality of conversion: The Ld.CIT(A) held that there is no legal bar on converting stock-in-trade to investments, citing the Sir Kikabhai Premchand case. The Tribunal also affirmed that such conversion is permissible and transparent from the audited accounts.
Motive behind conversion: The Revenue argued that the conversion was motivated by tax avoidance, but the Ld.CIT(A) found no evidence of sham transactions and upheld the conversion based on audited accounts and clarificatory notes.
Treatment of profits on sale of shares: The Ld.CIT(A) directed the AO to assess the profits on the sale of shares under the head of 'Capital Gains' and not as business income. The Tribunal upheld this decision, citing past acceptance of similar transactions by the Department.
Conclusion: The appeal filed by the Revenue was dismissed, upholding the order of the Ld.CIT(A) to assess the profits on the sale of shares as 'Capital Gains' and not as business income. The Tribunal found no justifiable reason to interfere with the decision of the Ld.CIT(A) in this regard.
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2013 (3) TMI 798
Issues Involved:
1. Disallowance on account of Modvat credit u/s 145A.
2. Disallowance u/s 14A for expenses incurred for earning dividend income.
3. Rejection of claim for leave encashment.
4. Depreciation rate on moulds (plastics).
5. Disallowance of bad debts.
Summary:
1. Disallowance on account of Modvat credit u/s 145A:
The assessee changed its accounting method from inclusive to exclusive and claimed that the profit amounting to Rs. 5,38,41,518/- is not assessable for A.Y. 2005-06. The Assessing Officer (AO) and CIT(A) did not accept this contention. For A.Y. 2006-07, the assessee's grievance was the AO's failure to grant relief of Rs. 12,43,44,020/- on account of unutilized Modvat credit. The Tribunal directed the AO to recalculate the value of inventory by excluding excise duty on goods not cleared from the factory and to allow deductions u/s 43B for taxes paid before the due date of filing the return.
2. Disallowance u/s 14A for expenses incurred for earning dividend income:
For A.Y. 2005-06 and 2006-07, the AO disallowed expenses u/s 14A. The CIT(A) applied Rule 8D, which was contested as it is applicable from A.Y. 2008-09 as per the Bombay High Court's decision in Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT. The Tribunal restored the issue to the AO for re-adjudication as per the aforementioned decision.
3. Rejection of claim for leave encashment:
The assessee inadvertently disallowed Rs. 1,84,50,950/- as leave encashment and later claimed that only Rs. 57,73,382/- should be disallowed. The AO rejected this claim as it was not filed in a revised return. The Tribunal directed the AO to verify the claim and provide appropriate relief, following the Bombay High Court's decision in CIT vs. Pruthvi Brokers & Shareholders (P) Ltd.
4. Depreciation rate on moulds (plastics):
The AO reduced the depreciation rate on moulds from 30% to 25%, which was upheld by CIT(A). The Tribunal noted that the assessee consistently claimed 30% depreciation in the past and cited judicial precedents supporting this rate. The Tribunal allowed the assessee's claim for 30% depreciation.
5. Disallowance of bad debts:
The AO disallowed bad debts of Rs. 1,47,93,001/- as they were less than one year old. The Tribunal, citing the Bombay High Court's decision in CIT vs. Star Chemical (Bombay) Pvt. Ltd. and the Supreme Court's decision in T.R.F. Ltd., held that writing off bad debts in the books is sufficient for deduction. The Tribunal directed the AO to allow the claim.
Conclusion:
Both appeals were partly allowed with directions for re-adjudication and verification by the AO on specific issues. The order was pronounced in the open court on 13.3.2013.
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2013 (3) TMI 797
The Gujarat High Court considered a tax appeal regarding the deletion of an addition made by the Assessing Officer in the hands of the assessee company. The court examined whether the Income Tax Appellate Tribunal was correct in allowing the appeal and not making a final decision on the remaining profit amount.
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2013 (3) TMI 796
Issues involved: Appeal against the judgment of the Income Tax Appellate Tribunal regarding the confirmation of profit share and deletion of balance amount in the case.
Judgment Summary:
Issue A: The first question raised was whether the Tribunal was correct in confirming only 6.25% of the total profit amount for substantive order.
The Tribunal reduced the addition to Rs. 13.53 lakhs at the rate of 6.25% of Rs. 2.16 crores, stating that the entire amount did not belong to the assessee. The Tribunal observed that the Assessing Officer added the amount without proper examination of facts. The Tribunal confirmed the addition to the extent of the assessee's share in profit and deleted the balance amount.
Issue B: The second question raised was whether the Tribunal was right in holding that the balance of Rs. 2.16 crores, being the difference between the total amount and the confirmed amount, should be deleted.
The Tribunal found that the Assessing Officer added the profit without examining the facts of the case. The Tribunal upheld the assessee's share of 6.25% in various projects and deleted the balance amount as there was no evidence to support that it belonged to the company.
The Tribunal's decision was based on the fact that the assessee only had a 6.25% share in the profit, and there was no dispute regarding this share. The Tribunal concluded that the addition made by the Assessing Officer without proper examination was not sustainable, leading to the reduction of the profit to Rs. 13.53 lakhs.
In conclusion, the High Court found no error in the Tribunal's decision and dismissed the Tax Appeal. The Court also allowed the parties to pursue further appeals regarding remaining additions made in the company's hands.
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2013 (3) TMI 795
Issues involved: Challenging deletion of penalty u/s 271D of the Income Tax Act.
Summary:
Issue 1: Deletion of penalty u/s 271D
The appellant challenged the deletion of penalty of Rs. 11,75,000 levied u/s 271D of the Income Tax Act for accepting cash loan exceeding Rs. 20,000. The assessing officer added this amount as unexplained cash credit under section 68 of the Act. The Commissioner (Appeals) partly confirmed the addition by deleting the penalty. The Tribunal concurred with the Commissioner's finding that penalty cannot be levied if there was a reasonable cause for the violation of section 269-SS of the Act. The appellant argued that the penalty should be invoked as the assessee had not established a pressing need for accepting cash loans in contravention of section 269-SS.
Issue 2: Interpretation of Section 269-SS
Section 269-SS requires loans or deposits exceeding Rs. 20,000 to be accepted through account payee cheques or bank drafts to prevent tax evasion. In this case, the assessee accepted cash exceeding Rs. 20,000 from Shri Ambika Finance. The Commissioner (Appeals) found the transactions genuine as the cash was received through cheque discounting to meet urgent business needs, thus not violating section 269-SS.
Issue 3: Invocation of Penalty
The assessing officer invoked section 68 of the Act for unexplained cash credit, adding the amount to the assessee's income. As the explanation provided was deemed unsatisfactory, the penalty under section 271-D was not applicable. The Tribunal upheld this decision, stating that penalty is not leviable when there is a reasonable cause for not adhering to section 269-SS and the transaction's genuineness is not in doubt.
Conclusion:
The Tribunal dismissed the Tax Appeal, as the cash received through cheque discounting was for urgent business needs, and there was no interference required based on the decisions of the Commissioner (Appeals) and the Tribunal. The assessing officer was deemed unjustified in invoking penalty provisions under section 271-D.
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2013 (3) TMI 794
The High Court of Bombay heard a case regarding the deduction under Section 80IB(10) for the assessee on a prorate basis. The court admitted the case based on substantial questions of law.
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